<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ALCO STANDARD CORPORATION
----------------
OHIO 23-0334400 5111
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482
(610) 296-8000
J. KENNETH CRONEY, ESQUIRE
ALCO STANDARD CORPORATION
VICE PRESIDENT AND GENERAL COUNSEL
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482
(610) 296-8000
COPIES TO:
RHONDA R. COHEN, ESQUIRE
BALLARD SPAHR ANDREWS & INGERSOLL
51ST FLOOR, 1735 MARKET STREET
PHILADELPHIA, PA 19103-7599
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following. [X]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLES OF EACH CLASS TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE* FEE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value(1)................ 2,500,000 $55.625 $139,062,500 $47,953
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Estimated solely for the purpose of determining the registration fee,
pursuant to Rule 457(c).
(1) Each share of Common Stock being registered hereunder includes a Common
Stock Purchase Right.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
ALCO STANDARD CORPORATION
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-1 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
---- ----------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Front Cover Page
Cover Page of Prospectus........
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front Cover Page
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Business
Charges.........................
4. Use of Proceeds.................. Front Cover Page
5. Determination of Offering Price.. Not Applicable
6. Dilution......................... Not Applicable
7. Selling Security Holders......... Front Cover Page; Resales
8. Plan of Distribution............. Front Cover Page; Plan of Distribution
9. Description of Securities to be Description of Common Stock and
Registered...................... Preferred Stock
10. Interests of Named Experts and Not Applicable
Counsel.........................
11. Information with Respect to the Business; Quarterly Data; Report of
Registrant...................... Independent Auditors; Consolidated
Financial Statements; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Corporate Financial Summary;
Management; Certain Transactions;
Executive Compensation
12. Disclosure of Commission Position
on Indemnification for Not Applicable
Securities Act Liabilities......
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS DATED DECEMBER 19, 1994, SUBJECT TO COMPLETION.
PROSPECTUS
DECEMBER , 1994
[LOGO OF ALCO STANDARD CORPORATION APPEARS HERE]
2,500,000 SHARES OF COMMON STOCK
(NO PAR VALUE)
This prospectus describes the offering by Alco Standard Corporation ("Alco")
of shares of its common stock in connection with acquisitions of other
businesses and properties which Alco (including its subsidiaries) may make from
time to time. A maximum of 2,500,000 shares of common stock may be sold
pursuant to this prospectus. These shares will ordinarily represent
consideration paid directly upon the acquisition of other businesses or
properties. The shares may also include shares to be delivered upon the
exercise or satisfaction of conversion or purchase rights which are created in
connection with acquisitions or which were previously created or assumed by the
companies whose businesses or properties were acquired by Alco.
This prospectus may be incorporated, in whole or in part, into proxy
statements of companies whose assets are to be exchanged for shares covered
hereby or which propose to merge with Alco or a subsidiary of Alco, in
connection with meetings of shareholders of such companies called for the
purpose of approving such transactions, so as to permit compliance with the
requirements of Rule 145 of the Securities and Exchange Commission under the
Securities Act of 1933. Certain information contained in such proxy statements
concerning the terms of such transactions and the assets and businesses to be
acquired thereby may be incorporated, by subsequent amendment or supplement,
into this prospectus, solely for the purpose of offering shares in connection
with the transactions.
This prospectus may also be used for the offering of shares by persons who
may be deemed affiliates of Alco or the companies acquired by Alco and who may
not freely sell such shares under the Securities Act of 1933. If Alco gives its
prior written consent and makes all filings required by law, such affiliates
may sell such shares pursuant to this prospectus, subject to whatever
conditions Alco may impose.
Shares offered hereby generally may be resold by the persons acquiring them
without further registration under the Securities Act of 1933. However, any
affiliate of a company acquired by Alco, or anyone otherwise deemed an
underwriter of such shares, may be subject to certain limitations on resale.
For further information on such limitations, see "RESALES" in this prospectus.
Shares of common stock of Alco are listed on the New York, Philadelphia and
Chicago Stock Exchanges. As of November 28, 1994, there were approximately
14,404 holders of record of Alco's common stock. The reported closing price of
the common stock of Alco on the New York Stock Exchange Composite Tape on
December 15, 1994 was $59 1/4.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH
THE SALE OF ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ALCO. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE OF THE SECURITIES COVERED HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALCO SINCE THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
BUSINESS................................................................... 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................ 8
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK............................ 13
MANAGEMENT................................................................. 16
EXECUTIVE COMPENSATION..................................................... 20
PLAN OF DISTRIBUTION....................................................... 26
RESALES.................................................................... 26
LEGAL OPINIONS............................................................. 27
EXPERTS.................................................................... 27
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING........................ 27
REPORT OF INDEPENDENT AUDITORS............................................. 28
CONSOLIDATED FINANCIAL STATEMENTS.......................................... 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................. 34
CORPORATE FINANCIAL SUMMARY................................................ 49
SEGMENT DATA............................................................... 50
QUARTERLY DATA............................................................. 52
</TABLE>
----------------
AVAILABLE INFORMATION
Additional information is contained in a registration statement, of which
this prospectus is a part. Alco is subject to the informational requirements of
the Securities Exchange Act of 1934 and in accordance therewith files reports
and other information with the Securities and Exchange Commission. Reports,
proxy statements and other information filed by Alco with the Securities and
Exchange Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at its Regional Offices at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, New York, New York 10048. Copies can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Reports, proxy statements and other information
about Alco can also be inspected at the New York, Philadelphia and Chicago
Stock Exchanges (on which Alco's common stock is listed).
Alco has filed with the Commission a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933 with respect to the securities to
which this prospectus relates. This prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Alco and such securities, reference is made
to the Registration Statement. Statements contained in this prospectus as to
the contents of any contract or any other document filed, or incorporated by
reference, as an exhibit to the Registration Statement, are qualified in all
respects by such reference.
2
<PAGE>
BUSINESS
Alco Standard Corporation ("Alco") was incorporated in Ohio in 1952 and is
the successor to a business incorporated under a similar name in 1928. The term
"Alco" generally includes Alco Standard Corporation and its subsidiaries and
divisions. The address of Alco's principal executive offices is P.O. Box 834,
Valley Forge, Pennsylvania 19482 (telephone number: (610) 296-8000).
Alco markets and distributes office equipment and paper. In fiscal 1994, Alco
had annual revenues of approximately $8 billion. Information concerning
revenues, income before taxes and assets attributable to each of Alco's
business segments for each of the three years in the period ended September 30,
1994 is set forth under "Segment Data" in the consolidated financial statements
on page 50 of this prospectus.
Alco was founded and continues to operate as "The Corporate Partnership."
Under this entrepreneurial principle, Alco field executives maintain a high
degree of operating autonomy, which enhances the company's ability to serve and
support its customers. The following describes Alco's two business segments.
ALCO OFFICE PRODUCTS
Alco Office Products ("AOP") sells, rents and leases photocopiers, fax
machines and other automated office equipment. AOP also provides equipment
service, supplies, and equipment leasing, and provides reprographic facilities
management and specialized document copying services.
AOP has locations throughout the United States, Canada and in Europe
(primarily in the United Kingdom). These companies comprise the largest network
of independent copier and office equipment dealers in North America and in the
United Kingdom, and represent the only independent distribution network with
national scope. AOP competes against numerous competitors over a wide range of
markets, competing on the basis of price, quality of service, and product
performance.
AOP distributes the products of numerous manufacturers, including Canon,
Ricoh and Sharp, throughout 47 states, four Canadian provinces and in Europe.
Customers include large and small businesses, professional firms and government
agencies.
During fiscal 1992, 1993 and 1994, AOP accounted for approximately 26%, 25%
and 28%, respectively, of Alco's consolidated revenues, and 47%, 50% and 55%,
respectively, of Alco's operating income (excluding Unisource restructuring
costs in 1993).
During fiscal 1994, AOP acquired 45 office products companies in the United
States and Canada, with an aggregate of over $200 million in annualized
revenues. AOP also expanded Erskine House Ltd., its office equipment
distribution network based in the United Kingdom, through two contiguous
acquisitions. In addition, as part of the IMM divestiture (described under
"Divestitures" on page 5 of this prospectus), AOP acquired operations in
Denmark and France.
UNISOURCE
Unisource Worldwide, Inc. ("Unisource") markets and distributes papers for
office and reprographic use, distributes quality printing papers, and
distributes paper and plastic packaging supply items for food retailers and
food processors. Unisource also distributes commercial sanitary and maintenance
products and industrial packaging equipment, closure systems, and supplies. The
Unisource companies were formerly known as "Paper Corporation of America," and
are currently in the process of restructuring and consolidating under the
single name "Unisource." Information concerning the restructuring is described
under "Restructuring Plan," on page 4 of this prospectus.
3
<PAGE>
During fiscal 1992, 1993 and 1994, Unisource accounted for approximately 74%,
75% and 72%, respectively, of Alco's consolidated revenues from continuing
operations, and 53%, 50%, and 45%, respectively, of Alco's operating income
(excluding Unisource restructuring costs in 1993).
Unisource's products are distributed to commercial printers and publishers,
and to all types of manufacturers, offices, government agencies and other
institutions. Paper, printing supplies and industrial and office supply
products are also sold directly to the commercial retail market through
Unisource's Paper Plus (R) retail stores.
Unisource sells the products of substantially all major domestic and Canadian
paper manufacturers and suppliers. There has been no difficulty in obtaining
products from these suppliers. Supplier relationships are good and are expected
to continue.
Unisource's operations constitute the largest independent network of paper
distributors in the United States and Canada. Although substantial in the
aggregate, these operations compete separately in many different markets
against numerous competitors, including both independent distributors and those
owned by major paper manufacturers. Although its business is highly competitive
and its competitors numerous, Unisource believes that its competitive position
is strong. Unisource competes principally on the basis of price, quality
customer service and the range of products maintained in inventory.
Unisource has locations throughout the United States and Canada. In the
aggregate, Unisource occupies over 17 million square feet of space.
In June 1994, Unisource acquired Larsen Packaging Equipment Company, a
distributor of packaging film and equipment located in St. Louis, Missouri,
with approximately $10 million in annual revenues.
INFORMATION CONCERNING ALCO'S BUSINESS IN GENERAL
RESTRUCTURING PLAN
In September 1993, the Board of Directors approved a restructuring plan for
Alco's paper distribution business and changed the name of such business from
"Paper Corporation of America" to "Unisource Worldwide, Inc." As a result of
the restructuring, a pretax charge of $175 million was recorded in the fourth
quarter of fiscal 1993.
The Unisource restructuring plan was adopted as a proactive response to
changes in the business environment in which Unisource operates. In recent
periods, mills have experienced overcapacity, resulting in depressed pricing
and pressure on distributors' margins. The usage and demand for paper has
shifted significantly because of consolidation in the commercial printing
industry, enhancements in imaging technology and the related growth in the
reprographics segment. Customers are increasingly requiring distributors to
provide enhanced services and greater capabilities.
Most facets of the Unisource restructuring plan are proceeding as planned,
with 68 facility consolidations substantially completed by the end of fiscal
1994. By September 30, 1994, Unisource reduced its employee base by
approximately 725. This excludes the data processing personnel who transferred
to Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM, as
part of an information technology system outsourcing agreement with ISSC. This
ten-year agreement for $300 million, which was effective January 1, 1994, will
provide the information technology system to be implemented as part of the
restructuring plan. The agreement was also expanded to automated warehouse and
truck routing systems at an estimated cost of approximately $30 million over
the ten-year period of the agreement. Due to a change in software, initial
implementation of the information technology system was postponed by six
months. This is not anticipated to delay the completion of the restructuring
plan by the end of fiscal 1996.
4
<PAGE>
BOARD AND MANAGEMENT CHANGES
Three new members were elected in 1994 to Alco's Board of Directors: Paul J.
Darling II, Chairman, President and Chief Executive of Corey Steel Company;
James J. Forese, IBM Vice President, Chairman of IBM Credit Corporation and a
member of IBM's Worldwide Management Council; and Dana J. Mead, President and
Chief Executive Officer of Tenneco, Inc., Chairman and Chief Executive Officer
of Case Corporation, a Tenneco subsidiary and former Executive Vice President
and Director of International Paper Company. Retiring from the Board were
Robert H. Potts and William J. Scharffenberger.
Among other executive changes during the 1994 fiscal year, J. Kenneth Croney
was appointed General Counsel of Alco succeeding Hugh G. Moulton, who continues
as Executive Vice President. Kathleen M. Burns, Treasurer, and Michael J.
Dillon, Controller, were named corporate vice presidents of Alco.
In August 1994, William T. Leith was named Executive Vice President of
Unisource with responsibility for all Unisource's U.S. operations. Mr. Leith
was formerly President of Distribix (a Unisource operating company located in
St. Louis, Missouri) and President of the Unisource Central Region. Jack H.
Keeney, formerly Vice President--Finance of Distribix, was appointed
Unisource's Vice President, Finance--U.S. Operations. Raymond A. Peterson was
named Executive Vice President of Unisource's Canadian Operations.
Two former AOP operating company presidents joined AOP group management in
fiscal 1994 in new executive vice president positions. In June 1994, Peter W.
Shoemaker was appointed Executive Vice President of AOP with responsibility for
all North American operations. In July 1994, Michael S. Koether was appointed
Executive Vice President--Marketing of AOP with responsibility for all North
American marketing and acquisition activities.
On October 17, 1994, Ray B. Mundt, who served as Chief Executive Officer from
1980 until August 1993, announced his retirement from his ongoing duties as an
officer of Alco, effective December 31, 1994. Mr. Mundt will continue in his
duties as Chairman of the Board during fiscal 1995 and will remain available to
provide guidance and advice in the future as appropriate.
EQUITY OFFERINGS
In December 1993, Alco completed a public offering of 5,750,000 shares of
common stock, and used the net proceeds of approximately $294 million primarily
to reduce outstanding debt.
DIVESTITURES
In October 1992, Alco made a 49.9% investment in IMM Office Systems
("IMMOS"), a European office equipment distribution joint venture, marking
Alco's entry into the European market. Alco's investment in IMMOS was intended
to serve as a base for further expansion in Europe. The venture agreement
provided Alco with the option of acquiring the remaining shares of IMMOS over a
three-year period beginning in 1996 if IMMOS achieved certain operating goals.
However, the capital structure and organizational complexities of IMMOS,
exacerbated by the distressed European economy and operational differences
among the venture partners, prevented IMMOS from progressing toward those
goals. As a result, in September 1994, Alco sold its 49.9% interest in IMMOS
for cash plus a passive interest in any subsequent sale of IMMOS for five
years. Alco retains no ongoing liability in the joint venture and the parties
exchanged complete mutual releases for past actions. In addition, Alco was
relieved of the covenant not to compete in Europe contained in the joint
venture agreement, although the parties will not compete with each other for a
period expiring on December 31, 1995. As part of the transaction, Alco acquired
profitable operations in Denmark and France and retained limited operations in
Germany. Alco recognized a loss on the sale of its interest in IMMOS in the
quarter ended June 30, 1994, and recorded a pre-tax loss of $115.3 million
($95.1 million, net
5
<PAGE>
of tax) equating to a loss per share of $1.75 for the quarter ($1.77 for fiscal
1994). This charge represents the write-off of Alco's investment in IMMOS plus
certain transactional costs less cash proceeds from the sale together with
related tax benefits.
SUPPLIERS AND CUSTOMERS
Products distributed by Alco are purchased from numerous domestic and
overseas suppliers. There has been no significant difficulty in obtaining
products from these suppliers. No industry segment of Alco is dependent upon a
single customer, or a few customers, the loss of any one or more of which would
have a material adverse effect on Alco's business taken as a whole.
Backlog is not significant because virtually all of Alco's revenues during
the last two fiscal years were derived from its distribution operations which
fill orders shortly after receipt from customers. There is no material seasonal
fluctuation in Alco's business as a whole.
Many of Alco's operations are required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. At September 30,
1994, inventories accounted for approximately 36% of Alco's total current
assets.
PROPRIETARY MATTERS
Alco has a number of patents, licenses and trademarks. Alco does not believe,
however, that any patent, license or trademark is material to its operations as
a whole.
ENVIRONMENTAL REGULATION
Environmental laws and liabilities relating to Alco's current businesses
(which are primarily distribution operations) have not had and are not expected
to have a material adverse effect upon Alco's capital expenditures, earnings or
competitive position. Although Alco has retained certain environmental
liabilities relating to the predivestiture operations of its divested
manufacturing companies, such environmental liabilities have not had and are
not expected to have a material adverse effect on Alco. While it is not
possible to estimate what expenditures may be required in order for Alco to
comply with environmental laws or discharge environmental liabilities in the
future, Alco does not believe that such expenditures will have a material
adverse effect on it or its operations as a whole.
EMPLOYEES
At September 30, 1994, Alco had approximately 30,600 employees.
FOREIGN OPERATIONS
Alco's operations in Canada distribute paper, industrial supplies and
packaging products, and distribute and service office equipment. Alco's
European operations distribute and service office equipment. Alco's 49.9%
equity interest in IMMOS, a German-based office equipment distribution network,
was divested in September 1994 (see "Divestitures" on page 5 of this
prospectus). Information concerning revenues, income before taxes and
identifiable assets of Alco's foreign operations for each of the three years in
the period ended September 30, 1994 set forth in note 9 to the consolidated
financial statements included on pages 43 and 44 of this prospectus. Revenues
from exports during the last three fiscal years were not significant.
6
<PAGE>
There are additional risks attendant to foreign operations, such as possible
currency fluctuations and unsettled political conditions.
PROPERTIES
At September 30, 1994, Alco owned or leased facilities in 47 states, nine
Canadian provinces and in Europe. These properties occupy a total of
approximately 22.6 million square feet of which approximately 8.1 million
square feet are owned and the balance are leased under lease agreements with
various expiration dates. Alco believes that none of its properties is
materially important to its operations as a whole, and believes that its
facilities are suitable and adequate for the purposes for which they are used.
LEGAL PROCEEDINGS
Alco does not believe that the outcome of lawsuits or other legal proceedings
to which it is a party will materially affect Alco or its operations as a
whole. However, Alco is presently in arbitration with a former subsidiary,
which has asserted that Alco is liable to it for certain liabilities arising
under the Coal Industry Health Benefit Act of 1992. Based on consultation with
its counsel, Alco does not believe that it is responsible for such liabilities
and, therefore, no provision for this matter has been recorded in Alco's
financial statements for the fiscal year ended September 30, 1994. In the event
that the arbitrators decide in favor of the claimant, Alco estimates that it
would be obligated to pay approximately $36 million over a twenty-year period
which would result in an after-tax charge of approximately $23 million to
discontinued operations.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL REVIEW
ALCO STANDARD CORPORATION AND SUBSIDIARIES
The discussion of the results of operations for the three years ended
September 30, 1994 reviews the continuing operations of Alco as contained in
the Consolidated Statements of Income.
RESULTS OF OPERATIONS--1994
Revenues and income before taxes by segment for fiscal years ended September
30, 1994 and September 30, 1993 and the percentage change for 1994 versus 1993
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ----------------------------
1994 1993 % CHANGE 1994 1993 % CHANGE
------ ------ -------- ------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products..... $2,240 $1,586 41.2% $ 199.4 $ 138.8 43.7%
Unisource
United States.......... 5,108 4,174 22.4 148.8 118.7 25.4
Canada................. 649 690 (5.9) 13.5 18.3 (26.2)
Restructuring costs.... (175.0)
------ ------ ---- ------- -------
Total Unisource...... 5,757 4,864 18.4 162.3 (38.0)
------ ------ ---- ------- -------
Operating................ 7,997 6,450 24.0 361.7 100.8
Unconsolidated affiliate. (117.2) (2.5)
Eliminations and
nonallocated............ (1) (5) (87.7)* (73.7)*
------ ------ ---- ------- -------
$7,996 $6,445 24.1 $ 156.8 $ 24.6
====== ====== ==== ======= =======
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
FISCAL 1994 COMPARED TO FISCAL 1993
Alco's revenues for fiscal 1994 were $8 billion, an increase of $1.5 billion
over fiscal 1993 revenues of $6.5 billion. Income before taxes from operations
increased to $361.7 million from $100.8 million in fiscal 1993, which included
a restructuring charge of $175 million related to the Unisource operations.
Earnings per share from continuing operations for fiscal 1994 were $1.10
compared to $(.04) for fiscal 1993 which included a loss of $2.38 per share
resulting from the Unisource restructuring charge. Earnings per share excluding
the loss on the sale of the investment in IMMOS in fiscal 1994 and the effect
of the restructuring charge in fiscal 1993 were $2.87 and $2.34, respectively.
AOP generated $654 million in increased revenues of which $288 million
relates to fiscal 1993 acquisitions and $134 million to fiscal 1994
acquisitions. The remaining $232 million increase reflects continued internal
growth in all revenue areas of AOP's base companies, particularly in its
equipment, service and facilities management businesses. The $934 million
increase in revenues from Unisource's U.S. operations includes $764 million
from acquisitions (primarily Butler Paper) and $170 million of internal growth
from its base companies. The $41 million revenue decrease in the Unisource
Canadian paper businesses is primarily attributable to a 5.9% decrease in the
average foreign exchange rate.
AOP's operating income increase of $60.6 million includes $16.4 million from
prior year acquisitions and $10.2 million from current year acquisitions. The
remaining $34 million increase reflects continued internal growth from its base
companies which is primarily the result of higher operating contributions from
the service, supply and facilities management areas of AOP's businesses, along
with increased operating
8
<PAGE>
income related to its leasing activities through Alco Capital Resource, Inc.
("Alco Capital"). Operating income from Unisource's U.S. paper operations
increased $30.1 million. This increase represents a contribution of $17.6
million from prior year acquisitions and $12.5 million from its base companies.
The internal growth is attributable to improved gross margins and expense
reductions realized in the last half of the fiscal year offset primarily by
lower comparable margins experienced in the first half of the year. The
Canadian paper distribution business decrease in operating income of $4.8
million is the result of the carryover of certain incremental merger costs
related to the Canadian merger plan implemented in fiscal 1993, gross margin
erosion in the first half of the fiscal year, and the effects of the declining
foreign exchange rates.
Geographically, revenues from Alco's paper and office products operations
outside the U.S. were $843 million for fiscal 1994 compared to $800 million for
the prior fiscal year. The increase reflects $77 million from the European
operations of Erskine acquired in fiscal 1993 along with $7 million from AOP
internal growth offset by a decrease of $41 million from the Canadian paper
distribution business. Operating income from foreign operations was $29.1
million for fiscal 1994, an increase of $1.8 million from the prior year, the
result of increased AOP foreign operations, offset by the decrease in operating
income of the Canadian paper distribution business.
The 49.9% investment in IMMOS in October 1992 marked Alco's entry into the
European market, and it was to serve as a base for further expansion in Europe.
The venture agreement provided Alco with the option of acquiring the remaining
shares of IMMOS over a three-year period beginning in 1996 if IMMOS achieved
certain operating goals. However, the capital structure and organizational
complexities of IMMOS, exacerbated by the distressed European economy and
operational differences among the venture partners, had prevented IMMOS from
progressing toward those goals. As a result, in September 1994, Alco sold its
49.9% interest in IMMOS for cash plus a passive interest in any subsequent sale
of IMMOS for five years (see "Divestitures" on page 5 of this prospectus). Alco
retains no ongoing liability in the joint venture and the parties exchanged
complete mutual releases for past actions. In addition, Alco was relieved of
the covenant not to compete in Europe contained in the joint venture agreement,
although the parties will not compete with each other for a period expiring on
December 31, 1995. As part of the transaction, Alco acquired profitable
operations in Denmark and France and retained limited operations in Germany.
Alco recognized a loss on the sale of its interest in IMMOS in the quarter
ended June 30, 1994, and recorded a pretax loss of $115.3 million ($95.1
million, net of tax) equating to a loss per share of $1.75 for the quarter
($1.77 for fiscal 1994). This charge represents the write-off of Alco's
investment in IMMOS plus certain transactional costs less cash proceeds from
the sale together with related tax benefits. For the fiscal year ended
September 30, 1994, Alco recorded a total pretax loss of $117.2 million from
its investment in an unconsolidated affiliate. This includes the pretax loss of
$115.3 million relating to the sale previously discussed and a $1.9 million
operating loss on its investment through March 31, 1994.
Interest expense increased by $3.6 million from fiscal 1993, a result of
higher interest rates along with higher borrowing levels during the year to
fund acquisitions and working capital requirements. Income before taxes from
continuing operations increased by $132.2 million, which reflects the net
effect of the $115.3 million loss on the sale of IMMOS in fiscal 1994 and the
$175 million charge for restructuring costs in fiscal 1993. Income before taxes
from continuing operations also includes improved operating results from base
companies and earnings contributed by current and prior year acquisitions net
of increased interest costs and other corporate items. The effective income tax
rate for fiscal 1994 is 55% compared to 69% in fiscal 1993. The effective
income tax rate for fiscal 1994, excluding the effect of the sale of IMMOS, is
39.1% compared with 39.6% in fiscal 1993, excluding the effect of the
restructuring costs. Fiscal 1994 weighted average shares were 6.3 million
shares greater than the 47.4 million shares for fiscal 1993, primarily the
result of a public offering of common stock in December 1993.
Most facets of the Unisource restructuring plan announced in September 1993
are proceeding as planned (see "Restructuring Plan" on page 4 of this
prospectus). As of September 30, 1994, Unisource had substantially completed 68
facility consolidations and reduced its employee base by approximately 725.
This
9
<PAGE>
excludes the data processing personnel that transferred to Integrated Systems
Solutions Corporation ("ISSC"), a subsidiary of IBM, as part of the information
technology system outsourcing agreement with ISSC. However, due to a change in
software, initial implementation of the information technology system was
postponed by six months. This is not anticipated to delay the completion of the
restructuring plan by the end of fiscal 1996.
At September 30, 1994, the remaining restructuring reserve is $107 million,
which management believes is adequate to complete the restructuring plan by the
end of fiscal 1996 and also obtain the goal of increasing Unisource's operating
return on sales to a run rate of 4% by the end of fiscal 1996. The estimated
cost to complete the facility consolidations is $44.4 million of which a
significant portion relates to costs to dispose and maintain facilities which
have been or will be vacated. Severance costs have been incurred during 1994 in
accordance with the plan and $23.8 million is the estimated balance for
severance costs. The related organizational and system redesign is estimated to
have a remaining cost of $16.2 million.
Alco is presently in arbitration with a former subsidiary, which has asserted
that Alco is liable to it for certain liabilities arising under the Coal
Industry Health Benefit Act of 1992 (see "Legal Proceedings" on page 7 of this
prospectus). Based on consultation with its counsel, Alco does not believe that
it is responsible for such liabilities and, therefore, no provision for this
matter has been recorded in the financial statements. In the event that the
arbitrators decide in favor of the claimant, Alco estimates that it would be
obligated to pay approximately $36 million over a twenty-year period, which
would result in an after-tax charge of approximately $23 million to
discontinued operations.
During the first quarter of fiscal 1994, Alco adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes"; the individual and combined effect on
earnings of these accounting changes was immaterial.
RESULTS OF OPERATIONS--1993
Revenues and income before taxes by segment for fiscal years ended September
30, 1993 and September 30, 1992 and the percentage change for 1993 versus 1992
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ---------------------------
1993 1992 % CHANGE 1993 1992 % CHANGE
------ ------ -------- ------- ------ --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products...... $1,586 $1,259 26.0% $ 138.8 $105.2 31.9%
Unisource
United States........... 4,174 3,585 16.4 118.7 118.2 .4
Canada.................. 690 83 18.3 2.3
Restructuring costs..... (175.0)
------ ------ ---- ------- ------ -----
Total Unisource....... 4,864 3,668 32.6 (38.0) 120.5
------ ------ ---- ------- ------ -----
Operating................. 6,450 4,927 30.9 100.8 225.7 (55.3)
Unconsolidated affiliate.. (2.5)
Investment gain, net...... 6.7
Eliminations and
nonallocated............. (5) (2) (73.7)* (59.9)*
------ ------ ---- ------- ------ -----
$6,445 $4,925 30.9 $ 24.6 $172.5 (85.7)
====== ====== ==== ======= ====== =====
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
FISCAL 1993 COMPARED WITH FISCAL 1992
Alco increased revenues $1.6 billion to $6.5 billion in fiscal 1993 from $4.9
billion in fiscal 1992. Income before taxes from operations, which includes a
restructuring charge of $175 million relating to Unisource operations,
decreased from $226 million in fiscal 1992 to $101 million in fiscal 1993.
Earnings per share from
10
<PAGE>
continuing operations decreased from $2.22 to $(.04), including the Unisource
restructuring charge of $2.38. Earnings per share from continuing operations
excluding the effect of the restructuring charge were $2.34.
AOP generated $327 million in increased revenues of which $17 million relates
to fiscal 1992 acquisitions and $100 million to current year acquisitions. The
remaining $210 million increase reflects continued growth in all revenue areas
of AOP's base companies, including its equipment, service and facilities
management businesses. The $589 million increase in revenues from Unisource's
U.S. operations represents $161 million from its base companies and $428
million from current and prior year acquisitions. The $607 million revenue
increase in the Unisource Canadian paper businesses is primarily attributable
to the prior year acquisitions and includes a decrease of $32 million relating
to changes in foreign currency rates.
Alco's total foreign operations including the foreign operations of AOP and
Unisource Canada generated $800 million in revenues for the fiscal year 1993
compared with $169 million for the same period of the prior fiscal year. The
increase is primarily the result of the Canadian paper distribution
acquisitions made in September 1992 and reflects a $48 million negative impact
because of foreign currency rate changes.
AOP's operating income increase of $33.6 million includes $1.7 million from
fiscal 1992 acquisitions and $2.7 million from current year acquisitions. The
remaining $29.2 million increase from its base companies is primarily the
result of higher operating contributions from the service and supply areas of
AOP's businesses. Unisource's U.S. paper operations include an increase in
operating income of $.5 million, reflecting $10.2 million contributed by
current and prior year acquisitions, offset by a decrease in earnings of $9.7
million from base paper distribution companies caused by competitive business
conditions in the paper industry. Unisource's Canadian paper operations include
a $16 million increase in operating income primarily relating to fiscal 1992
acquisitions. The overall decrease in operating income for Unisource is
primarily attributed to the $175 million of restructuring costs, $171.5 million
relating to U.S. operations and $3.5 million relating to Canadian operations.
In September 1993, Alco adopted the Unisource restructuring plan as a
proactive response to changes in the business environment in which Unisource
operates (see "Restructuring Plan" on page 4 of this prospectus). In recent
periods, mills have experienced overcapacity, resulting in depressed pricing
and pressure on distributors' margins. The usage and demand for paper has
shifted significantly because of consolidation in the commercial printing
industry, enhancements in imaging technology and the related growth in
reprographics segment.
The restructuring plan encompasses the following: adoption of the "Unisource"
identity, installation of a customer-focused information system, re-engineering
of warehouse and transportation management functions, regionalization of
management and administrative support functions and consolidation of service
center locations. In connection with certain elements of the restructuring
plan, Alco recorded a charge to earnings of $175 million ($112.9 million net of
taxes or $2.38 per share) in the fourth quarter of fiscal 1993. The major
components of the restructuring costs are location consolidation ($60.7
million), severance costs ($48 million) and related information system redesign
($22 million). Included in the charge are noncash asset writedowns relating to
inventory and equipment that approximate $22.5 million and are directly
attributable to the Unisource restructuring. The restructuring charge will be
funded from Unisource's cash flow. Alco's objective in adopting the
restructuring plan is to increase Unisource's operating return on sales from
2.6% in the fourth quarter of fiscal 1993 to 4% by the end of fiscal 1996.
Income from foreign operations was $27.3 million for the year ended September
30, 1993. This represents an increase of $13.5 million over the prior year
results of $13.8 million and is primarily attributable to the Canadian paper
distribution acquisitions in September 1992. Fluctuations in the foreign
currency rates reduced the increase by $1.9 million. Alco recorded a $2.5
million loss from an unconsolidated affiliate, IMM Office Systems GmbH, due to
recessionary conditions and costs associated with an increase in sales force.
Interest expense increased $8.5 million from the comparable period in fiscal
1992, a result of higher borrowing levels to fund acquisitions. Income before
taxes from continuing operations decreased by $147.9
11
<PAGE>
million, which reflects the $175 million restructuring charge in fiscal 1993.
Income before taxes from continuing operations also includes the combined
result of improved operations from base companies along with earnings
contributed by key acquisitions made in the prior year, which were achieved
despite the increase in interest cost and the $6.7 million net investment gain
from the prior year. The effective income tax rate for the current period is
69%. The effective tax rate, excluding the restructuring costs, is 39.6%, the
same as the effective rate for the year ended September 30, 1992.
FINANCIAL CONDITION AND LIQUIDITY
Debt, excluding finance subsidiaries, was $445 million at September 30,
1994, a decrease of $349 million from Alco's debt balance at September 30,
1993 of $794 million. Alco had a total of $616 million in bank credit
commitments as of September 30, 1994, of which $525 million were unused and
available. In December 1994, Alco intends to replace three of these credit
agreements with one $500 million multi-currency facility with more favorable
terms and to reduce the commitment under the remaining credit agreement to
$100 million, resulting in total bank credit commitments of $600 million. Debt
as a percentage of capitalization was 24.6% and the current ratio was 1.6 to 1
at September 30, 1994. At the end of fiscal 1994, Alco's commitments for
capital expenditures were approximately $22 million, all of which is expected
to be expended during fiscal 1995.
In December 1993, Alco issued 5,750,000 shares of common stock in a public
offering, and the net proceeds of approximately $294 million were used to
reduce outstanding debt. Alco entered into an agreement in May 1994 retiring
$25 million of redeemable preferred stock of a subsidiary and issued senior
notes in an equivalent amount.
Alco estimates that total cash expenditures in connection with the Unisource
restructuring plan will amount to $148 million, of which approximately $52
million has been spent to date, with $53 million anticipated to be paid in
fiscal 1995 and $43 million in fiscal 1996. Effective January 1, 1994,
Unisource entered into a ten-year agreement with ISSC for $300 million, to
provide the information technology system to be implemented as part of the
restructuring plan. Such contract has been expanded to provide automated
warehouse and truck routing systems at an estimated cost of approximately $30
million over the same contract period. The forgoing commitments are
anticipated to be funded from Unisource's operating cash flow.
Finance subsidiaries debt grew by $52 million from September 30, 1993, a
result of increased leasing activity. Effective July 1, 1994, Alco Capital
entered into a Medium Term Note Program, whereby Alco Capital may offer to the
public from time to time medium term notes having an aggregate initial
offering price not exceeding $500 million or the equivalent thereof in foreign
currency. These notes are offered at varying maturities of nine months or more
from their dates of issue and may be subject to redemption at the option of
Alco Capital or repayment at the option of the holder, in whole or in part,
prior to the maturity date in conjunction with meeting specified provisions.
Interest rates are determined based on market conditions at the time of
issuance. As of September 30, 1994, Alco Capital had issued $105 million of
medium term notes bearing a weighted average interest rate of 6.9%.
In addition, Alco Capital entered into an agreement in September 1994 to
sell under an asset securitization program, an undivided ownership interest in
$125 million of eligible direct financing lease receivables. The agreement,
which expires in September 1995, contains limited recourse provisions that
require Alco Capital to assign an additional undivided interest in leases to
cover any potential losses to the purchaser due to uncollectible leases. As
collections reduce previously sold interests, new lease receivables can be
sold up to $125 million. As of September 30, 1994, $125 million of lease
receivables have been sold pursuant to the agreement.
Alco believes that its operating cash flow together with unused lines of
credit and other financing arrangements will be sufficient to finance current
operating requirements including capital expenditure, acquisition and
restructuring programs.
12
<PAGE>
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
Alco is currently authorized to issue 75,000,000 shares of common stock and
2,135,988 shares of serial preferred stock. Both classes are without par value.
On January 26, 1995, the shareholders are expected to approve an increase in
the authorized number of common shares from 75,000,000 to 150,000,000. The
common stock is subject to the express terms of the serial preferred stock. Two
series of serial preferred stock are outstanding, and additional series may be
authorized by the board of directors.
DIVIDEND RIGHTS
Common Stock. Dividends and other distributions of assets may be made with
respect to the common stock from time to time by the board of directors within
the limits and from the sources permitted by law after payment or provision for
payment of all accrued and unpaid dividends (which are cumulative) on the
serial preferred stock, so long as there is no default in any sinking fund
provisions for the serial preferred stock. Certain loan agreements limit the
amount of retained earnings from which Alco may pay dividends, repurchase its
shares or take certain other actions.
Preferred Stock. The serial preferred stock is entitled to payment of annual
per share dividends as follows: Series 2, $5.00; and Series AA, $237.50 ($2.375
per Depositary Share) through January 1, 1996 and $325.00 ($3.25 per Depositary
Share) thereafter.
So long as any shares of serial preferred stock are outstanding, Alco may not
(a) declare or pay any dividends (other than dividends payable in common stock
or other shares of Alco ranking junior to the serial preferred stock) to
holders of common stock or shares of Alco of any other class ranking on a
parity with or junior to the serial preferred stock, or (b) make any
distributions of assets (directly or indirectly, by purchase, redemption or
otherwise) to the holders of common stock or shares of Alco of any other class
ranking on a parity with or junior to the serial preferred stock (except in the
case of shares purchases in compromise of claims, or to prevent loss on
doubtful debts and except in the case of shares purchases out of the proceeds
of the sale of common stock or other shares ranking junior to the serial
preferred stock received by Alco, subsequent to January 1, 1968):
(a) Unless all accrued and unpaid dividends on shares of serial preferred
stock, including the full dividends for the then quarterly dividend period,
shall have been paid or declared and funds sufficient for payment thereof
set apart; and
(b) Unless there shall be no arrearages with respect to redemption of
shares of serial preferred stock from any sinking fund provided therefor.
No dividends may be paid upon or declared or set apart for any of the serial
preferred stock for any quarterly dividend period unless at the same time a
like proportionate dividend for the same quarterly dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be
paid upon or declared or set apart for all serial preferred stock of all series
then issued and outstanding and entitled to receive such dividend.
PREEMPTIVE RIGHTS
Common Stock. The holders of common stock do not have any preemptive right to
purchase or have offered to them for purchase any shares or other securities of
Alco.
Preferred Stock. The only preemptive right of holders of serial preferred
stock is to participate in certain distributions, if any were to be made by
Alco, to holders of common stock of options or rights to acquire common stock,
or of evidences of Alco debt or assets (other than cash).
COMMON STOCK PURCHASE RIGHTS
In February 1988, Alco declared and paid a dividend distribution of one right
("Right") for each outstanding share of common stock. The Rights become
exercisable ten days (or such later date, not beyond
13
<PAGE>
thirty days, as is fixed by the Board of Directors) after the earlier of: (a)
public announcement that an individual or group has acquired or obtained the
right to acquire 20% or more of Alco's common stock or (b) an individual or
group commences or announces an intention to commence a tender or exchange
offer that could result in the acquisition of 30% or more of such securities
(the "Separation Date"). When exercisable, each Right entitles the holder to
purchase one one-hundredth of a share of Alco's Series 12 preferred stock for
$75 (the "Exercise Price"), subject to adjustment. Further, if any person or
group owning 20% or more of Alco's outstanding common stock (a) engages in
certain self-dealing practices with Alco, or (b) causes Alco to forgo or reduce
quarterly dividends or take an action which would result in a more than 2%
increase in the other entity's proportionate share of Alco's outstanding
shares; or if any person or group acquires 30% or more of Alco's outstanding
stock, each Right would entitle the holder thereof to acquire for the Exercise
Price shares of common stock having a market value equal to twice the Right's
exercise price.
If Alco were acquired in a merger or other business combination, or if more
than 50% of its earning power or assets were sold in one transaction or a
series of transactions, each Right would entitle the holder thereof to purchase
shares of the acquiring company's common stock having a market value equal to
twice the Right's exercise price. The Rights that are or were held by a person
or group owning 20% or more of Alco's outstanding voting securities become void
if such person or group engages in an event which entitles holders of the
Rights to purchase common stock or common stock of the acquiring company having
a market value equal to twice the Right's exercise price.
The Rights, which expire on February 10, 1998, are non-voting and may be
redeemed by Alco at a price of $.05 per Right any time prior to ten days after
public announcement that a person has acquired 20% or more of Alco's
outstanding voting securities. Until the Separation Date, the Rights are
transferable with and only with the common stock.
VOTING RIGHTS
Common Stock. Subject to certain voting rights of holders of the serial
preferred stock to vote in certain circumstances and with respect to certain
matters as a class, the holders of the common stock currently have full voting
rights upon all matters presented for shareholder action. Shareholders do not
have the right to cumulate votes in electing directors.
Preferred Stock. The holders of serial preferred stock are entitled to one
vote per share, and except as otherwise provided by specific provisions of
Alco's Articles of Incorporation or by Ohio law, to vote on all matters
together with the holders of common stock as one class. The holders of serial
preferred stock are not entitled to cumulate votes in electing directors. The
Articles of Incorporation of Alco provide that in the event of default in the
payment, in whole or in part, of six quarterly dividends on the serial
preferred stock, whether or not consecutive, the holders of shares of serial
preferred stock will be entitled to elect two directors, to serve in addition
to the directors otherwise elected. Such right to elect additional directors is
in lieu of all other rights of the holders of the serial preferred stock to
vote for directors, and will remain in effect until no quarterly dividend is in
default. It is also provided that the vote or the written consent of at least
two-thirds of the outstanding shares of serial preferred stock voting as a
class is necessary to effect (i) any amendment, alteration or repeal of any of
the provisions of the Articles of Incorporation or the Code of Regulations of
Alco which affects the voting powers, rights or preferences of the holders of
the serial preferred stock, (ii) the authorization or issue of any stock, or
any security convertible into any stock, ranking prior to the serial preferred
stock, (iii) the purchase or redemption of less than all the serial preferred
stock then outstanding (except in accordance with a stock purchase offer made
to all holders of serial preferred stock) when any dividends or sinking fund
obligations on the serial preferred stock are in arrears, or (iv) the sale,
lease or conveyance by Alco of all or substantially all of its property or
business, its voluntary liquidation or dissolution, or its consolidation with
or merger into any other corporation, unless the resulting corporation will
have no shares authorized or outstanding ranking prior to or on a parity with
the serial preferred stock except the same number with the same rights and
preferences as those of Alco authorized and outstanding immediately preceding
such consolidation or merger, and unless each holder of serial preferred stock
immediately prior thereto receives the same number of shares, with the same
rights and preferences, of the
14
<PAGE>
resulting corporation. It is further provided that the vote or written consent
of two-thirds of the holders of shares of any series is necessary to amend the
Articles of Incorporation or Code of Regulations of Alco in such a way as to
affect adversely and particularly the preferences, rights, powers or privileges
of such series. No such vote or consent is required if provision has been made
for the redemption of all of the serial preferred stock or any series thereof.
In addition, Alco may create additional classes of stock, increase the
authorized number of shares of serial preferred stock or issue series of
preferred stock ranking on a parity with the serial preferred stock with
respect, in each case, to the payment of dividends and amounts upon
liquidation, dissolution and winding up without the consent of any holder of
serial preferred stock.
REDEMPTION PROVISIONS AND SINKING FUND
Common Stock. The common stock is not redeemable.
Preferred Stock. The directors are empowered to determine any redemption
rights and price of each series of the serial preferred stock. The outstanding
shares of the Series 2 preferred stock are redeemable in whole or in part, at
Alco's option, at any time after five years from the date of issue, at the
redemption price of $100 per share, plus accrued unpaid dividends. Alco is
required to provide a sinking fund for the redemption of the Series 2 preferred
stock. Alco has determined to redeem the Series 2 preferred stock in equal
annual installments from 1989 through 1995 at the redemption price stated
above.
The Series AA preferred stock and the depositary shares representing such
stock are not redeemable prior to January 9, 1996. On and after January 9, 1996
and until January 9, 2000, the Series AA preferred stock will be redeemable, in
whole or in part, at the option of Alco, for such number of shares of common
stock as are issuable at a conversion rate of 1.1201 shares of common stock for
each depositary share, subject to adjustment in certain circumstances. Alco may
exercise this option only if for 20 trading days within any period of 30
consecutive days, including the last trading day of such 30 trading day period,
the closing price of the Common Stock on the New York Stock Exchange ("NYSE")
exceeds $58.03, subject to adjustment in certain circumstances. On and after
January 9, 2000 the Series AA preferred stock will be redeemable, in whole or
in part at the option of Alco, for cash at a redemption price equivalent to
$50.00 per depositary share, plus accrued and unpaid dividends. The Series AA
preferred stock is not entitled to the benefit of any sinking fund.
CONVERSION RIGHTS
Common Stock. The common stock is not convertible into any other security.
Preferred Stock. The directors are empowered to determine whether the shares
of any series of the serial preferred stock will be convertible into common
stock, and, if so, the conversion price or prices and the other terms or
provisions of such rights. Each outstanding share of Series 2 preferred stock
is convertible, at the option of the holder, at any time prior to the close of
business on the second day preceding the redemption date thereof, into 8.0
shares of common stock. Each outstanding share of Series AA preferred stock is
convertible at any time prior to the close of business on the redemption date
thereof into 112.01 shares of common stock (1.1201 shares per depositary
share). The conversion rights with respect to serial preferred stock are
subject to proportionate adjustment if Alco combines or splits the outstanding
shares of common stock or pays a dividend in common stock. Shares of common
stock issuable upon the exercise of outstanding stock options are similarly
subject to proportionate adjustment in such events. Shares of serial preferred
stock which have been converted must be retired and may not be reissued.
LIQUIDATION RIGHTS
Common Stock. The holders of common stock are entitled pro rata to the assets
of Alco in the event of voluntary or involuntary liquidation, subject to the
rights of creditors and the rights of the holders of the serial preferred stock
to receive certain per share amounts plus accrued unpaid dividends.
15
<PAGE>
Preferred Stock. In the event of voluntary or involuntary liquidation, the
holders of preferred stock are entitled to receive the following per share
amounts plus accrued unpaid dividends: Series 2, $100; and Series AA, $5,000.00
($50 per depositary share). At September 30, 1994, the preference upon
liquidation of the shares of serial preferred stock then outstanding aggregated
$201,261,000. After provision for the liquidation preference of serial
preferred stock, at September 30, 1994, the portion of shareholders' equity
applicable to common stock was $1,167,000,000. In the opinion of counsel for
Alco, there are no restrictions upon the payment of dividends or other
distributions out of surplus solely by reason of any excess of the liquidation
preference over the carrying value of the serial preferred stock, and there are
no remedies available to security holders before or after the payment of any
dividend or distribution solely because such dividend may reduce surplus to an
amount less than the amount of such excess. The serial preferred stock has
priority over the common stock on any liquidation, dissolution or winding up to
the extent of the liquidation price plus any accrued unpaid dividends. The
directors have authority in establishing any series to determine the
liquidation price for each series in the event of any liquidation, dissolution
or winding up.
LIABILITY FOR ASSESSMENT
Outstanding shares of the common and serial preferred stock, including the
shares of stock to be sold by the Selling Shareholders hereunder, are fully
paid and non-assessable.
MANAGEMENT
The following is a list of Alco's directors and executive officers, their
ages and their positions for the last five years. Unless otherwise noted, such
positions are with Alco or its subsidiaries.
----------------
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
O. Gordon Brewer, Jr. ........... 58 Vice President--Finance (1986-Present)
J. Mahlon Buck, Jr. ............. 69 Director of Alco since 1984; Chairman and
President, TDH Capital Corporation (1977-
Present) (also a trustee of The Vanguard Real
Estate Funds Nos. I and II, Main Line Health,
Inc. and The Bryn Mawr Hospital)
Kathleen M. Burns................ 42 Vice President (1994-Present) and Treasurer
(1989-Present); Assistant Treasurer (1987-1989)
J. Kenneth Croney................ 52 Vice President (1983-Present), General Counsel
(1994-Present) and Secretary (1983-Present)
Paul J. Darling, II.............. 56 Director of Alco since 1994; Chairman, President
and Chief Executive Officer, Corey Steel Company
(1984-Present) (also a director of Liberty
Mutual Insurance Company, Liberty Life Assurance
Company of Boston, Liberty Mutual Fire Insurance
Company and Liberty Financial Companies, Inc.)
Stephen K. Deay.................. 47 Vice President--Tax (1993-Present); Director--
Taxes (1989-1993)
Michael J. Dillon................ 41 Vice President (1994-Present) and Controller
(1993-Present); Group Controller, Alco Office
Products (1991-1993); Associate Audit Director
(1991); Senior Audit Manager (1987-1991)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Kurt E. Dinkelacker.............. 41 Executive Vice President and Chief Financial
Officer (1993-Present); Executive Vice
President--Finance, Alco Office Products (1989-
1991); Group Controller, Alco Office Products
(1987-1989)
William F. Drake, Jr. ........... 62 Director of Alco since 1969; Attorney and
Partner, Montgomery, McCracken, Walker & Rhoads
(1984-Present); Vice Chairman (1984-Present)
(also a director of Nocopi Technologies, Inc.)
James J. Forese.................. 59 Director of Alco since 1994; General Manager,
IBM Customer Financing, and Chairman, IBM Credit
Corporation (1993-Present); IBM Vice President,
Finance (1990-1993); IBM Vice President and
Group Executive (1988-1990) (also a director of
Lexmark International, Inc., IBM Latin America,
American Management Systems, Inc. and NUI
Corporation)
Frederick S. Hammer.............. 58 Director of Alco since 1986; A director of
United Student Aid Group, Inc., Tri-Arc
Financial Services and National Media
Corporation; Chairman, Chief Executive Officer
and a director, Mutual of America Capital
Management Corporation (1993-1994); President,
SEI Asset Management Services Group (1989-1993);
Mazur Fellow, The Wharton School, University of
Pennsylvania (1989-1990)
Barbara Barnes Hauptfuhrer....... 66 Director of Alco since 1988; A director of The
Vanguard Group of Investment Companies and of
each of the mutual funds in the Group, The Great
Atlantic and Pacific Tea Co., Inc., Knight-
Ridder, Inc., Massachusetts Mutual Life
Insurance Co. and Raytheon Company
James E. Head.................... 49 Vice President (1993-Present); Group President,
Alco Office Products (1993-Present); President,
CopyRite (an Alco Office Products company)
(1979-1993).
William M. Laughlin.............. 52 Vice President--Financial Operation Support
(1993-Present); Vice President--Operational
Audit, Alco Office Products (1992-1993);
Director--Audit (1982-1992)
Dana G. Mead..................... 58 Director of Alco since 1994; Chairman and Chief
Executive Officer (1994-Present), President and
Chief Operating Officer (1992-1994) and a
director (1992-Present), Tenneco, Inc.; Chairman
(1992-Present), J I Case (a Tenneco division);
Vice Chairman (1994-Present) and a director,
National Association of Manufacturers; Executive
Vice President (1989-1992), Senior Vice
President (1986-1989), International Paper
Company (also a director of National Westminster
Bancorp, Cummins Engine Company, Inc. and Baker
Hughes Incorporated)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Hugh G. Moulton.................. 61 Executive Vice President (1992-Present); General
Counsel (1979-1994); Senior Vice President--
Administration (1983-1992)
Ray B. Mundt..................... 66 Chairman (1986-Present) and a director (1971-
Present); Chief Executive Officer (1980-1993);
President (1974-1988) (also a director of
Liberty Mutual Insurance Company, Liberty Life
Assurance Company of Boston, Liberty Mutual Fire
Insurance Company, Liberty Financial Companies,
Inc., Nocopi Technologies, Inc., CoreStates
Bank, N.A., and Clark Equipment Company)
Paul C. O'Neill.................. 68 Director of Alco since 1978; Private investor;
Chairman, Ovington Securities Ltd. (1989-1991)
Rogelio G. Sada.................. 59 Director of Alco since 1980; Private investor;
Mayor, San Pedro, N.L., Mexico (1992-1994);
Director, International Advisory Board of
Security Pacific National Bank (1980-1991);
Director General, VITRO, a glass and glass-
related products manufacturer in Mexico (1972-
1985)
James W. Stratton................ 58 Director of Alco since 1988; President, Stratton
Management Company (1972-Present); Chairman
(1993-Present) and a director, Stratton Small-
Cap Yield Fund; Chairman (1981-Present) and a
director, Stratton Monthly Dividend Shares;
Chairman (1972-Present) and a director, Stratton
Growth Fund (also a director of UGI Corporation,
Gilbert Associates and Teleflex)
John E. Stuart................... 50 President, Chief Executive Officer and a
director (1993-Present); Vice President (1989-
1993); Group President, Alco Office Products
(1985-1993)
</TABLE>
All directors hold office until the election of successors by the
shareholders of Alco. All executive officers hold office at the pleasure of the
board of directors of Alco. All current directors will stand for reelection as
directors at the 1995 Annual Meeting.
SECURITY OWNERSHIP
As of November 30, 1994, shares of common stock of Alco were beneficially
owned (as determined by rules of the Securities and Exchange Commission,
although in certain cases the persons may disclaim beneficial ownership) by the
current directors, by each of the individuals named in the Summary Compensation
Table (on page 22 of this prospectus) and by all current directors and
executive officers of Alco as a group, as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING SHARED VOTING ACQUIRABLE
AND AND/OR WITHIN
INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2)
---------------- ------------------- ----------
<S> <C> <C> <C>
J. Mahlon Buck, Jr............ 20,984 0 15,991
Paul J. Darling, II........... 56 0 400
William F. Drake, Jr.......... 81,513 0 8,545
Kurt E. Dinkelacker........... 3,718 2,678 21,909
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING SHARED VOTING ACQUIRABLE
AND AND/OR WITHIN
INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2)
---------------- ------------------- ----------
<S> <C> <C> <C>
James J. Forese.............. 1,056 0 400
Frederick S. Hammer.......... 5,701 0 8,090
Barbara Barnes Hauptfuhrer... 1,619 0 11,140
James E. Head................ 3,918 3,606 22,645
Dana G. Mead................. 61 0 400
Hugh G. Moulton.............. 24,018 31,607 32,223
Ray B. Mundt................. 167,150 57,061 19,501
Paul C. O'Neill.............. 38,491 12,000 925
Rogelio G. Sada.............. 6,086 0 13,623
James W. Stratton............ 1,786 0 2,356
John E. Stuart............... 24,836 3,340 119,273
All current directors and ex-
ecutive officers as a group. 425,493 153,518 328,644
</TABLE>
--------
(1) Includes all shares held under Alco's Stock Participation Plan (and,
for Mr. Head, under Alco's Defined Contribution Plan), and, where
applicable, shares owned by spouses or minor children.
(2) Represents shares which may be acquired within 60 days of November 30,
1994 through the exercise of stock options or vesting under Alco's
Partners' Stock Purchase Plan.
As of November 30, 1994, for each of the individuals named above, the
percentage of common stock beneficially owned was less than 1%. The percentage
of common stock beneficially owned by all current directors and executive
officers as a group was approximately 1.6%. As of November 30, 1994, no person
beneficially owned more than 5% of the outstanding shares of common stock of
Alco, nor did any director, nominee or executive officer of Alco own any shares
of preferred stock of Alco. As of November 30, 1994, Alco employees, through
Alco's Stock Participation Plan, owned approximately 8.7% of the outstanding
shares of common stock of Alco.
For the fiscal year ended September 30, 1994, all reports required to be
filed by Section 16(a) of the Securities Exchange Act of 1934 to reflect
changes in beneficial ownership of Alco's securities were timely filed on
behalf of Alco's directors and officers. Amended Form 3 and Form 4 reports,
however, were filed on behalf of Mr. Head to reflect his ownership of 1,345
shares of Alco common stock (and reinvestment of dividends thereon) through an
employee benefit plan. The original Form 3 and 4 reports filed on behalf of Mr.
Head did not include these shares because of an administrative error.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
There are four standing committees of the Board of Directors, including the
Audit Committee and the Human Resources Committee. Between meetings of the
Board of Directors, its powers may be exercised by the Executive Committee,
Human Resources Committee and Investment Committee, and they, as well as the
Board of Directors, sometimes act by unanimous written consent.
The Audit Committee (Messrs. Buck, Darling, Sada, and Stratton) met four
times during the fiscal year ended September 30, 1994. Its functions are to
review the report of Alco's independent auditors relating to their audit of the
financial statements of Alco, to review and discuss internal financial controls
with both the independent auditors and internal auditors, and to direct that
special studies relating to the adequacy of financial controls and accounting
procedures be made from time to time as the Committee deems desirable.
The Human Resources Committee (Mrs. Hauptfuhrer and Messrs. Buck, Hammer,
Mead and Sada) met six times during the fiscal year. It is responsible for
reviewing and evaluating persons who are suggested as nominees for election as
members of the Board of Directors, and for making recommendations to the Board
19
<PAGE>
of Directors concerning such nominees. The Human Resources Committee is also
responsible for setting policies regarding executive compensation and for
determining the salaries and other compensation of each of the executive
officers of Alco. The Committee also has all of the powers and exercises all of
the duties of the Board of Directors as described in Alco's stock option, stock
purchase, deferred compensation and other similar plans.
During the fiscal year, the Board of Directors met five times. Each director
attended at least 75% of the total number of the meetings of the Board of
Directors and the meetings of all committees on which he or she served.
EXECUTIVE COMPENSATION
Alco's executive compensation program is administered by the Human Resources
Committee of the Board of Directors (the "Committee"), which has responsibility
for all aspects of the compensation program for the executive officers of Alco.
The Committee is comprised of five directors, none of whom is an employee of
Alco and each of whom qualifies as a disinterested person for the purpose of
Rule 16b-3 under the Securities Exchange Act of 1934 and an outside director
for purposes of Section 162(m) of the Internal Revenue Code (the "Code").
The primary components of Alco's executive compensation program are (a) base
salaries; (b) annual cash bonus opportunities; and (c) long term incentive
opportunities.
BASE SALARIES
Base salaries for executive officers are reviewed annually and are subject to
adjustment on the basis of individual, corporate, and business unit
performance, as well as competitive, inflationary and internal equity
considerations. Base salaries generally are fixed at or below the 50th
percentile of predicted executive salaries paid by comparable companies based
upon survey data compiled by Alco's compensation consultant. The companies
considered to be comparable to Alco for compensation purposes include a broad
cross-section of companies which are representative of industry generally.
ANNUAL BONUS
Annual bonus payments to executive officers are awarded pursuant to the Alco
Standard Corporation Annual Bonus Plan, and are based on corporate or business
unit performance compared to the annual business plans established for the
year. These annual bonus payments are in amounts equal to a percentage of base
salary. They generally range from 0% for threshold, 30-50% for target, and 60-
100% for maximum performance.
LONG TERM INCENTIVE COMPENSATION
LTIP Awards
The Alco Standard Corporation Long Term Incentive Compensation Plan ("LTIP")
directly aligns the long-term interests of Alco's executives with those of
Alco's shareholders. The LTIP motivates and rewards growth in shareholder value
by granting to eligible executives stock awards which vest only if certain
performance criteria are met. For corporate officers, the LTIP is based on
total shareholder return (stock price appreciation and dividends) over a three-
year plan period compared with the total shareholder return of the Standard &
Poor's 500 Stock Index (the "S&P 500") over the same period. Awards are made at
the fair market value on the last trading day immediately preceding the first
day of the plan period.
Total shareholder return is measured over successive three-year periods (with
a new three-year period beginning every fiscal year) and shares of common
stock, if earned pursuant to the terms of the award, will
20
<PAGE>
be issued at the end of each such three-year period. The number of shares
issued is dependent upon achievement of performance targets and range from 0
(in the case of performance at or below threshold) to the number of shares
determined by dividing a maximum of 100% of the participant's base salary at
the beginning of the plan period by the share price on that date (for maximum
performance). For performance between threshold and maximum, the number of
shares issued pursuant to the award will be prorated on a straight-line basis.
The value of the participant's award will depend on both Alco's total
shareholder return relative to the S&P 500 and changes in the share price
during the plan period.
Regular Stock Options
Stock options are granted under Alco's regular stock option plans as a reward
for past performance and as motivation for future performance which maximizes
shareholder value. Stock options are generally granted for ten-year terms and
vest over a five-year employment period. The exercise price of these stock
options is the fair market value of Alco common stock on the date of grant.
21
<PAGE>
SUMMARY OF EXECUTIVE COMPENSATION
The following table provides a summary of all compensation for the five most
highly compensated officers of Alco during the fiscal years ended September 30,
1994, 1993 and 1992:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION(5)
--------------------------------- ----------------------------
AWARDS
-------------
OTHER
NAME ANNUAL ALL OTHER
AND COMPEN- SECURITIES COMPEN-
PRINCIPAL FISCAL SATION UNDERLYING SATION
POSITION(1) YEAR SALARY($) BONUS($) ($)(2) OPTIONS(3) ($)(4)
----------- ------ --------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Stuart 1994 700,000 700,000 250,000 177,642
President and 1993 393,750 350,000 500 100,533
Chief Executive Officer 1992 315,000 315,000 15,500 87,886
Ray B. Mundt 1994 820,000 820,000 2,850 1,146 44,842
Chairman 1993 820,000 0 2,850 1,605 31,821
1992 820,000 498,970 2,850 1,689 43,244
Kurt E. Dinkelacker 1994 300,000 300,000 50,000 74,806
Executive Vice President 1993 168,750 150,000 0 42,066
and Chief Financial Officer 1992 130,400 130,400 5,000 32,345
Hugh G. Moulton 1994 300,000 300,000 0 78,136
Executive Vice President 1993 300,000 0 20,000 34,097
1992 284,000 120,970 10,000 49,429
James E. Head 1994 300,000 300,000 50,000 80,954
Vice President and 1993 167,083 177,535 0 46,098
Alco Office Products 1992 135,000 160,000 5,000 39,589
Group President
</TABLE>
(1) During fiscal 1992 and ten months of fiscal 1993, Mr. Mundt was Chief
Executive Officer of the corporation, Mr. Stuart was Group President of
Alco Office Products, Mr. Dinkelacker was Executive Vice President of Alco
Office Products, and Mr. Head was President of Copyrite, an Alco Office
Products operating company. In August 1993, Mr. Stuart became President and
Chief Executive Officer of the corporation, Mr. Dinkelacker became
Executive Vice President and Chief Financial Officer of the corporation,
and Mr. Head became Group President of Alco Office Products. In November
1993, Mr. Head was appointed a Vice President and executive officer of
Alco.
(2) Represents directors' fees.
(3) All stock options except those granted to Mr. Mundt were granted pursuant
to 1986 Stock Option Plan at an exercise price equal to fair market value
of Alco common stock on date of grant. For Mr. Mundt, all options were
granted in lieu of directors' fees pursuant to the 1989 Directors' Stock
Option Plan, which is described under Directors' Compensation on page 25.
Does not include LTIP awards granted during fiscal 1993 and fiscal 1994
pursuant to the Long Term Incentive Compensation Plan, which will only be
earned if certain performance criteria are met. LTIP awards made during
fiscal 1994 are included in the LTIP Awards Table on page 24.
(4) Includes the value of shares of Alco common stock purchased with matching
company contributions under Alco's stock purchase plans, calculated as of
the date of purchase, as follows: John E. Stuart--$176,356 (1994); $99,703
(1993), and $87,572 (1992); Ray B. Mundt--$44,842 (1994), $31,821 (1993),
and $43,244 (1992); Kurt E. Dinkelacker--$74,528 (1994) $41,884 (1993), and
$32,276 (1992); Hugh G. Moulton--$69,374 (1994), $27,367 (1993), and
$46,976 (1992); James E. Head--$80,954 (1994), $46,098 (1993) and $39,589
(1992). The remaining amounts represent above-market interest earned on
deferred compensation.
(5) There were no LTIP payouts in fiscal 1994, 1993 or 1992 to the named
individuals.
22
<PAGE>
OPTION GRANTS
The following table shows option grants to the five individuals named in the
Summary Compensation Table during the fiscal year ended September 30, 1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
% OF TOTAL
NUMBER OPTIONS
OF SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED (#) YEAR (%) ($/SH) DATE VALUE ($)(2)
---- ------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John E. Stuart..... 250,000 52.11 49.00 11/11/03 2,695,000
Ray B. Mundt....... 1,146(1) .23 42.28 2/17/14 31,962
Kurt E.
Dinkelacker....... 50,000 10.42 49.00 11/11/03 539,000
Hugh G. Moulton.... -- -- -- -- --
James E. Head...... 50,000 10.42 49.00 11/11/03 539,000
</TABLE>
(1) Represents directors' fees of $16,150 which Mr. Mundt elected to receive in
the form of stock options pursuant to the 1989 Directors' Stock Option Plan
(described on page 25) at an exercise price equal to 75% of the fair market
value of Alco stock on the date of grant.
(2) The present value of option grants to Messrs. Stuart, Dinkelacker and Head
were calculated using Black-Scholes option valuation methodology, based on
the following assumptions: (a) ten-year option term; (b) becomes
exercisable 20% per year from date of grant; (c) 4.71% expected risk-free
rate of return; (d) 21.87% expected volatility; and (e) 1.96% expected
dividend yield. The present value of the option grant to Mr. Mundt was
calculated using Black-Scholes option valuation methodology, based on the
following assumptions: (a) twenty-year option term; (b) fully exercisable
after one year from date of grant; (c) 5.97% expected risk-free rate of
return; (d) 21.00% expected volatility and (e) 1.77% expected dividend
yield.
OPTION EXERCISES
The following table shows option exercises for each of the five individuals
named in the Summary Compensation Table for the fiscal year ended September 30,
1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- --------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE(1) UNEXERCISABLE(1)
---- --------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
John E. Stuart.......... -- -- 61,200/269,200 2,117,990/3,865,748
Ray B. Mundt............ 26,000 834,000 11,078/8,346 345,140/238,676
Kurt E. Dinkelacker..... -- -- 11,350/57,000 308,621/926,460
Hugh G. Moulton......... 10,000 268,125 23,200/28,200 520,177/985,185
James E. Head........... -- -- 10,550/55,700 293,318/885,587
</TABLE>
(1) Value of unexercised options equals fair market value of Alco common stock
as of September 30, 1994, less exercise price, times the number of shares
underlying the stock options.
23
<PAGE>
LONG TERM INCENTIVE COMPENSATION PLAN
The following table shows the number of stock awards granted to each of the
named individuals under the Long Term Incentive Compensation Plan during the
fiscal year ended September 30, 1994 and the number of shares of Alco common
stock which will become issuable upon attainment of threshold, target and
maximum performance levels:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
PERFORMANCE ESTIMATED FUTURE
NUMBER OF OR OTHER PAYOUTS (SHARES OF
SHARES, UNITS PERIOD UNTIL COMMON STOCK) (#)(2)
OR OTHER MATURATION OR ------------------------
NAME RIGHTS (#) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- --------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
John E. Stuart........ 15,909 10/1/93-9/30/96 0 7,954 15,909
Ray B. Mundt.......... -- -- -- -- --
Kurt E. Dinkelacker... 6,818 10/1/93-9/30/96 0 3,409 6,818
Hugh G. Moulton....... 6,818 10/1/93-9/30/96 0 3,409 6,818
James E. Head......... 6,818 10/1/93-9/30/96 0 3,409 6,818
</TABLE>
(1) Represents the number of stock awards granted, which, if earned, will
entitle the participant to receive shares of common stock. For a
description of the LTIP, see "Executive Compensation" on pages 20 and 21
hereof.
(2) Represents the number of shares of common stock which will be received upon
attainment of threshold, target and maximum performance. For performance
between threshold and maximum, the number of shares which will be received
will be prorated on a straight-line basis.
PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLANS
Certain executive officers of Alco (including Messrs. Stuart, Mundt,
Dinkelacker, Moulton and Head) are participants in a pension plan (the "Pension
Plan") for salaried employees which provides to eligible retired employees at
age 65 annual pension benefits equal to the number of years of credited service
multiplied by 1% of average annual compensation earned during the three
consecutive years within the employee's last ten years of participation in the
Pension Plan which yield the highest average. All Pension Plan costs are paid
by Alco and the Pension Plan and benefits are funded on an actuarial basis. The
years of credited service as of September 30, 1994 for the individuals named in
the Summary Compensation Table were: John E. Stuart--8.9 years; Ray B. Mundt--
24.3 years; Kurt E. Dinkelacker--9.3 years; Hugh G. Moulton--23.9 years; and
James E. Head-- 4.0 years.
Alco also has a Supplemental Executive Retirement Plan ("SERP"). Coverage
under the SERP is limited to participants in the Alco pension plan who are not
commissioned sales employees and whose benefits under the pension plan are
limited because of (a) restrictions imposed by the Code on the amount of
benefits which may be paid from a tax-qualified plan, (b) restrictions imposed
by the Code on the amount of an employee's compensation that may be taken into
account in calculating benefits to be paid from a tax-qualified plan, or (c)
any reductions in the amount of compensation taken into account under the
pension plan because of an employee's participation in certain deferred
compensation plans sponsored by Alco or one of its subsidiaries. The SERP
provides for a supplement to the annual pension paid under the pension plan to
participants who attain early or normal retirement under the pension plan or
who suffer a total and permanent disability while employed by Alco or one of
its subsidiaries and to the pre-retirement death benefits payable under the
pension plan on behalf of such participants who die with a vested interest in
the pension plan. The amount of the supplement will be the difference, if any,
between the pension or pre-retirement death benefit paid under the pension plan
and that which would otherwise have been payable but for the restrictions
imposed by the Code and any reduction in the participant's compensation for
purposes of the pension plan because of his participation in certain deferred
compensation plans of Alco or one of its subsidiaries. The maximum amount of
annual compensation upon which such supplement may be based is $500,000 per
participant.
24
<PAGE>
The following table shows estimated annual retirement benefits that would be
payable to participants under Alco's pension plan and, if applicable, the SERP,
upon normal retirement at age 65 under various assumptions as to final average
annual compensation and years of credited service and on the assumption that
benefits will be paid in the form of a single life annuity. The benefits are
not subject to any deduction for Social Security benefits.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
-----------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
FINAL AVERAGE -----------------------------------
COMPENSATION 10 20 30 35
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$200,000................................. $ 20,000 $ 40,000 $ 60,000 $ 70,000
250,000................................. 25,000 50,000 75,000 87,500
300,000................................. 30,000 60,000 90,000 105,000
400,000................................. 40,000 80,000 120,000 140,000
500,000 or above........................ 50,000 100,000 150,000 175,000
</TABLE>
Covered compensation under the pension plan and SERP of Alco's five most
highly compensated executive officers includes salary and bonus set forth in
the Summary Compensation Table on page 22.
Mr. Mundt will receive an additional supplement to the pension plan and SERP
so that he shall receive a total annual pension benefit (including amounts paid
pursuant to the pension plan and SERP) of $500,000, payable for life in the
form of a joint and fifty percent survivor annuity (which will provide for an
annual lifetime benefit to Mrs. Mundt of $250,000 upon Mr. Mundt's death).
DIRECTORS' COMPENSATION
All directors are entitled to receive the following fees for service on the
Board of Directors and committees thereof: fees of $22,000 per year for
directors who are not employees of Alco or its subsidiaries ("independent
directors"), $12,000 per year for other directors, and attendance fees of
$1,000 for independent directors for each board and committee meeting attended.
Committee members also receive $3,000 per committee per year and committee
chairmen receive $1,000 per chairmanship per year. In addition, independent
directors who serve as trustees for Alco's employee benefit plans receive
$3,000 per year for services rendered to the plans, $1,000 per year for trustee
chairmanship, and attendance fees of $1,000 for each trustees' meeting
attended. Certain directors have elected to receive a portion of the foregoing
fees (excluding attendance fees) in the form of options to purchase Alco common
stock, pursuant to the terms of Alco's 1989 Directors' Stock Option Plan, which
enables directors of Alco to receive all or a portion of their directors' fees
in the form of options to purchase Alco common stock at exercise prices equal
to 75% of the fair market value on the date such options are granted. The
Directors' Plan provides for an automatic annual grant of stock options to each
director who has filed with Alco an election to receive such options in lieu of
all or a portion of his or her board, committee and trustee fees. The options
are exercisable for twenty years (except in the case of death), but generally
may not be exercised prior to the twelve-month anniversary of the date of
grant.
In addition to the above amounts, each independent director receives an
annual grant of options to purchase 400 shares of Alco common stock pursuant to
the 1993 Stock Option Plan for Non-Employee Directors. Options are granted at
an exercise price equal to the fair market value of Alco common stock on the
date of grant. Options are immediately exercisable and remain exercisable for a
period of ten years from the date of grant.
Independent directors who complete at least five full years of service as a
director are entitled to receive a monthly retirement benefit after retiring
from Alco's Board of Directors. Payment of such benefit begins upon the later
of the director's 70th birthday or his or her separation from service on the
Board of Directors. The amount of such monthly benefit is equal to one-twelfth
of the annual retainer in effect for such director
25
<PAGE>
(excluding committee fees, chairmanship fees, trustee fees and attendance fees)
immediately preceding his or her separation from service on the Board of
Directors. Payment of the monthly retirement benefit ceases upon the director's
death.
CERTAIN TRANSACTIONS
In August 1980, a subsidiary of Alco adopted a loan program which encourages
persons designated as "partners" to purchase and retain Alco stock. It offers
to make loans to partners in amounts limited to 50% of total annual
compensation (including cash bonuses) with the requirement that the loan be
secured by the borrower's pledge of Alco stock having a value at the time of
the loan of not less than twice the amount of the loan. The loans are payable
upon demand and bear interest at an annual rate of 6%. As of November 30, 1994,
loans were outstanding to 29 partners in an aggregate amount of $1,311,500.
From October 1, 1993 to November 30, 1994, the indebtedness of the following
individuals and groups under the loan program was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING AT
NAME OR GROUP DURING PERIOD($) NOVEMBER 30, 1994($)
- -------------------------------------------------------------------------------
<S> <C> <C>
John E. Stuart.............. -- --
Ray B. Mundt................ -- --
Kurt E. Dinkelacker......... 43,000 43,000
Hugh G. Moulton............. 247,000 0
James E. Head............... -- --
All current directors and
executive officers
as a group................. 678,000 428,000
- -------------------------------------------------------------------------------
</TABLE>
Mr. Drake, who serves as Vice Chairman and a director of Alco, is a partner
in the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, which
rendered legal services to Alco and its subsidiaries during the 1994 fiscal
year, and is expected to continue performing legal services during fiscal 1995.
Ray B. Mundt will resign his position as an executive officer of Alco
effective December 31, 1994, but will continue to perform consulting services
for Alco for a period of two years following his resignation. Mr. Mundt will
receive $250,000 annually for these consulting services (and for his covenant
not to compete). At Alco's option, Mr. Mundt's consulting contract may be
renewed for an additional two-year period after its expiration in December
1996.
PLAN OF DISTRIBUTION
Shares of common stock will be offered in connection with Alco's (or a
subsidiary's) acquisition of other businesses and properties from time to time.
A maximum of 2,500,000 shares of common stock may be sold pursuant to this
prospectus. These shares will ordinarily represent consideration paid directly
upon the acquisition of other businesses or properties. The shares may also
include shares to be delivered upon the exercise or satisfaction of conversion
or purchase rights which are created in connection with acquisitions or which
were previously created or assumed by the companies whose businesses or
properties were acquired by Alco (or a subsidiary).
RESALES
Shares offered hereby may be resold by the persons acquiring them without
further registration under the Securities Act of 1933, unless the recipient is
an "underwriter," as defined under such Act, with respect to the shares. Any
person who is an "affiliate" of Alco, or is otherwise deemed an underwriter by
reason of such person's relationship with Alco or the transaction, will be
subject to certain limitations on resale for a period of two years. An
"affiliate" of a company is a person who directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with the company.
26
<PAGE>
During the two-year period, such persons may sell their shares in limited
amounts in ordinary brokerage transactions or, if Alco consents, in offerings
registered under the Securities Act of 1933. The amount of shares which may be
sold by such persons in brokerage transactions in any three-month period may
not exceed the greater of (i) 1% of the Alco shares outstanding as shown by the
most recent report or statement published by Alco or (ii) the average weekly
trading volume in Alco shares reported on the Composite Tape during the four
calendar weeks preceding the order to sell. Such sales must be made in so-
called "brokers' transactions," which are ordinary sales through a broker
acting as agent without special commission arrangements or selling efforts.
Alco may require in its acquisition agreements that persons who may be deemed
underwriters deliver to Alco prior to any sales within such two-year period an
opinion of counsel to the effect that the proposed sales are exempt from the
registration requirements of the Securities Act of 1933. Such agreements may
also contain additional restrictions on resales by such persons.
In order for such persons to resell shares offered hereby in a registered
offering under the Securities Act of 1933, Alco would have to agree to amend
the registration statement of which this prospectus is a part to permit such
resales or to file a new registration statement which includes the shares
proposed to be resold. Unless the acquisition agreement obligates Alco to do
so, there is no assurance that it will agree to such amendment or registration.
LEGAL OPINIONS
Legal matters in connection with the stock offered hereby have been, or prior
to issue or delivery will be, passed upon by Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of Alco Standard Corporation at
September 30, 1994 and 1993, and for each of the three years in the period
ended September 30, 1994, appearing in this prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Alco Standard Corporation and Subsidiaries
The management of Alco Standard Corporation is responsible for the
preparation and presentation of the financial statements and related financial
information included in this prospectus. The financial statements include
amounts that are based on management's best estimates and judgments. The
statements have been prepared in conformity with generally accepted accounting
principles consistently applied and have been audited by Ernst & Young LLP,
independent auditors.
Management is also responsible for maintaining systems of internal accounting
controls that are designed to provide reasonable assurance as to the integrity
of the financial records and the protection of corporate assets. Alco Standard
Corporation supports an active program of auditing to monitor the proper
functioning of its systems. The reports issued by the Alco Audit Department, as
well as comment letters from Ernst & Young LLP, are reviewed regularly by the
Audit Committee of the Board of Directors, which is composed of five directors
who are not employees of Alco. The Audit Committee meets periodically with
Ernst & Young LLP, the Alco Audit Department and management to review audit
scope, timing and results.
27
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Alco Standard Corporation
We have audited the accompanying consolidated balance sheets of Alco Standard
Corporation and subsidiaries as of September 30, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended September 30, 1994. These
financial statements are the responsibility of Alco's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Alco Standard Corporation and subsidiaries at September 30, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended September 30, 1994, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 17, 1994
28
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------------
1994 1993 1992
------------ ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES
Net sales.......................... $ 7,925,784 $ 6,387,078 $ 4,882,908
Dividends, interest and other in-
come.............................. 3,537 6,332 3,292
Finance subsidiaries (note 13)..... 66,731 51,149 38,936
------------ ------------ ------------
7,996,052 6,444,559 4,925,136
------------ ------------ ------------
COSTS AND EXPENSES
Cost of goods sold................. 5,884,819 4,799,757 3,638,494
Selling and administrative......... 1,765,483 1,378,814 1,069,602
Interest........................... 43,802 40,189 31,680
Finance subsidiaries interest (note
13)............................... 27,978 23,662 19,523
Restructuring costs (note 16)...... 175,000
------------ ------------ ------------
7,722,082 6,417,422 4,759,299
------------ ------------ ------------
LOSS FROM UNCONSOLIDATED AFFILIATE
(note 4)............................ (117,158) (2,538)
INVESTMENT GAIN, net (note 11)....... 6,683
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES........................ 156,812 24,599 172,520
TAXES ON INCOME (note 7)............. 86,203 16,984 68,303
------------ ------------ ------------
INCOME FROM CONTINUING OPERATIONS.... 70,609 7,615 104,217
LOSS FROM DISCONTINUED OPERATIONS,
net of taxes (note 2)............... (7,515) (8,455)
------------ ------------ ------------
NET INCOME........................... 70,609 100 95,762
PREFERRED DIVIDENDS (note 6)......... 11,572 9,571
------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS........................ $ 59,037 $ (9,471) $ 95,762
============ ============ ============
EARNINGS (LOSS) PER SHARE (note 1)
Continuing operations.............. $ 1.10 $ (.04) $ 2.22
Discontinued operations............ (.16) (.18)
------------ ------------ ------------
$ 1.10 $ (.20) $ 2.04
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................. $ 53,369 $ 36,495
Accounts receivable, less allowance for doubtful ac-
counts:
1994--$29,428; 1993--$27,528 (note 14).............. 915,495 855,666
Inventories (note 1)................................. 609,974 591,964
Prepaid expenses and deferred taxes.................. 131,638 92,600
----------- -----------
Total current assets............................... 1,710,476 1,576,725
----------- -----------
INVESTMENT IN UNCONSOLIDATED AFFILIATE (note 4)........ 118,060
OTHER INVESTMENTS AND LONG-TERM RECEIVABLES............ 68,472 46,813
PROPERTY AND EQUIPMENT, at cost (note 5)
Land................................................. 29,308 23,959
Buildings and improvements........................... 213,037 226,256
Machinery and equipment.............................. 411,377 346,686
----------- -----------
653,722 596,901
Less accumulated depreciation........................ 299,775 260,551
----------- -----------
353,947 336,350
----------- -----------
OTHER ASSETS
Excess of cost of acquired companies over equity
(note 1)............................................ 747,629 694,757
Miscellaneous........................................ 59,331 69,662
Deferred taxes....................................... 22,454
----------- -----------
806,960 786,873
----------- -----------
FINANCE SUBSIDIARIES ASSETS (note 13).................. 562,403 484,069
----------- -----------
$ 3,502,258 $ 3,348,890
=========== ===========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.................. $ 12,299 $ 39,915
Notes payable (note 5)............................. 91,999 164,249
Trade accounts payable............................. 500,166 426,971
Accrued salaries, wages and commissions............ 96,987 80,097
Deferred revenues.................................. 134,485 116,631
Restructuring costs (note 16)...................... 56,971 27,480
Other accrued expenses............................. 164,023 164,831
----------- -----------
Total current liabilities........................ 1,056,930 1,020,174
----------- -----------
LONG-TERM DEBT (note 5).............................. 340,771 590,154
DEFERRED TAXES AND OTHER LIABILITIES
Deferred taxes..................................... 32,192
Restructuring costs (note 16)...................... 50,000 142,459
Workers' compensation and other.................... 156,511 113,069
----------- -----------
238,703 255,528
----------- -----------
FINANCE SUBSIDIARIES LIABILITIES (note 13)........... 498,710 437,418
REDEEMABLE PREFERRED STOCK OF SUBSIDIARY (note 5).... 25,000
SHAREHOLDERS' EQUITY (note 6)
Series AA convertible preferred stock, no par val-
ue:
4,025,000 depositary shares issued and outstand-
ing.............................................. 199,912 197,900
Common stock, no par value: authorized 75,000,000
shares; issued
1994--54,522,000 shares; 1993--48,772,000 shares.. 551,215 259,031
Retained earnings.................................. 642,634 651,373
Foreign currency translation adjustment............ (22,550) (23,640)
Cost of common shares in treasury: 1994--74,000
shares;
1993--1,808,000 shares............................ (4,067) (64,048)
----------- -----------
1,367,144 1,020,616
----------- -----------
$ 3,502,258 $ 3,348,890
=========== ===========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------
1994 1993 1992
---------------- ---------------- -----------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
------ -------- ------ -------- ------ ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SERIES AA CONVERTIBLE
PREFERRED STOCK
Balance, beginning of
year................. 4,025 $197,900
Issued in public of-
fering............... 4,025 $196,335
Dividend accretion.... 2,012 1,565
------ -------- ------ --------
Balance, end of year.... 4,025 $199,912 4,025 $197,900
====== ======== ====== ========
COMMON STOCK
Balance, beginning of
year................. 48,772 $259,031 48,772 $257,069 48,772 $ 249,870
Issued in public of-
fering............... 5,750 293,500
Mergers............... (4,104) 5,854
Tax benefit relating
to stock plans....... 2,788 1,962 1,345
------ -------- ------ -------- ------ ---------
Balance, end of year.... 54,522 $551,215 48,772 $259,031 48,772 $ 257,069
====== ======== ====== ======== ====== =========
RETAINED EARNINGS
Balance, beginning of
year................. $651,373 $699,015 $ 687,892
Net income............ 70,609 100 95,762
Cash dividends de-
clared:
Preferred stock, per
share: 1994--
$2.875; 1993--
$2.236............. (11,572) (9,571)
Common stock, per
share: 1994--$1.00;
1993--$.96; 1992--
$.92............... (52,222) (44,858) (41,520)
Pooled companies,
prior to merger.... (2,408) (3,907)
Credits (charges) from
issuance of treasury
shares and other..... (13,146) 6,687 (39,212)
-------- -------- ---------
Balance, end of year.... $642,634 $651,373 $ 699,015
======== ======== =========
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT
Balance, beginning of
year................. $(23,640) $ (6,622) $ 2,039
Translation adjust-
ment................. (1,347) (17,018) (8,661)
Sale of investment in
unconsolidated
affiliate............ 2,437
-------- -------- ---------
Balance, end of year.... $(22,550) $(23,640) $ (6,622)
======== ======== =========
COST OF COMMON SHARES IN
TREASURY
Balance, beginning of
year................. 1,808 $(64,048) 2,823 $(89,099) 4,134 $(118,606)
Purchases............. 887 (47,733) 756 (32,389) 1,569 (57,200)
Reissued for
Exercise of options. (454) 18,027 (405) 13,063 (297) 8,814
Sales to employee
stock plans........ (1,172) 47,799 (1,250) 40,564 (1,114) 33,127
Mergers, acquisi-
tions and other.... (995) 41,888 (116) 3,813 (1,469) 44,766
------ -------- ------ -------- ------ ---------
Balance, end of year.... 74 $ (4,067) 1,808 $(64,048) 2,823 $ (89,099)
====== ======== ====== ======== ====== =========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER
30
-------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................... $ 70,609 $ 100 $ 95,762
Additions (deductions) to reconcile net
income to net cash provided by operating
activities
Depreciation............................... 70,037 57,272 47,510
Amortization............................... 26,791 22,137 16,628
Provision for losses on accounts
receivable................................ 19,668 19,702 14,636
Provision (benefit) for deferred income
taxes..................................... 22,487 (55,042) 10,243
Change in deferred liabilities............. 2,816 15,232 1,198
Restructuring costs........................ (46,588) 169,939
Loss (gain) on sale of
Investment in unconsolidated affiliate... 115,265
Alco Diversified Services................ 9,841 15,294
Alco Food Systems........................ (5,669)
Other investments........................ (6,683)
Changes in operating assets and liabilities
Decrease (increase) in
Accounts receivable.................... (74,369) (72,064) (48,870)
Inventories............................ 3,154 (52,877) (28,954)
Prepaid expenses....................... (17,873) (5,083) (3,225)
Increase (decrease) in accounts payable,
deferred revenues, and accrued expenses. 79,855 (52,563) 44,254
Miscellaneous.............................. 364 (13,267) (10,880)
--------- --------- ---------
Net cash provided............................ 272,216 43,327 141,244
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sale (net of cash retained) of
Investment in unconsolidated affiliate..... 8,226
Alco Diversified Services.................. 69,836
Alco Food Systems.......................... 7,756
Other investments.......................... 15,881
Cost of companies acquired, net of cash
acquired.................................... (46,705) (439,447) (330,635)
Proceeds from sale of property and equipment. 24,833 21,769 8,123
Expenditures for property and equipment...... (107,969) (83,789) (58,076)
Payments received on long-term receivables... 9,251 5,369 2,740
Purchases of miscellaneous assets............ (7,973) (10,702) (26,339)
Finance subsidiaries receivables--Additions.. (408,412) (278,503) (228,951)
Finance subsidiaries receivables--
Collections................................. 210,969 166,274 126,493
--------- --------- ---------
Net cash used................................ (317,780) (549,193) (483,008)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from
Issuance of long-term debt................. 20,835 319,338 191,898
Issuance of common stock, net.............. 293,500
Issuance of Series AA convertible preferred
stock, net................................ 196,335
Option exercises and sale of treasury
shares.................................... 69,914 62,284 47,096
Sale of finance subsidiaries lease
receivables............................... 125,000
Life insurance borrowings.................. 31,055
Issuance (repayment) of short-term
borrowings, net............................. (68,278) 163,563
Proceeds (repayments) of accounts receivable
sold........................................ 14,985 (3,440) 52,124
Long-term debt repayments.................... (369,238) (241,827) (26,148)
Finance subsidiaries debt--Issuance.......... 248,098 228,307 127,843
Finance subsidiaries debt--Repayments........ (196,308) (124,201) (48,000)
Dividends paid............................... (59,392) (49,995) (41,582)
Purchase of treasury shares.................. (47,733) (32,389) (57,200)
--------- --------- ---------
Net cash provided............................ 62,438 517,975 246,031
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH.............. 16,874 12,109 (95,733)
CASH AT BEGINNING OF YEAR.................... 36,495 24,386 120,119
--------- --------- ---------
CASH AT END OF YEAR.......................... $ 53,369 $ 36,495 $ 24,386
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
CONSOLIDATION
All wholly-owned subsidiaries are consolidated and intercompany transactions
have been eliminated. The investment in unconsolidated affiliate at September
30, 1993 represented a 49.9% ownership interest in IMM Office Systems GmbH
(IMMOS) which was accounted for by the equity method. Alco sold its investment
in IMMOS in fiscal 1994 (note 4).
REVENUE RECOGNITION
Revenues are recorded at the time of shipment of products or performance of
services. Revenues from service contracts are recognized in earnings over the
term of the contract. The present values of payments due under sales-type lease
contracts are recorded as revenues and cost of goods sold is charged with the
book value of the equipment at the time of shipment. Future interest income is
deferred and recognized over the related lease term.
INVENTORIES
Inventories are stated at the lower of cost or market and consist of finished
goods available for sale. Alco uses the LIFO method of determining cost for
approximately 60% of its inventories and the FIFO method for the balance. If
the FIFO method of accounting had been used for all inventories, these balances
would have been $36,877,000 higher at September 30, 1994 and $38,630,000 higher
at September 30, 1993.
EXCESS OF COST OF ACQUIRED COMPANIES OVER EQUITY
Substantially all of the excess of cost of acquired companies over equity is
amortized over 40 years by the straight-line method. The recoverability of the
asset is evaluated at the operating unit level by an analysis of operating
results and consideration of other significant events or changes in the
business environment. If an operating unit has current operating losses and
based upon projections there is a likelihood that such operating losses will
continue, Alco will measure impairment on the basis of undiscounted expected
future cash flows from operations before interest.
DEPRECIATION
Properties and equipment are depreciated over their useful lives by the
straight-line method.
EARNINGS PER SHARE
Earnings per share are based on 53,729,000 weighted average shares in 1994,
47,396,000 shares in 1993 and 46,876,000 shares in 1992, and include the
dilutive effect of common stock equivalents, principally stock options.
FOREIGN CURRENCY TRANSLATION
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at fiscal year-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the fiscal year. The
resulting translation adjustments are recorded as a component of shareholders'
equity.
ACCOUNTING CHANGES
During fiscal 1994, Alco changed its methods of accounting for income taxes
and retiree healthcare benefits. The cumulative effect of adopting each of
these required new accounting methods was immaterial.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
34
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. DISCONTINUED OPERATIONS
In September 1992, Alco decided to sell Alco Diversified Services (ADS).
Accordingly, ADS results for fiscal years 1993 and 1992 are reported in the
accompanying Statements of Income as discontinued operations. In fiscal 1992,
Alco provided for an anticipated loss on the sale of ADS of $15,294,000. In
July 1993, Alco completed the sale of ADS assets of approximately $102,000,000
to an investor group for $84,000,000 in cash and notes. Alco recorded an
additional loss of $9,841,000, net of a LIFO layer liquidation of $3,572,000,
in fiscal 1993 in connection with this sale.
The 1993 tax benefit for ADS in the table below is comprised of $1,449,000
relating to ADS operations and $4,966,000 relating to the loss on the sale of
ADS. The 1992 tax expense for ADS relates to its operating income. No tax
benefits were recorded for the loss on disposal anticipated at September 30,
1992, since it consisted principally of the write-off of nondeductible cost in
excess of net assets of acquired businesses.
In fiscal 1990, Alco decided to sell Alco Food Systems (AFS) and began
presenting AFS as discontinued operations at that time. During fiscal 1991,
Alco sold six AFS businesses for $201,000,000 in cash and notes. Assets of the
companies sold were $155,599,000. The remaining two AFS businesses with assets
of $16,764,000 were sold in fiscal 1992 for cash, notes and preferred stock of
$20,714,000.
The results of discontinued operations are:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30
------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues
Alco Diversified Services............................. $153,063 $222,764
Alco Food Systems..................................... 18,233
-------- --------
$153,063 $240,997
======== ========
Income (loss) before taxes
Alco Diversified Services
Operating........................................... $ (3,946) $ 10,158
Loss on disposal.................................... (9,841) (15,294)
Alco Food Systems
Operating........................................... (5,281)
Gain on disposals................................... 5,669
Other................................................. (477)
-------- --------
(13,787) (5,225)
-------- --------
Tax expense (benefit)
Alco Diversified Services............................. (6,415) 3,239
Alco Food Systems..................................... 153
Other................................................. 143 (162)
-------- --------
(6,272) 3,230
-------- --------
Net income (loss)
Alco Diversified Services............................. (7,372) (8,375)
Alco Food Systems..................................... 235
Other................................................. (143) (315)
-------- --------
$ (7,515) $ (8,455)
======== ========
</TABLE>
35
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS
In fiscal 1994, Alco issued 698,675 common shares from treasury for three
acquisitions accounted for as poolings-of-interests and their results of
operations were included from the beginning of the fiscal year. Also during
fiscal 1994, 47 other acquisitions were made for an aggregate purchase price of
$62,009,000 in cash, notes and stock. Total assets related to these 47
acquisitions were $111,099,000 including excess of cost over equity of
$55,165,000. An additional $4,900,000 was paid and capitalized in fiscal 1994
relating to prior years' acquisitions.
In June 1993, Alco acquired over 90% of the outstanding shares of Erskine
House Group PLC (Erskine), a United States and European distributor of office
products, and the remaining outstanding shares were acquired during the fourth
quarter of fiscal 1993. The purchase price was approximately $103,000,000, plus
the assumption of approximately $101,000,000 of debt and redeemable preferred
stock. Total assets acquired were $278,975,000, which includes excess of cost
over acquired equity of $180,408,000.
In July 1993, Alco acquired the paper distribution businesses of Butler Paper
Company for a purchase price of $140,000,000. Total assets acquired were
$277,843,000 and excess of acquired equity over cost of approximately
$37,157,000 was allocated to fixed assets.
During fiscal 1993, 21 other acquisitions were made for an aggregate purchase
price of $50,606,000 in cash and stock. Total assets acquired were $68,878,000
including excess of cost over equity of $30,645,000. An additional $30,236,000
was paid and capitalized in 1993 relating to prior years' acquisitions.
During fiscal 1992, Alco issued 1,416,311 common shares from treasury for two
acquisitions accounted for as poolings-of-interests and their results of
operations were included from the beginning of the fiscal year. In September
1992, Alco purchased the Paper Distribution Group of Abitibi-Price (Abitibi)
for $309,246,000 in cash. Total assets acquired were $322,700,000 including
excess of cost over acquired equity of $163,246,000.
Alco made eight other acquisitions in fiscal 1992 for $40,839,000 in cash,
and costs relating to prior years' acquisitions of $4,768,000 were paid and
capitalized. Total assets related to fiscal 1992 acquisitions, excluding
Abitibi, were $79,595,000 including excess of cost over acquired equity of
$17,948,000.
All acquisitions, unless otherwise noted, are included from their dates of
acquisition.
Had the purchase acquisitions been made at the beginning of the year prior to
their acquisition and the poolings been made on October 1, 1991, pro forma
results from continuing operations would have been:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
--------------------------------------
1994 1993 1992
------------ ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues.............................. $ 8,111,204 $ 7,735,647 $ 7,217,085
Income from continuing operations..... 77,560 24,277 117,054
Earnings per share.................... 1.20 .23 1.98
</TABLE>
The pro forma results assume that $201,250,000 of the purchase price of 1993
and 1992 acquisitions was funded by the proceeds from issuance of the Series AA
convertible preferred stock, while $293,500,000 of the total purchase price of
1994 and 1993 acquisitions was funded by the proceeds from issuance of common
stock in December 1993.
Pro forma earnings per share for fiscal 1993 are diluted by a $4,647,000
write-off of Advance Corporation Tax related to Erskine.
36
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENT IN UNCONSOLIDATED AFFILIATE
In October 1992, Alco purchased a 49.9% interest in IMM Office Systems GmbH,
a European distributor of office products, for $122,500,000 in cash, which
included excess of cost over equity of $107,478,000. In September 1994, Alco
completed the sale of this investment for cash plus a passive interest in any
subsequent sale of IMMOS for five years. Alco retains no ongoing liability in
the joint venture and the parties exchanged complete mutual releases for past
actions. In addition, Alco was relieved of the covenant not to compete in
Europe contained in the joint venture agreement, although the parties will not
compete with each other for a period expiring on December 31, 1995. As part of
the transaction, Alco acquired profitable operations in Denmark and France and
retained limited operations in Germany. Alco recognized a loss on the sale of
its investment in IMMOS in the quarter ended June 30, 1994, recording a pretax
loss of $115,300,000 ($95,100,000, net of tax) equating to a loss per share of
$1.75 in the quarter ended June 30, 1994 and $1.77 for the fiscal year ended
September 30, 1994. This loss represents the write-off of Alco's investment in
IMMOS, plus certain transactional costs less the cash proceeds from the sale
together with related tax benefits. In addition, Alco recorded losses totaling
$1,900,000 which represent Alco's share of IMMOS operating losses for the first
half of the fiscal year.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------
1994 1993
------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks at average interest rate:
1994--5.5%; 1993--3.9%................................... $91,419 $ 73,563
Commercial paper at interest rate of 3.2%.................. 90,000
Other notes payable at average interest rate:
1994--7.1%; 1993--6.9%................................... 580 686
------- --------
$91,999 $164,249
======= ========
</TABLE>
Long-term debt consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30
-----------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable at average interest rate of 3.9%........... $300,000
Bond issue at interest rate of 8 7/8% due 2001........... $150,000 150,000
Private placement debt at average interest rate:
1994--8.2%; 1993--8.1%; due 1996-1998.................. 70,000 100,000
Notes payable to insurance company at average interest
rate:
1994--9.7%; 1993--10.7%; due 1997-2005................. 60,000 35,000
Industrial revenue bonds at average interest rate:
1994--8.4%; 1993--8.0%; due 1994-2001.................. 10,537 11,787
Sundry notes, bonds and mortgages at average interest
rate:
1994--7.5%; 1993--7.3%; due 1994-2005.................. 38,341 6,850
Present value of capital lease obligations (gross amount:
1994--$40,928; 1993--$45,784).......................... 24,192 26,432
-------- --------
353,070 630,069
Less current maturities.................................. 12,299 39,915
-------- --------
Long-term debt........................................... $340,771 $590,154
======== ========
</TABLE>
37
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt matures in fiscal years: 1995--$12,299,000; 1996--$16,599,000;
1997--$26,119,000; 1998--$5,227,000; 1999--$54,481,000; 2000-2005--
$238,345,000.
On June 8, 1993, Alco entered into a revolving credit agreement with four
banks allowing Alco to borrow up to $100,000,000 or the Pounds Sterling
equivalent. This credit agreement carries a facility fee of 3/16% per annum and
expires in October 1995. Loans under this agreement may be made under a
selection of rate formulas including prime, Eurodollar or Eurosterling rates.
Alco amended its April 21, 1993 credit agreement with four banks in April
1994, allowing Alco to borrow up to $200,000,000 or the Canadian dollar
equivalent. A facility fee of 1/10% per annum is charged for the $100,000,000
portion of the commitment expiring in April 1995, and 3/20% per annum is
charged for the $100,000,000 portion expiring in April 1996. Loans under the
agreement may be made under a selection of rate formulas including prime, the
Eurodollar rate in the United States or Canada, or the Canadian Bankers
Acceptance rate.
On October 15, 1992, Alco entered into a credit agreement with six banks to
borrow up to DM180,000,000, or the U.S. dollar equivalent ($116,000,000). A
facility fee of 1/8% per annum is charged for this commitment, which expires on
January 11, 1995 per an amendment executed in January 1994. Loans under this
agreement may be made under a selection of prime, DM Eurocurrency or Eurodollar
rate formulas.
On December 18, 1991, Alco entered into a credit agreement with 15 banks to
borrow up to $200,000,000. The agreement, which was amended in December 1993,
has two parts: half is subject to termination on December 18, 1996; the other
half is available for 364 days subject to annual renewal for successive 364-day
periods. Annual fees of 3/16% on the three-year portion and 1/8% on the 364-day
portion are charged for these commitments. The agreement provides that loans
may be made under either domestic or Eurodollar notes at rates computed under
various formulas selected by Alco from among the domestic certificates of
deposit rate, prime rate or Eurodollar rate.
At September 30, 1994, $91,419,000 was outstanding under the combined lines
of credit and $524,581,000 was unused and available. In December 1994, Alco
intends to replace three of the above lines of credit with one $500,000,000
multi-currency facility with more favorable terms and to reduce the commitment
under the April 21, 1993 agreement to $100,000,000.
On May 13, 1994, Alco entered into an agreement to amend the terms of
$35,000,000 of 10.7% notes payable to an insurance company and replaced
$25,000,000 of 9.14% redeemable preferred stock of a subsidiary. The notes and
redeemable preferred stock were assumed in connection with the acquisition of
Erskine in fiscal 1993. Under the terms of the new agreement, Alco issued
$35,000,000 of 10.51% senior notes which are due in equal annual installments
beginning on April 24, 1997 through April 24, 2001 and $25,000,000 of 8.61%
senior notes which are due in equal annual installments beginning on April 1,
2000 through April 1, 2005.
Alco is in compliance with all covenants, including financial, for all loan
agreements. The industrial revenue bonds, capital lease obligations and
mortgages are secured by property and equipment that had a net book value of
$53,671,000 at September 30, 1994.
Interest paid approximated the amounts of interest expense in the
Consolidated Statements of Income for fiscal years 1994, 1993 and 1992.
6. SHAREHOLDERS' EQUITY
In December 1993, Alco issued 5,750,000 shares of common stock in a public
offering. The net proceeds from the offering of $293,500,000 were used for
repayment of debt. Income and earnings per share from continuing operations for
fiscal year 1993 would have been $13,288,000 and $.07, respectively, if the
offering
38
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
had occurred on October 1, 1992. Income from continuing operations for fiscal
1994 would have been $71,896,000 and earnings per share would have been
unchanged if the offering had occurred on October 1, 1993.
On December 22, 1992, Alco sold 4,025,000 depositary shares, each
representing 1/100th of a share of Series AA convertible preferred stock at
$50.00 per depositary share totaling $201,250,000, and used the net proceeds to
reduce debt. Dividends are cumulative at $2.375 per year per depositary share
through January 2, 1996 and $3.25 per depositary share per year thereafter. The
dividend is accrued on a straight-line basis ($2.875 per depositary share) and
accretion for the difference between the accrued and cash dividend amounting to
$3,577,000 at September 30, 1994 has been credited to Series AA convertible
preferred stock. This series of preferred stock has one vote per share
(equivalent to 1/100 vote per depositary share) and is convertible at a rate of
1.1201 shares of Alco's common stock per depositary share at any time. The
Series AA convertible preferred stock, unless previously converted into common
stock, is redeemable by issuance of common stock at Alco's option at the rate
of 1.1201 shares of common stock per depositary share (with certain
limitations) on or after January 9, 1996 through January 9, 2000. On or after
January 9, 2000, this series of preferred stock is redeemable at Alco's option
at $50.00 per depositary share. Upon liquidation, the Series AA convertible
preferred stock has preference equivalent to $50.00 per depositary share plus
an amount equal to accrued and unpaid dividends. At September 30, 1994,
4,508,403 shares of common stock were reserved for conversion of the Series AA
convertible preferred stock.
Employee stock options are granted at the market price at dates of grant and
expire in ten years. The proceeds of options exercised are credited to
shareholders' equity. There are no charges or credits to income in connection
with these options. A 1989 plan for Alco's directors enables participants to
receive their annual directors' fees in the form of options to purchase shares
of common stock at a discount. The discount is equivalent to the annual
directors' fees and is charged to expense.
Changes in common shares under option were:
<TABLE>
<CAPTION>
DIRECTORS EMPLOYEES
--------------------------- -----------------------------
SHARES OPTION PRICE RANGE SHARES OPTION PRICE RANGE
------- ------------------ --------- ------------------
<S> <C> <C> <C> <C>
September 30, 1991... 70,450 $19.55 to $26.34 2,162,325 $ 9.13 to $35.63
Granted.............. 18,624 28.69 432,250 31.50 to 38.25
Exercised............ (2,391) 19.55 to 26.34 (294,908) 9.13 to 35.63
Cancelled............ (44,070) 9.38 to 38.25
------- ---------------- --------- ----------------
September 30, 1992... 86,683 19.55 to 28.69 2,255,597 16.13 to 38.25
Granted.............. 24,669 30.19 to 40.25 567,817 35.25 to 40.25
Exercised............ (17,224) 19.55 to 26.34 (387,916) 16.13 to 38.25
Cancelled............ (211,717) 22.88 to 40.25
------- ---------------- --------- ----------------
September 30, 1993... 94,128 19.55 to 40.25 2,223,781 16.13 to 40.25
Granted.............. 17,416 42.28 to 56.38 462,335 49.00 to 62.00
Exercised............ (21,315) 19.55 to 40.25 (432,741) 16.13 to 40.25
Cancelled............ (760) 30.19 (10,551) 16.13 to 57.63
------- ---------------- --------- ----------------
September 30, 1994... 89,469 19.55 to 56.38 2,242,824 18.19 to 62.00
======= ================ ========= ================
</TABLE>
At September 30, 1994, options to purchase 1,171,573 shares were exercisable
(1994: employees--1,099,520, directors--72,053; 1993: employees--1,070,710,
directors--69,459) and 648,632 shares were available for grant (1994:
employees--183,767, directors--464,865; 1993: employees--782,051, directors--
481,521). At September 30, 1994, 6,782,962 shares of common stock were reserved
for sale to employee stock plans.
39
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Alco has issued options pursuant to Alco's 1986 Stock Option Plan to purchase
common stock in accordance with Alco's Long-Term Incentive Compensation Plan.
The options become exercisable only to the extent that credits are issued
pursuant to the plan and the award of credits is conditional upon achieving
predetermined performance objectives during three-year intervals. The value of
these awards is charged to expense over the related plan period. In fiscal
1994, Alco issued options to purchase 150,575 shares of common stock relating
to the three-year performance period ending September 30, 1996. Options to
purchase 107,814 shares of common stock were issued in fiscal 1993, of which
4,575 were cancelled in fiscal 1994, leaving 103,239 options to cover the
performance period ending September 30, 1995.
One preferred share purchase right (Right) exists for each outstanding share
of common stock (the Shares). The Rights become exercisable ten days after the
earlier of a public announcement by another entity that it has acquired
beneficial ownership of 20% or more of the Shares or a public announcement of
another entity's intention to commence a tender offer to acquire beneficial
ownership of 30% or more of the Shares.
When the Rights become exercisable, each Right will entitle a holder to
purchase 1/100th of a share of Series 12 preferred stock for an exercise price
of $75. If Alco consolidates or merges with another entity, or sells assets
that aggregate 50% of its consolidated assets or generates more than 50% of its
consolidated operating income or cash flow, then each Right holder will have
the right to purchase, for the exercise price, a number of shares of the other
entity having a then-current market value equal to twice the exercise price.
If another entity owning 20% or more of the Shares (a) engages in certain
transactions with Alco, or (b) causes Alco to forgo or reduce quarterly
dividends or take an action that would result in a more than 2% increase in the
other entity's proportionate share of the outstanding shares; or if another
entity becomes the beneficial owner of 30% or more of the outstanding shares;
then each Right holder (other than the other entity) will have the right to
purchase, for the exercise price, a number of shares of Alco having a then-
current market value equal to twice the exercise price.
The Rights are redeemable by Alco prior to becoming exercisable at $.05 per
Right and expire on February 10, 1998.
7. TAXES ON INCOME--CONTINUING OPERATIONS
Effective October 1, 1993, Alco adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 permitted
Alco to recognize the benefit of certain deferred tax assets that could not be
recognized under the previous standard, SFAS No. 96, which Alco adopted in
fiscal 1988. The cumulative effect of adopting SFAS No. 109 as of October 1,
1993 was to increase net income by $1,421,000 or $.03 per share. As permitted
under SFAS No. 109, prior years' financial statements have not been restated.
Provision for income taxes:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------------------------
1994 1993 1992
---------------- ---------------- ----------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------- -------- ------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal..................... $46,349 $29,421 $57,200 $(48,149) $45,872 $10,503
Foreign..................... 11,862 (7,855) 6,602 (948) 5,239
State....................... 5,505 921 3,706 (1,427) 6,254 435
------- ------- ------- -------- ------- -------
Taxes on income............. $63,716 $22,487 $67,508 $(50,524) $57,365 $10,938
======= ======= ======= ======== ======= =======
</TABLE>
40
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred taxes resulting from temporary differences between financial and tax
accounting, which have not been restated for SFAS No. 109:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30
-------------------
1993 1992
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Depreciation........................................... $ 4,741 $ (1,658)
Lease income recognition............................... 11,993 13,648
Nondeductible reserves................................. (67,115) (5,568)
Other.................................................. (143) 4,516
--------- --------
Deferred taxes......................................... $ (50,524) $ 10,938
========= ========
</TABLE>
The components of deferred income tax assets and liabilities as of September
30, 1994, including finance subsidiaries, were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Nondeductible reserves........................................... $143,579
Net operating loss carryforwards................................. 34,932
Other--net....................................................... 10,454
--------
Total deferred tax assets...................................... 188,965
Valuation allowance.............................................. (50,592)
--------
Total deferred tax assets...................................... 138,373
--------
Deferred tax liabilities:
Depreciation..................................................... 42,778
Lease income recognition......................................... 82,837
--------
Total deferred tax liabilities................................. 125,615
--------
Net deferred tax assets............................................ $ 12,758
========
</TABLE>
The net operating loss deferred tax asset consists primarily of foreign
carryforwards of $59,371,000 principally expiring in years 1996 through 2000.
The valuation allowance increased by $11,124,000 during fiscal 1994 primarily
due to the effects of the IMMOS sale.
Components of the effective income tax rate:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30
-------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Federal................................................. 35.0% 34.8% 34.0%
State................................................... 2.3 6.1 2.6
Goodwill................................................ 3.5 16.1 2.0
Foreign................................................. 1.0 8.2 1.2
Effect of sale of IMMOS................................. 12.9
Other................................................... .3 3.8 (.2)
----- ----- -----
Effective income tax rate............................... 55.0% 69.0% 39.6%
===== ===== =====
</TABLE>
41
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effective tax rate for the fiscal year ended September 30, 1994,
excluding the effects of the loss on the sale of the investment in IMMOS, is
39.1%. The effective tax rate for the fiscal year ended September 30, 1993,
excluding the effects of the restructuring costs, is 39.6%.
Net income tax payments for all operations amounted to $62,270,000 in 1994,
$77,487,000 in 1993 and $57,861,000 in 1992.
Undistributed earnings of Alco's foreign subsidiaries were approximately
$28,040,000 at September 30, 1994. Those earnings are considered to be
indefinitely reinvested and, therefore, no provision has been recorded for U.S.
federal and state income taxes.
8. PENSION AND STOCK PURCHASE PLANS
Alco sponsors defined benefit pension plans for the majority of its
employees. The benefits generally are based on years of service and
compensation. Alco funds at least the minimum amount required by government
regulations. The cost of these plans, together with contributions to
multiemployer and defined contribution pension plans ($6,880,000 in 1994,
$5,134,000 in 1993 and $2,642,000 in 1992), charged to continuing operations
amounted to $18,283,000 for 1994, $12,684,000 for 1993 and $7,116,000 for 1992.
The components of net periodic pension cost for the company-sponsored defined
benefit pension plans are:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................... $ 16,991 $ 11,123 $ 8,131
Interest cost on projected benefit obliga-
tion...................................... 18,507 13,416 11,644
Actual return on plan assets............... (11,020) (34,238) (22,732)
Net amortization and deferral.............. (13,075) 17,249 6,520
---------- ---------- ----------
Net pension cost........................... $ 11,403 $ 7,550 $ 3,563
========== ========== ==========
</TABLE>
Assumptions used in accounting for the company-sponsored defined benefit
pension plans were:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Weighted average discount rates............................ 7.75% 7.25% 7.75%
Rates of increase in compensation levels................... 6.25% 5.75% 6.25%
Expected long-term rate of return on assets................ 10.00% 10.00% 10.00%
</TABLE>
42
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status and amounts recognized in the Consolidated Balance Sheets
for the company-sponsored defined benefit pension plans are:
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested................................................... $237,874 $216,926
======== ========
Accumulated.............................................. $241,069 $224,431
======== ========
Projected................................................ $277,500 $258,136
Plan assets at fair value.................................. 256,610 254,083
-------- --------
Plan assets less than projected benefits................... (20,890) (4,053)
Items not yet recognized
Net gain................................................. (3,873) (7,445)
Prior service cost....................................... 11,657 7,737
Net asset existing at transition date.................... (16,397) (18,260)
Adjustment required to recognize minimum liability......... (8,385) (4,902)
-------- --------
Net pension liability...................................... $(37,888) $(26,923)
======== ========
</TABLE>
Substantially all of the plan assets at September 30, 1994 are invested in
listed stocks, bonds and government securities including common stock of Alco
of $49,700,000.
During fiscal 1994, Alco increased its net pension liability by $5,949,000
due to early retirement benefits granted to 338 employees in connection with
the Unisource restructuring program (note 16).
The majority of Alco's employees are also eligible to participate in Alco's
Stock Participation Plan. They may invest 2% to 6% of regular compensation
before taxes. Alco contributes an amount equal to two-thirds of the employees'
investments and all amounts are invested in Alco's common shares. Employees
fully vest in Alco's contributions upon the completion of five years of
service. There is a similar plan for eligible management employees. The cost of
these plans charged to continuing operations amounted to $23,484,000 in 1994,
$16,174,000 in 1993 and $12,797,000 in 1992.
9. SEGMENT REPORTING
A description of each of Alco's industry segments appears elsewhere in this
prospectus. Dollar amounts for revenues, income before taxes, assets, capital
expenditures, and depreciation and amortization for each segment for 1994, 1993
and 1992 are reported on page 50.
43
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenues, income before taxes and identifiable assets by geographic area from
continuing operations for the fiscal years ended September 30 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Domestic..................................... $7,153.8 $5,649.8 $4,758.3
Foreign...................................... 843.1 799.9 168.8
-------- -------- --------
Operating.................................... 7,996.9 6,449.7 4,927.1
Eliminations and nonallocated................ (.9) (5.1) (2.0)
-------- -------- --------
Total...................................... $7,996.0 $6,444.6 $4,925.1
======== ======== ========
INCOME BEFORE TAXES
Domestic..................................... $ 332.6 $ 73.5 $ 211.9
Foreign...................................... 29.1 27.3 13.8
-------- -------- --------
Operating.................................... 361.7 100.8 225.7
Unconsolidated affiliate..................... (117.2) (2.5)
Investment gain, net......................... 6.7
Nonallocated................................. (87.7)* (73.7)* (59.9)*
-------- -------- --------
Total...................................... $ 156.8 $ 24.6 $ 172.5
======== ======== ========
ASSETS
Domestic..................................... $2,787.7 $2,547.5 $1,838.3
Foreign...................................... 572.5 536.4 413.7
-------- -------- --------
Operating.................................... 3,360.2 3,083.9 2,252.0
Unconsolidated affiliate..................... 118.1
Nonallocated................................. 142.1 146.9 69.2
-------- -------- --------
Total...................................... $3,502.3 $3,348.9 $2,321.2
======== ======== ========
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
Included in income before taxes for fiscal 1993 are restructuring costs of
$171,500,000 for domestic operations and $3,500,000 for foreign operations.
10. LEASES--CONTINUING OPERATIONS
Equipment acquired under capital leases is included in property and equipment
in the amount of $37,160,000 in 1994 and $34,583,000 in 1993 and the related
amounts of accumulated amortization are $15,888,000 in 1994 and $15,735,000 in
1993. Related obligations are in long-term debt and related amortization is
included in depreciation.
At September 30, 1994, future minimum payments under noncancelable operating
leases with initial or remaining terms of more than one year were: 1995--
$76,023,000; 1996--$63,552,000; 1997--$52,906,000; 1998--$43,444,000; 1999--
$51,477,000; thereafter--$84,289,000.
Total rental expense was $89,998,000 in 1994, $68,293,000 in 1993 and
$56,894,000 in 1992.
44
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INVESTMENT GAIN
In fiscal 1992, Alco sold debentures received in the 1989 sale of its equity
interest in a former subsidiary, which resulted in a pretax gain of
approximately $8,100,000 and also recorded nonrecurring expenses of
approximately $1,400,000.
12. CONTINGENCIES
There were contingent liabilities for taxes, guarantees, lawsuits, and
environmental and various other matters occurring in the ordinary course of
business. On the basis of information furnished by counsel and others,
management believes that none of these contingencies will materially affect
Alco.
Alco is presently in arbitration with a former subsidiary, which has asserted
that Alco is liable to it for certain liabilities arising under the "Coal
Industry Health Benefit Act of 1992". Based on consultation with its counsel,
Alco does not believe that it is responsible for such liabilities and,
therefore, no provision for this matter has been recorded in the financial
statements. In the event that the arbitrators decide in favor of the claimant,
Alco estimates that it would be obligated to pay approximately $36,000,000 over
a twenty-year period, which would result in an after-tax charge of
approximately $23,000,000 to discontinued operations.
13. FINANCE SUBSIDIARIES
Alco's wholly-owned finance subsidiaries are engaged in purchasing office
equipment from Alco dealers and leasing the equipment to customers under direct
financing leases.
Summarized financial information of the finance subsidiaries is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1994 1993
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Future minimum lease payments receivable................ $ 645,083 $555,020
Less: Unearned income................................... (109,416) (82,102)
--------- --------
Lease receivables....................................... 535,667 472,918
Accounts receivable and other assets.................... 26,736 11,151
--------- --------
Finance subsidiaries assets............................. $ 562,403 $484,069
========= ========
Debt at average interest rate:
1994-5.8%; 1993-6% due 1995-1997........................ $ 464,882 $413,092
Other liabilities....................................... 33,828 24,326
--------- --------
Finance subsidiaries liabilities........................ $ 498,710 $437,418
========= ========
</TABLE>
The finance subsidiaries results of operations included in Alco's
consolidated net income were net income of $13,347,000 in 1994, $8,180,000 in
1993, and $6,055,000 in 1992.
At September 30, 1994, future minimum payments to be received under direct
financing leases were: 1995-$255,987,000; 1996-$197,789,000; 1997-$120,699,000;
1998-$52,281,000; 1999-$18,090,000; thereafter-$237,000.
Effective July 1, 1994, Alco Capital Resource, Inc. (Alco Capital), a wholly-
owned finance subsidiary of Alco, may offer to the public from time to time
medium term notes having an aggregate initial offering price
45
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
not exceeding $500,000,000 or the equivalent thereof in foreign currency. These
notes will be offered at varying maturities of nine months or more from their
dates of issue and may be subject to redemption at the option of Alco Capital
or repayment at the option of the holder, in whole or in part, prior to the
maturity date in conjunction with meeting specified provisions. Interest rates
are determined based on market conditions at the time of issuance. As of
September 30, 1994, $105,000,000 of medium term notes are outstanding with a
weighted average interest rate of 6.9%.
Alco Capital has followed a policy of matching the maturities of borrowed
funds to the average life of its direct financing leases in order to minimize
the impact of interest rate changes on its operations. Alco Capital has
therefore entered into interest rate swap agreements to eliminate the impact of
interest rate changes on its variable rate notes payable. The interest rate
swap agreements effectively convert the variable rate notes into fixed rate
obligations. At September 30, 1994, there were two variable rate notes
outstanding and two related interest rate swap agreements on a
principal/notional amount of $57,000,000. The weighted average interest rate on
these variable rate notes and related interest rate swap agreements was 5.48%
and 5.04%, respectively, at September 30, 1994. During fiscal 1994, there were
four variable rate notes outstanding and four related interest rate swap
agreements on a weighted average principal/notional amount of $88,000,000. The
weighted average interest rate on these variable rate notes and related
interest rate swap agreements was 4.14% and 5.93%, respectively, during fiscal
1994. The interest rate swap agreements mature at the time the related notes
mature. Alco Capital is exposed to credit loss in the event of nonperformance
by the counterparties to the interest rate swap agreements. However, Alco
Capital does not anticipate nonperformance by the counterparties.
In September 1994, Alco Capital entered into an agreement to sell, under an
asset securitization program, an undivided ownership interest in $125,000,000
of eligible direct financing lease receivables. The agreement, which expires in
September 1995, contains limited recourse provisions which require Alco Capital
to assign an additional undivided interest in leases to cover any potential
losses to the purchaser due to uncollectible leases. As collections reduce
previously sold interests, new leases can be sold up to $125,000,000. As of
September 30, 1994, $125,000,000 of leases have been sold pursuant to the
agreement.
14. SALE OF ACCOUNTS RECEIVABLE
In September 1992, Alco entered into an agreement to sell, with limited
recourse, up to CN$70,000,000 of certain eligible Canadian accounts receivable.
In December 1993, this agreement was amended to extend the termination date
from December 20, 1993 to December 1, 1995. In September 1994, this agreement
was further amended to increase the maximum amount of receivables sold to
CN$85,000,000. The agreement provides limited recourse to the Company in the
event that any of the previously sold receivables become uncollectible. As
collections reduce previously sold interests, new receivables will be sold up
to CN$85,000,000. The amount of receivables outstanding under the agreement was
CN$81,000,000 (US$60,000,000) and CN$60,000,000 (US$45,000,000) at September
30, 1994 and 1993, respectively.
15. FINANCIAL INSTRUMENTS
Alco uses financial instruments in the normal course of its business. These
financial instruments include debt, commitments to extend credit and interest
rate swap agreements. The notional or contractual amounts of these commitments
and other financial instruments are discussed below.
CONCENTRATION OF CREDIT RISK
Alco is subject to credit risk through trade receivables and short-term cash
investments. Credit risk with respect to trade receivables is minimized because
of a large customer base and its geographic dispersion.
46
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Short-term cash investments are placed with high credit quality financial
institutions and in short duration corporate and government debt securities
funds. By policy, Alco limits the amount of credit exposure in any one type of
investment instrument.
INTEREST RATE SWAP AGREEMENTS
Please refer to note 13 for information on these instruments.
The following methods and assumptions were used by Alco in estimating fair
value disclosures for financial instruments:
CASH, NOTES PAYABLE AND LONG-TERM RECEIVABLES
The carrying amount reported in the balance sheet approximates fair value.
LONG-TERM DEBT
The fair value of long-term debt instruments is estimated using a discounted
cash flow analysis. For more information on these instruments, refer to note 5.
OFF-BALANCE SHEET INSTRUMENTS
Fair values for Alco's off-balance sheet instruments (interest rate swaps)
are based on the termination of the agreements.
The carrying amounts and fair values of Alco's financial instruments at
September 30, 1994 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Bond issue...................................... $150,000 $156,833
Private placement debt.......................... 70,000 71,837
Notes payable to insurance company.............. 60,000 62,614
Industrial revenue bonds........................ 10,537 11,442
Sundry notes, bonds and mortgages............... 38,341 36,786
Finance subsidiaries debt......................... 464,882 455,674
Interest rate swaps............................... 1,426
</TABLE>
16. RESTRUCTURING COSTS
On September 29, 1993, Alco adopted a plan to restructure its paper
distribution business including the following: installation of a customer-
focused information system, redesigning of warehouse and transportation
management functions, regionalization of management and administrative support
functions and consolidation of service center locations. In connection with
certain elements of the restructuring plan, Alco recorded a charge to earnings
of $175,000,000 ($112,875,000 net of taxes or $2.38 per share) in the fourth
quarter of fiscal 1993. The charge provided for facility consolidation
($60,700,000), severance costs ($48,000,000) and related organizational and
system redesign ($22,000,000).
At September 30, 1994, the remaining restructuring reserve is $106,971,000,
which management believes is adequate to complete the restructuring plan by the
end of fiscal 1996. As of September 30, 1994, 68 facility
47
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
consolidations had been substantially completed. The estimated cost to complete
the facility consolidations is $44,400,000 of which a significant portion
relates to costs to dispose and maintain facilities which have been or will be
vacated. Severance costs have been incurred during 1994 in accordance with the
plan and $23,800,000 is the estimated balance for severance costs. The related
organizational and system redesign is estimated to have a remaining cost of
$16,200,000. Alco estimates cash expenditures for the restructuring plan will
be $53,000,000 in fiscal 1995 and $43,000,000 in fiscal 1996.
17. COMMITMENTS
Effective January 1, 1994, Alco entered into an outsourcing agreement which
will provide the information technology system to be implemented as part of the
Unisource restructuring plan (note 16). This agreement calls for the payment of
$300,000,000 over a ten-year period. This contract has been expanded to provide
automated warehouse and truck routing systems at an estimated cost of
approximately $30,000,000 over the contract period.
48
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CORPORATE FINANCIAL SUMMARY
<TABLE>
<CAPTION>
SEVEN-YEAR
COMPOUND
GROWTH 1994 1993 1992 1991 1990 1989 1988 1987
---------- -------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE DATA, SHAREHOLDERS OF RECORD, EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
Revenues................. 14.1% $7,996.0 $6,444.6 $4,925.1 $4,516.0 $4,293.4 $3,783.6 $3,379.4 $3,173.7
Gross profit............. 18.2 2,083.3 1,621.1 1,267.1 1,110.0 1,022.4 841.9 690.3 646.8
% of revenues........... 26.1 25.2 25.7 24.6 23.8 22.3 20.4 20.4
Selling and administra-
tive.................... 18.1 1,765.5 1,378.8 1,069.6 946.8 864.4 711.1 584.7 552.1
% of gross profit....... 84.7 85.1 84.4 85.3 84.5 84.5 84.7 85.4
Operating income......... 21.0 361.7 100.8 225.7 195.3 190.0 153.0 128.4 95.2
% of revenues........... 4.5 1.6 4.6 4.3 4.4 4.0 3.8 3.0
Income before taxes...... 18.1(a) 156.8 24.6 172.5 125.8 111.5(c) 97.8 90.2 84.7(b)
% of revenues........... 2.0 .4 3.5 2.8 2.6 2.6 2.7 2.7
Effective income tax rate
(%)..................... 55.0 69.0 39.6 39.1 42.3 17.1 18.2 38.3
Income................... 18.8(a) 70.6 7.6 104.2 76.7 64.3(c) 81.1 72.5 49.7(b)
% of revenues........... .9 .1 2.1 1.7 1.5 2.1 2.1 1.6
Earnings (loss) per share
Primary................. 1.10 (.04) 2.22 1.70 1.44(c) 1.80 1.49 1.10(b)
Fully diluted........... (d) (d) (d) (d) (d) (d) (d) 1.05(b)
Capital expenditures..... 17.0 108.0 78.8 54.8 47.4 57.9 57.1 38.3 35.9
Depreciation and amorti-
zation.................. 15.0 96.8 76.1 59.3 58.2 49.5 43.8 37.3 36.4
-------- -------- -------- -------- -------- -------- -------- --------
DISCONTINUED OPERATIONS
Income (loss)............ $ (7.5) $ (8.4) $ 40.9 $ 29.2 $ 85.5 $ 37.0 $ 30.5
Earnings (loss) per share
Primary................. (.16) (.18) .91 .66 1.89 .76 .68
Fully diluted........... (d) (d) (d) (d) (d) (d) .62
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL OPERATIONS
Net income............... 10.9%(a) $ 70.6 $ .1 $ 95.8 $ 117.6 $ 93.5(c) $ 166.6 $ 109.5 $ 80.2(b)
Earnings (loss) per share
Primary................. 1.10 (.20) 2.04 2.61 2.10(c) 3.69 2.25 1.78(b)
Fully diluted........... (d) (d) (d) (d) (d) (d) (d) 1.67(b)
-------- -------- -------- -------- -------- -------- -------- --------
SHARE ACTIVITY
Dividends per share...... 6.6% $ 1.00 $ .96 $ .92 $ .88 $ .84 $ .76 $ .68 $ .64
Per share book value..... 8.1 21.44 17.52 18.72 18.40 16.93 14.96 14.08 12.43
Return on shareholders'
equity.................. 14.8(a) 11.5(a) 11.4 15.0 13.5 16.9(e) 16.9 15.8
Average common and common
equivalent shares....... 53.7 47.4 46.9 45.1 44.6 45.2 48.7 45.2
Shareholders of record... 14,348 13,999 13,726 14,096 14,152 13,410 14,103 12,875
-------- -------- -------- -------- -------- -------- -------- --------
SUPPLEMENTARY INFORMATION
Days sales outstanding... 37.8 38.9 37.8 38.6 39.7 39.3 38.5 38.9
Inventory turns (FIFO ba-
sis).................... 6.3 6.3 5.9 5.7 5.7 5.7 5.6 5.3
Current ratio............ 1.6 1.5 1.7 1.9 1.7 1.6 1.9 2.1
Pretax return on capital
employed................ 17.1(a) 14.7(a) 15.3 20.8 20.1 20.8(e) 19.9 21.3
Pretax return on capital
employed with finance
subsidiaries on equity
method.................. 18.4(a) 15.7(a) 16.2 22.5 21.6 21.7(e) 20.3 21.3
Working capital.......... 5.1% $ 653.5 $ 556.6 $ 496.0 $ 516.0 $ 404.3 $ 342.8 $ 412.3 $ 462.5
Total assets............. 14.1 3,502.3 3,348.9 2,444.8 2,020.6 1,916.5 1,623.9 1,512.4 1,389.3
Total debt............... 21.8 910.0 1,207.4 782.2 524.9 450.6 378.0 253.6 229.4
% of capitalization..... 40.0 53.6 47.6 38.9 37.4 36.9 26.6 26.3
Total debt excluding fi-
nance subsidiaries...... 11.7 445.1 794.3 481.7 304.2 291.0 283.5 201.4 205.8
% of capitalization..... 24.6 43.2 35.8 27.0 27.8 30.5 22.4 24.2
Serial preferred stock... .3 1.6 2.9 4.9 7.4 9.9 11.4
Employees................ 30,600 28,500 23,500 18,800 20,900 19,800 17,300 17,300
</TABLE>
- --------
(a) Excludes the effect of the sale of IMMOS (note 4) in fiscal 1994 and
restructuring costs (note 16) in fiscal 1993.
(b) Includes the sale of an automobile leasing subsidiary which resulted in a
pretax gain of $17,637,000.
(c) Includes unusual pretax charges relating to the Hillman Companies of
$10,323,000.
(d) Dilution is immaterial after 1987, therefore no disclosure.
(e) Excludes gain on sale of Alco Health Services Corporation of pretax--
$96,800,000; net income--$61,900,000.
Note: Unless otherwise noted, ratios and operating results include the effect
of: fiscal 1994--loss on sale of investment in IMMOS (note 4), pretax income
($115,265,000), net income ($95,086,000), earnings per share ($1.77); fiscal
1993--restructuring costs (note 16), operating income ($175,000,000), net
income ($112,875,000), earnings per share ($2.38).
49
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SEGMENT DATA
<TABLE>
<CAPTION>
INCOME DEPRECIATION
BEFORE CAPITAL AND
REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------ -------- ------------ ------------
(CONTINUING OPERATIONS, IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SEVEN-YEAR COMPOUND
GROWTH
1987-1994
Alco Office Products.... 33.0% 41.4% 38.5% 23.0% 22.4%
Unisource............... 14.1 11.1 18.0 19.7 17.2
======== ====== ======== ====== =====
1994
Alco Office Products.... $2,240.4 $199.4 $1,672.2 $ 72.5 $62.7
Unisource
United States......... 5,107.6 148.8 1,391.5 30.5 26.1
Canada................ 648.9 13.5 296.5 3.4 6.4
-------- ------ -------- ------ -----
Total Unisource......... 5,756.5 162.3 1,688.0 33.9 32.5
-------- ------ -------- ------ -----
Operating............... 7,996.9 361.7 3,360.2 106.4 95.2
Unconsolidated affili-
ate.................... (117.2)
Eliminations and
nonallocated........... (.9) (87.7)* 142.1 1.6 1.6
-------- ------ -------- ------ -----
$7,996.0 $156.8 $3,502.3 $108.0 $96.8
======== ====== ======== ====== =====
1993
Alco Office Products.... $1,585.6 $138.8 $1,450.0 $ 55.9 $45.4
Unisource
United States......... 4,173.7 118.7 1,319.6 18.8 22.3
Canada................ 690.4 18.3 314.3 2.9 6.9
Restructuring costs... (175.0)
-------- ------ -------- ------ -----
Total Unisource......... 4,864.1 (38.0) 1,633.9 21.7 29.2
-------- ------ -------- ------ -----
Operating............... 6,449.7 100.8 3,083.9 77.6 74.6
Unconsolidated affili-
ate.................... (2.5) 118.1
Eliminations and
nonallocated........... (5.1) (73.7)* 146.9 1.2 1.5
-------- ------ -------- ------ -----
$6,444.6 $ 24.6 $3,348.9 $ 78.8 $76.1
======== ====== ======== ====== =====
1992
Alco Office Products.... $1,259.2 $105.2 $ 967.5 $ 33.8 $37.0
Unisource
United States......... 3,585.1 118.2 988.7 19.1 20.0
Canada................ 82.8 2.3 295.8 1.1 .6
-------- ------ -------- ------ -----
Total Unisource......... 3,667.9 120.5 1,284.5 20.2 20.6
-------- ------ -------- ------ -----
Operating............... 4,927.1 225.7 2,252.0 54.0 57.6
Investment gain, net.... 6.7
Eliminations and
nonallocated........... (2.0) (59.9)* 69.2 .8 1.7
-------- ------ -------- ------ -----
$4,925.1 $172.5 $2,321.2 $ 54.8 $59.3
======== ====== ======== ====== =====
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
INCOME DEPRECIATION
BEFORE CAPITAL AND
REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------ -------- ------------ ------------
(CONTINUING OPERATIONS, IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1991
Alco Office Products..... $1,047.1 $ 79.6 $ 781.3 $28.6 $36.3
Unisource
United States.......... 3,441.1 113.8 897.3 16.1 18.4
Canada................. 35.8 1.9 8.2 .2 .4
-------- ------ -------- ----- -----
Total Unisource.......... 3,476.9 115.7 905.5 16.3 18.8
-------- ------ -------- ----- -----
Operating................ 4,524.0 195.3 1,686.8 44.9 55.1
Eliminations and
nonallocated............ (8.0) (69.5)* 177.8 2.5 3.1
-------- ------ -------- ----- -----
$4,516.0 $125.8 $1,864.6 $47.4 $58.2
======== ====== ======== ===== =====
1990
Alco Office Products..... $ 951.7 $ 58.9 $ 680.5 $32.3 $33.2
Unisource
United States.......... 3,316.3 129.4 843.9 24.6 14.9
Canada................. 22.2 1.7 8.5 .1 .2
-------- ------ -------- ----- -----
Total Unisource.......... 3,338.5 131.1 852.4 24.7 15.1
-------- ------ -------- ----- -----
Operating................ 4,290.2 190.0 1,532.9 57.0 48.3
Investment Gain.......... 5.6
Unusual charges (AOP).... (10.3)
Eliminations and
nonallocated............ 3.2 (73.8)* 88.8 .9 1.2
-------- ------ -------- ----- -----
$4,293.4 $111.5 $1,621.7 $57.9 $49.5
======== ====== ======== ===== =====
1989
Alco Office Products..... $ 729.5 $ 41.3 $ 540.4 $26.5 $26.7
Unisource--United States. 3,047.3 111.7 692.7 27.5 14.5
-------- ------ -------- ----- -----
Operating................ 3,776.8 153.0 1,233.1 54.0 41.2
Eliminations and
nonallocated............ 6.8 (55.2)* 108.3 3.1 2.6
-------- ------ -------- ----- -----
$3,783.6 $ 97.8 $1,341.4 $57.1 $43.8
======== ====== ======== ===== =====
1988
Alco Office Products..... $ 484.8 $ 28.9 $ 328.7 $19.6 $19.4
Unisource--United States. 2,755.5 99.5 670.9 15.9 13.9
-------- ------ -------- ----- -----
Operating................ 3,240.3 128.4 999.6 35.5 33.3
Gains, net of losses,
from divestitures....... 7.9
Eliminations and
nonallocated............ 139.1 (46.1)* 140.0 2.8 4.0
-------- ------ -------- ----- -----
$3,379.4 $ 90.2 $1,139.6 $38.3 $37.3
======== ====== ======== ===== =====
1987
Alco Office Products..... $ 303.7 $ 17.6 $ 171.0 $17.0 $15.2
Unisource--United States. 2,281.7 77.6 528.8 9.6 10.7
-------- ------ -------- ----- -----
Operating................ 2,585.4 95.2 699.8 26.6 25.9
Gains, net of losses,
from divestitures....... 17.6
Eliminations and
nonallocated............ 588.3 (28.1)* 348.5 9.3 10.5
-------- ------ -------- ----- -----
$3,173.7 $ 84.7 $1,048.3 $35.9 $36.4
======== ====== ======== ===== =====
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
51
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
QUARTERLY DATA
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
(UNAUDITED, IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1994
Revenues................ $ 1,921.8 $ 1,969.4 $ 2,001.3 $ 2,103.5 $ 7,996.0
Gross profit............ 485.4 511.7 535.4 550.8 2,083.3
Income (loss) before
taxes.................. 53.4 63.0 (38.9)(b) 79.3 156.8(b)
Net income (loss)....... 31.9 38.0 (48.3)(b) 49.0 70.6(b)
Earnings (loss) per
share.................. .60 .64 (.95)(b) .83 1.10(b)
Dividends............... $ .25 $ .25 $ .25 $ .25 $ 1.00
Common stock price
High/Low.............. 54 3/4-43 1/2 58 7/8-51 1/2 60 3/8-49 1/2 65 1/2-57 65 1/2-43 1/2
------------- ------------- ------------- ------------- -------------
1993
Revenues................ $ 1,444.5 $ 1,490.6 $ 1,547.1 $ 1,962.4 $ 6,444.6
Gross profit............ 364.2 382.1 389.2 485.6 1,621.1
Income (loss) before
taxes.................. 40.9 48.5 50.8 (115.6)(c) 24.6(c)
Income (loss)
Continuing operations. $ 24.8 $ 29.5 $ 30.7 $ (77.4)(c) $ 7.6(c)
Discontinued opera-
tions (a)............ 1.2 2.0 (10.7) (7.5)
------------- ------------- ------------- ------------- -------------
Net income (loss)....... $ 26.0 $ 31.5 $ 30.7 $ (88.1)(c) $ .1(c)
============= ============= ============= ============= =============
Earnings (loss) per
share
Continuing operations. $ .52 $ .57 $ .58 $ (1.71)(c) $ (.04)(c)
Discontinued opera-
tions (a)............ .03 .04 (.23) (.16)
------------- ------------- ------------- ------------- -------------
$ .55 $ .61 $ .58 $ (1.94)(c) $ (.20)(c)
============= ============= ============= ============= =============
Dividends............... $ .24 $ .24 $ .24 $ .24 $ .96
Common stock price
High/Low.............. 38 1/2-33 1/4 45 3/4-35 3/4 50 5/8-44 3/4 49 3/8-42 1/4 50 5/8-33 1/4
</TABLE>
- --------
(a) Alco recorded an additional pretax charge of $9,800,000 or $.10 per share,
in 1993 for the loss on the disposal of ADS.
(b) Includes a pretax charge of $115,265,000 ($95,086,000 net of taxes or $1.75
per share for the third quarter and $1.77 for the fiscal year) for the sale
of the investment in IMMOS.
(c) Includes a pretax charge of $175,000,000 ($112,875,000 net of taxes or
$2.38 per share) for restructuring costs.
The New York Stock Exchange is the principal market on which Alco's common
stock is traded (ticker symbol ASN). Alco's common stock is also traded on the
Philadelphia and Chicago Stock Exchanges. Alco currently expects to continue
its policy of paying quarterly cash dividends, although there can be no
assurance as to future dividends because they are dependent upon future
operating results, capital requirements and financial condition and may be
limited by covenants in certain loan agreements.
52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Filing Fee..................................................... $47,953
Listing Fees....................................................... 8,000
Accounting Fees.................................................... 10,000
Legal Fees......................................................... 2,000
Miscellaneous expenses............................................. 5,000
-------
Total.............................................................. $72,953
=======
</TABLE>
All of the above amounts, except for the SEC filing fee, have been estimated.
All such amounts will be paid by Alco.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Ohio General Corporation Law provides that a corporation may indemnify
persons who incur certain liabilities or expenses by reason of such persons
being or having been directors, officers, or employees of the registrant or
serving or having served in such capacities or similar capacities at the
registrant's request for other corporations or entities. Pursuant to the Ohio
law, the registrant has adopted, as a part of its Code of Regulations,
provisions whereby the registrant shall indemnify such persons against such
liabilities and expenses resulting from suits or other proceedings brought by
third persons and against expenses resulting from suits or other proceedings
brought in the right of the registrant, except that no indemnification against
expenses is to be made in respect of claims brought in the right of the
registrant where such person is finally adjudged to be liable for negligence or
misconduct in the performance of his duty to the registrant unless specific
court approval for such indemnification is obtained.
The registrant has purchased liability insurance policies covering its
directors and officers to provide additional protection where the registrant
cannot legally indemnify a director or officer and where a claim arises under
the Employee Retirement Income Security Act of 1974 against a director or
officer based upon an alleged breach of fiduciary or other wrongful act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
From time to time during the three-year period prior to the filing of this
registration statement, Alco has made unregistered sales of its common stock to
the sellers of acquired businesses pursuant to an exemption from registration
contained in Section 4(2) of the Securities Act of 1933. Such shares were
subsequently registered for resale on Form S-3 as follows:
<TABLE>
<CAPTION>
REGISTRATION
STATEMENT NO. FILING DATE NUMBER OF SHARES OF COMMON STOCK
------------- ----------- --------------------------------
<S> <C> <C>
33-50974 August 17, 1992 1,034,061
33-50976 August 17, 1992 382,250
33-49863 July 30, 1993 42,200
33-53711 May 19, 1994 496,090
33-54779 July 28, 1994 365,871
33-55947 October 7, 1994 122,409
33-56455 November 14, 1994 25,655
33-56457 November 14, 1994 46,774
</TABLE>
Based upon the market value of the Alco common shares described above, the
total consideration received by Alco for the above businesses was $117,751,000.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES*
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation, filed as Exhibit 3.1 to Alco's Form 10-Q for the
quarter ended June 30, 1994 are incorporated herein by reference.
3.2 Code of Regulations of Alco Standard Corporation, as amended
February 9, 1982, filed as Exhibit 3(b) to Alco's 1982 Form 10-K, is
incorporated herein by reference.
4.1 Credit Agreement dated December 1, 1994 among Alco Standard
Corporation and various lending institutions.
4.2 Revolving Credit and Acceptance Agreement, dated as of April 21,
1993, among Alco Standard Corporation, Unisource Canada Inc. and The
Toronto Dominion Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10-
K, is incorporated herein by reference. Amendment No. 1 to Revolving
Credit and Acceptance Agreement, filed as Exhibit 4.2 to Alco's Form
10-K for the fiscal year ended September 30, 1994 is incorporated by
reference.
4.3 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco Standard Corporation and Bank of
Montreal, filed as Exhibit 4.4 to Alco's 1992 10-K, is incorporated
herein by reference. Amendment dated September 30, 1994 to
Receivables Purchase Agreement, filed as Exhibit 4.4 to Alco's Form
10-K for the fiscal year ended September 30, 1994 is incorporated by
reference.
4.4 Rights Agreement dated as of February 10, 1988 between Alco Standard
Corporation and National City Bank, filed on February 11, 1988 as
Exhibit 1 to Alco's Registration Statement on Form 8-A, is
incorporated herein by reference.
4.5 Assumption Agreement and Amended and Restated Note Agreement dated
as of May 13, 1994 between Alco Standard Corporation and the
Prudential Insurance Company of America, filed as Exhibit 4.7 to
Alco Standard Corporation's Form 10-K for the fiscal year ended
September 30, 1994 is incorporated by reference.
4.6 Pursuant to Regulation S-K item 601(b)(4)(iii), Alco Standard
Corporation agrees to furnish to the Commission, upon request, a
copy of other instruments defining the rights of holders of long-
term debt of Alco Standard Corporation and its subsidiaries.
5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
legality of the securities being registered.
7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
liquidation preference of preferred stock.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco
Standard Corporation and certain Institutional Investors, filed as
Exhibit 4.2 to Alco's Current Report, dated July 1, 1988, on Form 8-
K, is incorporated herein by reference.
10.2 Alco Standard Corporation Long Term Incentive Compensation Plan, as
amended and restated, filed as Exhibit 99 to Registration Statement
No. 33-56471 on Form S-8, is incorporated herein by reference.
10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit 10.3
to Alco's Form 10-K for the fiscal year ended September 30, 1994 is
incorporated by reference.
10.4 Alco Standard Corporation Partners' Stock Purchase Plan, as amended
and restated, filed as Exhibit 10.4 to Alco's Form 10-K for the
fiscal year ended September 30, 1994 is incorporated by reference.
10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as Exhibit
10.5 to Alco's 1992 Form 10-K, is incorporated herein by reference.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.6 Alco Standard Corporation 1986 Stock Option Plan, filed as Exhibit
10.6 to Alco's 1993 Form 10-K, is incorporated herein by reference.
10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan, filed
as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan, filed
as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated herein by
reference.
10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as Exhibit
99 to Alco's Registration Statement No. 33-56469 on Form S-8, is
incorporated herein by reference.
10.10 Alco Standard Corporation 1980 Deferred Compensation Plan, filed as
Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.11 Alco Standard Corporation 1985 Deferred Compensation Plan, filed as
Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.12 Alco Standard Corporation 1991 Deferred Compensation Plan, filed as
Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.13 Alco Standard Corporation Retirement Plan for Non-Employee
Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is
incorporated herein by reference.
10.14 Alco Standard Corporation 1994 Deferred Compensation Plan, as
amended and restated, filed as Exhibit 10.14 to Alco's Form 10-K for
the fiscal year ended September 30, 1994 is incorporated by
reference.
10.15 Indenture, dated as of April 1, 1986 between Alco Standard
Corporation and the Chase Manhattan Bank, N.A., as Trustee, filed as
Exhibit 4.1 to Alco Standard Corporation's Registration Statement
No. 33-4829, is incorporated herein by reference.
10.16 Support Agreement dated as of June 1, 1994 between Alco Standard
Corporation and Alco Capital Resource, Inc. (Alco's leasing
subsidiary), filed as Exhibit 10.4 to Alco Capital Resource's
Amended Registration Statement on Form 10-12G/A dated May 27, 1994,
is incorporated herein by reference.
10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco
Standard Corporation and Alco Capital Resource, Inc. (Alco's leasing
subsidiary), filed as Exhibit 10.2 to Alco Capital Resource's
Registration Statement on Form 10 dated May 4, 1994, is incorporated
herein by reference.
10.18 Operating Agreement, dated as of August 15, 1991 between Alco
Standard Corporation and Alco Capital Resource, Inc. (Alco's leasing
subsidiary), filed as Exhibit 10.3 to Alco Capital Resource's
Registration Statement on Form 10 dated May 4, 1994, is incorporated
herein by reference.
10.19 Share Purchase Agreement dated September 7, 1994 between Alco
Standard Corporation and shareholders of IMM Office Systems Holding
GmbH, filed as Exhibit 10.19 to Alco's Form 10-K for the fiscal year
ended September 30, 1994 is incorporated by reference.
10.20 Agreement effective January 1, 1994 between Unisource Worldwide,
Inc. and Integrated Systems Solution Corporation, a subsidiary of
IBM, portions of which contain confidential material, filed as
Exhibit 10.20 to Alco's Form 10-K for the fiscal year ended
September 30, 1994 is incorporated by reference.
10.21 Receivables Transfer Agreement dated as of September 23, 1994 among
Alco Capital Resource, Inc., Twin Towers, Inc. and Deutsche Bank AG,
New York Branch, portions of which contain confidential material,
filed as Exhibit 10.21 to Alco's Form 10-K for the fiscal year ended
September 30, 1994 is incorporated by reference.
10.22 Distribution Agreement dated as of July 1, 1994 between Alco Capital
Resource, Inc. and various distribution agents, filed as Exhibit 1
to Alco Capital Resource's Form 10-Q for the fiscal quarter ended
June 30, 1994, is incorporated herein by reference.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.23 Indenture dated as of July 1, 1994 between Alco Capital Resource,
Inc. and Nations Bank, N.A., as Trustee, filed as Exhibit 4 to Alco
Capital Resource's Registration Statement No. 33-53779, is
incorporated herein by reference.
11 Statement re: computation of earnings per share.
21 Subsidiaries of Alco Standard Corporation.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- --------
* Copies of the exhibits will be furnished to any security holder of Alco upon
payment of the reasonable cost of reproduction.
(b) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF SCHEDULE
------ -----------------------
<C> <S>
S-1 --Schedule II--Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other Than Related Parties.
S-2 --Schedule VIII--Valuation and Qualifying Accounts.
S-3 --Schedule IX--Short-Term Borrowings.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to any provision or arrangement, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
THE REGISTRANT. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN VALLEY FORGE,
PENNSYLVANIA, ON THE 19TH DAY OF DECEMBER, 1994.
Alco Standard Corporation
/s/ Michael J. Dillon
Date: December 19, 1994 By: _________________________________
(MICHAEL J. DILLON)
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*John E. Stuart President, Chief December 19, 1994
- ------------------------------------- Executive Officer
(JOHN E. STUART) and Director
(Principal
Executive Officer)
*Kurt E. Dinkelacker Executive Vice December 19, 1994
- ------------------------------------- President and Chief
(KURT E. DINKELACKER) Financial Officer
(Principal
Financial Officer)
/s/ Michael J. Dillon Vice President and December 19 , 1994
- ------------------------------------- Controller
(MICHAEL J. DILLON) (Principal
Accounting Officer)
*Ray B. Mundt Chairman December 19, 1994
- -------------------------------------
(RAY B. MUNDT)
*J. Mahlon Buck, Jr. Director December 19, 1994
- -------------------------------------
(J. MAHLON BUCK, JR.)
*Paul J. Darling, II Director December 19, 1994
- -------------------------------------
(PAUL J. DARLING, II)
</TABLE>
II-6
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
*William F. Drake, Jr. Director December 19, 1994
- -------------------------------------
(WILLIAM F. DRAKE, JR.)
*James J. Forese Director December 19, 1994
- -------------------------------------
(JAMES J. FORESE)
*Frederick S. Hammer Director December 19, 1994
- -------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director December 19, 1994
- -------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Dana G. Mead Director December 19, 1994
- -------------------------------------
(DANA G. MEAD)
*Paul C. O'Neill Director December 19, 1994
- -------------------------------------
(PAUL C. O'NEILL)
*Rogelio G. Sada Director December 19, 1994
- -------------------------------------
(ROGELIO G. SADA)
*James W. Stratton Director December 19, 1994
- -------------------------------------
(JAMES W. STRATTON)
* By his signature set forth below, Hugh G. Moulton, pursuant to duly executed
Powers of Attorney duly filed with the Securities and Exchange Commission,
has signed this registration statement on behalf of the persons whose
signatures are printed above, in the capacities set forth opposite their
respective names.
/s/ Hugh G. Moulton December 19, 1994
- -------------------------------------
(HUGH G. MOULTON)
II-7
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ --------------------- --------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
---------- ------------------------
BALANCE
AT
BEGINNING AMOUNTS AMOUNTS
NAME OF DEBTOR(1) OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
----------------- --------- --------- --------- ----------- ---------- --------------
YEAR ENDED SEPTEMBER 30,
1994
- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Moulton......... $247,000 $247,000
William F. Drake, Jr. .. 121,000 $121,000
J. Kenneth Croney....... 115,000 $ 15,000 130,000
Peter W. Shoemaker...... 150,000 150,000
James J. Swearingen..... 150,000 150,000
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1993
- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Moulton......... $247,000 $247,000
O. Gordon Brewer, Jr.... 165,000 $115,000 50,000
Hallie H. Gibbs......... 150,000 150,000
William F. Drake, Jr.... 121,000 121,000
J. Kenneth Croney....... 115,000 115,000
Raymond A. Peterson..... 111,000 111,000
Peter Shoemaker......... $150,000 150,000
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1992
- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Hugh G. Moulton......... $247,000 $247,000
O. Gordon Brewer, Jr.... 165,000 165,000
Hallie H. Gibbs......... 150,000 150,000
William F. Drake, Jr.... 121,000 121,000
J. Kenneth Croney....... 115,000 115,000
Raymond A. Peterson..... 111,000 111,000
</TABLE>
- --------
(1) The notes receivable are secured by the debtors' pledge of Alco stock, bear
interest at 6% and are due upon demand.
S-1
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------------ -----------
ADDITIONS
----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ----------- ----------- ---------- ------------ -----------
YEAR ENDED SEPTEMBER 30,
1994
- ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $27,528,000 $19,668,000 $ 836,000(1) $18,604,000(2) $29,428,000
=========== =========== ========== =========== ===========
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1993
- ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $23,947,000 $19,702,000 $4,768,000(1) $20,889,000(2) $27,528,000
=========== =========== ========== =========== ===========
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1992
- ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $20,493,000 $14,636,000 $6,414,000(1) $17,596,000(2) $23,947,000
=========== =========== ========== =========== ===========
</TABLE>
- --------
(1) Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
S-2
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E(3) COL. F(4)
------ ------ ------ ------ --------- ---------
MAXIMUM AMOUNT WEIGHTED AVERAGE
WEIGHTED OUTSTANDING AVERAGE AMOUNT INTEREST RATE
CATEGORY OF AGGREGATE BALANCE AT AVERAGE DURING THE OUTSTANDING DURING THE
SHORT-TERM BORROWINGS END OF PERIOD INTEREST RATE PERIOD DURING THE PERIOD PERIOD
--------------------- ------------- ------------- -------------- ----------------- ----------------
YEAR ENDED SEPTEMBER 30,
1994
- ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $43,000,000 5.2% $303,000,000 $160,317,000 3.6%
Notes payable--foreign.. 48,519,000 5.7 52,050,000 47,348,000 5.0
Notes payable--other.... 480,000 6.9 1,583,000 848,000 8.1
Commercial paper(2)..... 90,000,000 15,769,000 3.3
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1993
- ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $ 1,166,000 3.3% $164,000,000 $123,999,000 3.3%
Notes payable--foreign.. 72,639,000 5.6 72,639,000 18,056,000 5.3
Notes payable--other.... 444,000 6.8 1,755,000 968,000 4.5
Commercial paper(2)..... 90,000,000 3.2 100,000,000 33,445,000 3.3
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1992
- ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $ 39,000,000 $ 23,099,000 3.9%
Notes payable--foreign.. $ 241,000 6.3% 835,000 187,000 9.1
Notes payable--other.... 1,324,000 4.3 4,752,000 1,377,000 7.5
</TABLE>
- --------
(1) Notes payable to banks represent borrowings under confirmed lines of credit
that are supported by bank credit agreements (See note 5 to the
consolidated financial statements).
(2) Commercial paper matures generally 30 days from date of issue.
(3) The average amount outstanding during the period was computed by dividing
the sum of the daily principal balances by 365.
(4) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt
outstanding.
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.1 Credit Agreement dated December 1, 1994 among Alco Standard
Corporation and various lending institutions.
5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
legality of the securities being registered.
7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
liquidation preference of preferred stock.
11 Statement re: computation of earnings per share.
21 Subsidiaries of Alco Standard Corporation.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- --------
* Copies of the exhibits will be furnished to any security holder of Alco upon
payment of the reasonable cost of reproduction.
1
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
Alco Standard Corporation
Certain of its Subsidiaries
and
Bank One, Columbus, NA,
Bank of America Illinois,
The Chase Manhattan Bank, N.A.,
Chemical Bank
CoreStates Bank, N.A.,
Deutsche Bank AG,
First Bank National Association,
First Fidelity Bank, National Association,
First Interstate Bank of California,
NationsBank of North Carolina, N.A.,
Shawmut Bank Connecticut, N.A.,
Society National Bank,
The Toronto-Dominion Bank,
Trust Company Bank
and
CoreStates Bank, N.A.,
as Agent
--------------------------
CREDIT AGREEMENT
dated December 1, 1994
U.S. $500,000,000
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
1. Definitions ............................................................... 1
1.1 Certain Definitions .............................................. 1
2. The Credit ................................................................ 8
2.1 The Loans ...................................................... 8
(a) The 364 Day Facility .................................... 8
(b) Five Year Facility ...................................... 9
2.2 Selected Currency .............................................. 10
2.3 Funding Procedures ............................................. 10
(a) Request for Advances .................................... 10
(b) Actions by Agent ........................................ 11
(d) Funding Assumptions ..................................... 11
(e) Maximum Borrowings Outstanding........................... 12
2.4 The Notes ...................................................... 12
2.5 Joint and Several Obligations................................... 12
2.6 Interest Rates ................................................. 13
(a) Alternate Base Rate Loans ............................... 13
(b) Eurocurrency Rate Loans ................................. 13
(c) Post Maturity Rate ...................................... 14
2.7 Facility Fee ................................................... 14
2.8 Termination or Reduction of Credit; Recomputation Date ......... 14
(a) Termination or Reduction of Credit....................... 14
(b) Reduction ............................................... 14
(c) Recomputation Date ...................................... 15
2.9 Optional Loan Prepayments....................................... 15
2.10 Payments ....................................................... 15
2.11 Illegality ..................................................... 16
2.12 Increased Cost.................................................. 17
2.13 Indemnity Against Funding Losses or Expenses.................... 19
2.14 Substitution of Bank ........................................... 19
3. Representations and Warranties ............................................. 19
3.1 Organization and Good Standing ................................. 19
3.2 Corporate Power and Authority .................................. 19
3.3 Validity of Agreement and Notes ................................ 19
3.4 Litigation ..................................................... 20
3.5 Financial Statements ........................................... 20
3.6 ERISA .......................................................... 20
3.7 Regulations G, T, U and X ...................................... 21
3.8 Compliance with Laws ........................................... 21
3.9 Taxes and Assessments .......................................... 21
3.10 Investment Company ............................................. 21
3.11 Environmental Matters .......................................... 21
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.12 Liens ............................................................ 22
3.13 Disclosure Generally ............................................. 22
3.14 Ownership of Subsidiary Borrowers ................................ 22
4. Conditions ................................................................ 22
4.1 Effectiveness of Agreement ..................................... 22
(a) Compliance .............................................. 22
(b) Evidence of Corporate Action ............................ 23
(c) Opinions of Counsel ..................................... 23
(d) Incumbency Certificate .................................. 23
(e) Executed Agreements ..................................... 23
(f) Notes ................................................... 23
(g) Material Adverse Change ................................. 23
4.2 Conditions to Loans ............................................ 24
4.3 Copies of Documents ............................................ 24
5. Covenants .................................................................. 24
5.1 Financial Statements and Information ........................... 25
5.2 Funded Debt to Net Worth Ratio ................................. 26
5.3 Interest Coverage Ratio ........................................ 26
5.4 Subsidiaries' Debt ............................................. 26
5.5 Contingent Liabilities.......................................... 27
5.6 Sale of Assets.................................................. 27
5.7 Mergers and Acquisitions........................................ 27
5.8 Negative Pledge................................................. 27
5.9 Sale, Discount of Receivables; Sale, Leaseback Transactions..... 28
5.10 Regulations G, T, U and X....................................... 28
5.11 Corporate Existence ............................................ 28
5.12 Books and Records .............................................. 29
5.13 Insurance ...................................................... 29
5.14 Litigation; Event of Default ................................... 29
5.15 Taxes .......................................................... 29
5.16 Compliance with Laws............................................ 29
5.17 Employee Benefit Plans ......................................... 30
5.18 Use of Proceeds................................................. 30
5.19 Continued Ownership of each Subsidiary Borrower................. 30
6. Defaults .................................................................. 30
6.1 Defaults ....................................................... 30
6.2 Acceleration by Reason of Default .............................. 32
7. The Banks and the Agent ................................................... 33
7.1 Authority of Agent ............................................. 33
7.2 Responsibility of Agent ........................................ 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
7.3 Pro-Rata Payments .................................................. 34
7.4 Indemnification of Agent ........................................... 34
7.5 Credit Decision .................................................... 34
7.6 The Agent as a Bank ................................................ 35
7.7 Successor Agent .................................................... 35
7.8 Withholding Taxes .................................................. 35
7.9 Allocations Made By Agent .......................................... 35
8. Indemnification ........................................................... 36
8.1 Indemnification of the Agent and the Banks ......................... 36
9. Miscellaneous ............................................................. 36
9.1 Notices ............................................................ 36
9.2 Effective Date, Successors and Assigns and Survival of Terms ....... 36
9.3 Participations ..................................................... 37
9.4 Expenses ........................................................... 37
9.5 Modifications and Waivers .......................................... 37
9.6 No Implied Rights or Waivers ....................................... 38
9.7 Offsets ............................................................ 38
9.8 Application of Payments ............................................ 38
9.9 Counterparts ....................................................... 38
9.10 Governing Law; Submission to Jurisdiction .......................... 39
9.11 Severability of Provisions ......................................... 40
9.12 Captions ........................................................... 40
9.13 Plural and Singular ................................................ 40
9.14 Judgment Currency .................................................. 40
9.15 Termination of the 1991 Credit, the 1993 Credit and the DM Credit .. 40
</TABLE>
Exhibit A List of Subsidiary Borrowers
Exhibit B List of Banks and Commitments
Exhibit C-1 Form of 364 Day Facility Note
Exhibit C-2 Form of Five Year Facility Note
Exhibit D Opinion of Counsel Form
Exhibit E Opinion of Counsel to Subsidiary Borrower Form
-iii-
<PAGE>
Credit Agreement
This Agreement, dated December 1, 1994 between and among ALCO STANDARD
CORPORATION, an Ohio corporation, with its main business office located at
Valley Forge, Pennsylvania 19482 (herein called the "Company"), those
subsidiaries of the Company set forth on Exhibit A hereto (the "Subsidiary
Borrowers"), the banking institutions named in Exhibit B attached hereto (herein
called collectively the "Banks" and individually a "Bank") and CORESTATES BANK,
N.A., a national banking association, as agent for the Banks under this
Agreement (herein in such capacity called the "Agent").
Witnesseth:
WHEREAS, the Company and the Subsidiary Borrowers anticipate the need
to borrow money from time to time for working capital and general corporate
purposes and have requested the Banks to establish credit facilities and make
available loans to one or more of them under the terms and conditions
hereinafter set forth;
WHEREAS, the Company, certain of the Banks and the Agent are parties
to a Credit Agreement dated December 8, 1991, as amended (the "1991 Credit");
and
WHEREAS, the Company, Alco Office Products (U.K.), Plc ("AOP-UK") a
subsidiary of the Company and certain of the Banks are parties to an Amended and
Restated Credit Agreement, dated as of September 30, 1993 (the "1993 Credit");
and
WHEREAS, the Company and certain of the Banks are parties to a
180,000,000 Deutsche Mark Revolving Credit Agreement dated October 1992 (the "DM
Credit"); and
WHEREAS, in connection with the establishment of the credit facilities
provided hereunder, the Borrower, AOP-UK and each Bank that is a party to the
1991 Credit, the 1993 Credit and/or the DM Credit are terminating the 1991
Credit, the 1993 Credit and the DM Credit, respectively.
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1. Definitions
1.1 Certain Definitions. The terms defined in this (S)1.1, whenever
used and capitalized in this Agreement, shall, unless the context otherwise
requires, have the respective meanings herein specified:
"1934 Act" shall have the meaning assigned to it in (S)6.1(g) hereof.
--------
"1991 Credit" shall have the meaning assigned to it in the recitals to this
-----------
Agreement.
<PAGE>
"1993 Credit" shall have the meaning assigned to it in the recitals to this
-----------
Agreement.
"Agent" shall mean CoreStates Bank, N.A., a national banking association in
-----
its capacity as agent for the Banks hereunder.
"Alternate Base Rate" shall mean the higher of (i) the rate of interest for
-------------------
commercial loans established and publicly announced by the Agent from time
to time as its prime rate, or (ii) the Federal Funds Rate plus 1/4 of 1%
per annum.
"Alternate Base Rate Loan" shall mean a Loan made at the Alternate Base
------------------------
Rate pursuant to the applicable Request for Advance.
"Applicable Margin" shall mean, (i) with respect to 364 Day Facility Loans,
-----------------
22 basis points per annum and (ii) with respect to Five Year Facility
Loans, 20 basis points per annum; provided, however that at such time and
so long as the Company's Funded Debt is rated below BBB- by Standard and
Poor's Rating Group or below Baa3 by Moodys Investor Service, Inc., such
Applicable Margin shall be increased by 12.5 basis points.
"Bank" shall mean any bank listed in Exhibit B hereto.
----
"Borrowing" shall mean a borrowing hereunder consisting of Loans made to a
---------
Borrower by the Banks on a given occasion. A Borrowing is an "Alternate
Base Rate Borrowing" if such Loans are Alternate Base Rate Loans or a
"Eurocurrency Rate Borrowing" if such Loans are Eurocurrency Rate Loans.
"Borrower" shall mean the Company or a Subsidiary Borrower.
--------
"Borrowers" shall mean the Company and each Subsidiary Borrower.
---------
"Business Day" shall mean (i) for all purposes other than as covered by
------------
clauses (ii) and (iii) below, any day excluding Saturday, Sunday and any
day which shall be in the City of New York a legal holiday or a day on
which banking institutions are authorized by law or other government action
to close, (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, any U.S. Dollar Loan, any
day which is a Business Day described in clause (i) above and which is also
a day for trading by and between banks in U.S. Dollar deposits in the
London interbank Eurodollar market and (iii) with respect to all notices
and determinations in connection with, and payments of principal and
interest on, any Loan the Selected Currency of which is not the U.S.
Dollar, any day which is a Business Day described in clause (i) above and
which is also (a) any day except a day which, in London, shall be a legal
holiday or a day on which banking institutions are authorized by law or
other government action to close and (b) a day for trading by and between
banks in deposits of such Selected Currency in the interbank market.
-2-
<PAGE>
"Code" shall have the meaning assigned to it in (S)5.17 hereof.
----
"Commitment" of any Bank shall mean the sum of its 364 Day Facility
----------
Commitment and its Five Year Facility Commitment.
"Commitment Percentage" shall have the meaning assigned to it in (S)2.1(a)
---------------------
hereof.
"Company" shall mean Alco Standard Corporation, an Ohio corporation.
-------
"Consolidated Subsidiaries" shall mean all Subsidiaries.
-------------------------
"Consolidated Net Worth" shall be determined in accordance with GAAP and
----------------------
shall mean the sum (as reflected in the consolidated balance sheet of the
Company and its Consolidated Subsidiaries) of (i) the stated dollar amount
of outstanding capital stock, (ii) the stated dollar amount of additional
paid in capital, if any, plus (iii) the amount of surplus and retained
earnings minus (iv) the cost of treasury shares and the excess of
redemption value over the stated value of preferred stock of the Company
and its Consolidated Subsidiaries.
"Contingent Liabilities" shall mean letters of credit (excluding commercial
----------------------
documentary letters of credit), unconditional guaranties to banks or other
lenders of indebtedness of another person or entity, and liabilities
associated with interest rate hedging agreements, provided, however that
-------- -------
Contingent Liabilities shall not be deemed to include any recorded
liability provided for on the Company's consolidated balance sheet.
"Controlling Person" shall have the meaning assigned to it in (S)6.1(g)
------------------
hereof.
"Credit" shall mean the aggregate amounts of the Commitments of the Banks
------
hereunder at any time.
"Danish Kroner" shall mean lawful currency of the Kingdom of Denmark.
-------------
"Debt" shall mean (i) Funded Debt and (ii) any portions of notes payable
----
and capital lease obligations which are classified as current liabilities.
"Deutsche Mark" shall mean lawful currency of the Federal Republic of
-------------
Germany.
"DM Credit" shall have the meaning assigned to it in the recitals to this
---------
Agreement.
"Employee Benefit Plan" shall have the meaning given in (S)3.6 hereof.
---------------------
"Environmental Control Statutes" shall have the meaning assigned to it in
------------------------------
(S)3.11 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
-3-
<PAGE>
"ERISA Affiliate" shall have the meaning given in (S)3.6 hereof.
---------------
"Eurocurrency Rate Loan" shall mean a Loan to be made at the LIBO Rate
----------------------
pursuant to the applicable Request for Advance.
"Eurodollar Rate Loan" shall mean a Eurocurrency Rate Loan for which the
--------------------
Selected Currency is U.S. Dollars.
"Event of Default" shall have the meaning set forth in (S)6.1 hereof.
----------------
"Facility" shall mean either of the 364 Day Facility or the Five Year
--------
Facility.
"Facility Fee" shall have the meaning assigned to it in (S)2.7 hereof.
------------
"FAX" shall mean any means of facsimile transmission.
---
"Federal Funds Rate" shall mean the daily rate of interest announced from
------------------
time to time by the Board of Governors of the Federal Reserve System in
publication H.-15 as the "Federal Funds Rate," or if such publication is
unavailable, such rate as is available to Agent on such day.
"Fees" shall mean the Facility Fee.
----
"Finance Leasing Subsidiaries" shall mean Alco Capital Resource, Inc., a
----------------------------
Delaware corporation, Alco Capital Resource Canada Limited, a Canadian
corporation, and TNL Financial, Inc., a Texas corporation, and their
respective successor corporations.
"Five Year Facility" shall have the meaning assigned to it in Section
------------------
2.1(b) hereof.
"Five Year Facility Amount" shall have the meaning assigned to it in
-------------------------
Section 2.1(b) hereof.
"Five Year Facility Commitment" shall have the meaning assigned to it in
-----------------------------
Section 2.1(b) hereof.
"Five Year Facility Loans" shall have the meaning assigned to it in Section
------------------------
2.1(b) hereof.
"Five Year Facility Termination Date" shall have the meaning assigned to it
-----------------------------------
in Section 2.1(b) hereof.
"French Francs" shall mean lawful currency of the Republic of France.
-4-
<PAGE>
"Funded Debt" shall mean any obligation payable more than one year from the
-----------
date of the creation thereof which under GAAP is shown on the consolidated
balance sheet as a liability (excluding reserves for deferred income taxes
and other reserves to the extent that such reserves do not constitute
obligations for borrowed money) and including, without limitation, the
portion of any such obligation properly classified as a current liability
and capitalized leases.
"GAAP" shall mean generally accepted accounting principles applied on a
----
consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or in such other
statements by such other entity as the Agent and the Company may reasonably
approve, which are applicable in the circumstances and as of the date in
question, and the requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current
period are comparable, in all material respects to those applied in a
preceding period, except for the adoption within any permissible period of
new accounting standards required by the Financial Accounting Standards
Board from time to time.
"Interest Period" shall mean:
---------------
(1) with respect to each Alternate Base Rate Borrowing the period
commencing on the date of such Alternate Base Rate Borrowing and ending not
more than 180 days thereafter, as the Company may elect in the applicable
Request for Advance (and ending 90 days thereafter if the Company shall
fail to so elect), provided that no Interest Period shall end later than
the 364 Day Facility Termination Date or the Five Year Facility Termination
Date, as applicable; and
(2) with respect to each Eurocurrency Rate Borrowing the period
commencing on the date of such Eurocurrency Rate Borrowing and ending one,
two, three, or six months thereafter, as the Company may elect in the
applicable Request for Advance; provided that:
--------
(a) any Interest Period which would otherwise end on a day which
is not a London Business Day shall be extended to the next succeeding
London Business Day unless such London Business Day falls in another
calendar month, in which case such Interest Period shall end on the
next preceding London Business Day;
(b) any Interest Period which begins on the last London Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last London
Business Day of a calendar month; and
-5-
<PAGE>
(c) no Interest Period shall end later than the 364 Day Facility
Termination Date or the Five Year Facility Termination Date, as
applicable.
The end of an Interest Period shall be deemed a maturity for purposes
of all Loans.
"LIBO Rate" shall mean the average (rounded upward, if necessary, to the
---------
next 1/6 of 1%) of the rates per annum at which the Reference Banks are
offered deposits in the Selected Currency as of 11:00 a.m., London time, on
the second London Business Day preceding the date of the proposed
Eurocurrency Rate Borrowing by prime banks in the London interbank
eurocurrency market for delivery on the date of such Borrowing, for the
applicable Interest Period of such Borrowing, and in an amount equal to the
aggregate amount of such Borrowing and in like funds.
"Loan" shall mean an Alternate Base Rate Loan or a Eurocurrency Rate Loan.
----
"London Business Day" shall mean any Business Day described in clause (iii)
-------------------
of the definition of "Business Day."
"Majority Banks" shall mean the Banks whose Commitment Percentages under
--------------
this Agreement aggregate at least 51.0% of the total Commitment Percentages
of all the Banks.
"Multiemployer Plan" shall have the meaning given in (S)3.6 hereof.
------------------
"Notes" shall have the meaning assigned to it in (S)2.4.
-----
"PBGC" shall have the meaning assigned to it in (S)3.6 hereof.
----
"Participant" shall have the meaning assigned to it in (S)9.3 hereof.
-----------
"Participations" shall have the meaning assigned to it in (S)9.3 hereof.
--------------
"Pension Plan" shall have the meaning given in (S)3.6 hereof.
------------
"Pounds Sterling" means lawful currency of the United Kingdom of England,
---------------
Scotland, Northern Ireland and Wales.
"Recomputation Date" shall have the meaning assigned to it in (S)2.8(c).
------------------
"Reference Bank" shall mean each of CoreStates Bank, N.A. and The Chase
--------------
Manhattan Bank, N.A.
-6-
<PAGE>
"Request for Advance" shall have the meaning assigned to it in (S)2.3(a)
-------------------
hereof.
"Selected Currency" shall mean, with respect to each Eurocurrency Rate
-----------------
Borrowing, the currency, which may be U.S. Dollars, Pounds Sterling,
Deutsche Marks, French Francs, Danish Kroner, or such currency as may be
approved from time to time by the Agent and the Majority Banks, so long as
such Selected Currency remains freely transferable and convertible into
U.S. Dollars and readily available to banks in the London interbank market,
selected by the Company pursuant to (S)2.2 and designated by the Company as
such in the Request for Advance for such Borrowing.
"Significant Subsidiary" shall mean a Subsidiary which is a 'significant
----------------------
subsidiary' as defined in (S)210.1-02(v) of Regulation S-X of the
Securities and Exchange Commission, 17 C.F.R. Part 210, as in effect on the
date hereof.
"Subsidiary" shall mean any corporation of which the Company directly or
----------
indirectly owns or controls at least a majority of the outstanding stock
having general voting power, including without limitation the right, under
ordinary circumstances, to vote for the election of a majority of the Board
of Directors of such corporation.
"364 Day Facility" shall have the meaning assigned to it in Section 2.1(a)
----------------
hereof.
"364 Day Facility Amount" shall have the meaning assigned to it in Section
-----------------------
2.1(a) hereof.
"364 Day Facility Commitment" shall have the meaning assigned to it in
---------------------------
Section 2.1(a) hereof.
"364 Day Facility Loans" shall have the meaning assigned to it in Section
----------------------
2.1(a) hereof.
"364 Day Facility Termination Date" shall have the meaning assigned to it
---------------------------------
in Section 2.1(a) hereof.
"Unfunded Pension Liabilities" shall have the meaning given in (S)3.6
----------------------------
hereof.
"Unisource Canada" shall mean Unisource Canada, Inc., a corporation
----------------
continued under the federal laws of Canada, and a wholly-owned Subsidiary.
"Unrecognized Retiree Welfare Liability" shall have the meaning given in
--------------------------------------
(S)3.6 hereof.
"U.S. Dollars" or "U.S. $" means lawful currency of the United States of
------------ ------
America.
"U.S. Dollar Equivalent" of any amount of a Selected Currency other than
----------------------
U.S. Dollars on any date shall mean the equivalent amount in U.S. Dollars
on such date, after giving effect to a conversion of such amount of such
Selected Currency to U.S. Dollars at the
-7-
<PAGE>
buy spot rate quoted for wholesale transactions by the Agent at
approximately 11:00 a.m. Philadelphia time on such date in accordance with
its normal practice. The U.S. Dollar Equivalent of all Loans the Selected
Currency of which is not U.S. Dollars shall be calculated as of the date
two London Business Days preceding the date on which such Loan was made and
thereafter as of the London Business Day immediately preceding the
applicable Recomputation Date.
"U.S. Dollar Loan" shall mean an Alternate Base Rate Loan and/or an
----------------
Eurodollar Rate Loan.
2. The Credit
2.1 The Loans.
---------
(a) The 364 Day Facility. Each Bank severally agrees, upon the terms and
--------------------
conditions hereinafter set forth, to make loans to the Borrowers (the "364 Day
Facility Loans") from time to time during the period beginning on the date
hereof and ending on December 1, 1995 or on the earlier date of termination in
full, pursuant to (S)2.8 or (S)6.2 hereof, of the obligations of such Bank under
this (S)2.1 (December 1, 1995 or such earlier date of termination being herein
called the "364 Day Facility Termination Date") in amounts not to exceed at any
time outstanding in the aggregate the commitment amount set forth opposite the
name of such Bank on Exhibit B hereto (each such amount, as the same may be
reduced pursuant to (S)2.8 hereof, being hereinafter called such Bank's "364 Day
Facility Commitment"). (The Banks' collective commitment to make 364 Day
Facility Loans shall be the "364 Day Facility"). All 364 Day Facility Loans
shall be made to the Borrowers at the main office of the Agent, Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19101. Within the limits of each
Bank's 364 Day Facility Commitment and subject to (S)2.9, the Borrowers may
borrow, prepay pursuant to (S)2.9 and reborrow under this (S)2.1(a). Any Bank
may make, carry or transfer Eurocurrency Rate Loans at, to or for the account
of, its Eurocurrency lending office or affiliate or such other offices or
affiliates all as may be designated from time to time in writing by any Bank to
the Agent.
The obligation of each Bank to make a 364 Day Facility Loan to the
Borrowers at any time shall be limited to its percentage (the "Commitment
Percentage") as set forth opposite the name of such Bank on Exhibit B hereto
multiplied by the aggregate amount of the 364 Day Facility Loans requested. The
principal amounts of the respective 364 Day Facility Loans made by the Banks on
the occasion of each Borrowing shall be pro rata in accordance with their
respective Commitment Percentages under the 364 Day Facility. No Bank shall be
required or permitted to make any 364 Day Facility Loan if, immediately after
giving effect to such 364 Day Facility Loan, and the application of the proceeds
thereof to the extent applied to the repayment of the 364 Day Facility Loans,
the sum of (a) the aggregate principal amount of such Bank's 364 Day Facility
Loans in U.S. Dollars outstanding to the Borrowers and (b) the U.S. Dollar
Equivalent of the aggregate principal amount of such Bank's 364 Day Facility
Loans in a
-8-
<PAGE>
Selected Currency other than U.S. Dollars outstanding to the Borrowers would
exceed such Bank's 364 Day Facility Commitment.
The maximum amount available to the Borrowers, individually and in the
aggregate, under this 364 Day Facility shall not at any time exceed U.S.
$150,000,000 or $150,000,000 in U.S. Dollar Equivalent, and at the option of the
Borrowers, may be reduced from time to time hereafter pursuant to (S)2.8 hereof
(such maximum amount, as the same may be so reduced, being hereinafter called
the "364 Day Facility Amount").
The failure of any one or more of the Banks to make Loans in accordance
with its or their obligations shall not relieve the other Banks of their several
obligations hereunder, but in no event shall the aggregate amount at any one
time outstanding, which any Bank shall be required to lend under this 364 Day
Facility, exceed its 364 Day Facility Commitment.
On or before the 30th day (but not earlier than the 60th day) prior to the
364 Day Facility Termination Date the Company may request in writing to the
Agent that a new 364 Day Facility be established with a new 364 Day Facility
Termination Date three hundred sixty-four (364) days from the previous 364 Day
Facility Termination Date. The Agent will promptly distribute such notice to
the Banks. The Banks shall notify the Agent not less than ten Business Days
prior to the then current 364 Day Facility Termination Date of their
willingness, in their sole discretion, to establish a new date, which agreement
may be revocable by any Bank on or prior to the then current 364 Day Facility
Termination Date. If Banks with Commitment Percentages aggregating 66 2/3% or
more agree to a new 364 Day Facility and a new 364 Day Facility Termination
Date, the Agent, on the then current 364 Day Facility Termination Date, shall
advise the Company and the Banks, in writing, that a new 364 Day Facility and
364 Day Facility Termination Date has been established and this Agreement shall
be deemed amended to such extent. Such new 364 Day Facility Termination Date
shall be the 364 Day Facility Termination Date for all purposes under this
Agreement. If a new 364 Day Facility and a new 364 Day Facility Termination
Date is established hereunder but fewer than all of the Banks agree to establish
such facility, the Borrowers shall repay the 364 Day Facility Loans of each Bank
that does not so agree, together with accrued but unpaid interest thereon, on
the then current 364 Day Facility Termination Date. The Company may at its
option elect to seek a substitute bank or banks (which may be one or more of the
Banks and which shall be reasonably satisfactory to the Company and the Agent)
to purchase the portion of the 364 Day Facility Loans then held by, and to
assume the 364 Day Facility Commitments hereunder of, such Banks that did not
elect to establish a new 364 Day Facility.
(b) Five Year Facility. Each Bank severally agrees, upon the terms and
------------------
conditions hereinafter set forth, to make loans to the Borrowers (the "Five Year
Facility Loans") from time to time during the period beginning on the date
hereof and ending on December 1, 1999 or on the earlier date of termination in
full, pursuant to (S)2.8 or (S)6.2 hereof, of the obligations of such Bank under
this (S)2.1(b) (December 1, 1999 or such earlier date of termination being
herein called the "Five Year Facility Termination Date") in amounts not to
exceed at any time outstanding in the aggregate the commitment amount set forth
opposite the name of such Bank on Exhibit
-9-
<PAGE>
B hereto under the caption "Banks' Commitments and Percentages" (each such
amount, as the same may be reduced pursuant to (S)2.8 hereof being hereinafter
called such Bank's "Five Year Facility Commitment"). (The Banks' collective
commitment to make Five Year Facility Loans shall be the "Five Year Facility").
The obligation of each Bank to make a Five Year Facility Loan to the
Borrowers at any time shall be limited to the Bank's Commitment Percentage times
the aggregate amount of the Five Year Facility Loans requested.
The maximum amount available to the Borrowers under this Five Year Facility
shall not at any time exceed U.S. $350,000,000 or $350,000,000 in U.S. Dollar
Equivalent, and at the option of the Borrowers, may be reduced from time to time
hereafter pursuant to (S)2.8 hereof (such maximum amount, as the same may be so
reduced, being hereinafter called the "Five Year Facility Amount").
The failure of any one or more of the Banks to make Five Year Facility
Loans in accordance with its or their obligations shall not relieve the other
Banks of their several obligations hereunder, but in no event shall the
aggregate amount at any one time outstanding which any Bank shall be required to
lend under this Five Year Facility exceed its Five Year Facility Commitment.
2.2 Selected Currency. Subject to the provisions of this Article 2, each
-----------------
Borrower shall have the right to receive the proceeds of Eurocurrency Rate
Borrowings in either U.S. Dollars or any other Selected Currency. All Alternate
Base Rate Loans shall be made in U.S. Dollars. The Selected Currency of
Eurocurrency Rate Borrowings sought by a Borrower shall be designated by the
Borrower in its Request for Advance for such Borrowing. All Eurocurrency Rate
Loans to be made on the occasion of a particular Eurocurrency Rate Borrowing
shall be made in a single currency.
2.3 Funding Procedures.
------------------
(a) Request for Advances. Loans to the Borrowers on the occasion of each
--------------------
Borrowing shall be made pursuant to a written request by the Borrowers therefor
(a "Request for Advance"), delivered to the Agent at least one Business Day, in
the case of Alternate Base Rate Loans and four London Business Days in the case
of Eurocurrency Rate Loans, prior to the date on which such Loan is desired,
stating:
(1) the date of such Borrowing, which shall be a Business Day in the
case of an Alternate Base Rate Borrowing and shall be a London Business Day
in the case of a Eurocurrency Rate Borrowing, the identities of the
Borrowers and the allocation of such Loans among the Borrowers;
(2) the amount of such Borrowing by each Borrower, which on the date
of each Borrowing shall be (a) in the case of an Alternate Base Rate
Borrowing,
-10-
<PAGE>
U.S. $25,000,000 in the aggregate by all Borrowers or any larger integral
multiple of U.S. $1,000,000, and (b) in the case of a Eurocurrency
Borrowing, U.S. $25,000,000 in the aggregate by all Borrowers or any larger
integral multiple of U.S. $1,000,000, or the U.S. Dollar Equivalent
thereof;
(3) whether the Loans comprising such Borrowing are to be Alternate
Base Rate Loans or Eurocurrency Rate Loans;
(4) if the Borrowing is to be comprised of Eurocurrency Rate Loans,
the Selected Currency;
(5) the duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period; and
(6) whether the Borrowing is under the 364 Day Facility or the Five
Year Facility.
Each written Request for Advance shall be signed by an authorized officer of the
Company on behalf of the Borrowers and shall be for Loans at a single interest
rate option for all Borrowers. No Request for Advance shall become effective
until actually received by the Agent.
(b) Actions by Agent. Upon the Agent's receipt of any Request for Advance,
----------------
such Request for Advance shall not thereafter be revocable by the Borrowers and
the Agent shall promptly provide to each Bank such Request for Advance and
amount of the Loan to be made by such Bank. In addition, upon receipt of a
Request for Advance in which the Borrowers specify a Eurocurrency Rate
Borrowing, the Agent shall inform each Bank of the amount of the U.S. Dollar
Equivalent of such Eurocurrency Rate Loan.
(c) Availability of Funds. Each Bank shall make available to the Agent the
---------------------
amount of such Bank's Loan at the main office of the Agent, or at an office or
account in London of the Agent designated in writing by the Agent to the Bank,
in immediately available funds no later than 12:00 noon, Philadelphia time, on
the date of each Borrowing. All such funds shall be in U.S. Dollars, in the
case of Alternate Base Rate Loans, and in the applicable Selected Currency, in
the case of Eurocurrency Rate Loans. On each such Borrowing date, and subject
to the prior receipt of funds from each Bank, the Agent shall make available to
the Borrowers in immediately available funds, no later than 2:00 p.m.,
Philadelphia time, all of the proceeds of the Loans to be made on such date upon
satisfaction by the Borrowers of all the applicable conditions specified in
Article 4 hereof.
(d) Funding Assumptions. Unless the Agent has been notified by any Bank at
-------------------
least one Business Day prior to the date of such Loan that such Bank does not
intend to make available to the Agent such Bank's portion of the total amount of
the Loan to be made on such date, the Agent may assume that each Bank has made
the amount of such Bank's Loan available to the Agent on the date for the
Borrowing of such Loan and the Agent may, in reliance upon
-11-
<PAGE>
such assumption, make available to the Borrowers a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such
Bank, the Agent shall be entitled to recover such corresponding amount on demand
from such Bank, which demand shall be made in a reasonably prompt manner. If
such Bank does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrowers and the Borrowers
shall pay such corresponding amount to the Agent. The Agent shall also be
entitled to recover from such Bank or the Borrowers, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrowers to the
date such corresponding amount is recovered by the Agent at a rate equal to (i)
if recovered from such Bank, the Federal Funds Rate for three Business Days, and
thereafter at the Alternative Base Rate and (ii) if recovered from the
Borrowers, the rate otherwise accruing on such Loan. Nothing herein shall be
deemed to relieve any Bank of its obligation to fulfill its Commitment hereunder
or to prejudice any rights which any Borrower may have against any Bank as a
result of any default by such Bank hereunder.
(e) Maximum Borrowings Outstanding. The Borrowers may not have more than
------------------------------
ten Borrowings outstanding at any one time. For such purpose, one Borrowing by
one Borrower or Borrowings by more than one Borrower commenced on the same date
shall be deemed a single Borrowing.
2.4 The Notes. The obligation of Borrowers to repay the 364 Day Facility
---------
Loans and the Five Year Facility Loans, respectively, of each Bank shall be
evidenced by a separate promissory note issued by the Borrowers in the form
attached hereto as Exhibit C-1 (collectively, the "364 Day Facility Notes") and
Exhibit C-2 (collectively, the "Five Year Facility Notes" and, together with the
364 Day Facility Notes, the "Notes"). Each 364 Day Facility Note shall be in a
stated amount equal to the 364 Day Facility Commitment of such Bank. Each Five
Year Facility Note shall be in a stated amount equal to the Five Year Facility
Commitment of such Bank and each such Note shall bear interest as provided
herein and be payable at the times and in the manner herein provided; provided,
however, that notwithstanding the stated amount of such Notes, the Borrowers'
liability under the Notes shall be limited at all times to the outstanding
principal amount of the Loans evidenced thereby (which principal amount may be
less than or may exceed the stated amount of such Note), plus all interest
accrued thereon and the amount of all costs and expenses then payable
thereunder, as established by each such Bank's books and records, which books
and records shall be conclusive absent manifest error.
2.5 Joint and Several Obligations.
------------------------------
(a) Each Borrower (including without limitation the Company) shall bear
liability under the Notes for all amounts as aforesaid jointly and severally
with each other Borrower and whether or not such Borrower is designated in any
Request for Advance as the Borrower requesting any Loans, it having been
determined by each Borrower that it will benefit from the availability of credit
to all Borrowers under the terms and conditions of this Agreement.
-12-
<PAGE>
(b) The liability of each Borrower under this Agreement and each Note for
any and all obligations of the Borrowers, individually and collectively, owed to
the Banks under this Agreement and each Note shall be unconditional and absolute
irrespective of (a) any lack of enforceability of any obligation, (b) any change
of the time, manner, place of payment, or any other term of any obligation, (c)
any law, regulation or order of any jurisdiction affecting the genuineness,
validity, or rights of the Banks, individually and collectively, with respect to
any obligation or any instrument evidencing any obligation, or (d) any other
circumstance which might otherwise constitute a defense to or discharge of any
Borrower, including, without limitation, the release of any other Borrower from
such obligations. Each Borrower agrees that its obligations hereunder are
irrevocable; that a separate action or actions may be brought and prosecuted
against it or other remedies hereunder may be sought regardless of whether any
other Borrower is joined in any such action or actions or subject to enforcement
of any such remedies; and that it waives the benefit of any statute of
limitations affecting its liabilities hereunder and each Note or the enforcement
hereof or thereof if the action otherwise barred by such statute of limitations
is brought against any other Borrower within such statute of limitations. Each
Borrower hereby irrevocably waives any right of subrogation or contribution it
may have against any other Borrower for amounts paid hereunder.
2.6 Interest Rates.
--------------
(a) Alternate Base Rate Loans. Each Alternate Base Rate Loan shall bear
-------------------------
interest on the unpaid principal balance thereof from day to day at a rate per
annum which at all times shall be equal to the Alternate Base Rate. Any change
in such interest rate due to a change in the Alternate Base Rate shall be
effective on the date of such change. Interest on an Alternate Base Rate Loan
shall be computed on the basis of a year of 360 days and shall be payable
quarterly on the last Business Day of each March, June, September and December
after the date hereof and at maturity of the applicable Interest Period, subject
to the Company's prepayment option set forth at (S)2.9 hereof.
(b) Eurocurrency Rate Loans. Each Eurocurrency Rate Loan shall bear
-----------------------
interest from its date on the unpaid principal amount thereof at a rate per
annum equal to the LIBO Rate plus the Applicable Margin. Interest on each
Eurocurrency Rate Loan shall be computed on the basis of a year of 360 days and
shall be payable at the maturity thereof, except that interest on each
Eurocurrency Rate Loan having a maturity of more than three months shall be
payable at intervals of three months after the date of such Loan and at maturity
of the applicable Interest Period, subject to the Company's prepayment option
set forth at (S)2.9 hereof.
The Agent shall give prompt notice by FAX to the Company and to each of the
Banks of the LIBO Rate determined in respect of each Eurocurrency Rate Loan and
of any change therein. If the Agent shall not so notify the Company and each
Bank of a rate, or if otherwise the Agent shall determine (which determination
shall be, in the absence of fraud or manifest error, conclusive and binding upon
all parties hereto) that by reason of abnormal circumstances affecting the
interbank eurodollar or applicable eurocurrency market, adequate and reasonable
means do not exist for ascertaining the LIBO Rate to be applicable to the
requested Eurocurrency
-13-
<PAGE>
Rate Loan or that applicable funds in amounts sufficient to fund such
Eurocurrency Rate Loan are not obtainable on reasonable terms, the Agent shall
give notice of such inability or determination by FAX to the Company and to each
of the Banks at least one Business Day prior to the date of the proposed
Eurocurrency Rate Loan and thereupon the obligations of the Banks to make such
Eurocurrency Rate Loans shall be excused, subject, however, to the right of the
Company at any time thereafter to submit another such request.
(c) Post Maturity Rate. After maturity (whether by acceleration or
------------------
otherwise) each Loan shall bear interest at a rate per annum equal to 3% in
excess of the rate otherwise in effect from time to time thereafter, from the
date when due, until such Loan is fully paid, which interest shall be payable by
the Borrowers on demand.
2.7 Facility Fee. The Borrowers agree to pay to the Agent in U.S.
------------
Dollars, for the account of each Bank, an annual facility fee (the "Facility
Fee") computed on the basis of a year of 360 days, in amounts equal to (i) 8
basis points per annum of such Bank's 364 Day Facility Commitment and (ii) 10
basis points per annum of such Bank's Five Year Facility Commitment, in each
case accruing from the date hereof to and including the 364 Day Facility
Termination Date and the Five Year Facility Termination Date, respectively;
provided, however, that at such time and so long as the Company's Funded Debt is
rated below either BBB- by Standard and Poor's Corporation or Baa3 by Moody's
Investor Service, Inc., such rates shall be increased to 12.5 basis points and
20 basis points, respectively. The Facility Fee shall be payable in quarterly
installments on the last Business Day of each March, June, September, and
December and on the 364 Day Facility Termination Date or the Five Year Facility
Termination Date, as applicable.
2.8 Termination or Reduction of Credit; Recomputation Date.
------------------------------------------------------
(a) Termination or Reduction of Credit. The Borrowers shall have the right
----------------------------------
at any time and from time to time, upon five Business Days' written notice to
the Agent (which shall promptly relay such notice to the other Banks), to
terminate in whole or reduce in part, in each case permanently but without
premium or penalty, the 364 Day Facility Amount or the Five Year Facility
Amount, provided that each such partial reduction shall be in the aggregate
amount of U.S. $25,000,000 or an integral multiple thereof, and provided that
each Bank's Commitment under the applicable Facility shall be reduced pro rata
in proportion to its Commitment Percentage.
(b) Reduction. In the event the 364 Day Facility Amount or the Five Year
---------
Facility Amount is reduced, the Borrowers shall, simultaneously with such
reduction, make a prepayment of principal and interest in respect of the
Alternate Base Rate Loans borrowed under such Facility in such amount as is
necessary to assure that the aggregate principal amount of Loans outstanding
under such Facility immediately after such reduction will not exceed the 364 Day
Facility Amount or the Five Year Facility Amount as reduced. If prepayment in
full of the Alternative Base Rate Loans does not reduce the amount of all Loans
outstanding under such Facility to an amount that will not exceed the 364 Day
Facility Amount or the Five Year Facility Amount as reduced, the Borrowers shall
deposit with the Agent cash in an amount sufficient to repay that
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<PAGE>
portion of the principal amount of Eurocurrency Rate Loans outstanding, with
interest thereon through the end of each applicable Interest Period, as is
necessary to assure that the aggregate principal amount of Loans outstanding
under such Facility immediately after such reduction less the principal amount
of Eurocurrency Rate Loans under each Facility repaid by such collateral will
not exceed the 364 Day Facility Amount or the Five Year Facility Amount as
reduced, such collateral to be held by the Agent on behalf of the Banks until
the maturity date of such Loans and then applied to the repayment of such Loans.
Interest on amounts so held by the Agent shall accrue at the Federal Funds Rate
and shall be paid to each Bank in accordance with their Commitment Percentage.
(c) Recomputation Date. Notwithstanding any other provisions of this
------------------
Agreement to the contrary, if there are any Eurocurrency Rate Loans outstanding
the Selected Currency of which is not U.S. Dollars, the Agent shall recompute,
on and as of the last day of each calendar quarter and on the date of the
reduction of the 364 Day Facility Amount or the Five Year Facility Amount (each
such date, a "Recomputation Date"), the U.S. Dollar Equivalent of such
Eurocurrency Rate Loans. If pursuant to such recomputations the Agent
determines that the aggregate principal amount of 364 Day Facility Loans or Five
Year Facility Loans is greater than 105% of the 364 Day Facility Amount or the
Five Year Facility Amount, respectively, as then in effect, the Agent shall so
advise the Borrowers, and the Borrowers shall prepay the amount in excess of
100% of the 364 Day Facility Amount or the Five Year Facility Amount,
respectively, together with accrued interest on the amount so prepaid within
five Business Days of receipt of such notice from the Agent.
2.9 Optional Loan Prepayments. Any Borrower, upon two Business Days'
-------------------------
written notice to the Agent (which shall promptly relay such notice to the other
Banks), may prepay one or more Loans as such Borrower shall designate in such
notice, in whole at any time or in part from time to time without premium or
penalty but with accrued interest to the date of such prepayment on the
principal amount being prepaid, provided that (a) each such partial prepayment
shall be in the aggregate principal amount of (i) U.S. $10,000,000 plus
integrals of U.S. $1,000,000, if U.S. Dollar Loans are to be prepaid, and (ii)
at least $10,000,000 in U.S. Dollar Equivalent plus integrals of $1,000,000 in
U.S. Dollars Equivalents, if Eurocurrency Rate Loans are to be prepaid, and
shall be applied as among the Banks pro rata in accordance with their respective
Commitments, (b) the Borrower shall specify the Facility, date, type and amount
of each Loan being prepaid and (c) if such prepayment applies to Eurocurrency
Rate Loans, simultaneously with such prepayment the Borrower shall pay the
applicable Bank or Banks pursuant to Section 2.13 hereof all funding costs and
loss of earnings which may arise in connection with such prepayment as
determined by each such Bank in good faith. The Agent shall promptly notify
each Bank of each such prepayment of Loans.
2.10 Payments.
--------
(a) All payments (including prepayments) to a Bank of the principal of or
interest on any Eurocurrency Rate Loan shall be made in the Selected Currency of
such Loan, and all other payments hereunder, including in respect of any
Facility Fee and all payments (including
-15-
<PAGE>
prepayments) to a Bank of the principal of or interest on any U.S. Dollar Loan
shall be made in U.S. Dollars. All payments (including prepayments) to a Bank
of the principal of or interest on any Loan or in respect of any Facility Fee
shall be remitted for the account of such Bank to the Agent at the main office
of the Agent, or at such office or account in London as the Agent shall specify
to the Banks and the Borrowers with respect to Loans denominated in a Selected
Currency other than U.S. Dollars, not later than 11 a.m. Philadelphia time or
London time, as applicable, on the due date thereof in immediately available
funds.
(b) Each such payment for the account of a Bank shall be made absolutely
net of, without deduction or offset for and altogether free and clear of any and
all present and future taxes, levies, imposts, deductions, charges and
withholdings and all liabilities with respect thereto under the laws of the
United States or any foreign jurisdiction (or any state, county, or political
subdivision thereof), excluding income and franchise taxes imposed on such Bank
under the laws of the United States or any foreign jurisdiction (or any state,
county or political subdivision thereof). If a Borrower is compelled by law to
deduct any such taxes (other than such excluded taxes) or to make any such other
deductions or withholdings, it will pay such additional amounts as may be
necessary in order that the net payments after such deduction, and after giving
effect to any income taxes under the laws of the United States or any foreign
jurisdiction (or any state, county or political subdivision thereof) required to
be paid by any Bank in respect of such additional amounts, shall equal the
amount provided for herein or in any Note.
(c) Any payments to a Bank of the principal or interest due under any
Alternate Base Rate Loan or Eurocurrency Rate Loan or in respect of the Facility
Fee, shall be made simultaneously with corresponding payments for the respective
accounts of the other Banks. All such simultaneous payments shall, as among the
Banks, be in amounts pro rata in accordance with their respective Commitment
Percentages. Payments received by the Agent shall be applied in accordance with
Section 9.8.
(d) Each 364 Day Facility Loan shall mature on the earlier of the last day
of the applicable Interest Period therefor and the 364 Day Facility Termination
Date, and each Five Year Facility Loan shall mature on the earlier of the last
day of the applicable Interest Period therefor and Five Year Facility
Termination Date.
(e) If the Banks make a Loan on a day on which all or any part of
outstanding Loans from the Banks denominated in the same Selected Currency are
to be repaid, each Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made available by such Bank
to the Agent and by the Agent to the Borrowers.
2.11 Illegality. Notwithstanding any other provisions herein, if any
----------
requirement of law, regulation, order or decree of any jurisdiction applicable
to any Bank (including the United States, the United Kingdom or any state,
county or political subdivision thereof) or any change therein or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain certain or all of the Loans contemplated by this Agreement,
such Bank shall so notify
-16-
<PAGE>
the Agent and the Borrowers and the Agent shall forthwith give notice thereof to
the other Banks. Upon the giving of any such notice to the Agent and the
Borrowers (a) such Bank shall no longer be obligated to make those types of
Loans determined by such Bank to be unlawful and (b) the Borrowers shall prepay
in full such Loans made by such Bank then outstanding, together with accrued
interest thereon and any other amounts which may be due to such Bank under this
Agreement (including, without limitation, amounts owing to such Bank pursuant to
Sections 2.12 and 2.13) on the earlier of (i) the last day of the then current
Interest Period applicable to each Loan of such Bank or (ii) on the date after
which such Bank may no longer lawfully continue to maintain and fund such Loans.
If a circumstance of the type described in this Section 2.11 occurs, the Banks
agree to negotiate in good faith with the Borrowers to amend this Agreement to
provide Loans hereunder which will not be unlawful. In addition, as soon as
practicable after the Agent or any Bank obtains knowledge of any event which
will cause, or is likely to cause, a circumstance of the type described in this
Section 2.11, the Agent or the Bank, as the case may be, shall notify the
Borrowers thereof and each affected Bank shall designate a different lending
office for its Loans or take such other action to avoid the need for repayment
of its Loans pursuant to this Section 2.11 to the extent that such a designation
or the taking of such action would not, in the reasonable opinion of such Bank,
be disadvantageous to such Bank.
2.12 Increased Cost.
--------------
(a) If Regulation D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time, or any
other requirement of law or regulation applicable to any Bank, including,
without limitation, the United States or the United Kingdom or any state, county
or political subdivision thereof, or any order or decree or in the
interpretation or application thereof or compliance by a Bank with any request
or directive (whether or not having the force of law) occurring after the date
hereof from any central bank or monetary authority or other governmental
authority:
(1) does or shall subject such Bank to any tax of any kind whatsoever
with respect to this Agreement or any Eurocurrency Rate Loan, or change the
basis of taxation of payments to such Bank of principal, Facility Fees,
interest or other amount payable hereunder (except for changes in the rate
of tax on general income and similar taxes on the overall net income of
such Bank in any jurisdiction); or
(2) does or shall impose, modify or hold applicable or change any
reserve, special deposit, Federal Deposit Insurance Corporation premium,
compulsory loan or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office
of such Bank which are not otherwise included in the determination of the
LIBO Rate hereunder; or
(3) does or shall impose on such Bank any other condition;
-17-
<PAGE>
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing, converting or maintaining advances or extensions of credit as
Eurocurrency Rate Loans, or to reduce any amount receivable in respect of such
Eurocurrency Rate Loans then, in any such case, the Borrowers shall promptly pay
to such Bank such additional amount which will compensate the Bank for such
additional cost or reduced amount receivable which the Bank deems to be material
as determined by the Bank with respect to this Agreement or the Eurocurrency
Rate Loans hereunder.
(b) If any Bank shall have determined that compliance by such Bank with any
applicable law, governmental rule, regulation or order of any jurisdiction
applicable to such Bank (including, without limitation, the United States or the
United Kingdom or any state, county or political subdivision thereof) regarding
capital adequacy of banks or bank holding companies, or any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank with any request or directive regarding capital adequacy (whether
or not having the force of law and whether or not failure to comply therewith
would be unlawful) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Bank's capital
as a consequence of such Bank's obligations hereunder to a level below that
which such Bank could have achieved but for such compliance (taking into
consideration such Bank's policies with respect to capital adequacy immediately
before such compliance and assuming that such Bank's capital was fully utilized
prior to such compliance) by an amount deemed by such Bank to be material, then,
upon demand, the Borrowers shall immediately pay to such Banks as are so
affected such additional amounts as shall be sufficient to compensate such Banks
for such reduced return, together with interest on each such amount from four
Business Days after the date demanded until payment in full thereof at the rate
of interest of 3% per annum over the Alternate Base Rate. In determining such
amount, such Bank may use any reasonable averaging and attribution methods. No
liability or cost pursuant to this (S)2.12(b) shall be incurred by the Borrowers
prior to, or relating to any period before, the date that the Borrowers receive
a demand from a Bank under this (S)2.12(b).
(c) If a Bank becomes entitled to claim any additional amounts pursuant to
this (S)2.12, it shall promptly notify the Borrowers thereof. A certificate as
to any additional amounts payable pursuant to the foregoing submitted by a Bank
to the Borrowers shall be conclusive absent manifest error. For purposes of the
application of this (S)2.12, and in calculating the amount necessary to
compensate such Bank for any imposition of or increase in capital requirements
or taxes hereunder, such Bank shall determine the applicability of this
provision and calculate the amount payable to it hereunder in a manner
consistent with the manner in which it shall apply and calculate similar
compensation payable to it by other borrowers having provisions in their credit
agreements comparable to this (S)2.12.
(d) If any Bank shall, at any time, incur costs associated with reserve
requirements pursuant to Regulation D in connection with the making or
maintenance of any Eurocurrency Rate Loan, then the Borrowers shall immediately
pay such costs to such Bank in accordance with (S)2.12(c) hereof.
-18-
<PAGE>
2.13 Indemnity Against Funding Losses or Expenses. The Borrowers shall
--------------------------------------------
indemnify each Bank against any loss, funding cost, expense or loss of earnings,
which such Bank may, as a consequence of the Borrowers' failure to accept Loans
requested at any time, failure to make a payment on the due date thereof or the
payment, prepayment or conversion of any Eurocurrency Rate Loans on a day other
than the maturity date thereof, reasonably sustain or reasonably incur in
liquidating or employing deposits from third parties acquired to effect, fund or
maintain such or any part thereof. If a Bank becomes entitled to claim any
additional amounts pursuant to this (S)2.13, it shall promptly notify the Agent,
which shall promptly notify the Borrowers thereof.
2.14 Substitution of Bank. If any Bank has demanded compensation under
--------------------
(S)2.11 or (S)2.12, the Borrowers shall have the right, after consultation with
the Agent, to seek a substitute bank or banks (which may be one or more of the
Banks) to purchase the Notes for cash without recourse to such Bank and assume
the Commitment of such Bank, which shall thereupon be released from all of its
obligations hereunder.
3. Representations and Warranties
The Borrowers represent and warrant that:
3.1 Organization and Good Standing. The Company, each Subsidiary Borrower
------------------------------
and each Significant Subsidiary is a corporation duly organized and in good
standing (where such concept exists) under the laws of the jurisdiction of its
incorporation and has the power to carry on its business as now conducted. The
officers of the Company have exercised due diligence to qualify the Company, and
to cause the qualification of each Subsidiary Borrower and each Significant
Subsidiary, as a foreign corporation in the various jurisdictions wherein the
nature of the business they transact makes such qualification necessary. The
Company's only Significant Subsidiaries on the date hereof are Alco Capital
Resource, Inc., Alco Standard Acquisition Capital Corporation, AOP, Inc., MDR
Corporation, Unisource Holdings, Inc. and Unisource Worldwide, Inc.
3.2 Corporate Power and Authority. The execution, delivery and
-----------------------------
performance of this Agreement and the Notes are within the corporate power and
authority of each Borrower, have been duly authorized by proper corporate
proceedings, will not contravene any provision of law or the Certificate or
Articles of Incorporation, Memorandum and Articles of Association or Bylaws or
Code of Regulations of any Borrower or constitute a default under any agreement
binding upon any Borrower, and do not require the consent or approval of, or
registration with, any governmental body, agency or authority.
3.3 Validity of Agreement and Notes. This Agreement is a legal, valid and
-------------------------------
binding obligation of each Borrower, and the Notes when issued will be legal,
valid and binding obligations of each Borrower, enforceable in accordance with
their respective terms.
-19-
<PAGE>
3.4 Litigation. There are no suits, litigation or other proceedings
----------
pending, or to the knowledge of any officer of any Borrower threatened, against
or affecting the Company or any Subsidiary or any of their respective
properties, before any court, governmental commission, bureau or other
regulatory body, the outcome of which might materially and adversely affect the
financial condition or business of the Company and its Subsidiaries considered
in the aggregate or the ability of any Borrower to perform its obligations
hereunder.
3.5 Financial Statements. The Company has heretofore furnished to the
--------------------
Banks consolidated balance sheets of the Company and its Subsidiaries as at
September 30, 1994 and September 30, 1993 and the related consolidated
statements of income and retained earnings, with a report thereon by Ernst &
Young, independent certified public accountants, stating in comparative form the
amounts for the corresponding dates and periods for the previous fiscal year.
Such balance sheets and such statements of income and retained earnings fairly
present the consolidated financial position of the Company and its Consolidated
Subsidiaries as of the dates thereof and the results of their operations for the
periods then ended. All such financial statements were prepared in accordance
with GAAP. Since September 30, 1994, there has not been any material adverse
change in the financial condition, business or operations of the Company and its
Subsidiaries.
3.6 ERISA. Each Employee Benefit Plan of the Company and any ERISA
-----
Affiliate is in compliance with ERISA and the Code, where applicable, in all
material respects. As of the date hereof, (i) the amount of all Unfunded
Pension Liabilities under the Pension Plans, (ii) the amount of the aggregate
Unrecognized Retiree Welfare Liability under all applicable Employee Benefit
Plans, and (iii) the aggregate potential annual withdrawal liability payments,
as determined in accordance with Title IV of ERISA, of the Company and any ERISA
Affiliate with respect to all Pension Plans which are Multiemployer Plans, are,
in the aggregate, no more than U.S. $5,000,000. The Company and each ERISA
Affiliate have complied with the requirements of ERISA Section 515 with respect
to each Pension Plan which is a Multiemployer Plan. The Company and/or any
ERISA Affiliate has, as of the date hereof, made all contributions or payments
to or under each such Pension Plan required by law or the terms of such Pension
Plan or any contract or agreement. No material liability on a consolidated
basis to the Pension Benefit Guaranty Corporation ("PBGC") has been, or is
expected by the Company or any ERISA Affiliate.
For purposes of ERISA matters under this Agreement, "Employee Benefit Plan"
means any employee benefit plan within the meaning of ERISA Section 3(3)
maintained, sponsored or contributed to by the Company or any ERISA Affiliate;
"ERISA Affiliate" means any entity that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c), (m) or (o) of
which the Company is a member; "Multiemployer Plan" means a pension plan that is
a multiemployer plan as defined in ERISA Section 4001(a)(3); "Pension Plan"
means any Employee Benefit Plan, including a Multiemployer Plan, the funding
requirements of which (under ERISA Section 302 or Code Section 412) are or, at
any time within the six years immediately preceding the time in question, were
in whole or in part, the responsibility of the Company or any ERISA Affiliate;
"Unfunded Pension Liabilities" means, with respect to any
-20-
<PAGE>
Pension Plan at any time, the amount determined by taking the accumulated
benefit obligation, as disclosed in accordance with FAS number 87, over the fair
market value of Pension Plan assets; and "Unrecognized Retiree Welfare
Liability" means, with respect to any Employee Benefit Plan that provides post-
retirement benefits other than pension benefits, the amount of the transition
obligation, as determined in accordance with FAS number 106, as of the most
recent valuation date that has not been recognized as an expense on the income
statement of the Company and its Subsidiaries.
3.7 Regulations G, T, U and X. Except for Partners Securities Company,
-------------------------
neither the Company nor any of its Subsidiaries is or will be engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying or trading in any margin stocks
or margin securities (within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any Loan made hereunder will be applied for the purpose of purchasing or
carrying or trading in any such stocks or securities, or of refinancing any
credit previously extended or of extending credit to others for the purpose of
purchasing or carrying or trading in any such margin stocks or margin
securities.
3.8 Compliance with Laws. The Company and each Subsidiary is in
--------------------
compliance in all material respects with all applicable laws and regulations,
federal, state and local, the violation of which would have a material adverse
effect on the Company and its Consolidated Subsidiaries taken as a whole; the
Company and each Subsidiary possess all the material franchises, permits and
licenses necessary or required in the conduct of its business, and the same are
valid, binding and enforceable.
3.9 Taxes and Assessments. The Company and each Subsidiary have filed all
---------------------
required tax returns or have filed for extensions of time for the filing
thereof, and have paid all applicable taxes, governmental charges and similar
obligations, including United States federal, state and local taxes, other than
taxes, governmental charges and similar obligations not yet due or which may be
paid hereafter without material penalty; the Internal Revenue Service has
completed audits of tax returns filed through September 30, 1987; and neither
the Company nor any Subsidiary has knowledge of any material deficiency or
additional assessment against it in connection with any applicable taxes not
provided for in the financial statements referred to in (S)3.5 hereof.
3.10 Investment Company. Neither the Company nor any Subsidiary is an
------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
3.11 Environmental Matters. The Company and each Subsidiary have received
---------------------
all permits and filed all notifications necessary to carry on their businesses
and are in compliance in all material respects with all federal, state or local
laws and regulations governing the control, removal, spill, release or discharge
of hazardous or toxic wastes, substances and petroleum products; including
without limitation as provided in the provisions or the regulations, as amended,
under the Comprehensive Environmental Response, Compensation and Liability Act
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<PAGE>
of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986,
the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, and the
Occupational Safety and Health Act, and any regulations thereunder (all of the
foregoing enumerated and non-enumerated statutes, including without limitation
any applicable state or local environmental statutes, collectively the
"Environmental Control Statutes"), the effect of which if not received, filed or
complied with could have a material adverse affect on the financial condition,
business or operations of the Company and its Subsidiaries. Also, neither the
Company nor any Subsidiary has received notice of potential responsibility for
costs associated with responding to the release or threatened release of
hazardous substances for any site where the Company's potential responsibility
could have a material adverse affect on the financial condition, business or
operations of the Company and its Subsidiaries.
3.12 Liens. Mortgages, pledges, security interests, encumbrances and other
-----
liens upon properties of the Company and its Subsidiaries which are in existence
at the date hereof do not secure indebtedness that is, in the aggregate,
material to the Company and its Consolidated Subsidiaries and do not encumber
properties which are material to the Company and its Consolidated Subsidiaries.
3.13 Disclosure Generally. The representations and statements made by or
--------------------
on behalf of the Company and its Subsidiaries in connection with this credit
facility, and each Loan, do not and will not contain any untrue statement of a
material fact or omit to state a material fact or any fact necessary to make the
representations made not materially misleading. No written information,
exhibit, report or financial statement furnished by the Company or any
Subsidiary to the Banks in connection with this credit facility or the Loans
contains or will contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained therein not
materially misleading.
3.14 Ownership of Subsidiary Borrowers. The Company owns, directly or
---------------------------------
indirectly, all of the issued and outstanding capital stock of each Subsidiary
Borrower other than qualifying shares held by the directors of such Subsidiary
Borrower.
4. Conditions
4.1 Effectiveness of Agreement. This Agreement shall not become effective
--------------------------
and no Bank shall have an obligation to make a Loan hereunder unless all the
following conditions shall have been satisfied on or before the date hereof, and
all documents submitted and actions taken shall be, in each instance, in form
and substance, satisfactory to the Agent:
(a) Compliance. (i) Each Borrower shall have complied and be in compliance
----------
with all of the terms, covenants and conditions of this Agreement which are
binding upon it, (ii) there shall exist no Event of Default and no event which,
with the giving of notice or the lapse of time, or both, would constitute such
an Event of Default, and (iii) the representations and warranties contained in
Article 3 hereof shall be true and correct. As evidence hereof, the Agent shall
have
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<PAGE>
received for the account of each Bank a certificate, dated the date hereof,
signed by an executive officer of the Company verifying the foregoing, to the
best of his knowledge and belief. Each Request for Advance in respect of any
Loan hereunder, and the acceptance of the proceeds of such Loan, shall
constitute a reaffirmation by the officer signing such Request for Advance (to
the best of his knowledge and belief) as of the time thereof and by the
Borrowers of the continuing truth and accuracy of the foregoing.
(b) Evidence of Corporate Action. The Agent shall have received copies,
----------------------------
certified as of the date hereof, of all corporate action taken by each Borrower
to authorize this Agreement, the Notes and the borrowing hereunder, and such
other evidence of corporate power and authority as the Banks shall reasonably
require.
(c) Opinions of Counsel. The Agent shall have received a favorable written
-------------------
opinion of the Company's General Counsel in the form and substance attached
hereto as Exhibit D.
(d) Incumbency Certificate. The Agent shall have received a certificate of
----------------------
the Secretary or an Assistant Secretary of each Borrower setting forth the name
of the officer or officers of each Borrower authorized to sign on behalf of such
Borrower this Agreement and the Notes and other documents and certificates to be
delivered by such Borrower hereunder, together with the true signatures of such
officer or officers, upon which certificate each Bank and the Agent may rely
conclusively until they shall have received a further certificate of the
Secretary or an Assistant Secretary of such Borrower amending the prior
certificate and submitting the signatures of the appropriate officers named in
such certificate.
(e) Executed Agreements. The Agent shall have received this Agreement or
-------------------
counterparts hereof executed by all parties to this Agreement.
(f) Notes. The Agent shall have received for each Bank a 364 Day Facility
-----
Note and a Five Year Facility Note duly executed, completed and issued in
accordance herewith.
(g) Material Adverse Change. Since September 30, 1994, there shall not
-----------------------
have been any material adverse change in the financial condition, operations or
assets of the Company and its Subsidiaries taken as a whole, and there shall not
be any other event or circumstance which gives the Majority Banks reasonable
grounds to conclude that any Borrower may not or will not be able to perform or
observe (in the normal course) its obligations hereunder and under the Notes.
(h) Satisfaction of 1991 Credit, 1993 Credit and DM Credit. The Agent
------------------------------------------------------
shall have received evidence acceptable to it of the termination of each of the
1991 Credit, the 1993 Credit and the DM Credit and the satisfaction by the
Company and its Subsidiaries of all obligations thereunder.
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<PAGE>
4.2 Conditions to Loans. After this Agreement has become effective, the
-------------------
obligation of each Bank to make each Loan to be made by it hereunder is further
conditioned upon the following:
(a) The Agent shall have received a Request for Advance;
(b) The Company and its Subsidiaries, including but not limited to each
Subsidiary Borrower, shall be in compliance with all of the terms, covenants and
conditions of this Agreement which are binding upon it;
(c) After giving effect to such Loan and the receipt of the proceeds
thereof, no Event of Default or no event which, with the giving of notice or the
lapse of time, or both, would constitute such an Event of Default, shall have
occurred and be continuing;
(d) Each representation and warranty contained herein shall be true and
accurate on and as of the date of the proposed Loan as though such was made on
such date; provided, however, that such condition shall include the truth and
accuracy of the representation contained in Section 3.14 only as such
representation applies to those Subsidiary Borrowers with Loans then outstanding
or to whom such Loan is to be made; and
(e) Since the date of this Agreement, there shall not have been any
material adverse change in the financial condition, operations or assets of the
Company and its Subsidiaries taken as a whole, and there shall not be any other
event or circumstance which gives the Majority Banks reasonable grounds to
conclude that any Borrower may not or will not be able to perform or observe (in
the normal course) its obligations hereunder and under the Notes.
(f) If such Loan is requested to be made to a Subsidiary Borrower, the
Agent shall have received a favorable written opinion from counsel to such
Subsidiary Borrower (which counsel shall be reasonably acceptable to the Agent)
in the form and substance attached hereto as Exhibit E or in such form as shall
be reasonably acceptable to the Agent.
4.3 Copies of Documents. All documents and instruments to be delivered
-------------------
hereunder in satisfaction of the conditions set forth in (S)4.1 and (S)4.2
(other than the Notes themselves) shall be delivered in sufficient numbers of
original counterparts to enable separate counterparts thereof to be furnished to
the Agent and each of the Banks. Upon its receipt of the same, the Agent shall
promptly supply each Bank with a counterpart of each document, certificate and
other paper delivered to the Agent in fulfillment of the conditions set forth in
(S)4.1 and (S)4.2.
5. Covenants
The covenants set forth in this Section shall be effective until the
expiration or prior termination of the Commitments or until payment in full of
all Notes issued and other amounts owing hereunder, whichever is later.
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<PAGE>
5.1 Financial Statements and Information. The Company will furnish to
------------------------------------
each Bank:
(a) as soon as available and in any event within 60 days after the end
of the first, second and third quarterly accounting periods in each fiscal
year of the Company, copies of a consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of the end of such accounting period
and of the related consolidated income and retained earnings statements of
the Company and its Consolidated Subsidiaries for the elapsed portion of
the fiscal year ended with the last day of such accounting period, all in
reasonable detail and stating in comparative form the amounts for the
corresponding date and period in the previous fiscal year, and all prepared
in accordance with GAAP, subject to year end audit adjustments and
certified by an authorized financial officer of the Company;
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, copies of consolidated balance
sheets of the Company and its Consolidated Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings of the Company and its Consolidated Subsidiaries for such fiscal
year, in reasonable detail and stating in comparative form the figures as
of the end of and for the previous fiscal year prepared in accordance with
GAAP and certified by independent public accountants of recognized standing
as may be selected by the Company and reasonably satisfactory to the Agent;
(c) concurrently with each of the financial statements furnished
pursuant to the foregoing subsections (a) and (b), a certificate of the
Chairman of the Board, President, a Vice President (whose duties are in the
finance area) or the Treasurer of the Company, stating that in the opinion
of the signer, based upon a review made under their supervision, no Event
of Default or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, has occurred is continuing, and
the Company has performed and observed all of, and the Company is not in
default in the performance or observance of any of, the terms and covenants
hereof or, if the Company shall be in default, specifying all such
defaults, and the nature thereof, of which the signer of such certificate
may have knowledge;
(d) concurrently with their being filed, mailed or delivered, as
applicable, copies of all proxy statements, financial statements and
reports which the Company shall send or make available generally to its
shareholders, and copies of all reports on Forms 10-K, 10-Q and 8-K and all
other filings and reports specifically requested by a Bank which the
Company or any Subsidiary may be required to file with the Securities and
Exchange Commission or any similar or corresponding governmental
commission, department or an agency substituted therefor or with any
securities exchange located in the United States of America; and
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<PAGE>
(e) such other information relating to the business, affairs and
financial condition of the Company and its Subsidiaries as the Agent (when
requested so to do by any Bank) may from time to time reasonably request.
5.2 Funded Debt to Net Worth Ratio. The Company will not permit Funded
------------------------------
Debt of the Company and its Consolidated Subsidiaries to exceed 45% of the sum
of (1) Funded Debt of the Company and its Consolidated Subsidiaries plus (2) the
consolidated minority interest obligations shown on the consolidated balance
sheet of the Company and its Consolidated Subsidiaries plus (3) the Consolidated
Net Worth of the Company and its Consolidated Subsidiaries.
5.3 Interest Coverage Ratio. The consolidated earnings (before reduction
-----------------------
for taxes and after interest expense has been added back) of the Company and its
Consolidated Subsidiaries for the most recent four quarters shall not be less
than 3.5 times the consolidated interest expense of the Company and its
Consolidated Subsidiaries for such four quarters. For purposes of calculating
such ratio, (a) the Finance Leasing Subsidiaries shall be treated as if they
were accounted for under the equity accounting method (i.e., the net or deficit
of their income over their expenses shall be taken into account in determining
consolidated earnings of the Company and its Consolidated Subsidiaries but their
aggregate interest expense shall not be added to the consolidated interest
expense of the Company and its Consolidated Subsidiaries) and (b) the amount of
either unusual or special non-operating gains or unusual or special non-
operating losses during such four quarters that, in either case, are in the
aggregate in excess of U.S. $25,000,000 shall be excluded. The aggregate amount
of either such gains or such losses up to and including U.S. $25,000,000 of
either or both is to be included in the consolidated earnings for purposes of
calculating compliance with this (S)5.3.
5.4 Subsidiaries' Debt. The Company will not permit any of its
------------------
Subsidiaries directly or indirectly to create, incur, assume, suffer to exist,
guarantee or otherwise become, be or remain liable with respect to any Debt
(other than Loans hereunder) in an aggregate amount outstanding at any time in
excess of 10% of Consolidated Net Worth plus the amount of such Debt outstanding
on the date hereof except (i) Debt owing exclusively to the Company or another
Subsidiary, (ii) Debt of a Subsidiary outstanding on the date that the Company
acquires such Subsidiary, (iii) Debt with respect to property to be used by the
Company or its Subsidiaries, the interest on which Debt is exempt from Federal
income tax pursuant to (S)103 of the Internal Revenue Code of 1986, as amended,
(iv) Debt of any foreign Subsidiary that is not guaranteed by the Company or any
other Subsidiary, (v) Debt of Finance Leasing Subsidiaries owing to the Company
or any of its Consolidated Subsidiaries, (vi) Debt of Finance Leasing
Subsidiaries to a person or persons other than the Company and its Consolidated
Subsidiaries provided that such Debt is not guaranteed by the Company or any of
its Consolidated Subsidiaries, and (vii) unsecured Debt of Unisource Canada in
an amount not to exceed U.S. $100,000,000 (or the equivalent amount on any day
in Canadian currency calculated after giving effect to a conversion of such
amount from U.S. Dollars to Canadian dollars calculated at the buy spot rate
quoted for wholesale transactions by the Agent at approximately 11:00 a.m.
Philadelphia time).
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<PAGE>
5.5 Contingent Liabilities. The Company will not permit Contingent
----------------------
Liabilities to exceed U.S. $20,000,000 plus 10% of Consolidated Net Worth.
5.6 Sale of Assets. The Company will not, and will not permit any
--------------
Consolidated Subsidiary to, sell, lease or transfer all or substantially all of
its assets unless (i) immediately after giving effect thereto the Company is in
compliance with the covenants and provisions of this Agreement and (ii) such
sale, lease or transfer shall not have any materially adverse effect upon the
financial condition of the Company and its Subsidiaries taken as a whole or the
Company's ability to perform its obligations hereunder. Notwithstanding this
provision, any Consolidated Subsidiary that is not a Subsidiary Borrower may
sell, lease or transfer all or substantially all of its assets to any other
Consolidated Subsidiary or to the Company, and any Subsidiary Borrower may sell,
lease or transfer all or substantially all of its assets to any other Subsidiary
Borrower or to the Company.
5.7 Mergers and Acquisitions. Neither the Company nor any Subsidiary
------------------------
Borrower will merge or consolidate with, or otherwise acquire control of the
assets of, any other corporation or other entity, unless (i) the Company is the
surviving or parent corporation of any merger or other acquisition involving the
Company, (ii) a Subsidiary Borrower is the surviving or parent corporation of
any merger or other acquisition involving one or more Subsidiary Borrowers and
(iii) the Company and each Subsidiary Borrower are in compliance with this
Agreement prior to and after such merger or acquisition; provided, however, that
the provisions of this Section 5.7 shall apply to a Subsidiary Borrower only if
and so long as such Subsidiary Borrower has outstanding Loans.
5.8 Negative Pledge. The Company will not, and will not permit any
---------------
Consolidated Subsidiary to, create, incur, assume or suffer to exist any
mortgage, pledge, security interest, encumbrance or other lien upon any
property, now owned or hereafter acquired, of the Company or any Consolidated
Subsidiary (the sale with recourse of receivables or any sale and lease back of
any fixed assets being deemed to be the giving of a lien thereon for money
borrowed), other than:
(a) liens existing on the date of this Agreement on any property,
provided that the amount secured by any such lien is not greater than the
amount secured thereby on the date of this Agreement;
(b) liens on any property (including but not limited to margin stock
(within the meaning of Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System)) hereafter acquired existing at the time of
such acquisition or created within a period of 120 days following any such
acquisition to secure or provide for the payment of any part of the
purchase price thereof or liens to secure indebtedness incurred to fund or
refund any liens within the scope of this subsection (b) provided that the
amount secured by any such lien is not greater than the amount secured
thereby on the date of such acquisition or within the 120 day period, as
the case may be;
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<PAGE>
(c) liens securing indebtedness of a Consolidated Subsidiary
outstanding on the date that the Company acquires such Consolidated
Subsidiary;
(d) liens for taxes, assessments or governmental charges or levies not
yet due and payable or being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted, provided that a
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor and no foreclosure, distraint, sale or
other similar proceedings shall have been commenced;
(e) statutory liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
sums not yet due or being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, provided that a
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(f) liens incurred or deposits made in the ordinary course of business
in connection with workmen's compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, performance and return-of-
money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(g) liens created hereafter in connection with borrowing or pledges of
receivables which liens when added to all sales and discounting
transactions contemplated by (S)5.9 do not in the aggregate exceed 10% of
Consolidated Net Worth; and
(h) liens, security interests and any other encumbrances on any of its
treasury shares.
5.9 Sale, Discount of Receivables; Sale, Leaseback Transactions. The
-----------------------------------------------------------
Company will not, and will not permit its Consolidated Subsidiaries to, sell or
discount receivables with recourse or sell and lease back fixed assets the
aggregate amount of which when added to all liens permitted by (S)5.8(g) exceed
10% of Consolidated Net Worth.
5.10 Regulations G, T, U and X. The Company will not, and will not permit
-------------------------
any Subsidiary, to use Borrowings hereunder in any manner which may cause a
violation of or non-compliance with Regulations G, T, U or X of the Board of
Governors of the Federal Reserve Board.
5.11 Corporate Existence. The Company will maintain its existence and,
-------------------
except as otherwise allowed by Section 5.7 above, the existence of each
Subsidiary in good standing as a business corporation under the laws of the
jurisdiction of its incorporation, and remain qualified and cause each
Subsidiary to remain qualified to do business in all jurisdictions wherein the
nature of the business it transacts or the character of the properties owned by
it makes such qualification necessary.
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<PAGE>
5.12 Books and Records. The Company will keep and maintain, and cause
-----------------
each Subsidiary to keep and maintain, satisfactory and adequate books and
records of account in accordance with GAAP and make or cause the same to be made
available to Banks or their agents or nominees at any reasonable time upon
reasonable notice for inspection and to make extracts thereof.
5.13 Insurance. The Company will insure and keep insured, and cause each
---------
Subsidiary to insure and keep insured, with reputable insurance companies, so
much of their respective properties, to such an extent and against such risks
(including liability and fire) as companies engaged in similar businesses
customarily insure properties of a similar character; or, in lieu thereof, the
Company or any one or more of its Subsidiaries will maintain or cause to be
maintained a system or systems of self-insurance which will be in accord with
the approved practices of companies owning or operating properties of a similar
character and maintaining such systems, and, in such cases of self-insurance,
maintain or cause to be maintained an insurance reserve or reserves in adequate
amounts.
5.14 Litigation; Event of Default. The Company will notify the Banks in
----------------------------
writing immediately of the institution of any litigation, the commencement of
any administrative proceedings, the happening of any event or the assertion or
threat of any claim which might materially or adversely affect its and its
Subsidiaries' business, operations or financial condition (taken as a whole), or
the occurrence of any Event of Default hereunder or an event which with the
passage of time or the giving of notice or both would constitute an Event of
Default hereunder.
5.15 Taxes. The Company will pay and discharge, and cause each Subsidiary
-----
to pay and discharge, all taxes, assessments or other governmental charges or
levies imposed on it or any of its property or assets prior to the date on which
any material penalty for non-payment or late payment is incurred, unless the
same is currently being contested in good faith by appropriate proceedings and
reserves in accordance with GAAP are being maintained.
5.16 Compliance with Laws. The Company will comply and cause each
--------------------
Subsidiary to comply in all material respects with all local, state and federal
laws and regulations material to its business and operations, including but not
limited to: (i) all rules and regulations of the Securities and Exchange
Commission, (ii) local, state and federal laws governing the control, removal,
spill, release, or discharge of hazardous or toxic wastes, substances or
petroleum products, including without limitation the Environmental Control
Statutes, and (iii) the provisions and requirements of all franchises, permits
and licenses applicable to its business, including, but not limited to, those
required by the Environmental Control Statutes. The Company shall notify the
Banks promptly in detail of any actual or alleged failure to comply with or
perform, breach, violation or default under any such laws or regulations or if
the Company receives notice of potential responsibility for the release or
threatened release of hazardous substances, or of the occurrence or existence of
any facts or circumstances which with the passage of time, the giving of notice
or both or otherwise could create such a breach, violation or default or could
occasion the termination of any of such franchises or grants of authority or the
creation of potential
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<PAGE>
responsibility for releases or threatened releases of hazardous substances, if
any of the foregoing would have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
5.17 Employee Benefit Plans. The Company will and will cause each ERISA
----------------------
Affiliate (a) to comply in all material respects with the provisions of ERISA to
the extent applicable to any Employee Benefit Plan maintained by it and cause
all Employee Benefit Plans maintained by it to satisfy the conditions under the
Internal Revenue Code of 1986, as amended (the "Code"), for tax qualification of
all such plans intended to be tax qualified; and (b) to avoid (1) any material
accumulated funding deficiency (within the meaning of ERISA section 302 and Code
section 412(a)) (whether or not waived) (2) any act or omission on the basis of
which it or an ERISA Affiliate might incur a material liability to the PBGC
(other than for the payment of required premiums) or to a trust established
under ERISA section 4049; (3) any transaction with a principal purpose described
in ERISA section 4069; and (4) any act or omission that might result in the
assessment by a Multiemployer Plan of withdrawal liability against the Company
or any ERISA Affiliate, but only to the extent that the liability arising from a
failure to comply with any covenant set forth in (a) or (b) of this Section 5.17
could reasonably be expected to result in a liability to the Company or a
Subsidiary or an ERISA Affiliate for any one such event in excess of U.S.
$5,000,000.
5.18 Use of Proceeds. Each Borrower shall use the proceeds of its Loans to
---------------
repay any and all loans outstanding under the 1991 Credit, the 1993 Credit and
the DM Credit, to pay all other obligations under the 1991 Credit, the 1993
Credit and the DM Credit and for working capital and general corporate purposes.
5.19 Continued Ownership of each Subsidiary Borrower. The Company shall
-----------------------------------------------
continue to own, directly or indirectly, all of the issued and outstanding
capital stock of each Subsidiary Borrower, other than qualifying shares held by
the directors of such Subsidiary Borrower; provided, however that this Section
5.19 shall apply to the Company's direct or indirect ownership of a Subsidiary
Borrower (i) as a condition to such Subsidiary Borrower obtaining a Loan
hereunder and (ii) if and so long as such Subsidiary Borrower has outstanding
Loans.
6. Defaults
6.1 Defaults. Any of the following shall constitute an "Event of Default"
--------
with respect to this Agreement and the Notes:
(a) Failure of any Borrower to pay any amount payable on account of
the principal of or interest on any Note when due, or the failure to pay
any fee or other payment due hereunder within 10 days after the same shall
become due;
(b) Failure of any Borrower to observe or perform any term, covenant
or agreement contained in this Agreement, the Notes or any other document
evidencing the
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<PAGE>
Loans (other than that specified in (a) above) and the continuation of such
failure for 30 days after written notice thereof has been given to the
Borrowers by the Agent at the request of the holder of any Note (including
but not limited to itself);
(c) Any statement, certificate, report, representation or warranty
made or furnished by any Borrower in this Agreement or in compliance with
the provisions hereof shall prove to have been false or misleading in any
material respect at the time when made;
(d) Any obligation(s) of the Company and/or any Subsidiary in excess
of U.S. $5,000,000, individually or in the aggregate (as principal or
guarantor or other surety), to any person other than the Banks in
connection with this Agreement and the Notes for borrowed money (other than
the Notes) shall become or is declared to be due and payable prior to its
stated maturity or any event of default or event which with the passing of
time or notice or both shall have occurred the effect of which permits
payment of any such obligation to be demanded prior to its stated maturity;
(e) If (1) Any Employee Benefit Plan shall cease to have "qualified"
status under the Code, (2) the minimum funding standards applicable to any
Employee Benefit Plan shall not be complied with, (3) any excise tax or tax
lien shall be incurred in connection with any Employee Benefit Plan and the
administration thereof, (4) any claim shall be incurred with respect to any
Employee Benefit Plan other than in the ordinary operation of such Plan,
(5) any "prohibited transaction" as defined by the Code or ERISA shall have
occurred, (6) any liability shall be incurred to the PBGC, (7) any
withdrawal liability shall be incurred with respect to a Multiemployer
Plan, (8) any liability shall be incurred in connection with a failure to
make timely reports and filings with respect to Employee Benefit Plans, or
(9) any other thing shall have occurred with respect to any Employee
Benefit Plan, the result of which (in any one of the foregoing clauses (1)
through (8), any combination of said clauses, or otherwise) is that the
Company or any Subsidiary, in the reasonable judgment of the Majority
Banks, has or is likely to incur liabilities (whether the liability is
direct or indirect, current or deferred, fixed or contingent) of U.S.
$5,000,000 or more;
(f) Any judgment or judgments against the Company and/or any
Subsidiary or any attachments against any of their assets or property in an
amount in excess of U.S. $5,000,000 in any one instance or in the aggregate
shall remain unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of 30 days;
(g) If (1) any person or group within the meaning of (S)13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
rules and regulations promulgated thereunder shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act), directly or
indirectly, of securities of the Company (or other securities convertible
into such securities) representing twenty percent (20%) of the combined
voting power of all securities of the Company entitled to vote in
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<PAGE>
the election of directors, other than securities having such power only by
reason of the happening of a contingency (hereinafter called a "Controlling
Person"); or (2) a majority of the Board of Directors of the Company shall
cease for any reason to consist of (A) individuals who on November 30, 1994
were serving as directors of the Company and (B) individuals who
subsequently become members of the Board if such individuals' nomination
for election or election to the Board is recommended or approved by a
majority of the Board of Directors of the Company. For purposes of clause
(1) above, a person or group shall not be a Controlling Person if such
person or group holds voting power in good faith and not for the purpose of
circumventing this (S)6.1(g) as an agent, bank, broker, nominee, trustee,
or holder of revocable proxies given in response to a solicitation pursuant
to the 1934 Act, for one or more beneficial owners who do not individually,
or, if they are a group acting in concert, as a group have the voting power
specified in clause (1).
(h) The Company and/or any Subsidiary shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or of its
property, (ii) be unable, or admit in writing inability, to pay its Debts
as they mature, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a
voluntary petition in bankruptcy, or a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law, or an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, (vi)
take corporate action for the purpose of effecting any of the foregoing, or
(vii) have an order for relief entered against it in any proceeding under
the United States Bankruptcy Code;
(i) An order, judgment or decree shall be entered, without the
application, approval or consent of the Company and/or any Subsidiary by
any court of competent jurisdiction, approving a petition seeking
reorganization of the Company or such Subsidiary or appointing a receiver,
trustee or liquidator of the Company or such Subsidiary or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 60 consecutive days; or
(j) The Company shall fail to continue to maintain its ownership of
each of the Subsidiary Borrowers to the extent required by Section 5.19.
6.2 Acceleration by Reason of Default. If an Event of Default occurs
---------------------------------
under (S)6.1(a) through (S)6.1(g) or (S)6.1(j) above, the Agent shall (a), if
requested by the Majority Banks, immediately terminate the Commitments by notice
in writing to the Borrowers and (b), if requested by the Banks then holding
51.0% of the aggregate outstanding principal amount of all Loans then
outstanding, immediately declare the Notes to be and they shall thereupon
forthwith become due and payable without presentment, demand, or notice of any
kind, all of which are hereby expressly waived. Simultaneously with the giving
of any such notice to the Borrowers, the Agent shall notify the Banks of any
such action. If an Event of Default occurs under (S)6.1(h) or (S)6.1(i) above,
then, forthwith and without any election or notice, the Commitments shall
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terminate and the Notes shall forthwith become due and payable without
presentment, demand or other notice of any kind, all of which are hereby
expressly waived.
7. The Banks and the Agent
7.1 Authority of Agent. Each of the Banks authorizes the Agent to act on
------------------
its behalf to the extent herein provided and to exercise such other powers as
are reasonably incidental thereto, including the receipt of all payments of
principal of and interest on the Notes, fees and other amounts payable
hereunder, with full power and authority as attorney-in-fact for the Banks to
institute and maintain actions, suits or proceedings for the collection and
enforcement of the Notes and to file such proofs of debt or other documents as
may be necessary to have the claims of the Banks allowed in any proceeding
relative to any Borrower or its creditors or affecting its properties and to
take such other action for the protection, collection and enforcement of the
Notes as the Agent may deem advisable. The Agent may take any such action in
its discretion and shall take such action for the protection, collection and
enforcement of the Notes as may be requested by the Majority Banks. The
relationship between the Agent and each Bank has no fiduciary aspects, and the
Agent's duties (as Agent) hereunder are acknowledged to be only ministerial and
not involving the exercise of discretion on its part. Nothing in this Agreement
or any Note shall be construed to impose on the Agent any duties or
responsibilities other than those for which express provision is made herein or
therein. In performing its duties and functions hereunder, the Agent does not
assume and shall not be deemed to have assumed, and hereby expressly disclaims,
any obligation with or for the Borrowers. As to matters not expressly provided
for in this Agreement or any Note, the Agent shall not be required to exercise
any discretion or to take any action or communicate any notice, but shall be
fully protected in so acting or refraining from acting upon the instructions of
the Majority Banks and their respective successors and assigns; provided,
however, that in no event shall the Agent be required to take any action which
exposes it to personal liability or which is contrary to this Agreement, any
Note or applicable law, and the Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be specifically
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or omitting to take any
such action. If an indemnity furnished to the Agent for any purpose shall, in
the reasonable opinion of the Agent, be insufficient or become impaired, the
Agent may call for additional indemnity from the Banks and not commence or cease
to do the acts for which such indemnity is requested until such additional
indemnity is furnished. The Majority Banks may revoke the authority of the
Agent set forth herein effective upon receipt of written notice by the Agent of
such revocation. The Agent shall promptly notify the Banks of any Event of
Default.
7.2 Responsibility of Agent. In performing its functions and duties
-----------------------
hereunder on behalf of the Banks, the Agent shall exercise the same care and
skill as it would exercise in dealing with loans for its own account. Neither
the Agent nor any of its directors, officers or employees shall be liable for
any action taken or omitted in the absence of gross negligence or willful
misconduct. Each Borrower shall certify to the Agent the names and signatures
of its officers authorized to sign Notes, execute certificates and otherwise act
in respect hereof, and the
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<PAGE>
Agent may conclusively rely thereon until receipt by it of notice to the
contrary. The Agent shall be entitled to rely upon any opinion of counsel
(including counsel for the Borrowers) in relation to this Agreement. The Agent
may treat the payee of any Note as the holder thereof until written notice of
transfer shall have been filed with it. The Agent shall promptly notify the
Borrowers of any such notice received by it.
7.3 Pro-Rata Payments. In case at any time any Bank, whether by setoff or
-----------------
otherwise, has payment made to it in respect of Notes in a greater proportion
than payments made in respect of the Notes to any other Bank, the Bank so
receiving such greater proportionate payment agrees to purchase a portion of the
Loans held by each other Bank, so that after such purchase there shall be held
by each Bank an unpaid balance of Loans bearing the same proportion to the total
principal amount of Notes at such time outstanding as existed in the original
Loans made by the Banks provided that if all or any portion of such
proportionately greater payment of such Notes is thereafter recovered from, or
must otherwise be restored by, such purchasing Bank, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest being paid by such purchasing Bank.
7.4 Indemnification of Agent. Each of the Banks agrees (which agreement
------------------------
shall survive payment of the Notes) to indemnify the Agent (to the extent not
reimbursed by the Borrowers), in amounts which are pro rata to their respective
Commitments, if such amounts are due prior to the making of the Loans hereunder,
and thereafter to the outstanding principal amount of their respective Loans,
from and against any and all losses, claims, damages, liabilities and expenses
which may be imposed on, incurred by or asserted against the Agent in any way
related to or arising out of this Agreement, the Notes or the Loans or any
action taken or omitted by the Agent, except any losses, claims, damages,
liabilities or expenses resulting from the Agent's gross negligence or willful
misconduct; provided, however, that in the event any Bank is required hereunder
to make available to the Agent the amount of a Loan, and any such Bank fails to
make such amount available to the Agent, such Bank agrees to indemnify the Agent
to the extent provided in Section 2.3(d) hereof. All reasonable expenses,
including reasonable counsel fees, incurred by the Agent in taking any action
hereunder shall be borne, subject to the Borrowers' liability therefor, by the
Banks pro rata in accordance with their respective Commitment Percentages under
this Agreement, and the Banks hereby agree to reimburse the Agent for all such
expenses on request.
7.5 Credit Decision. Each Bank acknowledges that it has, independently
---------------
and without reliance upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement. Each of the Banks agrees that the Agent shall
not have any responsibility for the accuracy or adequacy of any information
contained in any document, or any oral information, supplied to such Bank by the
Borrowers directly or through the Agent.
-34-
<PAGE>
7.6 The Agent as a Bank. With respect to its Commitment and the Loans
-------------------
made and to be made by it, CoreStates Bank, N.A. shall have the same rights,
powers and obligations under this Agreement and its Notes as the other Banks and
may exercise the same as if it were not the Agent, and the terms "Bank" and
"Banks" as used herein shall, unless otherwise expressly indicated, include
CoreStates Bank, N.A. in its individual capacity. CoreStates Bank, N.A. and any
successor Agent which is a commercial bank, and their respective affiliates, may
accept deposits from, lend money to, act as trustee under indentures of and
generally engage in any kind of business with, any Borrower and its affiliates
from time to time, all as if the Agent were not the agent hereunder and without
any duty to account therefor to any Bank.
7.7 Successor Agent. The Agent may resign at any time by giving written
---------------
notice of such resignation to the Banks and the Borrowers, such resignation or
removal to be effective only upon the appointment of a successor Agent as
hereinafter provided. Upon any such notice of resignation, the Banks other than
the Bank, if any, then serving as Agent shall jointly appoint a successor Agent
upon written notice to the Borrowers and the retiring Agent. If no successor
Agent shall have been jointly appointed by such Banks and shall have accepted
such appointment within 30 days after the retiring Agent shall have given notice
of resignation, the retiring Agent may, upon notice to the Borrowers and the
Banks, appoint a successor Agent. Upon its acceptance of any appointment as
Agent hereunder, the successor Agent shall succeed to and become vested with all
of the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder, the provisions
hereof shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was the Agent under this Agreement.
7.8 Withholding Taxes. Each Bank (a) represents and warrants to, and
-----------------
agrees with, the Agent that under applicable law and treaties no taxes will be
required to be withheld by the Agent with respect to any payments to be made to
such Bank hereunder, and (b) agrees to furnish (if it is organized under the
laws of any jurisdiction other than the United States or any State thereof) to
the Agent prior to the time that the Agent pays over to such Bank its portion of
any payment of interest or principal or their amounts hereunder either (i) U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein such Bank claims entitlement to the benefits of a tax treaty that
provides for a complete exemption from U.S. federal income withholding tax on
all interest payments hereunder) and (ii) a new Form 1001 or Form 4224 upon the
obsolescence of any previously delivered form or comparable statements in
accordance with applicable U.S. laws and regulations and amendments thereto,
duly executed and completed by such Bank, and (c) agrees to comply, from time to
time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption. Upon request of the Agent from time to time, each
Bank shall deliver to the Agent such evidence of compliance with this Section as
the Agent requires.
7.9 Allocations Made By Agent. As between the Agent and the Banks, unless
-------------------------
a Bank objecting to a determination or allocation made by the Agent pursuant to
this Agreement delivers to the Agent written notice of such objection within one
hundred twenty (120) days after the date any distribution was made by the Agent,
such determination or allocation shall be conclusive on
-35-
<PAGE>
such one hundred twentieth day and only those items expressly objected to in
such notice shall be deemed disputed by such Bank. The Agent shall not have any
duty to inquire as to the application by the Banks of any amounts distributed to
them.
8. Indemnification
8.1 Indemnification of the Agent and the Banks. Each Borrower hereby
------------------------------------------
agrees to indemnify and defend the Agent, each Bank and each Participant and
their respective directors, officers, agents, employees and counsel, from and
hold each of them harmless against, any and all losses, liabilities, claims,
damages, interests, costs, judgments or expenses, including reasonable
attorneys' fees, asserted against or incurred by any of them by or to any third
party arising out of or in connection with any Bank's Commitment, this
Agreement, or the Bank's financing of such Borrower's business and operations,
except any such amount claimed by a Bank resulting from such Bank's gross
negligence or wilful misconduct. All obligations provided for in this (S)8.1
shall survive any termination of this Agreement or the Notes, the repayment of
indebtedness hereunder, or any action taken by any Bank in the enforcement of
its rights and remedies, hereunder or thereunder, or any condition or event
relating to any Borrower or its business or operations.
9. Miscellaneous
9.1 Notices. All notices, requests, demands, directions and other
-------
communications provided for herein (other than telephonic communications to be
confirmed promptly thereafter in writing) shall be in writing (including
telegraphic communication and communication by FAX) and mailed, telegraphed,
FAXed or delivered in hand to the applicable party at the addresses and FAX
numbers indicated opposite its signature on the signature pages hereto or at
such other addresses or FAX numbers as such party may specify in prior written
notice given to the Agent and the Company for itself and on behalf of the
Subsidiary Borrowers. All such notices, requests, demands, directions and other
communications shall, when mailed, telegraphed or FAXed, be effective when
deposited in the mails or delivered to the telegraph company or sent by FAX,
respectively, addressed as aforesaid, except that notices or requests or
directions to the Agent pursuant to any provision hereof shall not be effective
until received by the Agent.
9.2 Effective Date, Successors and Assigns and Survival of Terms. This
------------------------------------------------------------
Agreement shall become effective upon receipt by the Agent from all parties
hereto of either an executed counterpart of this Agreement or written advice by
telex, telegram or FAX that a counterpart has been executed by the respective
party and is being concurrently sent to the Agent. The terms and provisions of
this Agreement shall be binding upon the parties hereto and their respective
successors and assigns except that no Borrower shall have the right to assign
any of its rights hereunder or any interest of it herein without the written
consent of all the Banks, and no Bank shall have the right to assign any of its
rights under or interest in this Agreement or any Note without (i) the written
consent of the Agent and the Company on behalf of the Borrowers received no
later than 14 days prior to such proposed assignment, (ii) execution and
delivery to
-36-
<PAGE>
the Agent and the Borrowers of an assignment agreement acceptable to the Agent
and the Borrower, and (iii) payment to the Agent (by the proposed assignor or
assignee) of an assignment fee of $3,000. All representations, warranties and
agreements herein contained on the part of the Borrowers shall survive the
execution of the Agreement and the execution of the Notes, the expiration or
prior termination of the Commitments, the payment of interest or principal
evidenced by any Note, and the payment of all fees and expenses, costs or other
payments due hereunder.
9.3 Participations. Each Borrower hereby acknowledges and agrees that any
--------------
Bank may at any time grant participations in all or any portion of its Loans or
its Note or of its right, title and interest therein or in or to this Agreement,
(collectively, "Participations") to any other lending office or to any other
bank, lending institution, or any other entity which has the requisite
sophistication to evaluate the merits and risks of investments in Participations
(collectively, "Participants"); provided, however, that: (i) all amounts payable
by the Borrowers hereunder shall be determined as if such Bank had not granted
such Participation, and (ii) any agreement pursuant to which any Bank may grant
a participation in its rights with respect to any particular Loans (x) shall
provide that with respect to any such Loans such Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrowers relating to
such Loans including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement, (y) may provide that
such Bank will not agree to any modification, amendment or waiver of this
Agreement without the consent of the Participant if such amendment, modification
or waiver would reduce the principal of or rate of interest on such Loans or
postpone the date fixed for any payment of principal of or interest on such
Loans, and (z) shall not relieve such Bank from its obligations, which shall
remain absolute, to make Loans hereunder. No Participant shall have the benefit
of the provisions contained in (S)2.12 hereof. Nothing contained herein shall
restrict the ability of any Bank to assign, pledge or hypothecate all or any
portion of its Note to any Federal Reserve Bank.
9.4 Expenses. The Borrowers agree to pay the reasonable out-of-pocket
--------
fees and expenses of the Agent incurred in connection with the negotiation and
documentation of this Agreement, the Notes and all related documents, the
enforcement of this Agreement and the Notes, and the enforcement of any other
rights of the Banks in connection herewith and therewith. The Borrowers agree
to pay the reasonable out-of-pocket fees and expenses of the Banks, including
reasonable counsel fees, in connection with the enforcement of this Agreement
and the Notes and the enforcement of any other rights of the Banks in connection
herewith and therewith.
9.5 Modifications and Waivers. No modifications or waivers of any
-------------------------
provision of this Agreement or any Note and no consent to any departure by any
Borrower therefrom shall in any event be effective, unless the same shall be in
writing, and approved by the Majority Banks, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given; provided, however, that without the written consent of all of the Banks
no such modification, waiver or consent shall (a) change the amount or maturity
date of the principal of, or change the rate or extend the time of payment of
interest on, any Note, (b) change any of the
-37-
<PAGE>
terms of the Commitments, (c) change or affect the provisions of (S)2.1, (S)2.5,
(S)2.7, (S)2.11, (S)2.12, (S)2.13, (S)6.1 or (S)6.2 hereof or modify the
definition of "Majority Banks," (d) subordinate any Note in right of payment to
any other indebtedness or obligation whatsoever, or (e) change or affect any
provision of this (S)9.5.
9.6 No Implied Rights or Waivers. No notice to or demand on any Borrower
----------------------------
in any case shall entitle any Borrower to any other or further notice or demand
in the same, similar or other circumstances. Neither any failure nor any delay
on the part of the Banks in exercising any right, power or privilege hereunder
or under any Note shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of the same or
the exercise of any other right, power or privilege.
9.7 Offsets. Nothing in this Agreement shall be deemed a waiver or
-------
prohibition of any Bank's right of banker's lien or offset.
9.8 Application of Payments. Subject to the provisions of Section 2.10,
-----------------------
the Agent and each Bank agree that all payments on account of the Loans shall be
applied by the Agent and the Banks as follows:
(1) First, to the Agent for any fees, costs or expenses (including
expenses described in Section 9.4) accrued to or incurred by the Agent
under this Agreement or any of the Notes, then due and payable and not
reimbursed by the Borrowers or the Banks until such fees, costs and
expenses are paid in full;
(2) Second, to the Banks for their percentage shares of the Facility
Fee then due and payable under this Agreement until such fee is paid in
full;
(3) Third, to the Banks for their respective shares of all costs,
expenses and fees then due and payable from the Borrowers until such costs,
expenses and fees are paid in full;
(4) Fourth, to the Banks for their Commitment Percentages of all
interest then due and payable from the Borrowers until such interest is
paid in full; and
(5) Fifth, to the Banks for their Commitment Percentages of the
principal amount of the Loans then due and payable from the Borrowers until
such principal is paid in full.
9.9 Counterparts. This Agreement and any amendment hereto or waiver of
------------
any provision hereof may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
-38-
<PAGE>
9.10 Governing Law; Submission to Jurisdiction, Entire Agreement.
-----------------------------------------------------------
(a) This Agreement and the Notes shall be deemed to be contracts made
under and shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania without regard to Pennsylvania or federal
principles of the conflict of laws.
(b) Each Borrower hereby consents to the jurisdiction of any state or
federal court located in the Commonwealth of Pennsylvania in any action or
proceeding which may be brought against it under or in connection with this
Agreement or the Notes executed and delivered hereunder or to enforce any
covenant or agreement contained herein or in any Note, and in the event any
such action or proceeding shall be brought against it, each Borrower agrees
not to raise any objection to such jurisdiction or to the laying of the
venue thereof in any such court. Each Borrower hereby waives any and all
rights to a trial by jury.
(c) Each Borrower also agrees that any legal action or proceeding
arising out of or in connection with this Agreement or any Note may be
brought against it, at the sole election of the Banks in the jurisdiction
of incorporation of any Subsidiary Borrower.
(d) Each Subsidiary Borrower hereby agrees at all times to maintain,
and the Company agrees to cause each Subsidiary Borrower at all times to
maintain, the Company as its agent for service of process for all purposes
of this Agreement and the Notes. Each Subsidiary Borrower hereby appoints
the Company as its agent for such purpose and agrees that service may be
made upon it by mailing, telegraphing, FAXing or delivering a copy of such
process to it in care of the Company at the Company's address as provided
in (S)9.1 hereof and it hereby irrevocably authorizes and directs the
Company to accept such service on its behalf. As an alternative method of
service, each Subsidiary Borrower also irrevocably consents to the service
of process in any suit, action or proceeding in Pennsylvania or its home
jurisdiction arising out of this Agreement or any Note by the mailing,
telegraphing, FAXing or delivery of copies of such process to it at its
address set forth on the signature pages hereto.
(e) Each Borrower hereby waives as a defense in any action brought
against it in respect of the Agreement or any Note, if brought in a court
described above with respect to it, that such action has been brought in an
inconvenient forum. Each Borrower agrees that a final judgment in any such
action 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.
(f) To the extent, if any, to which any Borrower or any of its
properties may be deemed to have or hereafter to acquire immunity from any
judicial process or proceeding to enforce this Agreement or any Note or to
collect amounts due hereunder or under any Note (including without
limitation, attachment proceedings prior to
-39-
<PAGE>
judgment) in any jurisdiction, such Borrower waives such immunity and
agrees not to claim the same.
(g) This Agreement and the Notes issued hereunder constitute the
entire understanding of the parties hereto as of the date hereof with
respect to the subject matter hereof and thereof and supersede any prior
agreements, written or oral, with respect hereto or thereto.
9.11 Severability of Provisions. Any provision of this Agreement which is
--------------------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
9.12 Captions. Article and section captions in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
9.13 Plural and Singular. All words used herein in the plural shall be
-------------------
deemed to have been used in the singular and all words used herein in the
singular shall be deemed to have been used in the plural where the context and
construction so require.
9.14 Judgment Currency. The obligations of the Borrowers in respect of any
-----------------
sum due to any Bank or the Agent hereunder or under the Notes shall,
notwithstanding any judgment in a currency (the "Judgment Currency") other than
the currency in which sum was originally denominated or required to be paid (the
"Original Currency"), be discharged only to the extent that on the Business Day
following receipt by such Bank or the Agent of any sum adjudged to be so due in
the Judgment Currency, such Bank or Agent, in accordance with normal banking
procedures, purchases the Original Currency with the Judgment Currency. If the
amount of Original Currency so purchased is less than the sum originally due to
such Bank or the Agent, the Borrowers agree, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of Original Currency so
purchased exceeds the sum originally due to such Bank or the Agent, as the case
may be, such Bank or the Agent agrees to remit such excess to the Company on
behalf of the Borrowers.
9.15 Termination of the 1991 Credit, the 1993 Credit and the DM Credit.
-----------------------------------------------------------------
Upon the execution and delivery of this Agreement by the parties hereto that
also are parties to the 1991 Credit, the 1993 Credit and/or the DM Credit, all
agreements relating to any such facility shall be deemed terminated and be of no
further force and effect without need of further action on the part of any Bank
or any Borrower that is a party thereto, and any rights to prior notice of such
termination provided thereunder are hereby waived; provided, however, that such
-------- -------
termination shall not relieve any Borrower that is a party to any such facility
of any obligation
-40-
<PAGE>
with respect to fees, charges or other matters under or pertaining to such
facilities, and all such fees and charges thereunder shall be paid upon the
effective date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed by their duly authorized officers as of the date first above
written.
[CORPORATE SEAL] ALCO STANDARD CORPORATION
Attest:
By: /s/ O. Gordon Brewer, Jr.
------------------------------
/s/ Karin M. Kinney O. Gordon Brewer, Jr.
- ------------------------------ Vice President-Finance
Karin M. Kinney 825 Duportail Road
Assistant Secretary of P.O. Box 834
Alco Standard Corporation Valley Forge, PA 19482
FAX No. (215) 296-8419
[CORPORATE SEAL] ERSKINE LIMITED
Attest:
By: /s/ Kurt E. Dinkelacker
------------------------------
/s/ Karin M. Kinney Name: Kurt E. Dinkelacker
- ------------------------------ Title: Director
Karin M. Kinney Address: Erskine House
Assistant Secretary of Oak Hill Road
Alco Standard Corporation SevenOaks
Kent TN13 1NW
United Kingdom
[CORPORATE SEAL] ERSKINE HOUSE GROUP PLC
Attest:
By: /s/ Kurt E. Dinkelacker
------------------------------
/s/ Karin M. Kinney Name: Kurt E. Dinkelacker
- ------------------------------ Title: Director
Karin M. Kinney Address: Erskine House
Assistant Secretary of Oak Hill Road
Alco Standard Corporation SevenOaks
Kent TN13 1NW
United Kingdom
-41-
<PAGE>
CORESTATES BANK, N.A.,
for itself and as Agent
By: /s/ James A. Bennett
------------------------------
James A. Bennett
Senior Vice President
FC 1-8-3-14
1345 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 973-7820
BANK ONE, COLUMBUS, NA SHAWMUT BANK CONNECTICUT, N.A.
By: /s/ David A. Hammond By: /s/ Jeffrey C. Lynch
------------------------------ ------------------------------
David A. Hammond Jeffrey C. Lynch
Vice President Vice President
100 East Broad Street 777 Main Street-MSN 203
Columbus, OH 43215 Hartford, CT 06115
FAX No. 614-248-5518 FAX No. 203-722-9378
FIRST BANK NATIONAL ASSOCIATION NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Mark R. Olmon By: /s/ M. Gregory Seaton
------------------------------ ------------------------------
Mark R. Olmon M. Gregory Seaton
Vice President Senior Vice President
601 Second Avenue South, 7th Fl. 100 North Tryon Street
Minneapolis, MN 55402-4302 (NC 1007-08-04)
FAX No. 612-973-0825 Charlotte, NC 28255
FAX No. 704-386-3271
-42-
<PAGE>
CHEMICAL BANK TRUST COMPANY BANK
By: /s/ Laura Thorne By: /s/ Elizabeth A. Muse
------------------------------ ------------------------------
Laura Thorne Elizabeth A. Muse
Vice President-Banking and Assistant Vice President
Corporate Finance
270 Park Avenue, 10th Fl.
New York, NY 10017-2070 By: /s/ Susan Stall
FAX No. 212-270-2112 ------------------------------
Susan Stall
Group Vice President
118-23rd Floor
25 Park Place N.E.
Atlanta, GA 30303
FAX No. 404-588-8833
THE CHASE MANHATTAN BANK, N.A. FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
By: /s/ Nancy A. Bridgman
------------------------------ By: /s/ Carl E. Goelz
Nancy A. Bridgman ------------------------------
Vice President Carl E. Goelz
One Chase Manhattan Plaza, 4th Fl. Vice President
New York, NY 10081 Broad & Walnut Streets, PMB006
FAX No. 212-552-7773 Philadelphia, PA 19109
FAX No. 215-985-8793
THE TORONTO-DOMINION BANK SOCIETY NATIONAL BANK
By: /s/ David G. Parker By: /s/ R. Robertson Hilton
------------------------------ ------------------------------
David G. Parker R. Robertson Hilton
Manager, Credit Administration Senior Vice President
31 West 52nd Street OH-01-27-0606
New York, NY 10019-6101 127 Public Square
FAX No. 212-262-1926 Cleveland, OH 44114-1306
FAX No. 216-689-4981
-43-
<PAGE>
DEUTSCHE BANK AG, NEW YORK BRANCH
BANK OF AMERICA ILLINOIS AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Brock T. Harris By: /s/ Rolf-Peter Mikolayczyk
------------------------------ ------------------------------
Brock T. Harris Rolf-Peter Mikolayczyk
Vice President Director
31 West 52nd Street
231 South LaSalle Street New York, NY 10019
Chicago, IL 60697 FAX No. 212-474-8212
Attn: Jennifer M. Kerwin
FAX: 312-828-5140
with a copy to: By: /s/ Ross A. Howard
------------------------------
335 Madison Avenue Ross A. Howard
New York, NY 10017 Assistant Vice President
Attn: Brock T. Harris
FAX No. 212-503-7771
FIRST INTERSTATE BANK OF CALIFORNIA
Notices for First Interstate Bank
of California should be directed to:
By: /s/ Peter G. Olson
------------------------------ Clark R. Wilcox
Peter G. Olson Vice President
Senior Vice President 885 Third Avenue, 5th Fl.
New York, NY 10022-4802
FAX No. 212-593-5238
By: /s/ Wendy V.C. Purcell
------------------------------
Wendy V.C. Purcell
Assistant Vice President
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<PAGE>
EXHIBIT A
SUBSIDIARY BORROWERS
Erskine Limited
Erskine House Group PLC
A-1
<PAGE>
EXHIBIT B
Banks' Commitments and Percentages
<TABLE>
<CAPTION>
364 Day Five Year
Facility Facility
Commitment Commitment Commitment
Bank (US Dollars) (US Dollars) Percentage
<S> <C> <C> <C>
CoreStates Bank, N.A. $ 13,500,000 $ 31,500,000 9.0%
Deutsche Bank AG 13,500,000 31,500,000 9.0%
The Toronto-Dominion Bank 13,500,000 31,500,000 9.0%
Bank of America Illinois 12,000,000 28,000,000 8.0%
The Chase Manhattan Bank, N.A. 12,000,000 28,000,000 8.0%
Chemical Bank 12,000,000 28,000,000 8.0%
NationsBank of North Carolina, N.A. 12,000,000 28,000,000 8.0%
Shawmut Bank Connecticut, N.A. 12,000,000 28,000,000 8.0%
Trust Company Bank 12,000,000 28,000,000 8.0%
Bank One, Columbus, NA 7,500,000 17,500,000 5.0%
First Bank National Association 7,500,000 17,500,000 5.0%
First Fidelity Bank, National Association 7,500,000 17,500,000 5.0%
First Interstate Bank of California 7,500,000 17,500,000 5.0%
Society National Bank 7,500,000 17,500,000 5.0%
------------ ------------ -----
$150,000,000 $350,000,000 100.0%
</TABLE>
B-1
<PAGE>
EXHIBIT C-1
364 DAY FACILITY NOTE
U.S.$ (U.S. Dollar Equivalent) Philadelphia, PA
[Bank's 364 Day Facility Commitment] December __, 1994
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, ERSKINE
LIMITED and ERSKINE HOUSE GROUP PLC (individually a "Borrower" and together the
"Borrowers"), jointly and severally, hereby promise to pay to the order of
__________________________ (the "Bank"), in lawful currency of the United States
of America or in such other currencies as are provided in the Credit Agreement
described below, in immediately available funds, at the account of the Agent,
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, on the 364
Day Facility Termination Date, or on such earlier date or dates as provided in
the Credit Agreement described below, the principal sum of U.S.$[Bank's 364 Day
Facility Commitment] or $[Bank's 364 Day Facility Commitment] in U.S. Dollar
Equivalent (or in a combination of U.S. Dollars and U.S. Dollar Equivalent equal
to U.S.$[Bank's 364 Day Facility Commitment] in the aggregate) or, if less, the
then aggregate unpaid principal amount of all 364 Day Facility Loans made by the
Bank to the Borrowers pursuant to the Credit Agreement.
Each Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid at the rates
and at the times provided in Article 2 of the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement, dated
December 1, 1994 (as such may be further amended or modified from time to time
after such date) among the Borrowers, the financial institutions from time to
time party thereto (including the Bank) and the Agent (as amended, modified or
supplemented from time to time, the "Credit Agreement") and is entitled to the
benefits thereof. This Note is subject to voluntary prepayment and mandatory
repayment prior to the 364 Day Facility Termination Date, in whole or in part,
as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and the accrued interest on this Note may be declared to be due and payable in
the manner and with the effect provided in the Credit Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the undersigneds' liability
hereunder shall be limited at all times to the actual aggregate outstanding
indebtedness to the Bank relating to such Bank's 364 Day Facility Loans,
including all principal and interest, together with all fees
C-1-1
<PAGE>
and expenses as provided in the Credit Agreement, all as established by the
Bank's books and records which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
The liability of each Borrower under this Note and the Credit Agreement for
any and all obligations of the Borrowers, individually and collectively, owed to
the Banks under this Note and the Credit Agreement shall be unconditional and
absolute irrespective of (a) any lack of enforceability of any obligation, (b)
any change of the time, manner, place of payment, or any other term of any
obligation, (c) any law, regulation or order of any jurisdiction affecting the
genuineness, validity, or rights of the Banks, individually and collectively,
with respect to any obligation or any instruments evidencing any obligation, or
(d) any other circumstance which might otherwise constitute a defense to or
discharge of any Borrower. Each Borrower agrees that its obligations hereunder
and under the Credit Agreement are irrevocable; that a separate action or
actions may be brought and prosecuted against it regardless of whether any other
Borrower is joined in any such action or actions; and that it waives the benefit
of any statute of limitations affecting its liabilities hereunder and under the
Credit Agreement or the enforcement hereof and thereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
ALCO STANDARD CORPORATION
By:
------------------------------
Title:
ERSKINE LIMITED
By:
------------------------------
Title:
ERSKINE HOUSE GROUP PLC
By:
------------------------------
Title:
C-1-2
<PAGE>
EXHIBIT C-2
FIVE YEAR FACILITY NOTE
U.S.$ (U.S. Dollar Equivalent) Philadelphia, PA
[Bank's Five Year Facility Commitment] December __, 1994
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, ERSKINE
LIMITED and ERSKINE HOUSE GROUP PLC (individually a "Borrower" and together the
"Borrowers"), jointly and severally, hereby promise to pay to the order of
__________________________ (the "Bank"), in lawful currency of the United States
of America or in such other currencies as are provided in the Credit Agreement
described below, in immediately available funds, at the account of the Agent,
located at Broad and Chestnut Streets, Philadelphia, Pennsylvania, on the Five
Year Facility Termination Date, or on such earlier date or dates as provided in
the Credit Agreement described below, the principal sum of U.S.$[Bank's Five
Year Facility Commitment] or $[Bank's Five Year Facility Commitment] in U.S.
Dollar Equivalent (or in a combination of U.S. Dollars and U.S. Dollar
Equivalent equal to U.S.$[Bank's Five Year Facility Commitment] in the
aggregate) or, if less, the then aggregate unpaid principal amount of all Five
Year Facility Loans made by the Bank to the Borrowers pursuant to the Credit
Agreement.
Each Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid at the rates
and at the times provided in Article 2 of the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement, dated
December 1, 1994 (as such may be further amended or modified from time to time
after such date) among the Borrowers, the financial institutions from time to
time party thereto (including the Bank) and the Agent (as amended, modified or
supplemented from time to time, the "Credit Agreement") and is entitled to the
benefits thereof. This Note is subject to voluntary prepayment and mandatory
repayment prior to the Five Year Facility Termination Date, in whole or in part,
as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and the accrued interest on this Note may be declared to be due and payable in
the manner and with the effect provided in the Credit Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the undersigneds' liability
hereunder shall be limited at all times to the actual aggregate outstanding
indebtedness to the Bank relating to such Bank's Five Year Facility Loans,
including all principal and interest, together with all fees
C-2-1
<PAGE>
and expenses as provided in the Credit Agreement, all as established by the
Bank's books and records which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
The liability of each Borrower under this Note and the Credit Agreement for
any and all obligations of the Borrowers, individually and collectively, owed to
the Banks under this Note and the Credit Agreement shall be unconditional and
absolute irrespective of (a) any lack of enforceability of any obligation, (b)
any change of the time, manner, place of payment, or any other term of any
obligation, (c) any law, regulation or order of any jurisdiction affecting the
genuineness, validity, or rights of the Banks, individually and collectively,
with respect to any obligation or any instruments evidencing any obligation, or
(d) any other circumstance which might otherwise constitute a defense to or
discharge of any Borrower. Each Borrower agrees that its obligations hereunder
and under the Credit Agreement are irrevocable; that a separate action or
actions may be brought and prosecuted against it regardless of whether any other
Borrower is joined in any such action or actions; and that it waives the benefit
of any statute of limitations affecting its liabilities hereunder and under the
Credit Agreement or the enforcement hereof and thereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
ALCO STANDARD CORPORATION
By:
------------------------------
Title:
ERSKINE LIMITED
By:
------------------------------
Title:
ERSKINE HOUSE GROUP PLC
By:
------------------------------
Title:
C-2-2
<PAGE>
EXHIBIT D
---------
J. KENNETH CRONEY, ESQ.
GENERAL COUNSEL
ALCO STANDARD CORPORATION
December __, 1994
CoreStates Bank, N.A.
Itself and as Agent to
Each of the Banks Named on
Exhibit A Attached Hereto
Broad & Chestnut Streets
Philadelphia, PA 19107
Attn: Mr. James A. Bennett
Senior Vice President
Re: Credit Agreement, dated December 1, 1994 among Alco Standard
Corporation and certain subsidiaries and the Banks named on
Schedule A attached hereto with CoreStates Bank, N.A., as Agent
---------------------------------------------------------------
Gentlemen:
As General Counsel of Alco Standard Corporation, an Ohio corporation (the
"Company"), I have served as counsel to the Company in connection with a Credit
Agreement, dated December 1, 1994 (the "Credit Agreement"), among the Company,
certain subsidiaries of the Company, the Banks named on Exhibit A attached
hereto and CoreStates Bank, N.A., as Agent for the Banks. Terms defined in the
Credit Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Credit Agreement.
I have examined the Credit Agreement with its exhibits and the originals or
copies, certified or otherwise authenticated to my satisfaction, of the
Certificate of Incorporation and Code of Regulations, both as amended to date,
of the Company and such other documents and instruments, and have made such
further inquiries of law and fact, as I have deemed appropriate for purposes of
this opinion.
Based upon the foregoing, I advise you that, in my opinion:
1. The Company and each Subsidiary is a corporation duly organized,
validly existing and in good standing (where such concept exists) under the laws
of its jurisdiction of incorporation and has all the corporate power and
authority necessary to own its properties and to carry on its business as now
being conducted and as is presently proposed to be conducted and, in the case of
the Company, to enter into and perform its obligations under each of the Credit
Agreement and the Notes. Further, the Company and each Subsidiary is qualified
as a foreign
D-1
<PAGE>
corporation in the various jurisdictions wherein the nature of the business they
transact makes such qualification necessary.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes have been duly authorized by all necessary corporate
action on its part. Neither the execution, delivery, issuance and performance
by the Company of this Agreement nor the Notes (i) require any consent or
approval of any shareholder of the Company, as such, or of any public authority,
(ii) violate any provision of law (including without limitation any usury law)
or any provision of the Certificate of Incorporation or the Code of Regulations
of the Company or any rule or regulation (including without limitation
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination or award
presently in effect and having application to the Company, or (iii) result in
any breach of, or constitute a default under, or result in the creation or
imposition of any lien or charge upon any property of the Company or any
Subsidiary pursuant to the terms of, the Certificate of Incorporation or Code of
Regulations of the Company, the applicable corporate documents of any Subsidiary
or any indenture, loan or credit agreement or other agreement, lease or
instrument to which the Company or any Subsidiary is a party or by which it may
be bound or to which any of its properties may be subject. Neither the Company
nor any Subsidiary is in default under any such law, order, writ, judgment,
injunction, decree, determination or award to an extent that would adversely
affect the ability of the Company to perform its obligations under this Credit
Agreement or the Notes.
3. Each of the Credit Agreement and the Notes has been duly executed,
delivered and issued by the Company and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. The obligation of the Company includes but is not limited to the
obligation to pay the aggregate unpaid principal amount of all Loans made by the
Banks pursuant to the Credit Agreement whether or not the Company was the
Borrower at the time the Loan was made. The foregoing opinions as to
enforceability are subject to bankruptcy, insolvency, reorganization, moratorium
and other laws and equitable principles affecting the enforceability of
creditors' rights generally. No authorization, consent, approval, license,
exemption of or filing or registration with any court or other tribunal or any
governmental department, commission, board, bureau or agency, domestic or
foreign, is or under present law will be necessary to the valid execution,
delivery or performance by the Company of the Credit Agreement or any Note.
4. There are no actions, suits or proceedings pending or threatened
against or affecting the Company or any Subsidiary or any of their assets or
properties before any court or other tribunal or any governmental department,
commission, board, bureau or agency, domestic or foreign, which, if determined
adversely to the Company or any Subsidiary, could have a material adverse effect
on the financial condition, operations or properties of the Company or any
Subsidiary or on the ability of the Company to perform its obligations under the
Credit Agreement or the Notes. I am not aware of any challenge in any pending
or threatened action or proceeding to any material patent, copyright, franchise
or other right owned, leased or otherwise held by the Company or any Subsidiary.
D-2
<PAGE>
5. Except for Partners Securities Company, neither the Company nor any
Subsidiary is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stocks (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System). Assuming all of the proceeds of each
of the Loans will be applied duly in accordance with the provisions of the
Credit Agreement, no part of the proceeds of any Loan made under the Credit
Agreement will be applied for the purpose of purchasing or carrying any margin
stocks or of refinancing any credit previously extended or of extending credit
to others for the purpose of purchasing or carrying any such margin stocks.
6. None of the Banks will be required, by reason of the execution and
delivery of the Credit Agreement and the making of the Loans, to register or
qualify to do business under any law of the Commonwealth of Pennsylvania
relating to the registration or qualification of foreign corporations. There are
no documentary stamp taxes payable in connection with the execution and delivery
of any of the Credit Agreement or the Notes.
This Opinion is intended solely for the benefit of, and may only be relied
upon by, the Agent and each of the Banks.
Very truly yours,
J. Kenneth Croney
General Counsel
D-3
<PAGE>
EXHIBIT A
BANKS
Bank One, Columbus, NA
Bank of America Illinois
The Chase Manhattan Bank, N.A.
Chemical Bank
CoreStates Bank, N.A.
Deutsche Bank AG
First Bank National Association
First Fidelity Bank, National Association
First Interstate Bank of California
NationsBank of North Carolina, N.A.
Shawmut Bank Connecticut, N.A.
Society National Bank
The Toronto-Dominion Bank
Trust Company Bank
D-4
<PAGE>
EXHIBIT E
---------
December __, 1994
CoreStates Bank, N.A.
Itself and as Agent to
Each of the Banks Named on
Exhibit A Attached Hereto
Broad & Chestnut Streets
Philadelphia, PA 19107
Attn: Mr. James A. Bennett
Senior Vice President
Re: Credit Agreement, dated December 1, 1994 among Alco Standard
Corporation and certain subsidiaries and the Banks named on
Schedule A attached hereto with CoreStates Bank, N.A., as Agent
---------------------------------------------------------------
Gentlemen:
1. We have acted as legal advisers in [England]to [name of subsidiary] ALCO
OFFICE PRODUCTS (U.K.) PLC (the "Company") in connection with a credit
agreement dated as of December 1, 1994 made between the Company and Alco
Standard Corporation (the "Borrowers"), the Banks named on Exhibit A
attached hereto (the "Banks") and CoreStates Bank, N.A. (as Agent for the
Banks) relating to the granting of a facility of up to $500 million by the
Banks to the Borrowers (the "Credit Agreement").
2. Terms defined in the Credit Agreement have the same meanings when used in
this opinion.
3. For the purposes of this opinion, we have examined the following documents:
(a) a draft [certified] copy of the Credit Agreement;
(b) a [certified] copy of resolutions of the Board of Directors (and/or a
duly constituted and authorized committee thereof) of the Company
relating (inter alia) to the Credit Agreement;
(c) a [certified] copy of the [Memorandum and Articles of Association]
[applicable charter documents] of the Company;
(d) a [certified] copy of resolutions, signed by all the shareholders of
the Company, relating to the assumption of joint liability under the
Credit Agreement; and
E-1
<PAGE>
[(e) microfiches of the Company's files at the Companies Registry in
London as at _____________, 199__.]
4. Except as stated above, we have not examined any contracts, instruments or
other documents entered into by or affecting the Company or any corporate
records of the Company and have not made any other inquiries concerning the
Company or made any search at [the High Court, Strand, London] in respect
of winding-up or similar petitions.
5. We have not investigated the laws of any country other than [England]
[jurisdiction of incorporation] and this opinion is given only with respect
to [English] law. We assume that no foreign law affects any of the
conclusions stated below. We have not investigated whether the Company is
or will by reason of the transactions and matters contemplated by the
Credit Agreement be in breach of any of its obligations under any
agreement, document, deed or instrument.
6. Based upon the foregoing and subject to any matters not disclosed to us,
and subject to the qualifications set out below we are of the opinion that:
(1) The Company is a [limited liability] [public liability] company, duly
incorporated and subsisting under the laws of [England];
(2) The Company has all requisite corporate power to enter into and
perform the Credit Agreement and the transactions contemplated thereby
and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Credit Agreement and the
transactions and matters contemplated thereby;
(3) The entry into and performance of the Credit Agreement by the Company
and the transactions and matters contemplated thereby to be undertaken
by the Company do not and will not violate the [Memorandum of Articles
of Association] [charter documents] of the Company;
(4) No authorizations, approvals, consents, licenses, exemptions, filing,
registrations or other requirement of governmental, judicial and
public bodies and authorities of or in [England] are required in
connection with the entry into, performance, validity or
enforceability of the Credit Agreement;
(5) Subject to its enforceability under the laws of the Commonwealth of
Pennsylvania (and to the assumptions and qualifications set out in
this letter), the Credit Agreement would be enforceable against the
Company in [England] and the Credit Agreement contains, subject as
otherwise provided herein, no provisions which (if it were subject to,
and construed in accordance with, [English] law) would be contrary to
law or public policy in [England] or which would for any reason not be
upheld by the courts in [England];
(6) The choice of the law of the Commonwealth of Pennsylvania to govern
the Credit Agreement would be recognized and enforced by the courts in
[England] save that
E-2
<PAGE>
there is some doubt in the event that a contract is avoided, as to
whether as a matter of [English] law the choice of law provision would
survive;
(7) The submission to the jurisdiction of the courts in the Commonwealth
of Pennsylvania as set out in the Credit Agreement constitutes a valid
submission by the Company;
(8) A judgment of a competent state or federal court sitting in the
Commonwealth of Pennsylvania finally and conclusively establishing a
debt should be capable of enforcement in the competent courts of
[England] without a re-examination of the merits, provided that the
defendant may have defenses open to it and enforcement may not be
permitted if, inter alia, the judgement was obtained by fraud, was
contrary to public policy of [English] law, relates to foreign penal
or revenue laws, is contrary to natural justice, amounts to judgement
on a matter previously determined by an [English] court, is given in
proceedings brought in breach of agreement for settlement of disputes
[or if enforcement of the judgement is restricted by the provisions of
the Protection of Trading Interests Act 1980];
(9) To ensure the legality, validity, enforceability or admissibility into
evidence of the Credit Agreement in the courts of [England], it is not
necessary that the Credit Agreement be registered, notarized, filed or
recorded with any court or other authority in [England] or that any
stamp or similar tax be paid with respect thereto in [England];
(10) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any government department
or regulatory authority, is necessary under the laws of [England and
Wales] as a condition to the lawful execution, delivery and
performance of the Credit Agreement.
7. The searches made on [ ] 1994 at [the Companies Registry]
revealed no order or resolution for the winding-up or order for the
administration of the Company and no notice of the appointment of a
receiver, liquidator or similar person; but such a search is not capable of
revealing whether or not a winding-up petition has been presented, and
notice of an order or resolution for winding-up or an order for
administration or notice of the appointment of a receiver, liquidator or
similar person may not be filed at [the Companies Registry] immediately.
8. This opinion is given subject to the following qualifications:
(a) the opinion is an opinion with respect to the matters referred to
above in so far as only [English domestic] law (as in force on the
date of this opinion) will itself determine those matters in the
[English] Courts; and we express no opinion as to the effect of any
other law which may be held to be applicable in determining any such
matter or as to the enforceability in any other jurisdiction of any
judgement which may be obtained in the [English] courts. An
obligation to be performed in any other jurisdiction may not be
enforceable in [England] in so far as its
E-3
<PAGE>
performance would be illegal, void or unenforceable under the laws
of that other jurisdiction;
(b) the enforcement of a claim may be or become subject to a right of
set-off or a counter-claim [or subject to any limitations imposed by
the Limitation Act of 1980 or by liquidation, bankruptcy,
insolvency, reorganization, reconstruction or similar laws of
general application];
(c) we assume:
(i) that the Credit Agreement is within the capacity and powers of
and has been validly authorized, executed and delivered by each
person (except the Company) who is a party to the Credit
Agreement;
(ii) the genuineness of all signatures, the authenticity and
completeness of every document submitted to us as an original
document, the conformity to the original document and
completeness of every document submitted to us as a certified
or photostatic copy of any document and the authenticity of its
original; and
(iii) [that the resolutions of the board of directors of the Company
were duly passed at a meeting of properly appointed directors
duly convened and held, that a duly qualified quorum of such
directors present throughout the meeting voted in favor of
approving the resolutions, that any provisions contained in the
Companies Act 1985 or in the Company's Articles of Association
relating to the declaration of directors' interests or the
power of interested directors to vote were duly observed and
that those resolutions have not been rescinded or varied;]
(iv) the accuracy of all representations as to fact made in the
Credit Agreement by the Company;
(v) that immediately after the execution of the Credit Agreement
the Company was solvent;
[(vi) that none of the transactions contemplated by the Credit
Agreement constituted financial assistance for the purposes of
Section 151 of the Companies Act 1985.]
(d) [English] Courts are prepared to render judgements for a monetary
amount in foreign currencies but the judgement may be converted into
[sterling] for enforcement purposes. Foreign currency amounts claimed
in an [English] liquidation must be converted into [sterling] at the
rate prevailing at the commencement of the liquidation;
E-4
<PAGE>
(e) a certificate, determination, notification or opinion of the Banks or
the Agent as to any matters provided for in the Credit Agreement might
be held by the [English] Courts not to be conclusive;
(f) an [English] Court might not enforce a provision of a document
providing that an obligation of any party is to survive a judgement on
such document whether obtained in [England] or elsewhere on the ground
that such obligation would be discharged by a judgement;
(g) an [English] Court may stay proceedings if concurrent proceedings are
being brought elsewhere;
(h) equitable remedies, such as orders for specific performance or the
issue of an injunction, are available only at the discretion of the
Court and are not normally awarded if an award of damages is
considered an adequate remedy;
(i) an [English] Court may recognize oral amendments to the Credit
Agreement by the parties thereto notwithstanding provisions therein to
the contrary;
(j) the question of whether or not any provisions of the Credit Agreement
which may be invalid on account of illegality may be severed from the
other provisions thereof in order to preserve the validity of those
other provisions would be determined by an [English] Court in its
discretion;
(k) an [English]company only has authority to carry on those businesses
specified in [the objects Clause of its Memorandum of Association];
(l) in relation to the opinion expressed at paragraph 6(5) above, the
Courts in [England] would not enforce the Credit Agreement if the
application of principles of the law of the Commonwealth of
Pennsylvania to the Credit Agreement would involve applying foreign
penal, revenue or public laws or involve applying foreign
expropriatory legislation or was contrary to public policy of
[English]law;
(m) the effectiveness of terms exculpating a party from a liability or
duty otherwise owed (including liability arising out of the non-
payment of stamp duty) is limited by law;
(n) we have not been involved in the drafting, preparation or negotiation
of the Credit Agreement and accordingly express no opinion as to the
sufficiency or effectiveness of the Credit Agreement to achieve the
purposes contemplated by the parties thereto;
(o) whilst we are of the opinion that the Company has the necessary powers
under its [Memorandum and Articles of Association] to assume the joint
liability for the whole of the amounts due under the Credit Agreement,
the directors of the Company must exercise those powers bona fide in
the interest of the Company
E-5
<PAGE>
which may involve demonstrating a sufficient commercial benefit for
the Company from the arrangements contemplated by the Credit Agreement
as to which we express no opinion;
(p) an [English] Court may refuse to give effect to paragraph 8.1 of the
Credit Agreement in respect of the costs of unsuccessful litigation
brought before an [English] Court or where the Court has itself made
an order for costs;
(q) a provision of the Credit Agreement providing for a higher rate of
interest to be paid on overdue sums may amount to a penalty if not
found to represent a genuine pre-estimate of loss and may therefore
not be recoverable;
(r) the obligations of the Company under the Credit Agreement are subject
to all laws affecting creditors' rights generally;
(s) so far as they relate to United Kingdom stamp duties, the undertakings
and indemnities given by the Company in Sections 2.10(b) and 8.1 of
the Credit Agreement may be void under Section 117 of the Stamp Act of
1891.
9. This opinion is given for the sole benefit of the person(s) to whom it is
addressed and is not to be relied upon by or communicated to any other
person or for any other purpose, nor is it to be quoted or referred to in
any public document or made public in any way or filed with anyone without
our prior written consent, save that it may be referred to in any
proceedings against us upon this opinion itself.
Yours faithfully,
E-6
<PAGE>
EXHIBIT 5
December 19, 1994
Alco Standard Corporation
P.O. Box 834
Valley Forge, PA 19482
Ladies and Gentlemen:
We have acted as counsel to Alco Standard Corporation ("Alco") in connection
with the filing of a Registration Statement on Form S-1 (the "Registration
Statement") to register under the Securities Act of 1933, as amended, 2,500,000
shares of its Common Stock (the "Shares") for offering from time to time in
connection with the acquisition of other business and properties by Alco and its
subsidiaries. The Shares may be presently authorized but unissued shares or
shares held as treasury shares at the time of their delivery. In this connection
we have made such investigation and reviewed such documents as we deem necessary
in the circumstances to render the following opinion.
Based upon such investigation and review, it is our opinion that the Shares
have been duly authorized for issue, and when (i) authorized for issuance by the
Board of Directors of Alco in transactions of the type and for the consideration
described in the Registration Statement and (ii) issued or delivered upon
receipt of such consideration, such Shares will be legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this opinion and to our firm in
the prospectus included therein.
Very truly yours,
/s/ Ballard Spahr Andrews &
Ingersoll
<PAGE>
EXHIBIT 7
December 19, 1994
Alco Standard Corporation
P.O. Box 834
Valley Forge, Pa 19482
Ladies and Gentlemen:
In connection with the filing by Alco Standard Corporation ("Alco") of a
registration statement on Form S-1 with respect to the registration of
2,500,000 shares of its Common Stock (no par value) (the "Registration
Statement"), to be issued from time to time by Alco in connection with
acquisitions of other businesses and properties, we have been requested to
furnish our opinion as to whether any preference upon liquidation provided in
shares of Serial Preferred Stock (no par value) of Alco places any restrictions
upon Alco's surplus if such preference exceeds the stated or carrying value of
such shares.
In this connection we have reviewed Alco's Articles of Incorporation and the
relevant provisions of the Ohio General Corporation Law, particularly Sections
1701.30, 1701.32 and 1701.33, Revised Code of Ohio. Under the Articles of
Incorporation of Alco the Board of Directors is empowered to fix the
liquidation preference of each series of Serial Preferred Stock in the event of
any liquidation, dissolution or winding up, which preference may exceed the
stated or carrying value of such shares on the books of Alco.
In our opinion, there are no restrictions upon the payment of dividends or
other distributions out of Alco's surplus solely by reason of the excess of the
liquidation preference over the stated or carrying value of shares of Serial
Preferred Stock and there are no remedies available to security holders before
or after the payment of any dividend or distribution by Alco solely because
such dividend may reduce its surplus to an amount less than the amount of such
excess.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews &
Ingersoll
<PAGE>
Exhibit 11
ALCO STANDARD CORPORATION
COMPUTATIONS OF EARNINGS (LOSS) PER SHARE
(in thousands, except earnings (loss) per share)
<TABLE>
<CAPTION>
1994 1993 1992
-------------------- -------------------- --------------------
Fully Fully Fully
Primary Diluted(1) Primary Diluted(1) Primary Diluted(1)
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended September 30
- ------------------------------
Average Shares Outstanding
- -------------------------
Common shares 52,691 52,691 46,657 46,657 46,178 46,178
Preferred stock
Considered common equivalents 5 5 48 48 108 108
Options 1,033 1,186 691 751 590 619
------- ------- -------- -------- -------- --------
Total shares 53,729 53,882 47,396 47,456 46,876 46,905
======= ======= ======== ======== ======== ========
Income (Loss)
- -------------
Continuing Operations $70,609 $70,609 $ 7,615 $ 7,615 $104,217 $104,217
Discontinued Operations (7,515) (7,515) (8,455) (8,455)
------- ------- -------- -------- -------- --------
Net Income 70,609 70,609 100 100 95,762 95,762
Less: Preferred dividends 11,572 11,572 9,571 9,571
------- ------- -------- -------- -------- --------
Net income (loss) available to common shareholders $59,037 $59,037 $ (9,471) $ (9,471) $ 95,762 $ 95,762
======= ======= ======== ======== ======== ========
Earnings Per Share
- ------------------
Continuing operations $1.10 $1.10 $(.04) $(.04) $2.22 $2.22
Discontinued operations (.16) (.16) (.18) (.18)
------- ------- -------- -------- -------- --------
$1.10 $1.10 $(.20) $(.20) $2.04 $2.04
======= ======= ======== ======== ======== ========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15
because it results in dilution of less than 3%.
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF REGISTRANT
--------------------------
The registrant is Alco Standard Corporation, an Ohio corporation, which has no
parent. The following sets forth information with respect to Alco's
subsidiaries as of November 15, 1994.
<TABLE>
<CAPTION>
State or other
% Voting jurisdiction of
Securities incorporation
Subsidiary Owned (by whom) or organization
- ---------- --------------- ---------------
<S> <C> <C>
Alco Realty, Inc. (ARI) 100% Alco Delaware
Alco Canada Realty, Inc. 100% ARI Canada
375347 British Columbia Ltd. 100% ARI Canada
The Alco Standard Foundation 100% Alco Pennsylvania
Alco-Texas Realty, Inc. 100% Alco Texas
Chesterbrook Insurance Limited 100% Alco Bermuda
MDR Corporation (MDR) 100% Alco Delaware
AOP Brands, Inc. 100% MDR Delaware
AOP, Inc. (AOP) 100% MDR Delaware
Alco Business Machines, Inc. 100% AOP Delaware
Alco Capital Resource Canada Ltd. 100% AOP Canada
Alco Capital Resource, Inc. 100% AOP Georgia
Alco Office Products (UK) Plc (AOPUK) 100% AOP England
Erskine House Group PLC (EHGPLC) 100% AOPUK England
Erskine Holdings, Inc. (EHI) 100% AOP Delaware
Advanced Image Systems, Inc. 100% EHI Delaware
Ameritech Equipment, Inc. 100% EHI Delaware
Copytex Corporation 100% EHI Delaware
Edgemont Sales Co., Inc. 100% EHI Delaware
Mirex Corporation of Texas 100% EHI Delaware
Omi of California, Inc. 100% EHI Delaware
University Copy Systems, Inc. 100% EHI Delaware
Zeno Systems of Colorado, Inc. 100% EHI Delaware
Zeno Systems of Georgia, Inc. 100% EHI Delaware
Zeno Systems of Houston, Inc. 100% EHI Delaware
Allegheny Business Machines, Inc. 100% AOP Delaware
American Business Machines, Inc. 100% AOP Ohio
American Business Machines, Inc. 100% AOP Oregon
Associated Business Products, Inc. 80% AOP, 20% EHI Idaho
Badger Business Products 100% AOP Delaware
Benndorf-Verster Limited 100% AOP Canada
Business Systems of Arizona, Inc. 100% AOP Delaware
Business Machines Center, Inc. (NSL) 100% AOP New Mexico
Calgary Copier, Ltd. 100% AOP Canada
Copier Consultants, Inc. 100% AOP North Carolina
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
State or other
% Voting jurisdiction of
Securities incorporation
Subsidiary Owned (by whom) or organization
- ---------- --------------- ---------------
<S> <C> <C>
Copy Corporation 100% AOP Kentucky
Copy Corporation of Canada Limited (CCC) 100% AOP Canada
Lion Business Machines, Ltd. 100% CCC Canada
Copy Data Group, Inc. 100% AOP Delaware
Copyline Corporation (Copy) 100% AOP California
Advanced Image Systems, Inc. 100% Copy California
Copy-Van, Incorporated 100% AOP Delaware
D.C. Hey Company, Inc. 100% AOP Minnesota
Halifax Office Products Limited 100% AOP Canada
Hovinga Business Systems, Inc. 100% AOP Michigan
Innovative Office Systems, Inc. (IOS) 100% AOP Texas
Innovative Office Systems-Louisiana
(IOSL) 100% IOS South Carolina
O'Brien Business Equipment, Inc. 100% AOP Ohio
Office Products, Inc. (OP) 100% AOP Delaware
Office Group, Inc. (OG) 100% AOP Delaware
Omni Business Systems, Inc. 80% AOP, 20% EHI Florida
Southern Copy Machines, Inc. 100% AOP Delaware
Standard Office Machines, Inc. (MOM) 100% AOP Delaware
Modern Office Machines, Inc. (MOM) 100% BPL South Carolina
TNL Financial, Inc. 100% AOP Delaware
Taft Locke Companies 100% AOP Delaware
The T. Talbott Bond Company 100% AOP Maryland
Taylor-Made Office Systems, Inc. 100% AOP California
J. L. Teel Company, Inc. 100% AOP Delaware
Texas Copy Systems, Inc. 100% AOP Delaware
Uni-Copy Corporation of North Carolina 100% AOP Delaware
Unitech, Inc., of Mississippi 100% AOP Mississippi
University Copy Systems of Hawaii, Inc. 100% AOP Hawaii
Western Business Resources, Inc. 100% AOP South Dakota
Worcester Business Machines, Inc. 100% AOP Massachusetts
Xtec Office Systems, Inc. 80% AOP, 20% EHI Pennsylvania
</TABLE>
-2-
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated October 17, 1994, in the Registration Statement
(Form S-1) and related Prospectus of Alco Standard Corporation for the
registration of 2,500,000 shares of its common stock.
Our audits also included the financial statement schedules of Alco Standard
Corporation listed in item 16(b). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
December 14, 1994 -----------------------
Ernst & Young LLP
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ J. MAHLON BUCK, JR.
------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ PAUL J. DARLING, II
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is Chief Financial Officer of Alco
Standard Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ KURT E. DINKELACKER
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ WILLIAM F. DRAKE, JR.
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ JAMES J. FORESE
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 16th day of December, 1994.
SIGNED: /s/ FREDERICK S. HAMMER
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that she is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as her attorneys-in-fact, each with the power of
substitution, to execute, on her behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 16th day of December, 1994.
SIGNED: /s/ BARBARA BARNES HAUPTFUHRER
-------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 17th day of December, 1994.
SIGNED: /s/ DANA G. MEAD
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ RAY B. MUNDT
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ PAUL C. O'NEILL
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 16th day of December, 1994.
SIGNED: /s/ ROGELIO G. SADA
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ JAMES W. STRATTON
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 19th day of December, 1994.
SIGNED: /s/ JOHN E. STUART
----------------------------
<PAGE>
Exhibit 24.1
CERTIFICATION
I, J. Kenneth Croney, Secretary of Alco Standard Corporation do hereby
certify that the following resolutions were duly passed by the Board of
Directors of the Corporation on November 11, 1994, and that such resolutions
are, as of the date hereof, in full force and effect:
RESOLVED, that each of the officers and directors of the
corporation is hereby authorized to appoint Hugh G. Moulton and J. Kenneth
Croney and Michael J. Dillon as his or her attorneys-in-fact on behalf of
each of them each attorney-in-fact with the power of substitution, to
execute on such officer's or director's behalf, one or more registration
statements and annual reports of the corporation for filing with the
Securities and Exchange Commission ("SEC"), and any and all amendments to
said documents which said attorney may deem necessary or desirable to
enable the corporation to register the offering of debt securities and to
further enable the corporation to file such reports as are necessary under
Section 13 or 15(d) of the Securities Exchange Act of 1934 and such other
documents as are necessary to comply with all rules, regulations or
requirements of the SEC in respect thereto; and
FURTHER RESOLVED, that any officer of the corporation is hereby
authorized to do and perform, or cause to be done or performed, any and all
things and to execute and deliver any and all agreements, certificates,
undertakings, documents or instruments necessary or appropriate in order to
carry out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of
December, 1994.
/s/ J. KENNETH CRONEY
-----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Alco Standard Corporation and subsidiaries
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1994
<PERIOD-END> Sep-30-1994
<CASH> 53,369
<SECURITIES> 0
<RECEIVABLES> 944,923
<ALLOWANCES> 29,428
<INVENTORY> 609,974
<CURRENT-ASSETS> 1,710,476
<PP&E> 653,722
<DEPRECIATION> 299,775
<TOTAL-ASSETS> 3,502,258 <F2>
<CURRENT-LIABILITIES> 1,056,930
<BONDS> 340,771
<COMMON> 551,215
0
199,912 <F1>
<OTHER-SE> 616,017
<TOTAL-LIABILITY-AND-EQUITY> 3,502,258 <F3>
<SALES> 7,925,784
<TOTAL-REVENUES> 7,996,052
<CGS> 5,884,819
<TOTAL-COSTS> 5,912,797 <F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19,668
<INTEREST-EXPENSE> 43,802
<INCOME-PRETAX> 156,812
<INCOME-TAX> 86,203
<INCOME-CONTINUING> 70,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,609
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
<FN>
<F1> Redeemable solely at the Company's option.
<F2> Includes Finance Subsidiaries assets (primarily lease receivables) of
$562,403.
<F3> Includes Finance Subsidiaries liabilities (primarily debt) of $498,710.
<F4> Includes Finance Subsidiaries interest of $27,978.
</FN>
</TABLE>
