<PAGE>
Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)*
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1994 or [ ] Transition
-------------
report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
--------- ---------
Commission file number 1-5964
--------------------------------------------------------
ALCO STANDARD CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 23-0334400
- - ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Box 834, Valley Forge, Pennsylvania 19482
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 296-8000
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NONE
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
* Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1994.
Common Stock, no par value 54,254,244 shares
<PAGE>
Page 2
INDEX
ALCO STANDARD CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--June 30, 1994
and September 30, 1993
Consolidated Statements of Income--Three months
ended June 30, 1994 and June 30, 1993;
Nine months ended June 30, 1994 and
June 30, 1993
Consolidated Statements of Cash Flows--Nine
months ended June 30, 1994 and June 30, 1993
Notes to Consolidated Financial Statements--
June 30, 1994
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition and Liquidity
PART II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- - ----------
<PAGE>
Page 3
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
( in thousands )
June 30 September 30
ASSETS 1994 1993
------------ -------------
<S> <C> <C>
Current Assets
Cash $ 41,848 $ 36,495
Accounts receivable less allowance for doubtful accounts:
6/94 - $33,248; 9/93 - $27,528 876,792 855,666
Inventories 612,993 591,964
Prepaid expenses, deposits and deferred taxes 110,194 92,600
--------- ---------
Total current assets 1,641,827 1,576,725
--------- ---------
Investment in Unconsolidated Affiliate 118,060
Other Investments and Long-Term Receivables 70,292 46,813
Property and Equipment, at cost 655,716 596,901
Less accumulated depreciation 302,604 260,551
--------- ---------
353,112 336,350
--------- ---------
Other Assets
Excess of cost of acquired companies over equity 713,978 694,757
Miscellaneous 73,651 69,662
Deferred taxes 24,127 22,454
--------- ---------
811,756 786,873
--------- ---------
Finance Subsidiaries Assets 610,248 484,069
--------- ---------
$ 3,487,235 $ 3,348,890
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Page 4
ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30 September 30
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
- - ------------------------------------ ----------- -------------
<S> <C> <C>
Current Liabilities
Current portion of long-term debt $ 40,820 $ 39,915
Notes payable 149,632 164,249
Trade accounts payable 395,203 426,971
Accrued salaries, wages and commissions 80,230 80,097
Deferred revenues 128,610 116,631
Restructuring costs 75,988 27,480
Other accrued expenses 144,182 164,831
----------- -------------
Total current liabilities 1,014,665 1,020,174
----------- -------------
Long-Term Debt 431,933 590,154
Other Liabilities
Restructuring costs 65,000 142,459
Workers' compensation and other 142,271 113,069
----------- -------------
207,271 255,528
----------- -------------
Finance Subsidiaries Liabilities;
including debt of: 6/94 - $492,664 ; 9/93 - $413,092 520,806 437,418
Redeemable Preferred Stock of Subsidiary 25,000
Shareholders' Equity
Series AA convertible preferred stock, no par value,
4,025 depositary shares issued and outstanding 199,409 197,900
Common stock, no par value: authorized 75,000 shares;
Issued 6/94 - 54,522 shares; 9/93 - 48,772 shares 549,440 259,031
Retained earnings 611,691 651,373
Foreign currency translation adjustment (28,807) (23,640)
Cost of common shares in treasury: 6/94 - 432
shares; 9/93 - 1,808 shares (19,173) (64,048)
----------- -------------
1,312,560 1,020,616
----------- -------------
$ 3,487,235 $ 3,348,890
=========== =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Page 5
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
----------------------- -----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 1,983,171 $ 1,532,801 $ 5,841,787 $ 4,442,242
Dividends, interest and other income 970 1,193 2,819 2,932
Finance subsidiaries 17,183 13,201 47,922 37,070
----------- ----------- ----------- -----------
2,001,324 1,547,195 5,892,528 4,482,244
----------- ----------- ----------- -----------
Costs and Expenses
Cost of goods sold 1,458,835 1,152,037 4,340,153 3,329,210
Selling and administrative 448,230 327,992 1,304,670 964,578
Interest 10,876 9,667 33,157 31,174
Finance subsidiaries interest 7,074 5,983 19,901 17,564
----------- ----------- ----------- -----------
1,925,015 1,495,679 5,697,881 4,342,526
----------- ----------- ----------- -----------
Income (Loss) from Unconsolidated Affiliate (115,265) (689) (117,158) 484
----------- ----------- ----------- -----------
Income (Loss) from Continuing
Operations, Before Taxes (38,956) 50,827 77,489 140,202
Taxes on Income 9,350 20,123 55,920 55,199
----------- ----------- ----------- -----------
Income (Loss) from Continuing Operations (48,306) 30,704 21,569 85,003
Income from discontinued operations,
net of income taxes 3,218
----------- ----------- ----------- -----------
Income (Loss) before cumulative effect of
changes in accounting principles (48,306) 30,704 21,569 88,221
Cumulative effect of
Postretirement benefits other than
pensions, net of income taxes (1,421)
Income taxes 1,421
----------- ----------- ----------- -----------
Net Income (Loss) (48,306) 30,704 21,569 88,221
Preferred Dividends 2,893 2,893 8,679 6,107
----------- ----------- ----------- -----------
Net Income (Loss) Available to Common
Shareholders $ (51,199) $ 27,811 $ 12,890 $ 82,114
=========== =========== =========== ===========
Earnings (Loss) Per Share (1)
Continuing operations ($0.95) $0.58 $0.24 $1.67
Discontinued operations 0.07
----------- ----------- ----------- -----------
Before cumulative effect of changes
in accounting principles (0.95) 0.58 0.24 1.74
Cumulative effect of
Postretirement benefits other than
pensions, net of income taxes (0.03)
Income taxes 0.03
----------- ----------- ----------- -----------
($0.95) $0.58 $0.24 $1.74
=========== =========== =========== ===========
Cash dividends per share of common stock $0.25 $0.24 $0.75 $0.72
=========== =========== =========== ===========
</TABLE>
(1) See Exhibit 11 for computation of earnings per share.
See notes to consolidated financial statements.
<PAGE>
Page 6
<TABLE>
<CAPTION>
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
June 30,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Operating activities
Net income $ 21,569 $ 88,221
Additions (deductions) to reconcile net income to net
cash provided (used) by operating activities:
Depreciation 51,840 41,530
Amortization 19,233 15,516
Provision for losses on accounts receivable 15,675 12,387
Benefit for deferred income taxes (240) (380)
Change in deferred liabilities 1,978 (1,561)
Loss on disposition of investment in IMMOS 115,265
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Increase in accounts receivable (16,975) (27,745)
Increase in inventories (8,366) (45,465)
Increase in prepaid expenses (17,360) (11,498)
Decrease in accounts payable, deferred
revenues and accrued expenses (68,418) (39,099)
Miscellaneous (6,351) (8,327)
--------- ---------
Net cash provided 107,850 23,579
Investing activities
Proceeds from sale of property and equipment 14,612 7,576
Payments received on long-term receivables 8,513 5,026
Cost of companies acquired, net of cash acquired (27,376) (269,030)
Expenditures for property and equipment (77,438) (60,144)
Purchase of miscellaneous assets (5,440) (7,812)
Finance subsidiaries receivables - additions (286,034) (200,665)
Finance subsidiaries receivables - collections 157,012 119,959
--------- ---------
Net cash used (216,151) (405,090)
Financing activities
Proceeds from issuance of long-term debt 111,319 242,301
Proceeds from option exercises and sale of treasury
shares 50,600 46,806
Proceeds from issuance of common stock, net 293,500
Proceeds from issuance of preferred stock, net 196,335
Proceeds (repayments) from short-term borrowings, net (5,278) 76,620
Long-term debt repayments (333,474) (199,385)
Finance subsidiaries debt - issuance 139,880 181,498
Finance subsidiaries debt - repayments (60,308) (103,672)
Dividends paid (45,147) (36,212)
Purchase of treasury shares (37,438) (17,142)
--------- ---------
Net cash provided 113,654 387,149
--------- ---------
Net increase in cash 5,353 5,638
Cash at beginning of year 36,495 24,386
--------- ---------
Cash at end of period $ 41,848 $ 30,024
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Page 7
Alco Standard Corporation
Notes To Consolidated Financial Statements
June 30, 1994
Note 1: Accounting Changes
------------------
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", and SFAS No. 109,
"Accounting for Income Taxes". In adopting SFAS No. 106, the Company has elected
to immediately recognize the transition obligation, which resulted in a
cumulative effect charge of $1,421,000, net of taxes, or $.03 per share. The new
standard for income taxes permitted the Company to recognize the benefit of
certain deferred tax assets that was prohibited under the previous standard,
SFAS No. 96, which the Company adopted for the fiscal year ended September 30,
1988. The cumulative effect of establishing the net deferred tax asset as of
October 1, 1993 was to increase net income by $1,421,000, or $.03 per share.
Note 2: Common Stock
------------
In December, 1993, the Company issued 5,750,000 shares of common stock in a
public offering. The net proceeds from the offering of approximately $294
million were used for repayment of debt. Net income from continuing operations
and earnings per share from continuing operations for the fiscal year ended
September 30, 1993 would have been $13,288,000 and $.07, respectively, if the
offering had occurred on October 1, 1992. Net income and earnings per share for
nine months ended June 30, 1994 would have been $22,161,000 and $.26,
respectively, if the offering had occurred on October 1, 1993.
Note 3: Investment in Unconsolidated Affiliate
--------------------------------------
On June 29, 1994 a preliminary agreement was signed which provides that the
Company will sell its 49.9% interest in its unconsolidated affiliate, IMM Office
Systems GmbH (IMMOS) for cash plus a passive interest in any subsequent sale of
IMMOS. The Company will retain no ongoing liability in the joint venture and
the parties will exchange complete mutual releases for past actions. In
addition, the Company will be 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, the Company will acquire profitable operations in Denmark and
France and retain its U.K. based Erskine House operations. The Company
recognized the loss on the expected sale of its interest in IMMOS in the quarter
ended June 30, 1994. Accordingly, the Company recorded a pre-tax loss of $115.3
million ($95.1 million, net of tax) equating to a loss per share of $1.75 for
the quarter. This charge represents
<PAGE>
Page 8
Alco Standard Corporation
Notes To Consolidated Financial Statements
June 30, 1994
Note 3: Investment in Unconsolidated Affiliate (Continued)
-------------------------------------------------
the write-off of Alco's investment in IMMOS, plus certain transactional costs
less the expected net cash proceeds from the sale together with related tax
benefits. The $117.2 million loss from IMMOS for the nine months ended June 30,
1994 includes $1.9 million which represents the Company's share of IMMOS
operating losses for the first half of the fiscal year.
Note 4: Debt
----
On December 13, 1993, the Company amended its $200 million credit agreement
dated December 18, 1991 to extend the term of the 364 day portion of the
facility to December 14, 1994 and the three year portion to December 18, 1996.
On January 14, 1994, the Company amended its DM 180 million credit
agreement dated October 15, 1992 to extend the expiration date of the commitment
to January 11, 1995.
On April 20, 1994, the Company amended its $200 million credit agreement
dated April 21, 1993 to extend the term of the 364 day portion of the facility
to April 19, 1995. The facility fee on the 364 day portion of the agreement was
reduced from 1/8% per annum to 1/10%, while the facility fee on the remaining
portion of the agreement was reduced from 3/16% per annum to 3/20%.
On May 13, 1994, the Company entered into an agreement to amend the terms
of the $35 million of 10.7% notes and replaced $25 million of 9.14% redeemable
preferred stock of a subsidiary. The notes and redeemable preferred stock were
assumed in connection with the acquisition of Erskine House Group PLC in fiscal
1993. Under the terms of the new agreement, the Company issued $35 million of
10.51% senior notes which are due in equal annual installments beginning on
April 24, 1997 through April 24, 2001 and $25 million of 8.61% senior notes
which are due in equal annual installments beginning on April 1, 2000 through
April 1, 2005. This is a non-cash transaction which is excluded from the
accompanying Consolidated Statements of Cash Flows.
On April 30, 1994, the Company issued two promissory notes representing the
Company's investment in a limited partnership which is constructing affordable
housing units. Each promissory note is for $4,962,500, bears interest at 7.25%,
and is due in installments beginning on January 1, 1995 through January 1, 2001.
This is a non-cash transaction which is excluded from the accompanying
Consolidated Statements of Cash Flows.
<PAGE>
Page 9
Alco Standard Corporation
Notes To Consolidated Financial Statements
June 30, 1994
Note 4: Debt (Continued)
---------------
On June 22, 1994, the Company issued two additional promissory notes
representing the Company's investment in two limited partnerships which are
constructing affordable housing units. One promissory note is for $4,665,616,
bears interest at 7.78%, and is due in annual installments beginning on April 3,
1995 through April 1, 2002. The other note is for $4,988,750, bears interest at
6.58%, and is due in annual installments beginning on March 1, 1995 through
March 1, 2001. This is a non-cash transaction which is excluded from the
accompanying Consolidated Statements of Cash Flows.
Note 5: Supplemental Information to Statements of Cash Flows
----------------------------------------------------
The Company has presented statements of cash flows for the periods ended
June 30, 1994 and 1993 in accordance with SFAS No. 95.
Interest paid for the nine months ended June 30, 1994 was $56,600,000.
Interest paid for the nine months ended June 30, 1993 approximates the amount
disclosed in the accompanying Statements of Income.
Income tax payments of $47,493,000 and $50,750,000 were made during the
nine months ended June 30, 1994 and 1993, respectively.
The total assets for acquisitions amounted to $84,675,000 during the nine
months ended June 30, 1994 and $285,862,000, which included the joint venture
investment in IMMOS of $122,500,000 during the nine months ended June 30, 1993.
The excess of cost over acquired equity included in these assets was $35,681,000
at June 30, 1994 and $128,351,000 including $96,066,000 relating to IMMOS at
June 30, 1993.
Note 6: Medium Term Note Program
------------------------
As of July 1, 1994, Alco Capital Resource, Inc. (ACR) may offer 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 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 ACR 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
will be determined based on market conditions at the time of issuance.
<PAGE>
Page 10
Item 2: Management's Discussion and Analysis of Results of Operations
- - -----------------------------------------------------------------------
and Financial Condition and Liquidity
-------------------------------------
Results of Operations
---------------------
The discussion of the results of operations reviews the continuing
operations of the Company as contained in the Consolidated Statements of Income.
Three Months Ended June 30, 1994
compared with Three Months Ended June 30, 1993
----------------------------------------------
Revenues and income (loss) before taxes for the third quarter of fiscal
1994 compared to the third quarter of fiscal 1993 were as follows:
<TABLE>
<CAPTION>
Revenues Income (Loss) Before Taxes
----------------------- --------------------------
June 30 % June 30 %
---------------- ----------------
1994 1993 Change 1994 1993 Change
----- ----- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
(in millions)
Alco Office Products $ 589 $ 386 52.6% $ 54.1 $34.3 57.7 %
Unisource:
United States 1,253 988 26.8 40.8 27.2 50.0
Canada 161 175 (8.0) 4.2 5.8 (27.6)
------ ------ ------- -----
Total Unisource 1,414 1,163 21.6 45.0 33.0 36.4
------ ------ ------- -----
Operating 2,003 1,549 29.3 99.1 67.3 47.3
Unconsolidated Affiliate (115.3) (.7)
Interest Expense (10.9) (9.7)
Eliminations and
Non-Allocated (2) (2) (11.9) (6.1)
------ ------ ------- -----
$2,001 $1,547 29.3% $ (39.0) $50.8
====== ====== ======= =====
</TABLE>
Alco Office Products (AOP) contributed $203 million of additional revenues,
of which $146 million related to current and prior year acquisitions. The
remaining $57 million increase reflects continued internal growth in all revenue
areas of AOP's base companies, but primarily in the equipment, service and
facilities management businesses. The $265 million increase in revenues from
Unisource's U.S. operations includes $250 million from prior year acquisitions
and $15 million of internal growth from its base companies. The $14 million
revenue decrease in the Unisource Canadian paper businesses is primarily
attributable to the 8% decrease in the average foreign exchange rate.
AOP's increase in operating income of $19.8 million includes $9.2 million
from current and prior year acquisitions. The remaining $10.6 million of
internal growth from its base companies is primarily the result of higher
operating contributions from the service, supplies and facilities management
areas of AOP's businesses, along with increased operating income related to
AOP's leasing activities through Alco Capital Resource, Inc. Operating income
from Unisource's U.S. paper operations increased $13.6 million including $6.7
million from prior year acquisitions and $6.9 million from its base companies.
The internal growth is attributable to improved gross margins and expense
reductions associated with the restructuring plan. The decrease in operating
income in the Canadian paper distribution business of $1.6 million is a result
of the negative impact of foreign exchange rates along with an increase in
operating expenses at a rate in excess of the growth in revenues and gross
margins.
<PAGE>
Page 11
Revenues from the Company's paper and office products operations outside
the U.S. were $209 million for the third quarter of fiscal 1994 compared to
$197 million for the third quarter of fiscal 1993. The $12 million increase
reflects internal growth in the AOP operations along with contributions from
prior year AOP acquisitions. These results collectively more than offset the
$14 million decrease in revenues from the Canadian paper distribution
business.
Operating income from foreign operations was $8.5 million for the three
months ended June 30, 1994, a decline of $500,000 from the prior year which
is attributed to the decrease in the operating income of the Canadian paper
distribution business. The decrease in foreign paper distribution operating
income was offset by positive contributions from the AOP foreign operations
of $1.1 million.
The 49.9% investment in IMM Office Systems (IMMOS) marked the entry of
the Company into the European market, and was to serve as a base for further
expansion in Europe. The venture agreement provided the Company 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, have prevented IMMOS from progressing toward those goals. As a
result, on June 29, 1994 a preliminary agreement was signed which provides
that the Company will sell its 49.9% interest in IMM Office Systems (IMMOS)
for cash plus a passive interest in any subsequent sale of IMMOS. The
Company will retain no ongoing liability in the joint venture and the parties
will exchange complete mutual releases for past actions. In addition, the
Company will be relieved of the covenant not to compete in Europe contained
in the joint venture, although the parties will not compete with each other
for a period expiring on December 31, 1995. As part of the transaction, the
Company will acquire profitable operations in Denmark and France and retain
its U.K. based Erskine House operations. The Company recognized a loss on
the expected 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 of
tax) equating to a loss per share of $1.75 for the quarter. This charge
represents the write-off of Alco's investment in IMMOS plus certain
transactional costs less the expected net cash proceeds from the sale
together with related tax benefits.
Interest expense increased by $1.2 million, a result of higher average
interest rates and debt levels. The $89.8 million decrease in income before
taxes represents a $25.5 million earnings improvement relating to the base
companies along with current and prior year acquisitions and a $115.3 million
loss on the expected sale of the investment in IMMOS. Income taxes for the
third quarter include a $20.2 million benefit on the loss on disposition of
IMMOS. Excluding the related tax benefit on this loss, the effective income
tax rate for the third quarter was 38.7% compared with 39.6% in fiscal 1993.
The increase of 6 million in weighted average shares for the quarter ended
June 30, 1994 compared to the comparable period of the prior year is
primarily attributable to a public offering of common stock in December 1993.
The $.95 loss per share for the current quarter includes a $1.75 loss per
share relating to the expected sale of the investment in IMMOS and earnings
per share of $.80 relating to the operations of the base companies along with
current and prior year acquisitions. Earnings per share for the comparable
period in the prior fiscal year was $.58.
<PAGE>
Page 12
Nine Months Ended June 30, 1994
compared with Nine Months Ended June 30, 1993
---------------------------------------------
Revenues and income before taxes for the first nine months of fiscal
1994 compared to the first nine months of fiscal 1993 were as follows:
<TABLE>
<CAPTION>
Revenues Income Before Taxes
----------------------- ------------------------
June 30 % June 30 %
---------------- ---------------
1994 1993 Change 1994 1993 Change
------ ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
(in millions)
Alco Office Products $1,632 $1,105 47.7% $ 144.4 $ 96.3 49.9 %
Unisource:
United States 3,786 2,865 32.1 104.0 84.2 23.5
Canada 480 517 (7.2) 9.4 14.5 (35.2)
----- ----- ----- -----
Total Unisource 4,266 3,382 26.1 113.4 98.7 14.9
----- ----- ----- -----
Operating 5,898 4,487 31.4 257.8 195.0 32.2
Unconsolidated Affiliate (117.2) .5
Interest Expense (33.2) (31.2)
Eliminations and
Non-Allocated (5) (5) (29.9) (24.1)
----- ----- ----- -----
$5,893 $4,482 31.5% $ 77.5 $140.2 (44.7)%
===== ===== ===== =====
</TABLE>
Alco Office Products generated $527 million in increased revenues of
which $283 million relates to fiscal 1993 acquisitions and $84 million to
fiscal 1994 acquisitions. The remaining $160 million increase reflects
continued growth in all revenue areas of AOP's base companies, but
particularly in its equipment, service and facilities management businesses.
The $921 million increase in revenues from Unisource's U.S. operations
includes $762 million from Butler Paper, a fiscal 1993 acquisition and $159
million of internal growth from its base companies. The $37 million revenue
decrease in the Unisource Canadian paper businesses is primarily attributable
to a 6% decrease in the average foreign exchange rate.
AOP's operating income increase of $48.1 million includes $16.1 million
from prior year acquisitions and $6 million from current year acquisitions.
The remaining $26 million increase reflects 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 income related to its leasing activities
through Alco Capital Resource, Inc. Operating income from Unisource's U.S.
paper operations increased $19.8 million. This increase represents a
contribution of $17.5 million from prior year acquisitions and $2.3 million
from its base companies. The internal growth is attributable to improved
gross margins and expense reductions realized in the third quarter offset
primarily by lower comparable margins experienced in the first and second
quarters. The Canadian paper distribution business decrease in operating
income of $5.1 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 the Company's paper and office products
operations outside the U.S. were $621 million for the first nine months of
fiscal 1994 compared to $581 million for the same period in the prior fiscal
year. The increase reflects $71 million from the European operations of
Erskine acquired in fiscal 1993 along with $6 million from AOP internal
growth offset by a decrease of $37 million from the Canadian paper
distribution business.
<PAGE>
Page 13
Operating income from foreign operations was $20.5 million for the nine
months ended June 30, 1994, down $2.9 million from the prior year primarily
the result of the decrease in operating income of the Canadian paper
distribution business. The decrease in foreign paper distribution operating
income was offset by positive contributions from the AOP foreign operations
of $2.2 million.
For the nine months ended June 30, 1994, the Company has recorded a
loss of $117.2 million relating to its investment in IMMOS which includes the
$1.9 million loss on its investment as of March 31, 1994 along with the
$115.3 million loss recorded in the third quarter on the expected sale of its
investment in IMMOS.
Interest expense increased by $2 million from the comparable period in
fiscal 1993, a result of higher interest rates along with higher borrowing
levels to fund acquisitions and working capital requirements. The decrease
in income before taxes of $62.7 million is a result of the $115.3 million
loss on the expected disposition of IMMOS and a $52.6 million earnings
improvement from our base companies, current and prior year acquisitions.
The effective income tax rate for the current period excluding the effect of
the expected sale of IMMOS was 39.5% compared with 39.4% in fiscal 1993. At
June 30, 1994 weighted average shares were 6 million shares greater than the
47 million shares at June 30, 1993. This increase includes the impact of a
public offering of common stock in December, 1993.
The Unisource restructuring plan announced in September, 1993 is
proceeding as planned, with seventy-seven facility mergers expected to be
completed by the end of the fourth quarter. Since September 30, 1993,
Unisource has reduced its employee base by approximately 700. This excludes
the data processing personnel that transferred as part of the information
technology system outsourcing agreement with Integrated Systems Solutions
Corporation, a subsidiary of IBM. This 10 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.
During the first quarter of fiscal 1994, the Company adopted Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement
Benefits other than Pensions" and Financial Accounting Standard No. 109,
"Accounting for Income Taxes"; the combined effect on earnings of these
accounting changes was neutral.
<PAGE>
Page 14
Financial Condition and Liquidity
---------------------------------
In December 1993, the Company 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. On May 13, 1994, the Company entered into
an agreement retiring $25 million of redeemable preferred stock of a
subsidiary and issued senior notes in an equivalent amount.
The Company's total debt (excluding finance subsidiaries) decreased to
$622 million at June 30, 1994 from $794 million at September 30, 1993. At
June 30, 1994 debt as a percentage of capitalization was 32.2% and the
current ratio was 1.6 to 1. The Company had a total of $613 million in bank
credit commitments as of June 30, 1994, of which $365 million were unused and
available.
Finance subsidiaries debt grew by $80 million from September 30, 1993, a
result of increased leasing activity. As of July 1, 1994, Alco Capital
Resource, Inc. (ACR) may offer 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 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 ACR 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 will be determined based on
market conditions at the time of issuance.
In connection with the Unisource restructuring accrual, the Company
estimates that total cash expenditures will amount to $148 million, of which
approximately $39 million has been spent to date. Related cash expenditures
in the fourth quarter are estimated to aggregate to $21 million.
The Company believes that its operating cash flow together with unused
lines of credit will be sufficient to finance current operating requirements
including capital expenditure, acquisition and restructuring programs.
<PAGE>
Page 15
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) The following Exhibit is furnished pursuant to Item 601
of Regulation S-K:
Exhibit No. (3) Amended and Restated Articles
of Incorporation
Exhibit No. (11) Computation of Earnings Per Share
(b) On June 30, 1994, the Registrant filed a Current
Report on Form 8-K to announce that the
Registrant had reached a preliminary agreement
with its equity partners in IMM Office Systems
(IMMOS) for the dissolution of the German-based
joint venture and its expected sale of its
investment in IMMOS.
<PAGE>
Page 16
BASIS OF PRESENTATION
---------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended September 30, 1993.
Date August 12, 1994 /s/Michael J. Dillon
--------------------- ----------------------------------
Michael J. Dillon
Vice President and Controller
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. This report has also been signed by the
undersigned in his capacity as the chief accounting officer of the Registrant.
ALCO STANDARD CORPORATION
Date August 12, 1994 /s/Michael J. Dillon
--------------------- -----------------------------------
Michael J. Dillon
Vice President and Controller
(Chief Accounting Officer)
<PAGE>
Page 17
Index to Exhibits
-----------------
Exhibit Number
- - --------------
(3) Amended and Restated Articles of Incorporation
(11) Computation of Earnings Per Share
<PAGE>
Exhibit 3
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ALCO STANDARD CORPORATION
FIRST: The name of the Corporation shall be ALCO STANDARD CORPORATION.
SECOND: The principal office of the Corporation in the State of Ohio is to be
located at Cleveland in Cuyahoga County.
THIRD: The purposes for which, and for any of which, the Corporation is formed
are as follows:
1. To develop, manufacture, service, repair, treat, finish, buy, sell
and generally deal in, in every manner, articles, materials and products of
every kind and description, to own, hold and deal in, in every manner, all real
and personal property, and to do all things necessary or incidental to the
foregoing purposes.
2. In general to carry on any other lawful business whatsoever which
is calculated, directly or indirectly, to promote the interests of the
Corporation or to enhance the value of its properties; and to have and exercise
all rights, powers and privileges which are now or may hereafter be conferred
upon corporations by the laws of Ohio; provided, however, that nothing contained
in this Article Third shall be construed as authorizing the Corporation to carry
on the business of a public utility or railroad as defined by the public utility
laws of the State of Ohio.
The Corporation reserves the right at any time and from time to time
to substantially change its purposes in any manner now or hereafter permitted by
statute. Any change of the purposes of the Corporation authorized or approved
by the holders of shares entitled to exercise the proportion of the voting power
of the Corporation now or hereafter required by statute for such authorization
or approval shall be binding and conclusive upon every shareholder of the
Corporation as fully as if such shareholder had voted therefor; and no
shareholder, notwithstanding that he may have voted against such change of
purposes or may have objected in writing thereto, shall be entitled to payment
of the fair cash value of his shares.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 77,135,988 consisting of 2,135,988 shares of Serial Preferred
Stock of no par value (hereinafter called "Serial Preferred Stock"), and
75,000,000 shares of Common Stock of no par value (hereinafter called "Common
Stock"). The shares of such classes shall have the following express terms:
Division A
Express Terms of the Serial Preferred Stock
1. Series and Rank. The Serial Preferred Stock may be issued from
---------------
time to time in one or more series. All shares of Serial Preferred Stock shall
be of equal
<PAGE>
-2-
rank and shall be identical, except in respect of the matters that may be fixed
by the Board of Directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except as to the date
from which dividends are cumulative. Subject to the provisions of Sections 2 to
7, both inclusive, of this Division, which provisions shall apply to all Serial
Preferred Stock, the Board of Directors hereby is authorized to cause such
shares to be issued in one or more series and with respect to each such series
prior to the issuance thereof to fix:
(a) The designation of the series, which may be by distinguishing number,
letter or title.
(b) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding).
(c) The annual dividend rate of the series.
(d) The dates at which dividends, if declared, shall be payable, and the
dates from which dividends shall be cumulative.
(e) The redemption rights and price or prices, if any, for shares of the
series.
(f) The terms and amount of any sinking fund provided for the purchase or
redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation, which
amount may vary depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary.
(h) Whether the shares of the series shall be convertible into Common
Stock, and, if so, the conversion price or prices, any adjustments thereof, and
all other terms and conditions upon which such conversion may be made.
(i) Restrictions on the issuance of shares of the same series or of any
other class or series.
The Board of Directors is authorized to adopt from time to time amendments
to the Articles of Incorporation fixing, with respect to each such series, the
matters described in clauses (a) to (i), both inclusive, of this Section 1.
2. Dividends. The holders of the Serial Preferred Stock of each series
---------
shall be entitled to receive, when and as declared by the Board of Directors,
out of funds of the Corporation legally available for dividends, dividends in
cash at the rate for such series fixed in accordance with the provisions of
Section 1 of this Division, and no more, payable quarterly on the dates fixed
for such series. Such dividends on each share of Serial Preferred Stock shall
accrue and be cumulative, whether or
<PAGE>
-3-
not earned or declared, from and after the date or dates fixed with respect to
such series. 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.
3. Dividends on or Distributions to Holders of Junior Stock. So long as
--------------------------------------------------------
any shares of Serial Preferred Stock are outstanding, the Corporation shall not
(a) declare or pay any dividends (other than dividends payable in Common Stock
or other shares of the Corporation ranking junior to the Serial Preferred Stock)
to holders of Common Stock or shares of the Corporation 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 the Corporation of any
other class ranking on a parity with or junior to the Serial Preferred Stock
(except in the case of shares purchased in compromise of claims or to prevent
loss on doubtful debts and except in the case of shares purchased out of the
proceeds of the sale of Common Stock or other shares ranking junior to the
Serial Preferred Stock received by the Corporation, 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 for shares of
such series in accordance with provisions of Section 1 of this Division.
4. Voting Rights. The holders of Serial Preferred Stock shall be
-------------
entitled at all times to one vote for each share, and except as otherwise
required by law, the holders of the Serial Preferred Stock and Common Stock of
the Corporation shall vote together as one class on all matters, subject,
however, to the special voting rights conferred upon the holders of the Serial
Preferred Stock as hereinafter provided.
If and when the Corporation shall be in default in the payment, in whole or
in part, of each of six quarterly dividends (whether or not consecutive) accrued
on any series of Serial Preferred Stock whether or not earned or declared, the
holders of the Serial Preferred Stock of all series, voting separately as a
single class, shall be entitled to elect two Directors of the Corporation, to
serve in addition to the Directors otherwise elected.
Such rights to elect additional Directors may be exercised at any annual
meeting of shareholders or, within the limitation hereinafter provided, at a
special meeting of shareholders held for such purpose. If such default shall
occur more than 90 days preceding the date of the next annual meeting of
shareholders as fixed by
<PAGE>
-4-
the Regulations of the Corporation, then a special meeting of the holders of the
Serial Preferred Stock shall be called by the Secretary of the Corporation upon
the written request of the holders of not less than 10% of the Serial Preferred
Stock then outstanding, such meeting to be held within 60 days after the
delivery to the Secretary of such request or such later time as may be
reasonably required to obtain clearance from the Securities and Exchange
Commission. Such additional Directors, whether elected at an annual meeting or
at a special meeting, shall serve until the next annual meeting and until their
successors shall be duly elected and qualified, unless their terms shall sooner
terminate pursuant to the provisions of this Section 4. At any meeting for the
purpose of electing such additional Directors, the holders of 35% of the Serial
Preferred Stock then outstanding shall constitute a quorum, and any such meeting
shall be valid, notwithstanding that a quorum of the outstanding shares of any
other class or classes shall not be present or represented thereat. At the time
of any such meeting at which a quorum shall be present, the number of Directors
constituting the whole Board of Directors shall be deemed to be increased by
two.
If and when all dividends in default on the Serial Preferred Stock shall be
paid or declared and funds sufficient for the payment thereof irrevocably set
aside for payment, the right of the holders of the Serial Preferred Stock as a
class to elect two Directors shall then cease and if any Directors were elected
by the holders of the Serial Preferred Stock, as a class, the term of such
Directors shall terminate, and the number of Directors constituting the whole
Board of Directors shall be accordingly reduced. The above provisions for the
vesting of such voting rights in the holders of the Serial Preferred Stock, as a
class, shall apply, however, in case of any subsequent default or failure under
this Section 4.
The rights of the holders of Serial Preferred Stock to elect two Directors
provided by this Section 4 shall, when in effect, be in lieu of, and not in
addition to, all other rights otherwise held by the holders of Serial Preferred
Stock to vote as a class with the Common Stock for the election of Directors.
5. Action Requiring Serial Preferred Stock Consent.
-----------------------------------------------
(a) So long as any shares of Serial Preferred Stock shall be outstanding,
the Corporation shall not, without (i) the affirmative vote of the holders of at
least two-thirds of the shares of Serial Preferred Stock at the time
outstanding, given in person or by proxy, either at a special meeting called for
the purpose, or at any annual meeting of shareholders if appropriate notice of
such proposed action is given, at which all of the shares of Serial Preferred
Stock shall vote separately as a single class, or (ii) the written consent of
the holders of at least two-thirds of the shares of Serial Preferred Stock at
the time outstanding:
A) Amend or repeal any of the provisions of the Articles or Regulations of
the Corporation so as to affect adversely the preferences, rights, powers or
privileges of the Serial Preferred Stock or the holders thereof.
<PAGE>
-5-
B) Authorize or issue any class or series of any class of the stock of the
Corporation ranking prior to the Serial Preferred Stock, or authorize or issue
any obligations or securities convertible into any such class.
C) Purchase or redeem (for sinking fund purposes or otherwise) less than
all of the Serial Preferred Stock then outstanding except in accordance with a
stock purchase offer made to all holders of record of Serial Preferred Stock,
unless all accrued and unpaid dividends on the Serial Preferred Stock, including
all dividends for the then quarterly dividend period, shall have been paid or
declared and funds sufficient for the payment thereof set apart, and unless all
accrued sinking fund obligations applicable thereto shall have been complied
with.
D) Sell, lease or convey all or substantially all of the property or
business of the Corporation, or voluntarily liquidate or dissolve the
Corporation, or consolidate or merge the Corporation with or into any other
corporation; provided, however, that no such class vote or consent of the
holders of the Serial Preferred Stock shall be required for consolidation or
merger of the Corporation if (i) each holder of shares of Serial Preferred Stock
immediately prior to such consolidation or merger shall, upon the occurrence
thereof, possess the same or an equivalent number of shares of the resulting
corporation (which may be the Corporation or another corporation) having
substantially the same or equivalent terms and provisions as the shares of
Serial Preferred Stock, and (ii) the resulting corporation will have,
immediately after such consolidation or merger, no stock either authorized or
outstanding ranking prior to or on a parity with such shares, other than stock
of the Corporation theretofore authorized ranking prior to or on a parity with
the Serial Preferred Stock (or stock of the resulting corporation into which
such stock of the Corporation is changed pursuant to the merger or
consolidation).
(b) So long as any shares of Serial Preferred Stock shall be outstanding,
the Corporation shall not, without (i) the affirmative vote of the holders of at
least a majority of the shares of Serial Preferred Stock at the time
outstanding, given in person or by proxy, either at a special meeting called for
the purpose, or at any annual meeting of shareholders if appropriate notice of
such proposed action is given, at which all of the shares of Serial Preferred
Stock shall vote separately as a single class, or (ii) the written consent of
the holders of at least a majority of the shares of Serial Preferred Stock at
the time outstanding: A) authorize or issue any class of the stock of the
Corporation ranking on a parity with the Serial Preferred Stock, with respect to
the payment of dividends or upon liquidation, dissolution and winding up of the
Corporation, or authorize or issue any obligations or securities convertible
into any such class, or B) increase the authorized number of shares of the
Serial Preferred Stock or increase the authorized number of shares of any class
ranking on a parity with the Serial Preferred Stock, with respect to the payment
of dividends or upon liquidation, dissolution and winding up of the Corporation,
or authorize or issue any obligations or securities convertible into any such
class.
(c) So long as any shares of a series of Serial Preferred Stock shall be
outstanding, the Corporation shall not, without (i) the affirmative vote of the
holders
<PAGE>
-6-
of at least two-thirds of the shares of such series at the time outstanding,
given in person or by proxy, either at a special meeting or at any annual
meeting of shareholders if appropriate notice of such proposed action is given,
at which all of the shares of such series shall vote separately as a single
class, or (ii) the written consent of the holders of at least two-thirds of the
shares of such series at the time outstanding, amend or repeal any of the
provisions of the Articles or Regulations of the Corporation so as to affect
adversely and particularly the preferences, rights, powers or privileges of such
series of Serial Preferred Stock or the holders thereof.
(d) Notwithstanding the foregoing, (i) no such vote or consent of the
holders of the Serial Preferred Stock shall be required if, prior to or
contemporaneously with the happening of any of the events listed in
subparagraphs (a) or (b) above, provision has been made in accordance with the
provisions fixed by the Directors for the redemption of all of the Serial
Preferred Stock at the time outstanding and (ii) no such vote or consent of the
holders of any series of Serial Preferred Stock shall be required if, prior to
or contemporaneously with the happening of any of the events listed in
subparagraph (c) above, provision has been made in accordance with the
provisions fixed by the Directors for the redemption of all shares of such
series of Serial Preferred Stock at the time outstanding.
6. Liquidation Rights. In the event of the liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
Serial Preferred Stock shall be entitled to receive out of the assets of the
Corporation, before any payment or distribution shall be made to the holders of
Common Stock or any other class of stock junior to the Serial Preferred Stock as
to rights upon liquidation, payment of the amount per share provided for in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such shares, plus an amount equal to all dividends accrued to the
date of such payment and unpaid, whether or not earned or declared but without
interest, and no more.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets available for distribution shall be insufficient to pay the holders of
all outstanding shares of Serial Preferred Stock the amounts to which they shall
respectively be entitled, the holders of Serial Preferred Stock of all series
shall share ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares held by them upon such
distribution if all amounts payable in respect of the Serial Preferred Stock of
all series were paid in full. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations, nor the sale or
transfer by the Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of any of the
provisions of this Section 6.
7. Definitions. For the purpose of this Division:
------------
Whenever reference is made to shares "ranking prior to the Serial Preferred
Stock" or "on a parity with the Serial Preferred Stock" such reference shall
mean and
<PAGE>
-7-
include all shares of the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as to distributions in the
event of any involuntary liquidation, dissolution or winding up of the
Corporation are given preference over, or rank on an equality with, (as the case
may be) the rights of the holders of the Serial Preferred Stock; and whenever
reference is made to shares "ranking junior to the Serial Preferred Stock" such
reference shall mean and include all shares of the Corporation in respect of
which the rights of the holders as to the payment of dividends and as to
distributions in the event of an involuntary liquidation, dissolution or winding
up of the Corporation are junior and subordinate to the rights of the holders of
the Serial Preferred Stock.
8. Express Terms of the Series 2 Preferred Stock.
---------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series 2 Preferred Stock to which all of the Express Terms of the
Serial Preferred Stock set forth in 1 through 7 above as well as the following
provisions shall be applicable:
(a) The designation of the series is Series 2 Preferred Stock;
(b) The number of shares of the series, which number the Board of Directos
may increase or decrease (but not below the number of shares than outstanding),
is 110 shares;
(c) The annual dividend rate of the series shall be $5.00 per share;
(d) The dividends, if declared, shall be payable quarterly on January 1,
April 1, July 1, and October 1, and such dividends shall be cumulative from the
date of issue;
(e) After five years from the date of issue, the Corporation, at the
option of the Board of Directors, may at any time redeem all and may from time
to time redeem any part of the outstanding shares of Series 2 Preferred Stock on
any date fixed by the Board of Directors, upon notice given as hereinafter
provided, by paying in cash for each share thereof to be redeemed an amount
equal to $100.00 per share plus, in each case, an amount equal to all dividends
thereon accrued to the date fixed for redemption and unpaid, whether or not
earned or declared but without interest (such amounts being in this subparagraph
(e) sometimes referred to as "redemption price"). In case of the redemption of
a part only of the outstanding shares of Series 2 Preferred Stock, the shares to
be redeemed shall be selected in such manner as the Board of Directors shall
determine. Not less than thirty nor more than ninety days prior written notice
shall be given by mail, first class postage prepaid, to the holders of record of
the shares of Series 2 Preferred Stock to be redeemed, such notice to contain a
statement of or reference to the conversion rights set forth in subparagraph (h)
below and to be addressed to each such shareholder at the post office address
shown by the records of the Corporation.
<PAGE>
-8-
On or after the date fixed for redemption and stated in such notice, the
holder of each share of Series 2 Preferred Stock called for redemption shall
surrender the certificate therefor at the place designated in such notice and
shall thereupon be entitled to receive payment of the redemption price.
If such notice of redemption shall have been duly given as provided above
and if on the date fixed for redemption funds sufficient to redeem the shares
called for redemption shall be irrevocably set aside for the payment thereof,
then, notwithstanding that the certificate for any share of Series 2 Preferred
Stock so called for redemption shall not have been surrendered, from and after
such date the shares so called for redemption shall no longer be deemed to be
outstanding and dividends thereon shall cease to accrue and all rights with
respect to the shares so called for redemption, including rights, if any, to
receive notices and to vote, shall forthwith on such date cease and determine,
except only the right of the holders thereof to receive the redemption price
without interest upon surrender of the certificates therefor; provided, however,
that if such notice of redemption shall have been duly given as provided above
and if on or prior to the date fixed for redemption there shall have been
deposited with a bank or trust company having a capital and surplus of more than
$5,000,000 named in such notice of redemption, in trust for the account of the
holders of the shares so called for redemption, other than any thereof which
shall have been surrendered for conversion pursuant to subparagraph (h) below,
funds sufficient to redeem, on the date fixed for redemption, the shares called
for redemption, then upon the making of such deposit in trust (although made
prior to the date fixed for redemption), the shares so called and with respect
to which such deposit shall have been made shall no longer be deemed to be
outstanding and all rights with respect to such shares, including rights, if
any, to receive notices and to vote, shall forthwith cease and determine, except
only the right of the holders thereof to receive, out of the funds so deposited
in trust, forthwith and without awaiting the date fixed for redemption, the
redemption price thereof, without interest, upon surrender of the certificate
therefor, and the right to convert such shares into Common Stock as provided in
subparagraph (h) below up to but not after the close of business on the second
business day prior to the date fixed for redemption of such shares. Any
interest accrued on such funds shall belong to the Corporation and shall be paid
to it from time to time. In case any shares called for redemption shall be
converted after deposit of the redemption price thereof, the redemption price of
the shares so converted shall be returned to the Corporation. Any other funds
so deposited and unclaimed at the end of two years after the date fixed for
redemption shall be repaid to the Corporation upon its request, and thereafter
the holders of the shares so called for redemption shall be entitled to receive
payment of the redemption price, but without interest, only from the
Corporation.
Shares of Series 2 Preferred Stock so redeemed shall be permanently retired
and cancelled and shall not be reissued.
(f) So long as any shares of Series 2 Preferred Stock shall be
outstanding, the Corporation shall, on January 1, 1986 and on January 1, of
1987, 1988, 1989, 1990, 1991 1992, 1993, 1994 and 1995 set aside as and for a
sinking fund for
<PAGE>
-9-
redemption of Series 2 Preferred Stock out of money legally then available
therefor and after full payment or provision for payment of dividends on the
then outstanding Series 2 Preferred Stock, amounts equal to the redemption price
at $100.00 per share for the following percentages of the Series 2 Preferred
Stock outstanding on the dates listed below:
January 1, 1986 - 10% January 1, 1991 - 20%
January 1, 1987 - 11.1% January 1, 1992 - 25%
January 1, 1988 - 12.5% January 1, 1993 - 33.3%
January 1, 1989 - 14.3% January 1, 1994 - 50%
January 1, 1990 - 16.7% January 1, 1995 - 100%
Such amounts shall be applied to effect redemption on March 1, 1986 and on
March 1, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995 of such number
of shares of Series 2 Preferred Stock as may be redeemed out of such amount at a
redemption price of $100.00 per share plus accrued and unpaid dividends to the
date fixed for redemption. The Corporation shall deposit the aggregate
redemption price of the shares so to be redeemed (such price being determined in
accordance with this subparagraph (f)) with any bank or trust company meeting
the requirements of subparagraph (e) above, and the redemption shall otherwise
be effected upon the notice, in the manner and with the effect set forth in
subparagraph (e) above, except that such redemption shall be pro rata with
respect to each shareholder.
Any accrued and unpaid dividends paid on shares of Series 2 Preferred Stock
redeemed pursuant to this subparagraph (f) shall not be charged to or paid out
of the sinking fund but shall be charged to and paid out of other funds of the
Corporation.
Shares of Series 2 Preferred Stock purchased from sinking fund moneys shall
be permanently retired and cancelled and shall not be reissued.
(g) The amount payable on shares of Series 2 Preferred Stock in the event
of any liquidation, dissolution or winding up of the affairs of the Corporation
shall be $100.00 per share.
(h) Conversion rights:
(i) At any time and from time to time after issuance, any share or
shares of Series 2 Preferred Stock may be converted into full shares of
Common Stock of the Corporation at the rate of 4 shares of Common Stock for
each share of Series 2 Preferred Stock surrendered for conversion, said
rate being equivalent to a price (taking the Series 2 Preferred Stock at
$100.00 per
<PAGE>
-10-
share) of $25.00 per share (the "conversion price"), such rate, and the
conversion price, being subject to adjustments as hereinafter provided.
(ii) The conversion rate and conversion price set forth in paragraph (i)
shall be adjusted from time to time as follows:
(A) In case the Corporation shall pay a dividend of shares of Common Stock
on the outstanding Common Stock, subdivide its outstanding Common Stock into a
larger number of shares of Common Stock by reclassification or otherwise, or
combine its outstanding Common Stock into a smaller number of shares of Common
Stock by reclassification or otherwise, the conversion rate in effect
immediately prior thereto shall be proportionately adjusted so that the holder
of any shares of Series 2 Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock which the
shareholder would have owned or have been entitled to receive after the
happening of any of the events described above had such shares of Series 2
Preferred Stock been fully converted immediately prior to the happening of such
event. Such adjustment shall be made whenever any of the events specified above
shall occur. An adjustment made pursuant to this subparagraph (A) shall become
effective immediately after the record date or the effective date, as the case
may be, of the event requiring such adjustment.
(B) In case the Corporation shall issue rights or warrants to the holders
of its Common Stock, entitling them to subscribe for or to purchase Common Stock
or securities convertible into Common Stock, or in case the Corporation shall
distribute to holders of Common Stock evidences of its indebtedness, or assets
(excluding cash dividends and distributions in the nature of a cash dividend and
also excluding distributions of the type referred to in subparagraph (A) above),
then, in each such case, the holders of the Series 2 Preferred Stock on the
record date for such issue or distribution shall, for the purpose of such issue
or distribution, be treated as though they had converted their Series 2
Preferred Stock into Common Stock immediately prior to such record date, and
shall be entitled to receive such rights or warrants or to share in such
distribution, in each case on a basis proportionately equal to the number of
shares of Common Stock they would have held if their Series 2 Preferred Stock
had been so converted.
(C) In case of any capital reorganization or any reclassification of the
stock of the Corporation (except as provided in subparagraphs (A) and (B)
above), any holder of Series 2 Preferred Stock, whether therefore or thereafter
issued, upon conversion thereof, shall be entitled to receive, in lieu of the
shares of Common Stock to which the shareholder would have become entitled upon
conversion immediately prior to such reorganization or reclassification, the
shares (of any class or classes) or other securities or property of the
Corporation to which the holders of such Common Stock would have been entitled
upon such reorganization or reclassification; and in any such case the Board of
Directors shall make appropriate provision for the application of the conversion
rights herein provided with respect to the rights and interests thereafter of
the holders of Series 2 Preferred Stock to the end that such conversion rights
(including the adjustments of the conversion rate)
<PAGE>
-11-
shall thereafter be reflected as nearly as reasonably practicable, in all
subsequent conversions of the shares of Series 2 Preferred Stock into any shares
or securities or other property thereafter deliverable upon the conversion of
shares of Series 2 Preferred Stock.
(D) Whenever the conversion rate is adjusted pursuant to any of the
foregoing provisions of the paragraph (ii), the Corporation shall forthwith
prepare a written statement signed by its President or a Vice President and its
Treasurer or an Assistant Treasurer, setting forth the adjusted conversion rate
determined as provided in this paragraph (ii) and in reasonable detail the facts
requiring such adjustment. Such statement shall be filed among the permanent
records of the Corporation and a copy thereof shall be furnished to the Transfer
Agent for the Series 2 Preferred Stock and to any holder of Series 2 Preferred
Stock requesting the same, and shall at all reasonable times during business
hours be open to inspection by the holders of Series 2 Preferred Stock. The
Corporation shall also cause a notice, stating that such an adjustment has been
effected and setting forth the adjusted conversion rate, to be mailed, first-
class postage prepaid, to all holders of record of outstanding Series 2
Preferred Stock at their addresses as the same appear on the stock records of
------
the Corporation, such notice to be mailed no later than the quarterly dividend
------ -- ----- ----
payment date next following the date on which the event requiring such
adjustment shall have occurred. If any question shall at any time arise with
respect to computation of the conversion rate or price or any adjustment or
readjustment of the conversion rate or price or the shares receivable on
conversion, such question shall be conclusively determined by a firm of
independent public accountants acceptable to the Corporation (and who may be the
auditors of the Corporation and who shall have access to all appropriate
records) and such determination shall be binding upon the Corporation and the
holders of the Series 2 Preferred Stock.
Anything in this subparagraph (h) to the contrary notwithstanding, the
Corporation shall not be required to give effect to any adjustment in the
conversion price or conversion rate unless and until the net effect of one or
more adjustments, determined as above provided, shall have resulted in a change
of the conversion price of $.50. When the cumulative net effect of more than
one adjustment so determined shall be to change the conversion price by at least
$.50, such change in the conversion price shall thereupon be given effect in
increments of $.50 and the remaining fraction, if any, shall be carried forward
and included in computing any subsequent adjustments. The Corporation at its
option may make adjustments of less than $.50, if it so desires.
(iii) If any shares of Series 2 Preferred Stock shall be called for
redemption as provided in subparagraph (e) above, the right of conversion
as to the shares called for redemption shall expire at the close of
business on the second day preceding the redemption date, notwithstanding
any earlier deposit by the Corporation of funds sufficient for such
redemption. In the event of any liquidation, dissolution or winding up of
the Corporation, all conversion rights of the holders of Series 2 Preferred
Stock shall terminate on
<PAGE>
-12-
the date fixed by resolution of the Board of Directors, such date so fixed
to be not later than ten days nor earlier than twenty days prior to such
liquidation, dissolution or winding up.
(iv) Any conversion of shares of Series 2 Preferred Stock into shares of
Common Stock shall be made by the surrender to the Corporation at the
office of any Transfer Agent for the Series 2 Preferred Stock of the
certificate or certificates representing the share or shares of Series 2
Preferred Stock to be converted, duly endorsed for transfer to the
Corporation, together with a written request for conversion. Shares of
Series 2 Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the date of the surrender of such shares
for conversion as provided above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Stock at such
time. The Corporation shall deliver to the holders of shares of Series 2
Preferred Stock so surrendered for conversion or to their respective
assigns (on payment to the Corporation of all transfer taxes that may be
payable in respect thereof), at the rate then governing the conversion of
such shares as hereinbefore provided, a certificate or certificates
representing the number of shares of Common Stock into which such shares of
Series 2 Preferred Stock shall have been so converted, together with cash
adjustments or scrip certificates for fractional shares, if any, as herein
provided. Upon any such conversion, there shall be paid in cash to the
holder of shares of Series 2 Preferred Stock so surrendered for conversion
after the record date set for the payment of the then quarterly dividend
the pro rata amount accrued to the date of conversion of dividends declared
on such shares for the then current quarterly dividend period but no
adjustment shall be made for any dividends in default upon such shares of
Series 2 Preferred Stock or for any dividends upon the Common Stock issued
or issuable on such conversion.
(v) All shares of Series 2 Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to
be outstanding, and all rights with respect to such shares shall forthwith
cease and determine except only the right of the holders thereof to receive
Common Stock and such accrued dividends in exchange therefor. Any shares
of Series 2 Preferred Stock so converted shall be permanently retired and
shall not be reissued.
(vi) A number of shares of the authorized Common Stock sufficient to
provide for the conversion of all of the Series 2 Preferred Stock
outstanding upon the basis herein provided shall at all times be reserved
for such conversion.
(vii) In case the Corporation shall, while any shares of Series 2
Preferred Stock remain outstanding, enter into any consolidation with or
merge into any other corporation wherein this Corporation is not the
surviving corporation, or
<PAGE>
-13-
sell or convey its property as an entirety or substantially as an entirety
and, in connection with such consolidation, merger, sale or conveyance,
shares or other securities shall be issuable or deliverable in exchange for
shares of Common Stock, proper provision shall be made that the holder of
any Series 2 Preferred Stock or any security issuable in exchange therefor
may thereafter convert the same into the same kind and amount of securities
as may be issuable by the terms of such consolidation, merger, sale or
conveyance with respect to the number of shares of Common Stock into which
such shares of Series 2 Preferred Stock are convertible at the time of such
consolidation, merger, sale or conveyance. After any such consolidation,
merger, sale or conveyance, the right of conversion shall be to convert the
shares of Series 2 Preferred Stock, or any security issuable in exchange
therefor, into such securities as the same may from time to time be
constituted.
(viii) In case at any time:
(A) the consolidation or merger of the Corporation with another
corporation shall be proposed by the Corporation; or
(B) the voluntary or involuntary dissolution, liquidation or winding up of
the Corporation shall be proposed;
then, and in any such case, the Corporation shall cause notice to be mailed to
each Transfer Agent for Series 2 Preferred Stock, and to the holders of record
of the outstanding shares of Series 2 Preferred Stock in the manner and form
prescribed in subparagraph (e) above for the giving of notice of redemption.
Such notice shall be given at least 10 days prior to the record date for the
shareholders' meeting at which action is to be taken with respect to such
proposal and at least 30 days prior to the date on which such consolidation,
merger, dissolution, liquidation or winding up shall take place. Such notice
shall also specify the date as of which it is expected the proposed action shall
become effective and the date as of which holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such consolidation, merger, dissolution, liquidation
or winding up.
(ix) No fractional shares shall be issued upon conversion, but in lieu
thereof the Corporation may either pay therefor in cash at the then current
conversion price or may issue non-dividend bearing and non-voting scrip
(exchangeable together with other scrip certificates aggregating one or
more full shares for certificates representing such one or more full
shares) in such denominations and in such form as the Board of Directors
may from time to time prescribe prior to the issue thereof.
9. Express Terms of the Series 12 Preferred Stock
----------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series 12 Preferred Stock to which all of the Express Terms of the
Serial
<PAGE>
-14-
Preferred Stock set forth in 1 through 7 above as well as the following
provisions shall be applicable:
(a) The designation of the series is Series 12 Preferred Stock;
(b) The number of shares of the series, which number the Board of
Directors may increase or decrease (but not below the number of shares then
outstanding) is 480,000 shares;
(c) The annual dividend rate of the series shall be in an amount per share
(rounded to the nearest cent) equal to, but no more than, the greater of (x)
$6.80 or (y) subject to the provision for adjustment thereinafter set forth,
one hundred times the aggregate per share amount of all cash dividends, and one
hundred times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock of the Corporation
since the immediately preceding Quarterly Dividend Payment Date (as defined in
subparagraph (d) below), or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of a share or fraction of a share of
Series 12 Preferred Stock (the "Original Issue Date"). In the event the
Corporation shall at any time on or after the Original Issue Date declare or pay
any dividend on the shares of Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series 12 Preferred Stock are
entitled (without giving effect to such event) under clause (y) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
The Corporation shall declare a dividend or distribution on the Series 12
Preferred Stock as provided in the paragraph above immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $6.80 per share on the Series 12 Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date. The record date for any such dividend or distribution shall be the tenth
Trading Day prior to the Quarterly Dividend Payment Date.
(d) The dividends provided above shall be payable quarterly on January 1,
April 1, July 1, and October 1 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date");
<PAGE>
-15-
(e) The Corporation, at the option of the Board of Directors, may at any
time redeem all and may from time to time redeem any part of the outstanding
shares of Series 12 Preferred Stock on any date fixed by the Board of Directors,
upon notice given as hereinafter provided, by paying in cash for each share
thereof to be redeemed an amount equal to the Market Price (as hereinafter
defined) of the Common Stock on the Trading Day (as hereinafter defined)
immediately prior to the date fixed for redemption, multiplied by one hundred
(the "Multiplier"), plus, in each case, an amount equal to all dividends thereon
accrued to the date fixed for redemption and unpaid whether or not earned or
declared but without interest (such amounts being in this subparagraph (e)
sometimes referred to as the "redemption price"). In case of the redemption of
a part only of the outstanding shares of Series 12 Preferred, the shares to be
redeemed shall be selected by lot in such manner as the Board of Directors shall
determine. Not less than thirty (30) nor more than ninety (90) days prior
written notice shall be given by mail, first class postage prepaid, to the
holders of record of the shares of Series 12 Preferred to be redeemed.
On or after the date fixed for redemption and stated in such notice, the
holder of each share of Series 12 Preferred Stock called for redemption shall
surrender the certificate therefor at the place designated in such notice and
shall thereupon be entitled to receive payment of the redemption price.
If such notice of redemption shall have been duly given as provided above
and if on the date fixed for redemption funds sufficient to redeem the shares
called for redemption shall be irrevocably set aside for the payment thereof,
then, notwithstanding that the certificate for any share of Series 12 Preferred
Stock so called for redemption shall not have been surrendered, from and after
such date the shares so called for redemption shall no longer be deemed to be
outstanding and dividends thereon shall cease to accrue and all rights with
respect to the shares so called for redemption, including rights, if any, to
receive notices and to vote, shall forthwith on such date cease and determine,
except only the right of the holders thereof to receive the redemption price
without interest upon surrender of the certificates therefor; provided, however,
that if such notice of redemption shall have been duly given as provided above
and if on or prior to the date fixed for redemption there shall have been
deposited with a bank or trust company having a capital and surplus of more than
$5,000,000 named in such notice of redemption, in trust for the account of the
holders of the shares so called for redemption, funds sufficient to redeem, on
the date fixed for redemption, the shares called for redemption, then upon the
making of such deposit in trust (although made prior to the date fixed for
redemption), the shares so called and with respect to which such deposit shall
have been made shall no longer be deemed to be outstanding and all rights with
respect to such shares, including rights, if any, to receive notices and to
vote, shall forthwith cease and determine, except only the right of the holders
thereof to receive, out of the funds so deposited in trust, forthwith and
without awaiting the date fixed for redemption, the redemption price thereof,
without interest, upon surrender of the certificates therefor, upon to but not
after the close of business on the second business day prior to the date fixed
for redemption of such shares. Any interest accrued on such funds shall belong
to the Corporation and shall be paid to it from
<PAGE>
-16-
time to time. In case any shares called for redemption shall be converted after
deposit of the redemption price thereof, the redemption price of the shares so
converted shall be returned to the Corporation. Any other funds so deposited and
unclaimed at the end of two years after the date fixed for redemption shall be
repaid to the Corporation upon its request, and thereafter the holders of the
shares so called for redemption shall be entitled to receive payment of the
redemption price, but without interest only from the Corporation.
In the event the Corporation shall at any time on or after the Original
Issue Date declare or pay any dividend on the shares of Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders of
Series 12 Preferred Stock were entitled (without giving effect to such event),
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
As used herein the term "Market Price" per share of the Common Stock on any
date of determination shall mean the average of the daily closing prices per
share of the Common Stock (determined as described below) on each of the 20
consecutive Trading Days through and including the Trading Day immediately
preceding such date; provided, however, that if the Company shall at any time
-------- -------
(i) declare a dividend on the Common Stock payable in Common Stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue any shares
in a reclassification of the Common Stock, and such event or an event of a type
analogous to any such event shall have caused the closing prices used to
determine the Market Price on any Trading Days not to be fully comparable with
the closing price on such date of determination, each such closing price so used
shall be appropriately adjusted in order to make it fully comparable with the
closing price on such date of determination. The closing price per share of the
Common Stock on any date shall be the last sale price, regular way, or, in case
no such sale takes place on such date, the average of the closing bid and asked
prices, regular way, for each share of the Common Stock, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the average of the high bid and low asked prices for each share of Common Stock
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Common
<PAGE>
-17-
Stock is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
securities elected by the Board of Directors of the Corporation; provided,
--------
however, that if on any such date the Common Stock is not listed or admitted
- - -------
for trading on a national securities exchange or traded in the over-the-counter
market, the closing price per share of the Common Stock on such date shall mean
the fair value per share of Common Stock on such date as determined in good
faith by the Board of Directors of the Corporation, after consultation with a
nationally recognized investment banking firm with respect to the fair value per
share of such securities, and set forth in a certificate delivered to the
Corporation.
As used herein, the term "Trading Day," when used with respect to the
Common Stock, shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a Business Day (defined to mean any
day other than a Saturday, Sunday or a day on which banking institutions in New
York, New York are generally authorized or obligated by law or executive order
to close.)
(f) Except as otherwise provided herein, the holders of shares of this
Series 12 Preferred Stock shall not have any rights herein to convert such
shares into or exchange such shares for shares of any other class or classes or
of any other series of any class or classes of capital stock of the Corporation.
(g) In case the Corporation shall enter into any consolidation, merger
combination, reclassification or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or securities, cash and/or
any other property, then in any such case the shares of Series 12 Preferred
Stock shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
one hundred times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time on or after the Original Issue Date declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series 12
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(h) Upon the liquidation, dissolution or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive and amount
equal to
<PAGE>
-18-
the greater of (x) $7,500 or (y) 100 times the aggregate per share amount
received by the holders of Common Stock upon such liquidation, dissolution or
winding up.
(i) Series 12 Preferred Stock may be issued in fractions of a share
which shall entitle the holder, in proportion to such holders fractional shares
to exercise voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series 12 Preferred Stock.
10. Express Terms of the Series AA Preferred Stock
----------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series AA Convertible Preferred Stock to which all of the Express Terms
of the Serial Preferred Stock set forth in 1 through 7 above as well as the
following provisions shall be applicable:
(a) The designation of the series is Series AA Convertible Preferred
Stock;
(b) The number of shares of the series, which number the Board of
Directors may increase or decrease (but not below the number of shares then
outstanding) is 40,250 shares;
(c) The annual dividend rate of the series shall be in an amount per share
equal to, but no more than, $237.50 through January 2, 1996 and $325.00
thereafter.
(d) The dividends provided above shall accrue from the date of original
issue of the Series AA Preferred Stock and be payable quarterly on January 2,
April 1, July 1 and October 1 of each year, commencing April 1, 1993 (each such
date being referred to herein as a "Dividend Payment Date"), to holders of
record as they appear on the stock records of the Corporation at the close of
business on such record dates, not exceeding 60 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors. Dividends payable on the
Series AA Preferred Stock for any period greater or less than a full dividend
period will be computed on the basis of a 360-day year consisting of twelve
30-day months. Dividends payable on the Series AA Preferred Stock for each full
dividend period will be computed by dividing the annual dividend rate by four.
(e)(i) The Series AA Preferred Stock shall not be redeemable by the
Corporation prior to January 9, 1996. On and after that date, the Corporation,
at its option, may redeem the shares of Series AA Preferred Stock, in whole or
in part, as set forth herein, subject to the provisions described below.
(ii)(A) The Series AA Preferred Stock may be redeemed for Common Stock,
in whole or in part, at the option of the Corporation, at any time on or after
January 9, 1996, until January 9, 2000 only if for 20 Trading Days, within any
period of 30 consecutive Trading Days, including the last Trading Day of such
period, the Current Market Price of the Common Stock on each of such 20 Trading
Days exceeds 130% of the Conversion Price in effect on such Trading Day. In
order to
<PAGE>
-19-
exercise this redemption option, the Corporation must issue a press release
announcing the redemption (the "Press Release") prior to the opening of business
on the second Trading Day after the condition in the preceding sentence has been
met. The Press Release shall announce the redemption and set forth the number of
shares of Series AA Preferred Stock which the Corporation intends to redeem.
(B) Upon redemption of Series AA Preferred Stock by the Corporation on the
date specified in the notice to holders required under paragraph (C) of this
clause (ii) (the "Stock Call Date"), each share of Series AA Preferred Stock so
redeemed shall be converted into a number of shares of Common Stock equal to the
liquidation preference of the shares of Series AA Preferred Stock being redeemed
divided by the Conversion Price as of the opening of business on the Stock Call
Date. The Stock Call Date shall be selected by the Corporation, shall be
specified in the notice of redemption and shall be not less than 30 days or more
than 60 days after the date on which the Corporation issues the Press Release.
Upon any redemption of Series AA Preferred Stock for Common Stock, the
Corporation shall pay any accrued and unpaid dividends in arrears for any
Dividend Period ending on or prior to the Stock Call Date. If a Stock Call Date
falls after a dividend payment record date and prior to the corresponding
dividend payment date, then each holder of Series AA Preferred Stock at the
close of business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding dividend payment date
notwithstanding the redemption of such shares before such dividend payment date.
In the case of any Stock Call Date occurring prior to the record date for the
April 1, 1996 Dividend Payment Date, the holders of the Series AA Preferred
Stock to be redeemed on such Stock Call Date shall be entitled to any accrued
and unpaid dividends through January 2, 1996 but not thereafter. Except as
provided above, the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on shares of Series AA Preferred Stock
called for redemption for Common Stock or on the shares of Common Stock issued
upon such redemption.
(C) If the Corporation elects to redeem shares of Series AA Preferred
Stock pursuant to paragraph (A) of this clause (ii), notice of such redemption
shall be given not more than four Business Days after the date on which the
Corporation issues the Press Release, to each holder of record of the shares to
be redeemed. Such notice shall be provided by first class mail, postage
prepaid, at such holder's address as the same appears on the stock records of
the Corporation, and shall state, as appropriate: (1) the Stock Call Date; (2)
the number of shares of Series AA Preferred Stock (expressed in 1/100 of a share
of Series AA Preferred Stock) to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of such shares (expressed in
1/100 of a share of Series AA Preferred Stock) to be redeemed from such holder;
(3) the number of shares of Common Stock to be issued with respect to each 1/100
of a share of Series AA Preferred Stock; (4) the place or places at which
certificates for such shares are to be surrendered for certificates representing
shares of Common Stock; (5) the then-
<PAGE>
-20-
current Conversion Price; and (6) that dividends on the shares to be redeemed
shall cease to accrue on such Stock Call Date, except as otherwise provided
herein.
At the close of business on the Stock Call Date, each holder of Series AA
Preferred Stock to be redeemed (unless the Company defaults in the delivery of
the shares of Common Stock or cash payable on such Stock Call Date) shall be
deemed to be the record holder of the number of shares of Common Stock into
which such Series AA Preferred Stock is to be redeemed, regardless of whether
such holder has surrendered the certificates representing the Series AA
Preferred Stock. As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and the
notice shall so state), such shares shall be exchanged for certificates of
shares of Common Stock and any cash (without interest thereon) for which such
shares have been redeemed.
(D) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon redemption of the Series AA Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the redemption of a share of Series AA Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) based upon the Current Market Price of Common
Stock on the Trading Day immediately preceding the Stock Call Date. If more
than one share shall be surrendered for redemption at one time by the same
holder, the number of full shares of Common Stock issuable upon redemption
thereof shall be computed on the basis of the aggregate number of shares of
Series AA Preferred Stock so surrendered.
(E) The Corporation covenants that any shares of Common Stock issued upon
redemption of the Series AA Preferred Stock shall be validly issued, fully paid
and non-assessable. The Corporation shall endeavor to list the shares of Common
Stock required to be delivered upon redemption of the Series AA Preferred Stock,
prior to such redemption, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such delivery.
The Corporation shall endeavor to take any action necessary to ensure that
any shares of Common Stock issued upon the redemption of Series AA Preferred
Stock are freely transferable and not subject to any resale restrictions under
the Securities Act of 1933, as amended (the "Act"), or any applicable state
securities or blue sky laws.
(iii)(A) The Series AA Preferred Stock may be redeemed for cash, in whole
or in part, at the option of the Corporation, at any time on or after January 9,
2000 at the Redemption Price.
(B) At least 30 days but not more than 60 days prior to the date fixed for
the redemption of the Series AA Preferred Stock for cash, a written notice will
be mailed to each holder of record of the Series AA Preferred Stock to be
redeemed, notifying such holder of the Company's election to redeem such shares
stating the date fixed
<PAGE>
-21-
for redemption thereof, and calling upon such holder to surrender to the Company
on the redemption date at the place designated in such notice the certificate or
certificates representing the number of shares specified therein. On or after
the redemption date, each holder of the Series AA Preferred Stock to be redeemed
must present and surrender his certificate or certificates for such shares to
the Company at the place designated in such notice and thereupon the redemption
price of such shares will be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate will be cancelled.
(iv)(A) If full cumulative dividends on the Series AA Preferred Stock
and any other class or series of stock of the Corporation ranking, as to
dividends and amounts distributable on liquidation, dissolution or winding up,
on a parity with the Series AA Preferred Stock have not been paid or declared
and set apart for payment, the Series AA Preferred Stock may not be redeemed in
part and the Corporation may not purchase or acquire shares of Series AA
Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of shares of Series AA Preferred Stock.
(B) If fewer than all the outstanding shares of Series AA Preferred Stock
are called for redemption, shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series AA Preferred Stock not previously
called for redemption by lot or pro rata (as nearly as may be). If fewer than
all the shares represented by any certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof. Neither the failure to mail any notice of redemption required by this
Section (e), nor any defect therein or in the mailing thereof, to any particular
holder, shall affect the sufficiency of the notice or the validity of the
proceedings for redemption with respect to the other holders. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given on the date mailed whether or not the holder receives the
notice.
(C) Notice of any redemption pursuant to this Section (e) having been duly
mailed, from and after the Stock Call Date or other redemption date (unless the
Corporation shall fail to make available a number of shares of Common Stock or
amount of cash necessary to effect such redemption), (i) except as otherwise
provided herein, dividends on the shares of the Series AA Preferred Stock so
called for redemption shall cease to accrue, (ii) said shares shall no longer be
deemed to be outstanding, and (iii) all rights of the holders thereof as holders
of Series AA Preferred Stock of the Corporation shall cease (except the rights
to receive the shares of Common Stock or cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The Corporation's
obligation to provide shares of Common Stock or cash in accordance with the
preceding sentence shall be deemed fulfilled if, on or before the Stock Call
Date, the Corporation shall deposit with a bank or trust company that has an
office in the Borough of Manhattan, City of New York, and that has, or is an
affiliate of a bank or trust company that has, a
<PAGE>
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capital and surplus of at least $50,000,000, any shares of Common Stock and cash
necessary for such redemption, in trust, with irrevocable instructions that such
shares of Common Stock and cash be applied to the redemption of the shares of
Series AA Preferred Stock so called for redemption.
No interest shall accrue for the benefit of the holders of Series AA
Preferred Stock to be redeemed on any cash so set aside by the Corporation.
Subject to applicable escheat laws, any such cash unclaimed at the end of two
years from the Stock Call Date or other redemption date shall revert to the
general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
(f) Holders of shares of Series AA Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as follows:
(A) Subject to and upon compliance with the provisions of this Section
(f), a holder of shares of Series AA Preferred Stock shall have the right, at
his or her option, at any time, to convert such shares into the number of fully
paid and nonassessable shares of Common Stock obtained by dividing the aggregate
liquidation preference of such shares by the Conversion Price (as in effect at
the time and on the date provided for in the last paragraph of paragraph (B) of
this Section (f)) by surrendering such shares to be converted, such surrender to
be made in the manner provided in paragraph (B) of this Section (f); provided
--------
however, that the right to convert shares called for redemption pursuant to
- - -------
Section (e) shall terminate at the close of business on the date fixed for such
redemption, unless the Corporation shall default in making payment of any shares
of Common Stock and any cash payable upon such redemption under Section (e)
hereof. Any share of Series AA Preferred Stock may be converted, at the request
of its holder, in part into Common Stock. If a part of a share of Series AA
Preferred Stock is converted, then the Corporation will convert such share into
the requested shares of Common Stock (subject to paragraph (C) of this Section
(f)) and issue a fractional share of Series AA Preferred Stock evidencing the
remaining interest of such holder.
(B) In order to exercise the conversion right, the holder of each share of
Series AA Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent in the Borough of Manhattan, City of
New York, accompanied by written notice to the Corporation that the holder
thereof elects to convert Series AA Preferred Stock or a specified portion
thereof. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such share of Series AA Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the holder
or such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
<PAGE>
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Holders of shares of Series AA Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date notwithstanding the
conversion thereof following such dividend payment record date and prior to such
dividend payment date. However, shares of Series AA Preferred Stock surrendered
for conversion during the period between the close of business on any dividend
payment record date and the opening of business on the corresponding dividend
payment date (except shares converted after the issuance of a notice of
redemption with respect to a Stock Call Date or other redemption date during
such period, which shall be entitled to such dividend on the dividend payment
date) must be accompanied by payment of an amount equal to the dividend payable
on such shares on such dividend payment date. A holder of shares of Series AA
Preferred Stock on a dividend payment record date who (or whose transferee)
tenders any such shares for conversion into shares of Common Stock on such
dividend payment date will receive the dividend payable by the Corporation on
such shares of Series AA Preferred Stock on such date, and the converting holder
need not include payment of the amount of such dividend upon surrender of shares
of Series AA Preferred Stock for conversion. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Series AA Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with provisions of
this Section (f), and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in paragraph (C)
of this Section (f).
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
AA Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares presented thereby at such time on such date and
such conversion shall be at the Conversion Price in effect at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation.
<PAGE>
-24-
(C) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series AA Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series AA Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one share shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series AA Preferred Stock so
surrendered.
(D) The Conversion Price shall be adjusted from time to time as follows:
(i) If the Corporation shall after the Issue Date (A) pay a dividend or
make a distribution on its capital stock in shares of its Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares, (C)
combine its outstanding Common Stock into a smaller number of shares or (D)
issue any shares of capital stock by reclassification of its Common Stock,
the Conversion Price in effect at the opening of business on the day next
following the date fixed for the determination of stockholders entitled to
receive such dividend or distribution or at the opening of business on the
day next following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted
so that the holder of any share of Series AA Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock that such holder would have owned or have been
entitled to receive after the happening of any of the events described
above had such share been converted immediately prior to the record date in
the case of a dividend or distribution or the effective date in the case of
a subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph (i) shall become effective immediately after
the opening of business on the day next following the record date (except
as provided in paragraph (H) below) in the case of a dividend or
distribution and shall become effective immediately after the opening of
business on the day next following the effective date in the case of a
subdivision, combination or reclassification.
(ii) If the Corporation shall issue after the Issue Date rights or
warrants (in each case, other than the Rights) to all holders of Common
Stock entitling them (for a period expiring within 45 days after the record
date mentioned below) to subscribe for or purchase Common Stock at a price
per share less than the Fair Market Value per share of Common Stock on the
record date for the determination of stockholders entitled to receive such
rights or warrants, then the Conversion Price in effect at the opening of
business on the day next following such record date shall be adjusted to
equal the price determined by multiplying (I) the Conversion Price in
effect immediately prior to the opening of business on the day next
following the date fixed for such determination by
<PAGE>
-25-
(II) a fraction, the numerator of which shall be the sum of (A) the number
of shares of Common Stock outstanding on the close of business on the date
fixed for such determination and (B) the number of shares that the
aggregate proceeds to the Corporation from the exercise of such rights or
warrants for Common Stock would purchase at such Fair Market Value, and the
denominator of which shall be the sum of (A) the number of shares of Common
Stock outstanding on the close of business on the date fixed for such
determination and (B) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or warrants.
Such adjustment shall become effective immediately after the opening of
business on the day next following such record date (except as provided in
paragraph (H) below). In determining whether any rights or warrants entitle
the holders of Common Stock to subscribe for or purchase shares of Common
Stock at less than such Fair Market Value, there shall be taken into
account any consideration received by the Corporation upon issuance and
upon exercise of such rights or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors.
(iii) If the Corporation shall distribute to all holders of its Common
Stock any shares of capital stock of the Corporation (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash dividends
or distributions paid from profits or surplus of the Corporation) or rights
or warrants (in each case, other than the Rights) to subscribe for or
purchase any of its securities (excluding those rights and warrants issued
to all holders of Common Stock entitling them for a period expiring within
45 days after the record date referred to in subparagraph (ii) above to
subscribe for or purchase Common Stock, which rights and warrants are
referred to in and treated under subparagraph (ii) above) (any of the
foregoing being hereinafter in this subparagraph (iii) called the
"Securities"), then in each such case the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the close of business on
the date fixed for the determination of stockholders entitled to receive
such distribution by (II) a fraction, the numerator of which shall be the
Fair Market Value per share of the Common Stock on the record date
mentioned below less the then fair market value (as determined by the Board
of Directors, whose determination shall be conclusive) of the portion of
the capital stock or assets or evidences of indebtedness so distributed or
of such rights or warrants applicable to one share of Common Stock, and the
denominator of which shall be the Fair Market Value per share of the Common
Stock on the record date mentioned below. Such adjustment shall become
effective immediately at the opening of business on the Business Day next
following (except as provided in paragraph (H) below) the record date for
the determination of shareholders entitled to receive such distribution.
For the purpose of this clause (iii), the distribution of a Security, which
is distributed not only to the holders of the Common Stock on the date
fixed for the determination of stockholders entitled to such distribution
of such Security, but also is distributed with each
<PAGE>
-26-
share of Common Stock delivered to a person converting a share of Series AA
Preferred Stock after such determination date or is distributed prior to
conversion to persons holding shares of Series AA Preferred Stock (as
though they had converted their Series AA Preferred Stock into Common Stock
immediately prior to close of business on the date fixed for the
determination of stockholders entitled to receive such distribution), shall
not require an adjustment of the Conversion Price pursuant to this clause
(iii); provided that on the date, if any, on which a Person converting a
--------
share of Series AA Preferred Stock would no longer be entitled to receive
such Security with a share of Common Stock (other than as a result of the
termination of all such Securities), a distribution of such Securities
shall be deemed to have occurred and the Conversion Price shall be adjusted
as provided in this clause (iii) (and such day shall be deemed to be "the
date fixed for the determination of the stockholders entitled to receive
such distribution" and "the record date" within the meaning of the two
preceding sentences).
(iv) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1%
in such price; provided, however, that any adjustments that by reason of
-------- -------
this subparagraph (iv) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
-------- -------
accordance with the provisions of this Section (f) (other than this
subparagraph (iv)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of shares of
Common Stock. Notwithstanding any other provisions of this Section (f),
the Corporation shall not be required to make any adjustment of the
Conversion Price for the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under such plan. All calculations under
this Section (f) shall be made to the nearest 1/100 of a cent (with $.00005
being rounded upward) or to the nearest 1/10,000 of a share (with .00005 of
a share being rounded upward), as the case may be. Anything in this
paragraph (D) to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions in the
Conversion Price, in addition to those required by this paragraph (D), as
it in its discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, reclassification or combination of
shares, distribution of rights or warrants to purchase stock or securities,
or a distribution of other assets (other than cash dividends) hereafter
made by the Corporation to its stockholders shall not be taxable.
(E) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or substantially all of
the Corporation's assets or recapitalization of the Common Stock and excluding
any transaction as to which subparagraph (D) (i) of this Section (f) applies)
(each of the foregoing being
<PAGE>
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referred to herein as a "Transaction"), in each case as a result of which shares
of Common Stock shall be converted into the right to receive stock, securities
or other property (including cash or any combination thereof), receivable upon
the consummation of such Transaction by a holder of that number of shares or
fraction thereof of Common Stock into which one share of Series AA Preferred
Stock was convertible immediately prior to such Transaction, assuming such
holder of Common Stock (i) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an affiliate of a Constituent Person and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of stock,
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of stock securities and other property
(including cash) receivable upon such Transaction is not the same for each share
of Common Stock of the Corporation held immediately prior to such Transaction by
other than a Constituent Person or an affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this paragraph (E) the kind and amount of stock,
securities and other property (including cash) receivable upon such Transaction
by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). The Corporation
shall not be a party to any Transaction unless the terms of such Transaction are
consistent with the provisions of this paragraph (E) and it shall not consent or
agree to the occurrence of any Transaction until the Corporation has entered
into an agreement with the successor or purchasing entity, as the case may be,
for the benefit of the holders of the Series AA Preferred Stock that will
contain provisions enabling the holders of the Series AA Preferred Stock that
remains outstanding after such Transaction to convert into the consideration
received by holders of Common Stock at the Conversion Price in effect
immediately prior to such Transaction. The provisions of this paragraph (E)
shall similarly apply to successive Transactions.
(F) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than in cash out of profits or
surplus and other than the Rights); or
(ii) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants (other than the Rights) to subscribe for
or purchase any shares of any class or any other rights or warrants (other
than the Rights); or
(iii) there shall be any reclassification of the Common Stock (other
than an event to which subparagraph (D) (i) of this Section (f) applies) or
any consolidation or merger to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required, or the
sale or transfer of all or substantially all of the assets of the
Corporation as an entirety; or
<PAGE>
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(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of shares of the Series AA Preferred
Stock at their addresses as shown on the stock records of the Corporation, as
promptly as possible, but at least 15 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights or warrants
are to be determined or (B) the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation merger, sale, transfer, liquidation, dissolution
or winding up. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section (f).
(G) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be prima facie evidence of the correctness of such adjustment. Promptly after
delivery of such certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series AA
Preferred Stock at such holder's last address as shown on the stock records of
the Corporation.
(H) In any case in which paragraph (D) of this Section (f) provides that
an adjustment shall become effective on the day next following a record date for
an event, the Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Series AA Preferred Stock converted after
such record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any amount in cash in lieu of any fraction pursuant to paragraph (C) of this
Section (f).
(I) For purposes of this Section (f), the number of shares of Common Stock
at any time outstanding shall not include any shares of Common Stock then owned
or held by or for the account of the Corporation. The Corporation shall not pay
a dividend or make any distribution on shares of Common Stock held in the
treasury of the Corporation.
<PAGE>
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(J) There shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section (f).
If any action or transaction would require adjustment of the Conversion Price
pursuant to more than one paragraph of this Section (f), only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value.
(K) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section (f), that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of the shares of Series AA Preferred Stock, the Conversion Price for
the Series AA Preferred Stock may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances.
(L) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Series AA
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series AA Preferred Stock not
theretofore converted. For purposes of this paragraph (L), the number of shares
of Common Stock that shall be deliverable upon the conversion of all outstanding
shares of Series AA Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Series AA Preferred Stock shall be validly issued, fully paid
and non-assessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then-par value of the shares of Common
Stock deliverable upon conversion of the Series AA Preferred Stock, the
Corporation will take any corporate action that, in the opinion of its counsel,
may be necessary in order that the Corporation may validly and legally issue
fully-paid and nonassessable shares of Common Stock at such adjusted Conversion
Price.
The Corporation shall endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Series AA Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Series AA Preferred Stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(M) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common
<PAGE>
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Stock or other securities or property on conversion of the Series AA
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
-------- -------
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock or other securities
or property in a name other than that of the holder of the Series AA Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the Corporation
the amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(g) For purposes of the Series AA Preferred Stock, the following terms
shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Conversion Price" shall mean the conversion price per share of Common
Stock for which the Series AA Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to Section (f). The initial conversion price
will be $44.64.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sales price, regular way on such
day, or, if no sale takes place on such day, the average of the reported closing
bid and asked prices on such day, regular way, in either case as reported on the
New York Stock Exchange or, if such security is not listed or admitted for
trading on the New York Stock Exchange ("NYSE"), on the principal national
securities exchange on which such security is listed or admitted for trading or,
if not listed or admitted for trading on any national securities exchange, on
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, if such security is not quoted
on such National Market System, the average of the closing bid and asked prices
on such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by any
NYSE member firm regularly making a market in such security selected for such
purpose by the Board of Directors.
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive Trading Days
selected by the Corporation commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. The term "'ex' date", when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.
<PAGE>
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"Redemption Price" shall mean the redemption price per share of Series AA
Preferred Stock, which shall be subject to reduction from time to time in an
amount equal to the per share fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of any Securities
distributed to holders of Series AA Preferred Stock as described in Section
(f)(D)(iii). The initial Redemption Price shall be $5,000.
"Rights" shall mean the rights of the Corporation which are issuable under
the Corporation's Stockholder Rights Plan adopted on February 10, 1988 and as
amended from time to time, or rights to purchase any capital stock of the
Corporation under any successor shareholder rights plan or plan adopted in
replacement of the Corporation's Stockholder Rights Plan.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class of Common Stock
-------- -------
or Series Preferred Stock or any class or series of stock ranking on a parity
with the Series AA Preferred Stock as to the payment of dividends are placed in
a separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then "set apart for payment" with respect to the Series AA
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE, or if such securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the National Market System of the NASDAQ,
or if such securities are not quoted on such National Market System, in the
applicable securities market in which the securities are traded.
"Transfer Agent" means National City Bank or such other agent or agents of
the Corporation as may be designated by the Board of Directors as the transfer
agent for the Series AA Preferred Stock.
(h) Upon the liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of this Series AA
Preferred Stock shall be entitled to receive an amount equal to $5,000 per
share, plus accrued and unpaid dividends thereon (whether or not earned or
declared) at the date of final distribution to such holders.
(i) Series AA Preferred Stock may be issued in fractions of a share which
shall entitle the holder, in proportion to such holder's fractional shares to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series AA Preferred Stock.
<PAGE>
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Division B
Express Terms of the Common Stock
The Common Stock shall be subject to the express terms of the Serial
Preferred Stock. Each share of Common Stock shall be equal to every other share
of Common Stock. The holders of shares of Common Stock shall be entitled to one
vote for each share of such stock upon all matters presented to the
shareholders.
FIFTH: No holders of any class of shares of the Corporation shall have any
preemptive right to purchase or have offered to them for purchase any shares or
other securities of the Corporation.
SIXTH: The Corporation may from time to time, pursuant to authorization by
the Board of Directors and without action by the shareholders, purchase or
otherwise acquire shares of the Corporation of any class or classes in such
manner, upon such terms and in such amounts as the Board of Directors shall
determine; subject, however, to such limitation or restriction, if any, as is
contained in the express terms of any class of shares of the Corporation
outstanding at the time of the purchase or acquisition in question.
SEVENTH: A director or officer of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as a
vendor, purchaser, employee, agent or otherwise; nor shall any transaction,
contract or other act of the Corporation be void or voidable or in any way
affected or invalidated by reason of the fact that any director or officer, or
any firm in which such director or officer is a member, or any corporation of
which such director or officer is a member, or any corporation of which such
director or officer is a shareholder, director or officer, is in any way
interested in such transaction, contract or other act, provided the fact that
such director, officer, firm or corporation is so interested shall be disclosed
or shall be known to the Board of Directors or such members thereof as shall be
present at any meeting of the Board of Directors at which action upon any such
transaction, contract or other act shall be taken; nor shall any such director
or officer be accountable or responsible to the Corporation for or in respect of
any such transaction, contract or other act of the Corporation or for any gains
or profits realized by him by reason of the fact that he or any firm of which he
is a member or any corporation of which he is a shareholder, director or officer
is interested in such transaction, contract or other act; and any such director
may be counted in determining the existence of a quorum at any meeting of the
Board of Directors of the Corporation which shall authorize or take action in
respect of any such transaction, contract or other act, and may vote thereat to
authorize, ratify or approve any such transaction, contract or other act with
like force and effect as if he or any firm of which he is a member or any
corporation of which he is a shareholder, director or officer were not
interested in such transaction, contract or other act.
<PAGE>
-33-
EIGHTH: Notwithstanding any provision of the Ohio Revised Code now or
hereafter in force requiring for any purpose the vote, consent, waiver or
release of the holders of shares entitling them to exercise two-thirds, or any
other proportion, of the voting power of the Corporation or of any class or
classes of shares thereof, such action, unless otherwise expressly required by
statute or by these Articles, may be taken by the vote, consent, waiver or
release of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation or of such class or classes.
NINTH: No shareholder of the Corporation may cumulate such shareholder's
voting power in the election of directors of the Corporation.
TENTH: Any and every statute of the State of Ohio hereafter enacted,
whereby the rights, powers or privileges of corporations or of the shareholders
of corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Amended and
Restated Articles of Incorporation of the Corporation in the office of the
Secretary of the State of Ohio.
ELEVENTH: These Amended and Restated Articles of Incorporation shall
supersede and take the place of the heretofore existing Amended Articles of
Incorporation as amended of the Corporation.
END
<PAGE>
EXHIBIT 11
- - ----------
ALCO STANDARD CORPORATION
COMPUTATIONS OF EARNINGS (LOSS) PER SHARE
(in thousands, except earnings (loss) per share)
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
Fully Fully
Primary Diluted(1) Primary Diluted(1)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Three Months Ended June 30
- - --------------------------
Average Shares Outstanding
- - --------------------------
Common shares 53,915 53,915 46,816 46,816
Preferred stock
Considered common equivalents 34 34
Options 809 833
-------- -------- -------- --------
Total shares 53,915 (2) 53,915 (2) 47,659 47,683
======== ======== ======== ========
Income (Loss)
- - -------------
Net Income (Loss) $(48,306) $(48,306) $ 30,704 $ 30,704
Less: Preferred dividends 2,893 2,893 2,893 2,893
-------- -------- -------- --------
Net income (loss) available to common shareholders $(51,199) $(51,199) $ 27,811 $ 27,811
======== ======== ======== ========
Earnings (Loss) Per Share ($0.95) ($0.95) $0.58 $0.58
====== ====== ===== =====
Nine Months Ended June 30
- - -------------------------
Average Shares Outstanding
- - --------------------------
Common shares 52,023 52,023 46,509 46,509
Preferred stock
Considered common equivalents 6 6 57 57
Options 999 1,091 680 909
-------- -------- -------- --------
Total shares 53,028 53,120 47,246 47,475
======== ======== ======== ========
Income
- - ------
Continuing Operations $ 21,569 $ 21,569 $ 85,003 $ 85,003
Discontinued Operations 3,218 3,218
-------- -------- -------- --------
Income before cumulative effect of changes in accounting principles 21,569 21,569 88,221 88,221
Cumulative effect of
Postretirement benefits other than pensions, net of income taxes (1,421) (1,421)
Income taxes 1,421 1,421
-------- -------- -------- --------
Net Income 21,569 21,569 88,221 88,221
Less: Preferred dividends 8,679 8,679 6,107 6,107
-------- -------- -------- --------
Net income available to common shareholders $ 12,890 $ 12,890 $ 82,114 $ 82,114
======== ======== ======== ========
Earnings Per Share
- - ------------------
Continuing operations $0.24 $0.24 $1.67 $1.66
Discontinued operations 0.07 0.07
-------- -------- -------- --------
Before cumulative effect of changes in accounting principles 0.24 0.24 1.74 1.73
Cumulative effect of
Postretirement benefits other than pensions, net of income taxes (0.03) (0.03)
Income taxes 0.03 0.03
-------- -------- -------- --------
$0.24 $0.24 $1.74 $1.73
======== ======== ======== ========
</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%.
(2) Preferred Stock which are considered common equivalents and stock options
are excluded because the effect would be anti dilutive and result in a
lower loss per share.
