ALCO STANDARD CORP, DEF 14A, 1994-12-01

ALCO STANDARD CORP
DEF 14A, 1994-12-01
PAPER & PAPER PRODUCTS

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12

Alco Standard Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Karin M. Kinney, Esq.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
(previously paid on November 18, 1994 pursuant to Preliminary Proxy
Statement)

[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

---------------------------------------------------------------------------

2) Aggregate number of securities to which transaction applies:

---------------------------------------------------------------------------

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/

---------------------------------------------------------------------------

4) Proposed maximum aggregate value of transaction:

---------------------------------------------------------------------------

/1/ Set forth the amount on which the filing fee is calculated and state how
it was determined.

<PAGE>

ALCO STANDARD CORPORATION

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

JANUARY 26, 1995

----------------

To the Shareholders of Alco Standard Corporation ("Alco"):

You are invited to be present either in person or by proxy at the annual
meeting of shareholders of Alco to be held at the People's Light and Theatre
Company, 39 Conestoga Road, Malvern, PA 19355 on Thursday, January 26, 1995 at
9:30 a.m. to consider and act upon the following proposals:

1. To elect 12 directors to serve during the year and until their
successors are elected;

2. To approve an amendment to the Amended Articles of Incorporation of
Alco to increase the number of shares of common stock that Alco shall have
authority to issue from 75,000,000 to 150,000,000 shares;

3. To approve the Alco Standard Corporation 1995 Stock Option Plan
authorizing grants of options to purchase an aggregate of 2,500,000 shares
of Alco common stock;

4. To approve the Alco Standard Corporation Annual Bonus Plan authorizing
the award of annual cash bonuses;

5. To approve the Alco Standard Corporation Long Term Incentive
Compensation Plan authorizing awards of an aggregate of 2,500,000 shares of
Alco common stock; and

6. To transact such other business as may properly come before the
meeting.

Shareholders of Alco of record at the close of business on November 28, 1994
are entitled to vote at the annual meeting and any adjournments thereof. All
shareholders are urged to attend the meeting or to vote by proxy.

If you do not expect to attend the meeting in person, please sign and return
the accompanying proxy in the enclosed postage prepaid envelope. If you later
find that you can be present or for any other reason desire to revoke your
proxy, you can do so at any time before the voting.

[SIGNATURE OF JOHN E. STUART APPEARS HERE]
President and Chief Executive Officer

Valley Forge, Pennsylvania 19482-0834
November 30, 1994
<PAGE>

ALCO STANDARD CORPORATION
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482-0834

PROXY STATEMENT

This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Alco Standard Corporation ("Alco") of proxies to be voted
at its annual meeting of shareholders on January 26, 1995 and all adjournments
thereof. The proxy statement and proxy card will be first mailed to
shareholders on or about December 5, 1994.

Only holders of record of common stock and serial preferred stock at the
close of business on November 28, 1994 will be entitled to vote. On that date,
there were 54,382,269 shares of common stock and 40,360 shares of preferred
stock outstanding. The holders of all shares will vote together as a class.
Each share of common stock or preferred stock entitles the holder thereof to
one vote.

I. ELECTION OF DIRECTORS

NOMINEES FOR ELECTION AS DIRECTORS

A board consisting of 12 directors is proposed to be elected for the ensuing
year and until their successors are elected. Unless authority to do so is
specifically withheld, the persons named in the accompanying proxy will vote
for the election as directors of the nominees named below. The 12 nominees who
receive the most votes at the meeting will be elected as directors. All of the
nominees are now directors of Alco, holding office until election of their
successors. Information regarding the nominees is set forth below.

Paul J. Darling, II..... Chairman, President and Chief Executive Officer, Corey 1994 56
Steel Company (1984-Present) (also a director of Liberty
Mutual Insurance Company, Liberty Life Assurance Company
of Boston, Liberty Mutual Fire Insurance Company and
Liberty Financial Companies, Inc.)

William F. Drake, Jr. .. Attorney and Partner, Montgomery, McCracken, Walker & 1969 62
Rhoads (1984-Present); Vice Chairman (1984-Present)
(also a director of Nocopi Technologies, Inc.)

James J. Forese......... General Manager, IBM Customer Financing, and Chairman, 1994 59
IBM Credit Corporation (1993-Present); IBM Vice Presi-
dent, Finance (1990-1993); IBM Vice President and Group
Executive (1988-1990) (also a director of Lexmark Inter-
national, Inc., IBM Latin America, American Management
Systems, Inc. and NUI Corporation)

Frederick S. Hammer..... A director of United Student Aid Group, Inc., Tri-Arc Fi- 1986 58
nancial Services and National Media Corporation; Chair-
man, Chief Executive Officer and a director, Mutual of
America Capital Management Corporation (1993-1994);
President, SEI Asset Management Services Group (1989-
1993); Mazur Fellow, The Wharton School, University of
Pennsylvania (1989-1990)
Barbara Barnes
Hauptfuhrer............ A director of The Vanguard Group of Investment Companies
and of each of the mutual funds in the Group, The Great 1988 66
Atlantic and Pacific Tea Co., Inc., Knight-Ridder, Inc.,
Massachusetts Mutual Life Insurance Co. and Raytheon
Company
</TABLE>

1
<PAGE>

<TABLE>
<CAPTION>
YEAR
PRINCIPAL OCCUPATION OR EMPLOYMENT FOR PAST FIVE YEARS BECAME
NAME (WITH ALCO UNLESS OTHERWISE INDICATED) DIRECTOR AGE
---- ------------------------------------------------------ -------- ---
<S> <C> <C> <C>
Dana G. Mead............ Chairman and Chief Executive Officer (1994-Present), 1994 58
President and Chief Operating Officer (1992-1994) and a
director (1992-Present), Tenneco, Inc.; Chairman (1992-
Present), J I Case (a Tenneco division); Vice Chairman
(1994-Present) and a director, National Association of
Manufacturers; Executive Vice President (1989-1992), Se-
nior Vice President (1986-1989), International Paper
Company (also a director of National Westminster
Bancorp, Cummins Engine Company, Inc. and Baker Hughes
Incorporated)
Ray B. Mundt............ Chairman (1986-Present), Chief Executive Officer (1980- 1971 66
1993), President (1974-1988) (also a director of Liberty
Mutual Insurance Company, Liberty Life Assurance Company
of Boston, Liberty Mutual Fire Insurance Company, Lib-
erty Financial Companies, Inc., Nocopi Technologies,
Inc., CoreStates Bank, N.A., and Clark Equipment Compa-
ny)
Paul C. O'Neill......... Private investor; Chairman, Ovington Securities Ltd. 1978 68
(1989-1991)
Rogelio G. Sada......... Private investor; Mayor, San Pedro, N.L., Mexico (1992- 1980 59
1994); Director, International Advisory Board of Secu-
rity Pacific National Bank (1980-1991); Director Gener-
al, VITRO, a glass and glass-related products manufac-
turer in Mexico (1972-1985)
John E. Stuart.......... President and Chief Executive Officer (1993-Present); 1993 50
Vice President (1989-1993); Group President, Alco Office
Products (1985-1993)
James W. Stratton....... President, Stratton Management Company (1972-Present); 1988 58
Chairman (1993-Present) and a director, Stratton Small-
Cap Yield Fund; Chairman (1981-Present) and a director,
Stratton Monthly Dividend Shares; Chairman (1972-Pres-
ent) and a director, Stratton Growth Fund (also a direc-
tor of UGI Corporation, Gilbert Associates and Teleflex)
</TABLE>

SECURITY OWNERSHIP

As of November 30, 1994, shares of common stock of Alco were beneficially
owned (as determined by rules of the Securities and Exchange Commission,
although in certain cases the persons may disclaim beneficial ownership) by the
current directors, by each of the individuals named in the Summary Compensation
Table (on page 7) and by all current directors and executive officers of Alco
as a group, as follows:

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING SHARED VOTING ACQUIRABLE
AND AND/OR WITHIN
INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2)
---------------- ------------------- ----------
<S> <C> <C> <C>
J. Mahlon Buck, Jr........... 20,984 0 15,991
Paul J. Darling, II.......... 56 0 400
William F. Drake, Jr......... 81,513 0 8,545
Kurt E. Dinkelacker.......... 3,718 2,678 21,909
James J. Forese.............. 1,056 0 400
Frederick S. Hammer.......... 5,701 0 8,090
Barbara Barnes Hauptfuhrer... 1,619 0 11,140
James E. Head................ 3,918 3,606 22,645
Dana G. Mead................. 61 0 400
Hugh G. Moulton.............. 24,018 31,607 32,223
Ray B. Mundt................. 167,150 57,061 19,501
Paul C. O'Neill.............. 38,491 12,000 925
Rogelio G. Sada.............. 6,086 0 13,623
James W. Stratton............ 1,786 0 2,356
John E. Stuart............... 24,836 3,340 119,273
All current directors and ex-
ecutive officers as a group. 425,493 153,518 328,644
</TABLE>
--------
(1) Includes all shares held under Alco's Stock Participation Plan (and,
for Mr. Head, under Alco's Defined Contribution Plan), and, where
applicable, shares owned by spouses or minor children.
(2) Represents shares which may be acquired within 60 days of November 30,
1994 through the exercise of stock options or vesting under Alco's
Partners' Stock Purchase Plan.

2
<PAGE>

As of November 30, 1994, for each of the individuals named above, the
percentage of common stock beneficially owned was less than 1%. The percentage
of common stock beneficially owned by all current directors and executive
officers as a group was approximately 1.6%. As of November 30, 1994, no person
beneficially owned more than 5% of the outstanding shares of common stock of
Alco, nor did any director, nominee or executive officer of Alco own any
shares of preferred stock of Alco. As of November 30, 1994, Alco employees,
through Alco's Stock Participation Plan, owned approximately 8.7% of the
outstanding shares of common stock of Alco.

For the fiscal year ended September 30, 1994, all reports required to be
filed by Section 16(a) of the Securities Exchange Act of 1934 to reflect
changes in beneficial ownership of Alco's securities were timely filed on
behalf of Alco's directors and officers. Amended Form 3 and Form 4 reports,
however, were filed on behalf of Mr. Head to reflect his ownership of 1,345
shares of Alco common stock (and reinvestment of dividends thereon) through an
employee benefit plan. The original Form 3 and 4 reports filed on behalf of
Mr. Head did not include these shares because of an administrative error.

COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS

There are four standing committees of the Board of Directors, including the
Audit Committee and the Human Resources Committee. Between meetings of the
Board of Directors, its powers may be exercised by the Executive Committee,
Human Resources Committee and Investment Committee, and they, as well as the
Board of Directors, sometimes act by unanimous written consent.

The Audit Committee (Messrs. Buck, Darling, Sada, and Stratton) met four
times during the fiscal year ended September 30, 1994. Its functions are to
review the report of Alco's independent auditors relating to their audit of
the financial statements of Alco, to review and discuss internal financial
controls with both the independent auditors and internal auditors, and to
direct that special studies relating to the adequacy of financial controls and
accounting procedures be made from time to time as the Committee deems
desirable.

The Human Resources Committee (Mrs. Hauptfuhrer and Messrs. Buck, Hammer,
Mead and Sada) met six times during the fiscal year. It is responsible for
reviewing and evaluating persons who are suggested as nominees for election as
members of the Board of Directors, and for making recommendations to the Board
of Directors concerning such nominees. The Human Resources Committee is also
responsible for setting policies regarding executive compensation and for
determining the salaries and other compensation of each of the executive
officers of Alco. (See "Human Resources Committee Report on Executive
Compensation," page 4). The Committee also has all of the powers and exercises
all of the duties of the Board of Directors as described in Alco's stock
option, stock purchase, deferred compensation and other similar plans.

During the fiscal year, the Board of Directors met five times. Each director
attended at least 75% of the total number of the meetings of the Board of
Directors and the meetings of all committees on which he or she served.

3
<PAGE>

EXECUTIVE COMPENSATION

HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Alco's executive compensation program is administered by the Human Resources
Committee of the Board of Directors, which has responsibility for all aspects
of the compensation program for the executive officers of Alco. The Human
Resources Committee (the "Committee") is comprised of the five directors listed
at the end of this report, none of whom is an employee of Alco and each of whom
qualifies as a disinterested person for the purpose of Rule 16b-3 under the
Securities Exchange Act of 1934 and an outside director for purposes of Section
162(m) of the Internal Revenue Code (the "Code").

The Committee's primary objective is to establish and administer programs
which attract and retain key executives, and to align their compensation with
Alco's performance, business strategies and growth in shareholder value. To
this end, the Committee has established and the Board of Directors has endorsed
an executive compensation philosophy which includes the following elements:

--A "pay-for-performance" orientation under which compensation reflects
corporate, business unit and individual performance;

--An emphasis on stock incentives to closely align the interest of executives
with the long-term interests of shareholders;

--An emphasis on total compensation under which base salaries are generally
set at or below competitive levels but which motivates and rewards executives
with total compensation, including incentive programs, at or above competitive
levels if corporate or individual performance is superior;

--An appropriate balance of short and long-term compensation which
facilitates retention of talented executives, rewards long-term strategic
planning, and encourages Alco stock ownership; and

--Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based on stock
and other performance incentives and less on salary and benefits.

As a matter of policy, the Committee recommends that the shareholders approve
executive compensation plans, so that payments under such plans will be
excluded from compensation subject to the annual $1,000,000 deduction limit of
Section 162(m) of the Code.

The primary components of Alco's executive compensation program are (a) base
salaries; (b) annual cash bonus opportunities; and (c) long term incentive
opportunities.

BASE SALARIES

Base salaries for executive officers are reviewed annually and are subject to
adjustment on the basis of individual, corporate, and business unit
performance, as well as competitive, inflationary and internal equity
considerations. Base salaries generally are fixed at or below the 50th
percentile of predicted executive salaries paid by comparable companies based
upon survey data compiled by Alco's compensation consultant. The Committee does
not consider the market for determining the compensation of Alco's executives
to be limited to the companies included in the industry performance graph on
page 12. The companies considered to be comparable to Alco for compensation
purposes include a broad cross-section of companies which are representative of
industry generally.

In setting the $700,000 base salary of Mr. Stuart as Chief Executive Officer,
the Committee evaluated the factors described above which are used for setting
compensation generally, as well as Mr. Stuart's strong record and leadership
abilities as Group President of Alco Office Products ("AOP") from 1985 until
August 1993, including growth in AOP's revenues of 26% and growth in AOP's
operating income of 32% in fiscal 1993 compared with fiscal 1992.

4
<PAGE>

ANNUAL BONUS

Annual bonus payments to executive officers are awarded pursuant to the Alco
Standard Corporation Annual Bonus Plan (further described on page 16 hereof),
and are based on corporate or business unit performance compared to the annual
business plans established for the year. These annual bonus payments are in
amounts equal to a percentage of base salary. They generally range from 0% for
threshold, 30-50% for target, and 60-100% for maximum performance. For the
individuals named in the Summary Compensation Table, annual bonus potential
(as a percentage of base salary) is 0% for threshold, 50% for target and 100%
for maximum performance. For performance between threshold and maximum levels,
bonus awards are prorated on a straight line basis. For corporate officers,
the 1994 annual bonus plan was based upon fiscal 1994 earnings per share
(excluding special charges and credits) as compared to the earnings per share
goals contained in Alco's business plan. For 1994, the earnings per share
threshold, target and maximums were $2.67, $2.72 and $2.82, respectively. Alco
achieved earnings per share of $2.87 for fiscal 1994 (excluding special
charges and credits). Because of this performance, Messrs. Mundt, Stuart,
Dinkelacker and Moulton received bonuses at the maximum level. The Alco Office
Products 1994 annual bonus plan was based on operating income and operating
cash flow, weighted 60% for operating income and 40% for operating cash flow.
The operating income threshold, target and maximums were $157.6 million,
$165.9 million and $170.9 million, respectively. The operating cash flow
threshold, target and maximums were $133 million, $140 million and $170
million, respectively, excluding the captive leasing company. Alco Office
Products achieved operating income of $199.4 million and operating cash flow
of $198.8 million for fiscal 1994. Because of this performance, Mr. Head
received a bonus at the maximum level.

In November 1994 the Committee fixed the targets for the annual bonus plan
for fiscal 1995, subject to shareholder approval of the plan. For corporate
officers, these targets are based upon growth in "economic value per share," a
concept which measures growth in economic value under a financial model which
Alco utilizes. As used in this model, "economic value" reflects the results of
the performance factors and investment variables which are within management's
control. It disregards macro-economic factors such as interest rates and taxes
which also affect market prices for Alco's stock. As a result, changes in
"economic value" may not be accompanied by corresponding increases or
decreases in stock prices over the measurement period. For fiscal 1995 the
annual bonus plan for corporate officers will be based on increases in
economic value per share over this value at the end of fiscal 1994. The
threshold, target and maximum increases have been fixed at 15%, 18% and 20%,
respectively. For group officers, annual bonus targets for fiscal 1995 are
based on increases in operating income and operating cash flow. Awards under
the 1995 annual bonus plan will be contingent upon the Committee receiving
confirmation from Alco's independent auditors that the requisite performance
levels have been achieved.

LONG TERM INCENTIVE COMPENSATION

LTIP Awards

In November 1992, the Board of Directors approved the Alco Standard
Corporation Long Term Incentive Compensation Plan ("LTIP") to more directly
align the long-term interests of Alco's executives with those of Alco's
shareholders. The LTIP motivates and rewards growth in shareholder value by
granting to eligible executives stock awards which vest only if certain
performance criteria are met. For corporate officers, the LTIP is based on
total shareholder return (stock price appreciation and dividends) over a
three-year plan period compared with the total shareholder return of the
Standard & Poor's 500 Stock Index (the "S&P 500") over the same period. Awards
are made at the fair market value on the last trading day immediately
preceding the first day of the plan period. For the individuals named in the
Summary Compensation Table, the number of awards granted during fiscal 1994
(for the 1994-1996 plan period) was determined by dividing an amount equal to
100% of the participant's base salary for the first year of the plan period by
the share price.

Total shareholder return is measured over successive three-year periods
(with a new three-year period beginning every fiscal year) and shares of
common stock, if earned pursuant to the terms of the award, will be issued at
the end of each such three-year period. The number of shares issued is
dependent upon

5
<PAGE>

achievement of performance targets and range from 0 (in the case of performance
at or below threshold) to the number of shares determined by dividing a maximum
of 100% of the participant's base salary at the beginning of the plan period by
the share price on that date (for maximum performance). For performance between
threshold and maximum, the number of shares issued pursuant to the award will
be prorated on a straight-line basis. The value of the participant's award will
depend on both Alco's total shareholder return relative to the S&P 500 and
changes in the share price during the plan period.

In November 1993, the Committee fixed targets for corporate officers for the
1994-1996 plan period. For this plan period, the value on September 30, 1996 of
a $100 investment made in Alco common stock on September 30, 1993 will be
compared to the value on September 30, 1996 of a $100 investment made on
September 30, 1993 in the S&P 500 (with dividends reinvested). The targets as
established by the Committee for the 1994-1996 plan period are as follows:
<TABLE>
<CAPTION>
ALCO INVESTMENT VALUE AS
A PERCENT OF S&P 500
------------------------
<S> <C>
Threshold...................................... 100%
Target......................................... 105%
Maximum........................................ 110%
</TABLE>

In November 1994, the Committee fixed targets for corporate officers for the
1995-1997 plan period. Performance for this plan period will be calculated in
the same manner as performance for the 1994-1996 plan period. The targets as
established by the Committee for the 1995-1997 plan period are as follows:

<TABLE>
<CAPTION>
ALCO INVESTMENT VALUE AS
A PERCENT OF S&P 500
------------------------
<S> <C>
Threshold...................................... 100%
Target......................................... 107.5%
Maximum........................................ 115%
</TABLE>

This means that there will be no awards earned under the LTIP for corporate
officers unless growth in Alco's shareholder value exceeds the S&P 500 total
shareholder return over the plan period. LTIP targets were set for Messrs.
Stuart, Dinkelacker and Moulton based upon the Alco v. S&P 500 targets
described above.

If an executive officer is an officer of one of Alco's two business units
(Alco Office Products or Unisource), performance targets under the LTIP for the
1994-1996 and 1995-1997 plan periods are based 50% on the same targets as
corporate officers and 50% on the growth in value and cash flows of the
relevant business unit. LTIP targets were set for Mr. Head on the foregoing
basis.

Regular Stock Options

Stock options are granted under the corporation's regular stock option plans
(including, if approved, the 1995 Stock Option Plan) as a reward for past
performance and as motivation for future performance which maximizes
shareholder value. Stock options are generally granted for ten-year terms and
vest over a five-year employment period. The exercise price of these stock
options is the fair market value of Alco stock on the date of grant.

In fiscal 1994, Mr. Stuart's receipt of an option to purchase 250,000 shares
reflected his promotion to the position of Chief Executive Officer and
President, Mr. Dinkelacker's receipt of an option to purchase 50,000 shares
reflected his promotion to the position of Chief Financial Officer, and Mr.
Head's receipt of an option to purchase 50,000 shares reflected his promotion
to the position of Group President of Alco Office Products. All of these option
grants reflect promotions which occurred in August 1993. The option grants took
into consideration outstanding awards and were at the fair market value on the
dates of the grants.

THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS

Barbara Barnes Hauptfuhrer (Chair)
J. Mahlon Buck, Jr.
Frederick S. Hammer
Dana G. Mead
Rogelio G. Sada

6
<PAGE>

SUMMARY OF EXECUTIVE COMPENSATION

The following table provides a summary of all compensation for the five most
highly compensated officers of Alco during the fiscal years ended September 30,
1994, 1993 and 1992:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION(5)
-------------------------- ---------------------------
OTHER AWARDS
NAME ANNUAL ------------- ALL OTHER
AND COMPEN- SECURITIES COMPEN-
PRINCIPAL FISCAL SATION UNDERLYING SATION
POSITION(1) YEAR SALARY($) BONUS($) ($)(2) OPTIONS(3) ($)(4)
----------- ------ --------- -------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Stuart 1994 700,000 700,000 250,000 177,642
President and 1993 393,750 350,000 500 100,533
Chief Executive Officer 1992 315,000 315,000 15,500 87,886

Ray B. Mundt 1994 820,000 820,000 2,850 1,146 44,842
Chairman 1993 820,000 0 2,850 1,605 31,821
1992 820,000 498,970 2,850 1,689 43,244

Kurt E. Dinkelacker 1994 300,000 300,000 50,000 74,806
Executive Vice President 1993 168,750 150,000 0 42,066
and Chief Financial Officer 1992 130,400 130,400 5,000 32,345

Hugh G. Moulton 1994 300,000 300,000 0 78,136
Executive Vice President 1993 300,000 0 20,000 34,097
1992 284,000 120,970 10,000 49,429

James E. Head 1994 300,000 300,000 50,000 80,954
Vice President and 1993 167,083 177,535 0 46,098
Alco Office Products 1992 135,000 160,000 5,000 39,589
Group President
</TABLE>
- --------
(1) During fiscal 1992 and ten months of fiscal 1993, Mr. Mundt was Chief
Executive Officer of the corporation, Mr. Stuart was Group President of
Alco Office Products, Mr. Dinkelacker was Executive Vice President of Alco
Office Products, and Mr. Head was President of Copyrite, an Alco Office
Products operating company. In August 1993, Mr. Stuart became President and
Chief Executive Officer of the corporation, Mr. Dinkelacker became
Executive Vice President and Chief Financial Officer of the corporation,
and Mr. Head became Group President of Alco Office Products. In November
1993, Mr. Head was appointed a Vice President and executive officer of
Alco.
(2) Represents directors' fees.
(3) All stock options except those granted to Mr. Mundt were granted pursuant
to 1986 Stock Option Plan at an exercise price equal to fair market value
of Alco common stock on date of grant. For Mr. Mundt, all options were
granted in lieu of directors' fees pursuant to the 1989 Directors' Stock
Option Plan, which is described under Directors' Compensation on page 10.
Does not include LTIP awards granted during fiscal 1993 and fiscal 1994
pursuant to the Long Term Incentive Compensation Plan, which will only be
earned if certain performance criteria are met. LTIP awards made during
fiscal 1994 are included in the LTIP Awards Table on page 9.
(4) Includes the value of shares of Alco common stock purchased with matching
company contributions under Alco's stock purchase plans, calculated as of
the date of purchase, as follows: John E. Stuart--$176,356 (1994); $99,703
(1993), and $87,572 (1992); Ray B. Mundt--$44,842 (1994), $31,821 (1993),
and $43,244 (1992); Kurt E. Dinkelacker--$74,528 (1994) $41,884 (1993), and
$32,276 (1992); Hugh G. Moulton--$69,374 (1994), $27,367 (1993), and
$46,976 (1992); James E. Head--$80,954 (1994), $46,098 (1993) and $39,589
(1992). The remaining amounts represent above-market interest earned on
deferred compensation.
(5) There were no LTIP payouts in fiscal 1994, 1993 or 1992 to the named
individuals.

7
<PAGE>

OPTION GRANTS

The following table shows option grants to the five individuals named in the
Summary Compensation Table during the fiscal year ended September 30, 1994:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
% OF TOTAL
NUMBER OPTIONS
OF SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED (#) YEAR (%) ($/SH) DATE VALUE ($)(2)
---- ------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John E. Stuart 250,000 52.11 49.00 11/11/03 2,695,000
Ray B. Mundt 1,146(1) .23 42.28 2/17/14 31,962
Kurt E. Dinkelacker 50,000 10.42 49.00 11/11/03 539,000
Hugh G. Moulton -- -- -- -- --
James E. Head 50,000 10.42 49.00 11/11/03 539,000
</TABLE>
(1) Represents directors' fees of $16,150 which Mr. Mundt elected to receive in
the form of stock options pursuant to the 1989 Directors' Stock Option Plan
(described on page 10) at an exercise price equal to 75% of the fair market
value of Alco stock on the date of grant.
(2) The present value of option grants to Messrs. Stuart, Dinkelacker and Head
were calculated using Black-Scholes option valuation methodology, based on
the following assumptions: (a) ten-year option term; (b) becomes
exercisable 20% per year from date of grant; (c) 4.71% expected risk-free
rate of return; (d) 21.87% expected volatility; and (e) 1.96% expected
dividend yield. The present value of the option grant to Mr. Mundt was
calculated using Black-Scholes option valuation methodology, based on the
following assumptions: (a) twenty-year option term; (b) fully exercisable
after one year from date of grant; (c) 5.97% expected risk-free rate of
return; (d) 21.00% expected volatility and (e) 1.77% expected dividend
yield.

OPTION EXERCISES

The following table shows option exercises for each of the five individuals
named in the Summary Compensation Table for the fiscal year ended September 30,
1994:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- ------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE) UNEXERCISABLE(1)
---- --------------- ------------------ -------------- -------------------
<S> <C> <C> <C> <C>
John E. Stuart.......... -- -- 61,200/269,200 2,117,990/3,865,748
Ray B. Mundt............ 26,000 834,000 11,078/8,346 345,140/238,676
Kurt E. Dinkelacker..... -- -- 11,350/57,000 308,621/926,460
Hugh G. Moulton......... 10,000 268,125 23,200/28,200 520,177/985,185
James E. Head........... -- -- 10,550/55,700 293,318/885,587
</TABLE>

(1) Value of unexercised options equals fair market value of Alco common stock
as of September 30, 1994, less exercise price, times the number of shares
underlying the stock options.

8
<PAGE>

LONG TERM INCENTIVE COMPENSATION PLAN

The following table shows the number of stock awards granted to each of the
named individuals under the Long Term Incentive Compensation Plan during the
fiscal year ended September 30, 1994 and the number of shares of Alco common
stock which will become issuable upon attainment of threshold, target and
maximum performance levels:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
PERFORMANCE ESTIMATED FUTURE
NUMBER OF OR OTHER PAYOUTS (SHARES OF
SHARES, UNITS PERIOD UNTIL COMMON STOCK) (#)(2)
OR OTHER MATURATION OR --------------------
NAME RIGHTS (#) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- --------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
John E. Stuart........ 15,909 10/1/93-9/30/96 0 7,954 15,909
Ray B. Mundt.......... -- -- -- -- --
Kurt E. Dinkelacker... 6,818 10/1/93-9/30/96 0 3,409 6,818
Hugh G. Moulton....... 6,818 10/1/93-9/30/96 0 3,409 6,818
James E. Head......... 6,818 10/1/93-9/30/96 0 3,409 6,818
</TABLE>

(1) Represents the number of stock awards granted, which, if earned, will
entitle the participant to receive shares of common stock. For a
description of the LTIP and the basis for the awards shown in the above
table, see "Human Resources Committee Report on Executive Compensation" on
page 4 and "Approval of Long Term Incentive Compensation Plan" on page 17.

(2) Represents the number of shares of common stock which will be received upon
attainment of threshold, target and maximum performance. For performance
between threshold and maximum, the number of shares which will be received
will be prorated on a straight-line basis.

PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLANS

Certain executive officers of Alco (including Messrs. Stuart, Mundt,
Dinkelacker, Moulton and Head) are participants in a pension plan (the "pension
plan") for salaried employees which provides to eligible retired employees at
age 65 annual pension benefits equal to the number of years of credited service
multiplied by 1% of average annual compensation earned during the three
consecutive years within the employee's last ten years of participation in the
pension plan which yield the highest average. All pension plan costs are paid
by Alco and the pension plan and benefits are funded on an actuarial basis. The
years of credited service as of September 30, 1994 for the individuals named in
the Summary Compensation Table were: John E. Stuart--8.9 years; Ray B. Mundt--
24.3 years; Kurt E. Dinkelacker--9.3 years; Hugh G. Moulton--23.9 years; and
James E. Head-- 4.0 years.

Alco also has a Supplemental Executive Retirement Plan ("SERP"). Coverage
under the SERP is limited to participants in the Alco pension plan who are not
commissioned sales employees and whose benefits under the pension plan are
limited because of (a) restrictions imposed by the Code on the amount of
benefits which may be paid from a tax-qualified plan, (b) restrictions imposed
by the Code on the amount of an employee's compensation that may be taken into
account in calculating benefits to be paid from a tax-qualified plan, or (c)
any reductions in the amount of compensation taken into account under the
pension plan because of an employee's participation in certain deferred
compensation plans sponsored by Alco or one of its subsidiaries. The SERP
provides for a supplement to the annual pension paid under the pension plan to
participants who attain early or normal retirement under the pension plan or
who suffer a total and permanent disability while employed by Alco or one of
its subsidiaries and to the pre-retirement death benefits payable under the
pension plan on behalf of such participants who die with a vested interest in
the pension plan. The amount of the supplement will be the difference, if any,
between the pension or pre-retirement death benefit paid under the

9
<PAGE>

pension plan and that which would otherwise have been payable but for the
restrictions imposed by the Code and any reduction in the participant's
compensation for purposes of the pension plan because of his participation in
certain deferred compensation plans of Alco or one of its subsidiaries. The
maximum amount of annual compensation upon which such supplement may be based
is $500,000 per participant.

The following table shows estimated annual retirement benefits that would be
payable to participants under Alco's pension plan and, if applicable, the SERP,
upon normal retirement at age 65 under various assumptions as to final average
annual compensation and years of credited service and on the assumption that
benefits will be paid in the form of a single life annuity. The benefits are
not subject to any deduction for Social Security benefits.

<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
-----------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
FINAL AVERAGE -----------------------------------
COMPENSATION 10 20 30 35
------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$200,000................................. $ 20,000 $ 40,000 $ 60,000 $ 70,000
250,000................................. 25,000 50,000 75,000 87,500
300,000................................. 30,000 60,000 90,000 105,000
400,000................................. 40,000 80,000 120,000 140,000
500,000 or above........................ 50,000 100,000 150,000 175,000
</TABLE>

Covered compensation under the pension plan and SERP of Alco's five most
highly compensated executive officers includes salary and bonus set forth in
the Summary Compensation Table on page 7.

Mr. Mundt will receive an additional supplement to the pension plan and SERP
so that he shall receive a total annual pension benefit (including amounts paid
pursuant to the pension plan and SERP) of $500,000, payable for life in the
form of a joint and fifty percent survivor annuity (which will provide for an
annual lifetime benefit to Mrs. Mundt of $250,000 upon Mr. Mundt's death).

FISCAL 1995 COMPENSATION PURSUANT TO CERTAIN PLANS

The following table shows estimated benefits to be received by the named
individuals and groups for fiscal 1995 pursuant to the 1995 Stock Option Plan,
Annual Bonus Plan, and amended and restated Long Term Incentive Compensation
Plan, which are being submitted to the shareholders for approval pursuant to
this proxy statement.

<TABLE>
<CAPTION>
ESTIMATED NEW PLAN BENEFITS--FISCAL 1995
- --------------------------------------------------------------------------------------
1995 STOCK OPTION PLAN LTIP(3)
-------------------------- ------------------------
SECURITIES
UNDERLYING ANNUAL
OPTIONS BONUS
NAME OR GROUP TO BE GRANTED PLAN($)(2) THRESHOLD TARGET MAXIMUM
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John E. Stuart.......... -- 850,000 0 6,841 13,682
Ray B. Mundt............ -- -- -- -- --
Kurt E. Dinkelacker..... -- 350,000 0 2,817 5,634
Hugh G. Moulton......... -- 312,000 0 2,511 5,022
James E. Head........... -- 325,000 0 2,615 5,230
Executive Officer Group. -- 3,570,300 0 27,427 54,857
Non-Executive Director
Group.................. -- -- -- -- --
Non-Executive Officer
Employee Group......... 350,000 -- -- -- --
- --------------------------------------------------------------------------------------
</TABLE>

(1) The table shows the number of securities underlying options to be granted
for fiscal 1995 pursuant to the 1995 Stock Option Plan, subject to
shareholder approval.
(2) Shows the maximum amount of annual bonus to be paid to the named
individuals and groups for fiscal 1995, assuming maximum performance goals
are met, subject to shareholder approval.
(3) Shows the number of shares of common stock to be issued pursuant to the
LTIP for the plan period from October 1, 1994 through September 30, 1997
for attainment of threshold, target and maximum performance goals, subject
to shareholder approval. For performance between threshold and maximum, the
number of shares to be issued will be prorated on a straight-line basis.

10
<PAGE>

DIRECTORS' COMPENSATION

All directors are entitled to receive the following fees for service on the
Board of Directors and committees thereof: fees of $22,000 per year for
directors who are not employees of Alco or its subsidiaries ("independent
directors"), $12,000 per year for other directors, and attendance fees of
$1,000 for independent directors for each board and committee meeting attended.
Committee members also receive $3,000 per committee per year and committee
chairmen receive $1,000 per chairmanship per year. In addition, independent
directors who serve as trustees for Alco's employee benefit plans receive
$3,000 per year for services rendered to the plans, $1,000 per year for trustee
chairmanship, and attendance fees of $1,000 for each trustees' meeting
attended. Certain directors have elected to receive a portion of the foregoing
fees (excluding attendance fees) in the form of options to purchase Alco common
stock, pursuant to the terms of Alco's 1989 Directors' Stock Option Plan, which
enables directors of Alco to receive all or a portion of their directors' fees
in the form of options to purchase Alco common stock at exercise prices equal
to 75% of the fair market value on the date such options are granted. The
Directors' Plan provides for an automatic annual grant of stock options to each
director who has filed with Alco an election to receive such options in lieu of
all or a portion of his or her board, committee and trustee fees. The options
are exercisable for twenty years (except in the case of death), but generally
may not be exercised prior to the twelve-month anniversary of the date of
grant.

In addition to the above amounts, each independent director receives an
annual grant of options to purchase 400 shares of Alco common stock pursuant to
the 1993 Stock Option Plan for Non-Employee Directors. Options are granted at
an exercise price equal to the fair market value of Alco common stock on the
date of grant. Options are immediately exercisable and remain exercisable for a
period of ten years from the date of grant.

Independent directors who complete at least five full years of service as a
director are entitled to receive a monthly retirement benefit after retiring
from Alco's Board of Directors. Payment of such benefit begins upon the later
of the director's 70th birthday or his or her separation from service on the
Board of Directors. The amount of such monthly benefit is equal to one-twelfth
of the annual retainer in effect for such director (excluding committee fees,
chairmanship fees, trustee fees and attendance fees) immediately preceding his
or her separation from service on the Board of Directors. Payment of the
monthly retirement benefit ceases upon the director's death.

CERTAIN TRANSACTIONS

In August 1980, a subsidiary of Alco adopted a loan program which encourages
persons designated as "partners" to purchase and retain Alco stock. It offers
to make loans to partners in amounts limited to 50% of total annual
compensation (including cash bonuses) with the requirement that the loan be
secured by the borrower's pledge of Alco stock having a value at the time of
the loan of not less than twice the amount of the loan. The loans are payable
upon demand and bear interest at an annual rate of 6%. As of November 30, 1994,
loans were outstanding to 29 partners in an aggregate amount of $1,311,500.
From October 1, 1993 to November 30, 1994, the indebtedness of the following
individuals and groups under the loan program was as follows:

<TABLE>
<CAPTION>
LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING AT
NAME OR GROUP DURING PERIOD($) NOVEMBER 30, 1994($)
- -------------------------------------------------------------------------------
<S> <C> <C>
John E. Stuart.............. -- --
Ray B. Mundt................ -- --
Kurt E. Dinkelacker......... 43,000 43,000
Hugh G. Moulton............. 247,000 0
James E. Head............... -- --
All current directors and
executive officers
as a group................. 678,000 428,000
</TABLE>

Mr. Drake, who serves as Vice Chairman and a director of Alco, is a partner
in the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, which
rendered legal services to Alco and its subsidiaries during the 1994 fiscal
year, and is expected to continue performing legal services during fiscal 1995.

Ray B. Mundt will resign his position as an executive officer of Alco
effective December 31, 1994, but will continue to perform consulting services
for Alco for a period of two years following his resignation. Mr. Mundt will
receive $250,000 annually for these consulting services (and for his covenant
not to compete). At Alco's option, Mr. Mundt's consulting contract may be
renewed for an additional two-year period after its expiration in December
1996.

11
<PAGE>

PERFORMANCE OF ALCO COMMON STOCK

The following graph compares the cumulative total shareholder return on
Alco's common stock with the cumulative total return of: (i) the Standard &
Poor's 500 Stock Index, and (ii) an industry peer group based on a combination
of the S&P 500 Paper and Forest Products Sub-Index and the S&P 500 Office
Equipment and Supplies Sub-Index (the "Composite Index"):

[TO BE REVISED]

[GRAPH APPEARS HERE]

<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ALCO STANDARD, S&P 500 AND COMPOSITE INDEX

<CAPTION>
Measurement period Alco Composite
(Fiscal Year Covered) Standard S&P 500 Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
09/30/89 $100.00 $100.00 $100.00

FYE 09/30/90 $ 89.04 $ 90.77 $ 72.01
FYE 09/30/91 $102.38 $119.95 $108.56
FYE 09/30/92 $111.19 $132.03 $123.25
FYE 09/30/93 $139.43 $149.12 $129.47
FYE 09/30/94 $200.38 $154.66 $163.30

</TABLE>

- --------
(1) Cumulative total shareholder return is measured by assuming an investment
of $100 made on September 30, 1989 (with dividends reinvested).
(2) The components of the Composite Index have been weighted on the basis of
the respective operating income contribution from each of Alco's two
business segments (Unisource and Alco Office Products), as follows:

<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Paper/Forest Products..................... 44.87% 49.67% 53.39% 59.24% 69.00%
Office Equipment/Supplies................. 55.13% 50.33% 46.61% 40.76% 31.00%
</TABLE>

12
<PAGE>

II. AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK

The Board of Directors recommends that the shareholders approve the proposal
to amend the Amended Articles of Incorporation of Alco to increase the number
of authorized shares of common stock from 75,000,000 to 150,000,000. At
November 30, 1994, there were outstanding 54,376,569 shares of common stock.
Thus, there were 20,623,431 shares of common stock available for issuance (or
delivery from the treasury of Alco), and if the current proposal is adopted,
this amount will be increased to 95,623,431 shares. If the proposed amendment
is adopted, the first paragraph of Article FOURTH of Alco's Amended Articles of
Incorporation will be amended to read as follows:

FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 152,135,988, consisting of 2,135,988 shares of Serial
Preferred Stock of no par value (hereinafter called "Serial Preferred
Stock"), and 150,000,000 shares of Common Stock of no par value
(hereinafter called "Common Stock").

The increase in authorized shares of common stock would permit Alco to (i)
make acquisitions which may involve issuance of a significant number of shares,
(ii) sell shares for cash, (iii) continue the issuance of shares in connection
with Alco's stock purchase and option plans, (iv) authorize stock dividends and
stock splits and (v) use the common stock for other purposes, without the delay
and expense of calling a special meeting of shareholders for such purpose.
Except for the issuance of shares for use in connection with Alco's stock
purchase and option plans or upon the conversion of Alco's outstanding
convertible securities, there is no present intention to issue the additional
shares of stock and Alco does not have any commitments, arrangements,
understandings or agreements which would require the issuance of the additional
shares. If the proposed increase in the amount of authorized shares of common
stock is approved, however, the shares could be issued by action of the board
of directors, at any time and for any purpose, without further approval or
action by the shareholders, subject to the provisions of the Amended Articles
of Incorporation and other applicable legal requirements. The New York Stock
Exchange, on which Alco's common stock is listed, currently specifies
shareholder approval as a prerequisite for listing shares in several instances,
including acquisition transactions where the present or potential issuance of
shares could result in an increase in the number of shares outstanding by 20%
or more.

The issuance of additional shares of common stock in certain transactions and
under certain circumstances could have the effect of discouraging or impeding
an unfriendly attempt to acquire control of Alco. Shares could be issued to
persons, firms or entities known to be more favorable to management, thus
creating possible voting impediments and assisting management to retain their
positions. The board of directors is unaware of any pending or proposed effort
to take control of Alco or to change management and there have been no contacts
or negotiations with the board of directors in this connection.

Shareholders have no preemptive rights to purchase any additional shares of
common stock which may be issued. Accordingly, the issuance of additional
shares would likely reduce the percentage interest of current shareholders in
the total outstanding shares. The terms of the additional shares of common
stock will be identical to those of the currently outstanding common stock.

The Board recommends that the shareholders approve this proposed amendment to
the Amended Articles of Incorporation. The favorable vote of a majority of the
votes entitled to be cast at the meeting is required for approval.

13
<PAGE>

III. APPROVAL OF 1995 STOCK OPTION PLAN

The Board of Directors recommends that the shareholders approve a new stock
option plan (the "1995 Stock Option Plan"). The 1995 Stock Option Plan would
authorize grants of options to purchase an aggregate of 2,500,000 shares of
Alco common stock. On November 30, 1994, the closing price of Alco common stock
on the NYSE composite tape was $56.

BACKGROUND

The current Alco Standard Corporation 1986 Stock Option Plan ("1986 Plan")
was approved by shareholders in 1986 and terminates November 14, 1995. The
Board adopted the 1995 Stock Option Plan on November 11, 1994, subject to
shareholder approval, to replace the 1986 Plan.

KEY FEATURES OF THE PLAN

The purpose of the 1995 Stock Option Plan is to secure for Alco and its
shareholders the benefits of the incentive inherent in the ownership of common
stock of Alco by those employees and other persons who will be responsible for
Alco's future growth and continued success. The 1995 Stock Option Plan
authorizes grants of options for an aggregate of 2,500,000 shares of common
stock of Alco (subject to adjustment for subsequent stock splits, stock
dividends and in certain other circumstances). Options may be granted to key
persons who are employees of Alco, including employee directors and officers of
Alco, or subsidiaries (including companies in which Alco has at least a 10%
voting interest) or who provide services as independent contractors to Alco or
its subsidiaries. Like the 1986 Plan, the 1995 Stock Option Plan will authorize
grants at option prices equal to or less than 100% of the fair market value of
the shares on the date of grant and grants exercisable for up to ten years. No
one person may receive more than 1,000,000 options pursuant to the 1995 Stock
Option Plan in any fiscal year. Alco estimates that there may be approximately
3,000 persons (including employee directors and officers) in the category of
key employees to whom options may be granted under the 1995 Stock Option Plan.

ADMINISTRATION AND DETERMINATION OF OPTION GRANTS

The Human Resources Committee will determine the persons to whom options will
be granted, the dates of grant, the number of shares to be subject to each
option, the option prices, the duration, and the other terms and conditions of
the options, including any restrictions to be placed on transferability of
shares upon exercise of options. Options will be granted for various terms of
up to ten years, but unless the particular option award provides otherwise,
they will generally terminate within three months following termination of
employment or services, or, in the case of death, within one year thereafter.
Options will not be transferable except by will or the laws of descent and
distribution.

The Human Resources Committee will determine whether to grant options
qualifying as "incentive stock options" under Section 422 of the Code
(hereinafter referred to as "ISOs"), or options which do not so qualify
(hereinafter referred to as "non-ISOs"), or a combination of both. Only
employees of Alco or its majority owned subsidiaries are eligible to receive
ISOs.

The Human Resources Committee may establish conditions precedent to the
vesting of the right to exercise options, including continued employment with
Alco. The obligation of Alco to sell, issue and deliver shares under options
granted under the 1995 Stock Option Plan will be subject to all applicable
laws, rules and regulations, and to such approvals as may be required by any
governmental agencies. Shares subject to an option which expired or was
terminated, including options originally granted pursuant to the 1986 Plan,
will again be available for option grant under the 1995 Stock Option Plan.

14
<PAGE>

TAX CONSEQUENCES

The federal income tax consequences of grants and exercises of options under
the 1995 Stock Option Plan will depend upon the terms and conditions of
particular options as determined by the Human Resources Committee in granting
the options, and upon the provisions of law as then in effect. The Human
Resources Committee may consider the expected tax consequences in determining
from time to time the particular terms and conditions of various options. Among
the factors that may cause varying tax consequences would be the option price
and duration, and any restrictions which the Human Resources Committee may
place upon exercisability and upon the transferability of shares acquired upon
exercise of the option.

Under the Code as currently in effect, an optionee will not recognize taxable
income from the grant or exercise of an ISO, except that the excess of the fair
market value of the shares at the time of exercise over the option price would
be a tax preference item. As an item of tax preference, such excess would be
included in the alternative minimum tax calculation for the year in which the
ISO is exercised. If the optionee holds the shares (or transfer them only to
joint tenants including the optionee) for at least two years after the date of
grant and one year from the day after the date the shares are transferred to
the optionee, any difference between the option price and amount received upon
sale is treated as capital gain or loss. If instead the optionee were not to
comply with such periods, ordinary income is recognized in the year of
disposition of the shares in an amount equal to the sale price (or, for other
transfers, the fair market value on the date of transfer) or the fair market
value on the date of exercise (whichever is less) less the option price. In
such event, any item of tax preference otherwise generated upon the exercise of
the option is disregarded. Alco will not be allowed a deduction for federal
income tax purposes in connection with the grant or exercise of any ISO. If the
shares acquired were disposed of during the one-year or two-year periods as
described above, Alco will be entitled to deduct an amount equal to the
ordinary income recognized by the optionee.

As to non-ISOs, the optionee will recognize ordinary income upon the exercise
of the option to the extent that the fair market value of the shares at the
time of exercise exceeded the option price. Alco is entitled to a deduction for
federal income tax purposes to the extent of the ordinary income which results
to the optionee subject to any deduction limitation imposed by Section 162(m)
of the Code. For the purpose of subsequent disposition of the stock (which
would be treated as any other sale of stock), the optionee's cost basis is
equal to the option price plus any amount recognized as ordinary income, and
the holding period for the stock commences with the exercise of the option.

TERMINATION AND AMENDMENT

The Board may amend or terminate the 1995 Stock Option Plan in any manner and
at any time, except that no such amendment or termination may adversely affect
the rights of the holders of then outstanding options, without such holders'
consent.

BOARD RECOMMENDATION

The Board recommends that the shareholders approve the 1995 Stock Option
Plan. The favorable vote of a majority of the votes cast at the meeting is
required for approval.

15
<PAGE>

IV. APPROVAL OF ANNUAL BONUS PLAN

The Board of Directors recommends that the shareholders approve the Annual
Bonus Plan (the "Bonus Plan"). The Bonus Plan authorizes the award of cash
bonuses to eligible individuals.

BACKGROUND

The Bonus Plan was adopted by the Board of Directors on November 11, 1994 as
the continuation of a program initiated in the 1960's intended to attract and
retain key employees, to encourage key employees to devote their best efforts
to Alco and to recognize key employees for their contributions to the overall
success of Alco. It provides for the payment of annual cash bonuses following
the close of each fiscal year, based upon the achievement of objective
performance goals.

The "performance-based compensation" exception to the annual $1,000,000
deduction limit of Section 162(m) of the Code is available with respect to
compensation which is conditioned upon and paid only if (i) certain performance
business goals are attained and (ii) such goals and the maximum amount of
compensation to be paid upon meeting such goals are disclosed to and approved
by shareholders. The Bonus Plan satisfies both criteria, and is being submitted
to the shareholders in order to exclude amounts paid under the Bonus Plan to
individuals named in the Summary Compensation Table ("Covered Executives") from
compensation which is subject to the $1,000,000 deduction limit.

ADMINISTRATION AND DETERMINATION OF BONUS

The Bonus Plan will be administered by the Human Resources Committee. All
decisions made by the Human Resources Committee in designating employees
eligible to receive bonuses, determining performance objectives, determining
types of bonuses to be paid, determining bonus amounts, determining how and
when bonuses will be paid and construing the provisions of the Bonus Plan shall
be final. Participation is generally limited to management employees. Bonuses
paid to individuals, other than Covered Executives, will be paid at the
discretion of the Human Resources Committee.

KEY FEATURES OF PLAN

For each Covered Executive, the Human Resources Committee establishes
objective performance goals under which a bonus can be paid to the Covered
Executive. The Human Resources Committee establishes, in writing, for each
fiscal year, the bonus opportunity for each Covered Executive, the performance
goals, the specific performance criteria and the appropriate weight of each
performance criteria and the performance target or range of targets to measure
satisfaction, in whole or in part, of the performance goals.

At the end of the performance period, the Human Resources Committee will
evaluate Alco's performance based upon the achievement of the pre-established
performance goals and certify, in writing, the extent to which the specific
performance criteria were attained. Individual awards will be determined based
on performance against the pre-established goals.

TERMINATION AND AMENDMENT

The Board may amend or terminate the Bonus Plan in any manner and at any
time. Neither the Bonus Plan nor any provision thereof precludes Alco from
adopting or continuing other compensation arrangements, which arrangements may
be either generally applicable or applicable only in specific cases.

BOARD RECOMMENDATION

The Board recommends that the shareholders approve the Annual Bonus Plan. The
favorable vote of a majority of the votes cast at the meeting is required for
approval.

16
<PAGE>

V. APPROVAL OF LONG TERM INCENTIVE COMPENSATION PLAN

The Board of Directors recommends that the shareholders approve the amended
and restated Long Term Incentive Compensation Plan (the "LTIP"). The LTIP is
intended to motivate, recognize and reward full-time employees of Alco and its
subsidiaries for long-term performance at the corporate, group and company
levels.

BACKGROUND

The LTIP originally became effective as of October 1, 1992. As originally
adopted, the LTIP permitted participants to earn option credits if specified
performance targets were met. Participants could use these option credits to
pay the exercise price for stock options granted in conjunction with the LTIP
award, thereby enabling participants to acquire shares of common stock without
payment of the exercise price. The amended and restated LTIP was approved by
the Board in November 1994, subject to shareholder approval. The amended and
restated LTIP achieves the same purpose as the original LTIP, and has been
designed to comply with the performance-based compensation exception to section
162(m) of the Code. Subject to shareholder approval of the amended and restated
LTIP, stock awards have been granted under the amended and restated LTIP to
replace all LTIP stock options granted under the original LTIP.

As with the Bonus Plan, the LTIP satisfies the "performance-based"
compensation exception to Section 162(m), and is being submitted to
shareholders in order to exclude amounts paid under the LTIP to Covered
Executives from compensation subject to the annual $1,000,000 deduction limit.

ADMINISTRATION AND DETERMINATION OF LTIP AWARDS

The LTIP is administered by the Human Resources Committee, which has the
authority to select the employees to whom awards will be made. The Committee
also determines the number of shares of Alco common stock subject to each award
and sets the objective performance goals that must be met within a specified
time period in order for the employee to receive the shares. All management
personnel, including Covered Executives, are eligible for selection to
participate in the LTIP.

KEY FEATURES OF THE PLAN

The performance goals specified by the Committee generally relate to the
performance of the employee's business unit or the performance of Alco as a
whole. Measurements of performance may include stock price, sales, earnings per
share, return on equity, return on assets, growth in assets, total shareholder
return or such other objective performance goals as may be established by the
Committee.

If the applicable performance goals are met within the specified time period
and the Committee so certifies, Alco will cause a stock certificate
representing the number of shares to which the employee is entitled to be
issued to the employee. The employee may elect to have up to one-third of the
value of the award withheld by Alco to satisfy tax obligations. If the
Committee does not certify that the applicable performance goals have been met
within the specified time period, the award will be forfeited.

A maximum of 2,500,000 shares may be issued under the LTIP (subject to
adjustment in certain cases). Shares subject to awards which are forfeited
under the LTIP will be available to be awarded again under the LTIP.

TERMINATION AND AMENDMENT

The Board may amend or terminate the LTIP in any manner and at any time.
Neither the LTIP nor any provision thereof precludes Alco from adopting or
continuing other compensation arrangements, which arrangements may be either
generally applicable or applicable only in specific cases.

BOARD RECOMMENDATION

The Board recommends that the shareholders approve the amended and restated
Long Term Incentive Compensation Plan. The favorable vote of a majority of the
votes cast at the meeting is required for approval.

17
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VI. GENERAL AND OTHER MATTERS

The Board of Directors knows of no matter, other than as referred to in this
proxy statement, which will be presented at the annual meeting of shareholders.
However, if other matters properly come before the meeting or any of its
adjournments, the person or persons voting the proxies will vote them in
accordance with their judgment in such matters. The Board of Directors is not
aware that any nominee named herein will be unable or unwilling to accept
nomination or election. Should any nominee for the office of director become
unable to accept nomination or election, the persons named in the proxy will
vote for the election of such other person, if any, as the Board of Directors
may recommend.

As the independent auditors for Alco, Ernst & Young LLP audited the financial
statements of Alco for the fiscal year ended September 30, 1994 and will audit
certain of its employee benefit plans as of that date. The Audit Committee of
the Board of Directors has appointed Ernst & Young LLP as the auditors for Alco
for the 1995 fiscal year. Representatives of Ernst & Young LLP are expected to
be present at the meeting, and will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to questions.

The cost of soliciting proxies will be borne by Alco. Employees of Alco may
solicit proxies personally or by telephone. In addition to solicitation by mail
and by employees, arrangements have been made with Corporate Investor
Communications, Inc. to solicit proxies, at an expected cost of $7000 (plus
out-of-pocket expenses).

Votes are tabulated by National City Bank, Alco's transfer agent. Shares
represented by abstentions are counted in determining the number of shares
present at a meeting, but are not counted as a vote in favor of a proposal, and
therefore have the same effect as a vote against a proposal. Broker non-votes
are counted in determining the number of shares present at a meeting for
purposes of the proposal to elect directors, but not for purposes of any other
proposal. Broker non-votes have the effect of a vote against the proposal to
elect directors, a vote against the proposal to amend the Amended Articles of
Incorporation, but are not counted as either a vote for or against the other
proposals described in this proxy statement.

You are urged to sign and return your proxy promptly to make certain your
shares will be voted at the meeting. You may revoke the proxy at any time
before it is voted by giving notice to the Secretary of the corporation, and if
you attend the meeting, you may vote your shares in person. For your
convenience, a return envelope is enclosed, requiring no additional postage if
mailed in the United States.

1996 ANNUAL MEETING

If a shareholder desires to propose a matter for inclusion in the proxy
material for the annual meeting of shareholders to be held in 1996, or to
recommend nominees for election to Alco's Board of Directors, the Secretary of
Alco must receive any such proposal or recommendation no later than August 5,
1995 at its principal office in Valley Forge, Pennsylvania.

J. Kenneth Croney
Secretary

November 30, 1994

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ALCO STANDARD CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY

The undersigned holder of Alco Standard Corporation Common Stock and/or
Serial Preferred Stock hereby appoints Hugh G. Moulton, O. Gordon Brewer, Jr.,
and J. Kenneth Croney, and each of them, the Proxies of the undersigned, with
full power of substitution, to vote the shares of the undersigned at the Annual
Meeting of Shareholders to be held on January 26, 1995, and at any adjournment
thereof, for the transaction of such business as may come before the meeting.
The undersigned hereby instructs said Proxies to vote said shares upon the
proposals set forth in the proxy statement furnished by the Board of Directors,
as follows:

Election of Directors

[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below

J.M. Buck, P.J. Darling, W.F. Drake, J.J. Forese, F.S. Hammer,
B.B. Hauptfubrer, D.G. Mead,

R. B. Mundt, P.C. O'Neill, R.G. Sada, J.W. Stratton, J.E. Stuart

(To withhold authority to vote for a nominee, write such person's name below)

- --------------------------------------------------------------------------------
Proposal to Amend Articles of Incorporation to Increase Amount of Authorized
Common Stock
[_] FOR [_] AGAINST [_]ABSTAIN

Proposal to Approve 1995 Stock Option Plan
[_] FOR [_] AGAINST [_]ABSTAIN

Proposal to Approve Annual Bonus Plan
[_] FOR [_] AGAINST [_]ABSTAIN

Proposal to Approve Long Term Incentive Compensation Plan
[_] FOR [_] AGAINST [_]ABSTAIN

(Please sign on other side)
- --------------------------------------------------------------------------------

(Continued from reverse side)

THIS PROXY WILL BE VOTED AS DIRECTED ON THE OTHER SIDE, OR, IF NO DIRECTION
IS INDICATED, WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS, FOR
--- ---
THE PROPOSAL TO APPROVE THE 1995 STOCK OPTION PLAN, FOR THE PROPOSAL TO APPROVE
---
THE ANNUAL BONUS PLAN, AND FOR THE PROPOSAL TO APPROVE THE LONG TERM INCENTIVE
---
COMPENSATION PLAN.

Dated _________________, 199_

_____________________________
Signature