<PAGE>
Rule 424(b)(3)
Registration No. 33-
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO +
+ COMPLETION OR AMENDMENT. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 5, 1995
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 18, 1994
3,400,000 SHARES
ALCO STANDARD CORPORATION
$ DEPOSITARY SHARES
EACH REPRESENTING 1/100 OF A SHARE OF CONVERSION PREFERRED STOCK, SERIES BB
(AUTOMATICALLY CONVERTIBLE EQUITY SECURITIES)
(NO PAR VALUE)
(SUBJECT TO CONVERSION INTO SHARES OF COMMON STOCK)
-----------
Each of the $ Depositary Shares represents ownership of 1/100 of a share
of Conversion Preferred Stock, Series BB, no par value ("Automatically
Convertible Equity Securities" or the "Securities"), of Alco Standard
Corporation, to be deposited with National City Bank, as Depositary, and
entitles the holder to such proportion of all the rights and preferences of the
Security represented thereby.
The annual dividend rate payable with respect to each Depositary Share is
$ (based on the annual dividend rate for each Security of $ ), will be
cumulative from the date of issuance and will be payable quarterly in arrears,
commencing October 1, 1995. The liquidation preference applicable to each
Depositary Share (based on the liquidation preference of each Security) is
equal to the sum of (i) the per share initial public offering price shown below
and (ii) 1/100 of the amount of accrued and unpaid dividends on each Security.
On October 1, 1998 (the "Mandatory Conversion Date"), unless previously
converted at the option of the holder, each of the outstanding Depositary
Shares will automatically convert into a number of shares of Common Stock of
the Company equal to the Exchange Rate. The Exchange Rate is equal to (a) if
the Current Market Price is greater than or equal to $ per share (the
"Threshold Price"), . of a share of Common Stock per Depositary Share,
(b) if the Current Market Price is less than the Threshold Price but greater
than the Initial Price, a fractional share of Common Stock per Depositary Share
having a value (determined at the Current Market Price) equal to the Initial
Price, and (c) if the Current Market Price is less than or equal to the Initial
Price, one share of Common Stock per Depositary Share, subject in each case to
adjustment in certain events. The "Initial Price" is $ per share of Common
Stock. The "Current Market Price" means the average Closing Price per share of
Common Stock of the Company on the 20 Trading Days immediately prior to, but
not including, the Mandatory Conversion Date.
At any time after September , 1995 and prior to the Mandatory Conversion
Date, each of the Depositary Shares is convertible at the option of the holder
thereof into . of a share of Common Stock of the Company, equivalent to a
conversion price per share equal to the Threshold Price, subject to adjustment
in certain events (such conversion rate being equivalent to shares of Common
Stock for each Security).
Holders of Depositary Shares will receive dividends at a higher annual rate
than the current annual dividends paid on the Common Stock of the Company. The
opportunity for equity appreciation afforded by an investment in the Depositary
Shares (and the Securities represented thereby), however, is less than that
afforded by an investment in the Common Stock. Holders of Depositary Shares
will realize no equity appreciation if at the Mandatory Conversion Date the
Current Market Price of the Common Stock is below the Threshold Price and less
than all of the appreciation if at such time the Current Market Price of the
Common Stock is above the Threshold Price. Holders of Depositary Shares will
realize the entire decline in equity value if at such time the Current Market
Price of the Common Stock is below the initial per share public offering price
shown below. For a detailed description of the terms of the Securities and the
Depositary Shares, see "Description of Securities" and "Description of
Depositary Shares."
Application has been made to list the Depositary Shares on the New York Stock
Exchange under the symbol ASNPrB. On July 5, 1995, the last reported sale price
of the Common Stock on the New York Stock Exchange was $79 per share.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Depositary Share.................... $ $ $
Total (3)............................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $420,920 payable by the Company.
(3) The Company has granted to the Underwriters an option for 30 days to
purchase up to an additional Depositary Shares at the initial public
offering price, less the underwriting discount, solely to cover over-
allotments. If such option is exercised in full, the total Initial Public
Offering Price, Underwriting Discount, and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."
-----------
The Depositary Shares are offered severally by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that receipts for the
Depositary Shares will be ready for delivery in book entry form only through
the facilities of The Depository Trust Company in New York, New York, on or
about July , 1995.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
-----------
The date of this Prospectus Supplement is July , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEPOSITARY
SHARES OFFERED HEREBY AND OF THE OUTSTANDING COMMON STOCK OF THE COMPANY AT
LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PHILADELPHIA
STOCK EXCHANGE, THE CHICAGO STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMPANY
Alco Standard Corporation ("Alco" or the "Company") is a marketing,
distribution, and services company with operations in two primary businesses:
Alco Office Products ("AOP") and Unisource ("Unisource"). Alco's fiscal 1994
revenues were approximately $8 billion and its operating income was $362
million.
AOP is the largest independent copier distribution network in North America
and the United Kingdom, with a presence in Europe. AOP has more than 770
locations in forty-seven states, four Canadian provinces and Europe. AOP
sells, rents and leases copiers, fax machines and other automated office
equipment. AOP also provides equipment services and supplies, reprographic
facilities management and specialized document copying services. Through its
captive leasing companies, AOP finances equipment leases for customers of AOP
companies throughout the United States, Canada and the United Kingdom. In
fiscal 1994, AOP's revenues were $2.2 billion and its operating income was
$199.4 million.
Unisource is North America's largest marketer and distributor of paper and
imaging products and supply systems, which includes disposable paper and
plastic products, packaging systems and supplies, and sanitary maintenance
supplies. Unisource has facilities in every major metropolitan market in the
United States and in every province of Canada. Unisource focuses on five
market segments: commercial printing, business imaging, general manufacturing,
food processing and retail grocery. Unisource combines its broad array of
products with specialized customer services and is implementing a
sophisticated information technology system to offer custom solutions which
lower the total customer cost of procurement and improve the efficiency of
customers' operations. In fiscal 1994, Unisource's revenues were $5.8 billion
and its operating income was $162.3 million.
Alco pursues an active strategic acquisition program for both AOP and
Unisource. From October 1, 1991 through March 31, 1995, Alco acquired 123
companies for a total purchase price of approximately $1 billion. This amount
includes both cash and stock transactions, with approximately one-half of such
amount spent on acquisitions for AOP and approximately one-half spent on
acquisitions for Unisource. Alco expects that acquisitions will continue to
play an important role in its growth strategy.
Alco is managed as "The Corporate Partnership." Under this entrepreneurial
philosophy, field executives maintain a high degree of operating autonomy over
issues that affect the Company's ability to serve customers, while financial
and administrative support is provided on a centralized basis.
S-2
<PAGE>
RECENT DEVELOPMENTS
In May 1995, AOP signed a distribution agreement with Oce van der Grinten
N.V., a Netherlands-based manufacturer and distributor of office equipment
("Oce"). The agreement grants AOP distribution rights in the U.S. for the Oce
high volume models 2475 and 2600. Oce's products are new to the American
market, but well-known in Europe. Oce's products are recognized for their
speed, quality and durability. The Company believes that Oce's superior
quality, high volume copiers will allow AOP to compete for the first time in
this attractive segment of the copier market which represents nearly one-
quarter of total copy volume in the United States.
In June 1995, Alco acquired through Erskine Limited, its subsidiary in the
United Kingdom, Southern Business Group, a publicly held office products
dealer located in the U.K. for a purchase price of approximately $131 million.
This acquisition nearly doubles AOP's market share in the U.K. and adds world-
class copier remanufacturing capability which offers additional opportunities
for growth.
On June 30, 1995, Alco announced that it had reached an agreement in
principle to sell Central Products Company to Spinnaker Industries, Inc.
Central Products, which manufactures and markets a wide variety of carton
sealing tapes, is Alco's last remaining manufacturing company, with annualized
revenues of approximately $125 million. The transaction is subject to several
conditions, including financing, which are expected to be satisfied prior to
the end of Alco's fiscal year. Alco does not expect to recognize a loss in
connection with the transaction.
Alco expects to report earnings for the third quarter ended June 30, 1995 on
July 20, 1995. The Company expects earnings of approximately $.98 per share
for the quarter, which represents a 22.5% increase over adjusted earnings per
share of $.80 for the third quarter of fiscal 1994. The Company's anticipated
third quarter results are consistent with its earnings expectation of $3.60
per share for the fiscal year ending September 30, 1995.
USE OF PROCEEDS
The purpose of the offering is to fund the Company's ongoing acquisition
program. The net proceeds of the sale of the Depositary Shares, estimated to
be $ after deducting the underwriting discount and estimated offering
expenses (assuming no exercise of the Underwriters' over-allotment option),
will be used to repay short-term borrowings incurred to fund working capital
requirements and acquisitions. During the nine months ended June 30, 1995, the
Company's cash acquisition costs were $244.4 million. See "The Company." At
June 30, 1995, such short-term borrowings carried an average interest rate of
6.3% and had a maturity of one to twenty-one days.
S-3
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company at March 31, 1995 and as adjusted to reflect the
issuance of the Series BB Conversion Preferred Stock (assuming no exercise of
the Underwriters' overallotment option) and the application of the proceeds
therefrom to repay bank debt as described in "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Short-Term Debt.................................. $ 232,168 $
---------- ----------
Long-Term Debt:
Notes Payable........................................ $ 100,000 $ --
8 7/8% Notes due 2001................................ 150,000 150,000
Private Placement Debt............................... 70,000 70,000
Industrial Revenue Bonds............................. 10,353 10,353
Sundry Notes, Bonds and Mortgages.................... 38,862 38,862
Present Value of Capital Lease Obligations........... 27,059 27,059
Notes Payable to Insurance Company................... 60,000 60,000
---------- ----------
456,274 356,274
Less Current Maturities.............................. 14,953 14,953
---------- ----------
Long-Term Debt......................................... 441,321 341,321
Finance Subsidiaries Debt (including current maturi-
ties)................................................. 616,555 616,555
Shareholders' Equity:
Series BB Conversion Preferred Stock, no par value... --
Series AA Convertible Preferred Stock, no par value
(4,025,000 depositary shares issued and outstanding)
(1)................................................. 200,918 200,918
Common Stock, no par value (authorized 150,000,000
shares; issued 55,082,000 shares) (2)............... 588,011 588,011
Retained Earnings.................................... 687,747 687,747
Foreign Currency Translation Adjustment.............. (31,782) (31,782)
Cost of Common Shares in Treasury (214,000 shares)... (13,501) (13,501)
---------- ----------
Total Shareholders' Equity............................. 1,431,393
---------- ----------
Total Capitalization................................... $2,489,269
========== ==========
</TABLE>
- --------
(1) Series AA Preferred Stock is redeemable for common stock at the option of
the Company commencing January 9, 1996, provided that the closing price of
the Common Stock of the Company on the New York Stock Exchange exceeds
$58.03 for twenty of the thirty consecutive trading days prior to January
9, 1996. See "Description of Capital Stock--Redemption Provisions and
Sinking Fund--Preferred Stock" in the accompanying Prospectus. Given the
current price of the Common Stock, the Company anticipates that it will
exercise this option to redeem the Series AA preferred shares.
(2) At March 31, 1995, options to purchase 2,507,022 shares of Common Stock
were outstanding under the Company's stock option plans.
S-4
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The following table sets forth the high and low closing sales prices of the
Company's Common Stock on the NYSE, as reported on the NYSE Composite Tape,
and dividends per share declared on the Company's Common Stock during the
periods indicated:
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
Year ended September 30, 1993
First Quarter....................................... $38 1/2 $33 1/4 $0.24
Second Quarter...................................... 45 3/4 35 3/4 0.24
Third Quarter....................................... 50 5/8 44 3/4 0.24
Fourth Quarter...................................... 49 3/8 42 1/4 0.24
Year ended September 30, 1994
First Quarter....................................... 54 3/4 43 1/2 0.25
Second Quarter...................................... 58 7/8 51 1/2 0.25
Third Quarter....................................... 60 3/8 49 1/2 0.25
Fourth Quarter...................................... 65 1/2 57 0.25
Year ended September 30, 1995
First Quarter....................................... 63 7/8 53 0.26
Second Quarter...................................... 73 3/4 61 7/8 0.26
Third Quarter....................................... 79 7/8 69 1/4 0.26
Fourth Quarter (through July 5, 1995)............... 80 3/8 79
</TABLE>
For a recent sale price, see the cover page of this Prospectus Supplement.
Alco currently expects to continue its policy of paying regular cash
dividends, although dividend payments are determined at the discretion of the
Board of Directors and will depend upon the Company's future operating
results, capital requirements and financial condition. Certain loan agreements
limit the amount of consolidated retained earnings from which Alco may pay
dividends.
SELECTED FINANCIAL INFORMATION
The following annual data has been derived from financial statements audited
by Ernst & Young LLP, independent auditors. Consolidated balance sheets at
September 30, 1994 and September 30, 1993 and the related consolidated
statements of income, cash flows and changes in shareholders' equity for each
of the three fiscal years in the period ended September 30, 1994, and the
related auditor's report, appear in the Company's 1994 Annual Report to
Shareholders, portions of which are incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended September 30, 1994 (as amended
by its Form 10-K/A's filed on November 30, 1994 and March 17, 1995). Interim
data presented are unaudited, but management believes that all adjustments
necessary for a fair presentation have been made. Operating results for the
six months ended March 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1995. The information
set forth below should be read in conjunction with the financial statements
and discussion included in the Form 10-K (as amended by the Form 10-K/A's) and
in the Form 10-Q for the quarter ended March 31, 1995 incorporated by
reference in the accompanying Prospectus.
S-5
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
--------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Net Sales............... $4,586,145 $3,858,616 $7,925,784 $6,387,078 $4,882,908 $4,481,324 $4,266,802
Dividends, Interest and
Other Income........... 1,562 1,849 3,537 6,332 3,292 6,088 8,529
Finance Subsidiaries.... 39,728 30,739 66,731 51,149 38,936 28,565 18,099
---------- ---------- ---------- ---------- ---------- ---------- ----------
4,627,435 3,891,204 7,996,052 6,444,559 4,925,136 4,515,977 4,293,430
---------- ---------- ---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Goods Sold...... 3,425,488 2,881,318 5,884,819 4,799,757 3,638,494 3,390,246 3,259,889
Selling and
Administrative......... 1,001,930 856,440 1,765,483 1,378,814 1,069,602 946,756 864,415
Interest................ 26,997 22,281 43,802 40,189 31,680 37,426 41,792
Finance Subsidiaries
Interest............... 16,597 12,827 27,978 23,662 19,523 15,747 11,150
---------- ---------- ---------- ---------- ---------- ---------- ----------
4,471,012 3,772,866 7,722,082 6,242,422 4,759,299 4,390,175 4,177,246
---------- ---------- ---------- ---------- ---------- ---------- ----------
Restructuring Costs..... (175,000)
Loss from Unconsolidated
Affiliate.............. (1,893) (117,158) (2,538)
Investment Gain, Net.... 6,683 5,599
Unusual Charges......... (10,323)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Continuing
Operations Before
Taxes.................. 156,423 116,445 156,812 24,599 172,520 125,802 111,460
Taxes on Income......... 61,829 46,570 86,203 16,984 68,303 49,160 47,160
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income From Continuing
Operations............. 94,594 69,875 70,609 7,615 104,217 76,642 64,300
Income (Loss) From
Discontinued
Operations, Net of
Income Taxes........... (7,515) (8,455) 40,939 29,232
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.............. 94,594 69,875 70,609(1) 100 (2) 95,762 117,581 93,532
---------- ---------- ---------- ---------- ---------- ---------- ----------
Preferred Dividends..... 5,786 5,786 11,572 9,571
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)
Available to Common
Shareholders........... $ 88,808 $ 64,089 $ 59,037(1) $ (9,471)(2) $ 95,762 $ 117,581 $ 93,532
========== ========== ========== ========== ========== ========== ==========
EARNINGS (LOSS) PER
SHARE:
Continuing Operations... $ 1.60 $ 1.24 $ 1.10 $ (.04) $ 2.22 $ 1.70 $ 1.44
Discontinued Operations. (.16) (0.18) 0.91 0.66
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 1.60 $ 1.24 $ 1.10 $ (.20) $ 2.04 $ 2.61 $ 2.10
========== ========== ========== ========== ========== ========== ==========
Dividends Per Share..... $ 0.52 $ 0.50 $ 1.00 $ 0.96 $ 0.92 $ 0.88 $ 0.84
BALANCE SHEET DATA (AT
PERIOD END):
Working Capital......... $ 688,442 $ 631,044 $ 653,546 $ 556,551 $ 496,037 $ 515,956 $ 404,280
Total Assets............ 3,987,095 3,486,425 3,502,258 3,348,890 2,444,761 2,020,571 1,916,485
Total Debt, Excluding
Finance Subsidiaries... 688,442 587,963 445,069 794,318 481,686 304,245 290,994
Total Debt of Finance
Subsidiaries........... 616,555 454,927 464,882 413,092 300,509 220,666 159,584
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Debt............. 1,304,997 1,042,890 909,951 1,207,410 782,195 524,911 450,578
Shareholders' Equity.... 1,431,393 1,364,441 1,367,144 1,020,616 860,363 821,195 748,212
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS: (3)
Including Captive
Finance Subsidiaries .. 3.1 2.9 3.1 1.1(4) 3.5 2.8 2.7
Excluding Captive
Finance Subsidiaries .. 3.6 3.3 3.5 1.1(4) 4.2 3.2 3.0
</TABLE>
- -------
(1) Includes a pretax charge of $115 million ($95 million net of taxes or
$1.77 per share for the fiscal year) for the sale of the Company's
investment in IMM Office Systems GmbH, a European distributor of office
products.
(2) Includes a pretax charge of $175 million ($113 million net of taxes or
$2.38 per share) for Unisource restructuring costs.
(3) For purposes of calculating this ratio, earnings consist of income from
continuing operations before provisions for income taxes and preferred
stock dividends and excluding the loss from unconsolidated affiliate, plus
fixed charges. Fixed charges include interest expense on indebtedness, and
an estimate of the interest component of rental expense. Preferred stock
dividends include the pretax earnings required to cover preferred stock
dividend requirements. The first ratio gives effect to the consolidation
of the captive finance subsidiaries of Alco Office Products. The second
ratio excludes the income from continuing operations before provision for
income taxes, and the fixed charges and any preferred stock dividends
attributable to those captive finance subsidiaries.
(4) The 1993 ratios include the Unisource $175 million ($113 million net of
taxes) restructuring charge; if the restructuring charge were excluded for
1993, the ratios would be 2.8 (including captive finance subsidiaries) and
3.4 (excluding captive finance subsidiaries).
S-6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS--SIX MONTHS ENDED MARCH 31, 1995 COMPARED WITH SIX
MONTHS ENDED MARCH 31, 1994
Revenues and income before taxes for the first half of fiscal 1995 versus
the first half of fiscal 1994 were as follows:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ------------------------
MARCH 31 MARCH 31
-------------- --------------
1995 1994 % CHANGE 1995 1994 % CHANGE
------ ------ -------- ------ ------ --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
AOP.......................... $1,334 $1,042 28.0% $114.2 $ 90.3 26.5%
Unisource
United States.............. 2,918 2,534 15.2 78.5 63.2 24.2
Canada..................... 379 319 18.8 17.1 5.1
------ ------ ------ ------
Total Unisource.......... 3,297 2,853 15.6 95.6 68.3 40.0
------ ------ ------ ------
Operating.................... 4,631 3,895 18.9 209.8 158.6 32.3
Unconsolidated affiliate..... (1.9)
Interest..................... (27.0) (22.3)
Eliminations and
nonallocated................ (3) (4) (26.4) (18.0)
------ ------ ------ ------
$4,628 $3,891 18.9% $156.4 $116.4 34.4%
====== ====== ====== ======
</TABLE>
Alco Office Products contributed $292 million of additional revenues, of
which $73 million related to fiscal 1994 acquisitions and $37 million to
fiscal 1995 acquisitions. The remaining $182 million increase reflects
continued internal growth in all revenue areas of AOP's base companies, but
particularly in its equipment sales, service and facilities management
businesses. The $384 million increase in revenues from Unisource's U.S.
operations includes $6 million from prior year acquisitions and $17 million
from current acquisitions. The remaining $361 million increase reflects
internal growth from its base companies. The $60 million revenue increase in
the Unisource Canadian paper businesses is attributable to price and volume
increases in the fine paper and supply systems businesses and is despite the
negative impact from foreign exchange rates.
AOP's operating income increase of $23.9 million includes $6.3 million from
prior year acquisitions and $3.2 million from current acquisitions. The
remaining $14.4 million increase reflects internal growth from its base
companies which is primarily the result of higher operating contributions from
the service, facilities management and supply areas of AOP's businesses, along
with increased operating income related to its leasing activities through Alco
Capital Resource, Inc. ("Alco Capital"). Operating income from Unisource's
U.S. paper operations increased $15.3 million. This increase represents a
contribution of $1.2 million from current and prior year acquisitions. The
remaining $14.1 million is from its base companies which reflects the impact
of price and volume increases along with the cost reductions realized from the
restructuring. The Canadian paper distribution business increase in operating
income of $12 million is the result of the growth and price increases in the
fine paper distribution business and cost reductions which combined more than
offset any negative fluctuations in the Canadian foreign exchange rates.
Geographically, revenues from the Company's paper and office products
operations outside the U.S. was $518 million for the first half of fiscal 1995
compared to $413 million for the same period in the prior fiscal year. The
increase reflects $60 million from the Canadian paper distribution business
and $7 million of internal growth in the AOP Canadian operations. It also
reflects $38 million relating to the European operations of Erskine and two
companies acquired in September 1994.
S-7
<PAGE>
Operating income from foreign operations was $26 million for the six months
ended March 31, 1995, up $14 million from the prior year, primarily the result
of the increase in operating income of the Canadian paper distribution
business. For the first six months of fiscal 1994, the Company incurred a $1.9
million loss from its investment in an unconsolidated affiliate, IMM Office
Systems GmbH ("IMMOS").
Interest expense increased by $4.7 million from the comparable period in
fiscal 1994, a result of higher borrowing levels and interest rates during
fiscal 1995, offset by the effect of the debt reduction resulting from the
Company's common stock offering in December 1993. The increase in income
before taxes of 34.4% or $40 million is a combined result of improved
operations from our base companies along with the earnings contributed by
acquisitions. The effective income tax rate for the current period was 39.5%
compared with 40% in fiscal 1994. At March 31, 1995 weighted average shares
were 3.9 million shares greater than the 52 million shares at March 31, 1994.
This increase includes the impact of a public offering of common stock in
December 1993 and acquisition activity.
The major components of the Unisource restructuring plan are proceeding as
planned. Unisource management has reduced the pace at which changes are being
made in order to better control the transformation process, thereby affecting
the pace of planned headcount reductions and the timing of originally
anticipated cost reductions. Unisource does expect to achieve in fiscal 1997
the full benefit of the projected annual $100 million net cost reductions
resulting from the completion of the restructuring. The restructuring reserve
at March 31, 1995 is $85.2 million, which management continues to believe is
adequate to complete the restructuring plan.
The Company was in arbitration with a former subsidiary, which had asserted
that the Company was liable to it for certain liabilities arising under the
Coal Industry Health Benefit Act of 1992. The Company has agreed to pay $10
million to the former subsidiary to settle claims arising under this claim,
which primarily has been charged against existing reserves for discontinued
operations. The Company paid $5 million during the second quarter of fiscal
1995 with the remaining $5 million to be paid over the next four years.
RESULTS OF OPERATIONS--1994
Revenues and income before taxes by segment for fiscal years ended September
30, 1994 and September 30, 1993 and the percentage change for 1994 versus 1993
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ----------------------------
1994 1993 % CHANGE 1994 1993 % CHANGE
------ ------ -------- ------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
AOP...................... $2,240 $1,586 41.2% $ 199.4 $ 138.8 43.7%
Unisource
United States.......... 5,108 4,174 22.4 148.8 118.7 25.4
Canada................. 649 690 (5.9) 13.5 18.3 (26.2)
Restructuring costs.... (175.0)
------ ------ ------- -------
Total Unisource...... 5,757 4,864 18.4 162.3 (38.0)
Operating................ 7,997 6,450 24.0 361.7 100.8
Unconsolidated affiliate. (117.2) (2.5)
Eliminations and
nonallocated............ (1) (5) (87.7)* (73.7)*
------ ------ ------- -------
$7,996 $6,445 24.1 $ 156.8 $ 24.6
====== ====== ======= =======
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
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FISCAL 1994 COMPARED TO FISCAL 1993
The Company's revenues for fiscal 1994 were $8 billion, an increase of $1.5
billion over fiscal 1993 revenues of $6.5 billion. Income before taxes from
operations increased to $361.7 million from $100.8 million in fiscal 1993,
which included a restructuring charge of $175 million related to the Unisource
operations. Earnings per share from continuing operations for fiscal 1994 were
$1.10 compared to $(.04) for fiscal 1993 which included a loss of $2.38 per
share resulting from the Unisource restructuring charge. Earnings per share
excluding the loss on the sale of the investment in IMMOS in fiscal 1994 and
the effect of the restructuring charge in fiscal 1993 were $2.87 and $2.34,
respectively.
AOP generated $654 million in increased revenues of which $288 million
relates to fiscal 1993 acquisitions and $134 million to fiscal 1994
acquisitions. The remaining $232 million increase reflects continued internal
growth in all revenue areas of AOP's base companies, particularly in its
equipment, service and facilities management businesses. The $934 million
increase in revenues from Unisource's U.S. operations includes $764 million
from acquisitions (primarily Butler Paper) and $170 million of internal growth
from its base companies. The $41 million revenue decrease in the Unisource
Canadian paper businesses is primarily attributable to a 5.9% decrease in the
average foreign exchange rate.
AOP's operating income increase of $60.6 million includes $16.4 million from
prior year acquisitions and $10.2 million from current year acquisitions. The
remaining $34 million increase reflects continued internal growth from its
base companies which is primarily the result of higher operating contributions
from the service, supply and facilities management areas of AOP's businesses,
along with increased operating income related to its leasing activities
through Alco Capital. Operating income from Unisource's U.S. paper operations
increased $30.1 million. This increase represents a contribution of $17.6
million from prior year acquisitions and $12.5 million from its base
companies. The internal growth is attributable to improved gross margins and
expense reductions realized in the last half of the fiscal year offset
primarily by lower comparable margins experienced in the first half of the
year. The Canadian paper distribution business decrease in operating income of
$4.8 million is the result of the carryover of certain incremental merger
costs related to the Canadian merger plan implemented in fiscal 1993, gross
margin erosion in the first half of the fiscal year, and the effects of the
declining foreign exchange rates.
Geographically, revenues from the Company's paper and office products
operations outside the U.S. were $843 million for fiscal 1994 compared to $800
million for the prior fiscal year. The increase reflects $77 million from the
European operations of Erskine acquired in fiscal 1993 along with $7 million
from AOP internal growth offset by a decrease of $41 million from the Canadian
paper distribution business. Operating income from foreign operations was
$29.1 million for fiscal 1994, an increase of $1.8 million from the prior
year, the result of increased AOP foreign operations, offset by the decrease
in operating income of the Canadian paper distribution business.
The 49.9% investment in IMMOS in October 1992, marked the entry of the
Company into the European market, and it 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, had prevented IMMOS from progressing toward those goals. As a
result, in September 1994, the Company sold its 49.9% interest in IMMOS for
cash plus a passive interest in any subsequent sale of IMMOS for five years.
The Company retains no ongoing liability in the joint venture and the parties
exchanged complete mutual releases for past actions. In addition, the Company
was relieved of the covenant not to compete in Europe contained in the joint
venture agreement, although the parties will not compete with each other for a
period expiring on December 31, 1995. As part of the transaction, the Company
acquired
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profitable operations in Denmark and France and retained limited operations in
Germany. The Company recognized a loss on the sale of its interest in IMMOS in
the quarter ended June 30, 1994, and recorded a pretax loss of $115.3 million
($95.1 million, net of tax) equating to a loss per share of $1.75 for the
quarter ($1.77 for fiscal 1994). This charge represents the write-off of the
Company's investment in IMMOS plus certain transactional costs less cash
proceeds from the sale together with related tax benefits. For the fiscal year
ended September 30, 1994, the Company recorded a total pretax loss of $117.2
million from its investment in an unconsolidated affiliate. This includes the
pretax loss of $115.3 million relating to the sale previously discussed and a
$1.9 million operating loss on its investment through March 31, 1994.
Interest expense increased by $3.6 million from fiscal 1993, a result of
higher interest rates along with higher borrowing levels during the year to
fund acquisitions and working capital requirements. Income before taxes from
continuing operations increased by $132.2 million, which reflects the net
effect of the $115.3 million loss on the sale of IMMOS in fiscal 1994 and the
$175 million charge for restructuring costs in fiscal 1993. Income before
taxes from continuing operations also includes improved operating results from
base companies and earnings contributed by current and prior year acquisitions
net of increased interest costs and other corporate items. The effective
income tax rate for fiscal 1994 is 55% compared to 69% in fiscal 1993. The
effective income tax rate for fiscal 1994, excluding the effect of the sale of
IMMOS, is 39.1% compared with 39.6% in fiscal 1993, excluding the effect of
the restructuring costs. Fiscal 1994 weighted average shares were 6.3 million
shares greater than 47.4 million shares for fiscal 1993, primarily the result
of a public offering of common stock in December 1993.
Most facets of the Unisource restructuring plan announced in September 1993
are proceeding as planned. As of September 30, 1994, Unisource had
substantially completed 68 facility consolidations and reduced its employee
base by approximately 725. This excludes the data processing personnel that
transferred to Integrated Systems Solutions Corporation (ISSC), a subsidiary
of IBM, as part of the information technology system outsourcing agreement
with ISSC. However, due to a change in software, initial implementation of the
information technology system has been postponed.
At September 30, 1994, the remaining restructuring reserve is $107 million,
which management believes is adequate to complete the restructuring plan by
the end of fiscal 1996 and also obtain the goal of increasing Unisource's
operating return on sales to a run rate of 4% by the end of fiscal 1996. The
estimated cost to complete the facility consolidations is $44.4 million of
which a significant portion relates to costs to dispose and maintain
facilities which have been or will be vacated. Severance costs have been
incurred during 1994 in accordance with the plan and $23.8 million is the
estimated balance for severance costs. The related organizational and system
redesign is estimated to have a remaining cost of $16.2 million.
During the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"; the individual
and combined effect on earnings of these accounting changes was immaterial.
FINANCIAL CONDITION AND LIQUIDITY
Debt, excluding finance subsidiaries, was $688 million at March 31, 1995, an
increase of $243 million from the Company's debt balance at September 30, 1994
of $445 million. This increase in borrowing levels was primarily to satisfy
the Company's working capital and acquisition requirements. On December 1,
1994, the Company entered into a new credit agreement to borrow up to $500
million. This multi-currency facility replaced three other lines of credit
amounting to approximately $415 million. At the same time, the Company also
reduced the commitment under another agreement from $200
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<PAGE>
million to $100 million. The Company had a total of $600 million in bank
credit commitments as of March 31, 1995 of which $273 million were unused and
available. At March 31, 1995, debt as a percentage of capitalization was 32.5%
and the current ratio was 1.6 to 1.
On April 13, 1995, Erskine Limited, Alco's U.K. subsidiary, announced that
it had reached agreement on the terms of a recommended cash offer to acquire
all of the outstanding shares of Southern Business Group, a publicly held U.K.
company. The total purchase price for the shares was approximately $131
million.
The Company's change in cash from operating activities during the first six
months of fiscal 1995 primarily relates to working capital requirements.
Unisource's working capital primarily reflects the effects of substantial
price increases presently being experienced in the paper business along with
the increased sales volume. Changes relating to AOP primarily relate to
inventory resulting from both growth in the business along with supplier price
increases.
The Company estimates that total cash expenditures in connection with the
Unisource restructuring plan will amount to $148 million. In addition to the
$52 million spent in fiscal 1994, $16 million was expended in the first half
of fiscal 1995, totaling $68 million spent to March 31, 1995. Unisource
anticipates spending an additional $37 million during the remainder of fiscal
1995.
Finance subsidiaries' debt grew by $152 million from September 30, 1994, to
March 31, 1995, as a result of increased leasing activity. During the six
months ended March 31, 1995, Alco Capital issued an additional $203 million
under its Medium Term Notes Program which began in July 1994. At March 31,
1995, $308 million was outstanding under this program. On June 30, 1995, Alco
Capital increased the amount available to be offered under its Medium Term
Notes Program by $1 billion. Under its $125 million asset securitization
agreement commenced in September 1994, Alco Capital sold an additional $38
million in direct financing leases during the first half of fiscal 1995,
replacing those leases liquidated and leaving the total amount of contracts
sold unchanged.
The Company believes that its operating cash flow, together with unused
lines of credit and other financing arrangements (including this offering)
will be sufficient to finance current operating requirements including capital
expenditure, acquisition and restructuring programs.
BUSINESS
Over the past decade, Alco has evolved from a diversified company into a
growth-oriented, focused distribution company with two business segments, AOP
and Unisource. The Company's expansion has been generated by both internal
growth and strategic acquisitions. AOP is the largest network of independent
office equipment dealers in North America and the United Kingdom, with a
presence in Europe. Unisource is the leading paper and supply systems
distribution network in North America.
Alco has expanded by selectively acquiring domestic and international
distribution companies which are integrated into Alco's existing distribution
networks. This strategic acquisition policy has allowed Alco to grow market
share and to expand into new markets. During the first nine months of fiscal
1995, AOP acquired 68 office products companies in the United States, Canada
and Europe, with annualized revenues of approximately $418 million. These
acquisitions include Southern Business Group ("Southern"), a publicly held
office products dealer located in the United Kingdom, with revenues of
approximately $86 million. During the first nine months of fiscal 1995,
Unisource completed eight acquisitions (primarily supply systems and packaging
companies), with annualized revenues of approximately $95 million. Alco
expects that acquisitions will continue to play an important role in its
growth strategy.
S-11
<PAGE>
Alco is committed to maintaining a strong balance sheet and adhering to
prudent financial policies. Alco's financial strength has provided it with the
strategic flexibility to compete effectively and to take advantage of
attractive acquisitions.
As a result of these strategies, Alco's two business segments have had a
record of consistent growth in revenues and operating income. Revenues from
continuing operations increased to $8 billion in fiscal 1994, from $3.8
billion in 1989. Operating income from continuing operations has grown to
$361.7 million in fiscal 1994, from $153.0 million in fiscal 1989.
ALCO OFFICE PRODUCTS
AOP is the largest independent marketer and distributor of copiers and
office equipment dealers in North America and the United Kingdom, with a
growing presence on the European continent. AOP has more than 770 locations in
forty-seven states, four Canadian provinces and Europe.
AOP sells, rents and leases copiers, fax machines and other automated office
equipment. AOP also provides equipment service and supplies. AOP provides
customer financing through three equipment leasing subsidiaries in the United
States, Canada and the United Kingdom. These leasing subsidiaries lease
exclusively to AOP customers and provide a competitive advantage in marketing
and customer retention. AOP also operates a facilities management business
(FM), which provides central reprographic services for its customers on a per
copy fee basis, mail/distribution services, records management, microfilming,
office supplies and other services.
AOP primarily distributes the products of Canon, Oce, Ricoh and Sharp. AOP
has capitalized on the growth in demand for color copiers and plain paper fax
machines as well as having expanded its product line to include larger, higher
volume copiers, which increases servicing and supply opportunities. In May
1995, Alco signed a distribution agreement with Oce, which grants AOP
distribution rights in the U.S. for the Oce high volume models 2475 and 2600.
Oce's products are new to the American market, but well-known in Europe. Oce's
products are recognized for their speed, quality and durability. The Company
believes that Oce's superior quality, high volume copiers will allow AOP to
compete for the first time in this attractive segment of the copier market
which represents nearly one-quarter of total copy volume in the United States.
During fiscal years 1992, 1993 and 1994 and the first six months of fiscal
1995, AOP accounted for approximately 26%, 25%, 28% and 29%, respectively, of
Alco's consolidated revenues from continuing operations, and 47%, 50%, 55% and
54%, respectively, of Alco's operating income (excluding Unisource
restructuring costs in 1993).
AOP has pursued an active acquisition program. During the first nine months
of fiscal 1995, AOP acquired 68 office products companies in the United
States, Canada and Europe, with annualized revenues of approximately $418
million, including Southern in the United Kingdom. The acquisition of Southern
nearly doubles AOP's market share in the U.K. and adds world-class copier
remanufacturing capability which offers additional opportunities for growth.
Southern's purchase price was approximately $131 million.
AOP believes that it is positioned to benefit from the growth in multi-
functional and network connected digital equipment, as these technologies
develop and mature. The Company believes that these technologies will provide
incremental growth opportunities through the remainder of the decade.
AOP competes against numerous competitors over a wide range of markets on
the basis of price, quality of service and product performance. Customers
include large and small businesses, professional firms and governmental
agencies.
AOP recently initiated a three-year program to change its organization into
a more cohesive and efficient network by building a uniform information
technology system and implementing best practices
S-12
<PAGE>
for critically important management functions throughout the AOP companies.
The initiative will include the establishment of a national identity for AOP,
a targeted national accounts program, and the exploration of new vendor
alliances.
UNISOURCE
Unisource is the largest network of paper distributors in North America.
Unisource markets and distributes quality printing and imaging papers for
office and reprographic use. Unisource also distributes supply systems
products, such as disposable paper and plastic products, packaging systems and
supplies and sanitary maintenance supplies. Unisource has approximately 380
warehouses, distribution centers, sales offices and other facilities located
throughout the United States and Canada.
Unisource focuses on five market segments: commercial printing, business
imaging, general manufacturing, food processing and retail grocery. Unisource
combines its broad array of products with specialized customer services and is
implementing sophisticated information technology to tailor solutions which
lower the total cost of customers' procurement and improve the efficiency of
their operations. Unisource offers its customers coordinated delivery of
products, customized reporting and consolidated billing. Unisource's national
distribution capabilities allow it to respond quickly to the customer's needs.
Unisource is the leading supplier of printing papers to commercial printers,
publishers and business forms manufacturers, which produce catalogs,
brochures, advertising supplements, annual reports, business forms and direct
mail advertising. Unisource's geographic scope and its market-driven
orientation allow it to serve as a single-source supplier to meet all of its
customers' paper and supply systems needs. Approximately 72% of Unisource's
revenues are derived from the distribution of coated and uncoated printing,
writing and reprographic papers. The Company expects its supply systems
operations, which currently represent approximately 28% of Unisource's
revenues, to account for an increasing percentage of its sales in the future.
During fiscal 1992, 1993 and 1994 and the first six months of fiscal 1995,
Unisource accounted for approximately 74%, 75%, 72% and 71%, respectively, of
consolidated revenues from continuing operations, and 53%, 50%, 45% and 46%,
respectively, of Alco's operating income (excluding Unisource restructuring
charges in 1993).
In 1993, Unisource adopted a restructuring plan that encompasses
installation of a customer-focused information system, re-engineering of
warehouse and transportation management functions, regionalization of
management and administrative support functions and consolidation of service
center locations. The major components of the Unisource restructuring plan are
proceeding as planned. Unisource management has reduced the pace at which
changes are being made in order to better control the transformation process,
thereby affecting the pace of planned headcount reductions and the timing of
originally anticipated cost reductions. Unisource does expect to achieve in
fiscal 1997 the full benefit of the projected $100 million annual net cost
reductions resulting from the completion of the restructuring. Through March
31, 1995, $89.8 million of restructuring costs had been charged to the $175
million restructuring reserve. Management believes that the remaining reserve
at March 31, 1995 of $85.2 million is adequate to complete the restructuring
plan.
Unisource's extensive distribution network and national presence in both the
United States and Canada enables it to service national accounts, and its
large size gives the Company important economies of scale in purchasing and
other functions. Unisource's operations compete in many different markets
against both independent distributors and those owned by major paper
manufacturers. Unisource competes principally on the basis of price, quality
of service, and the range of products maintained in inventory. The percentage
of paper products sold through distributors such as Unisource has increased
over the past several years, and Unisource expects this trend to continue.
S-13
<PAGE>
Unisource is committed to growing its business both internally and through
acquisitions. During the first nine months of fiscal 1995, Unisource completed
eight acquisitions (primarily supply systems and packaging companies), with
annualized revenues of approximately $95 million.
DESCRIPTION OF SECURITIES
The Board of Directors has adopted resolutions authorizing issuance of the
Conversion Preferred Stock, Series BB (referred to herein as the
"Automatically Convertible Equity Securities" or the "Securities"). Each of
the Depositary Shares represents beneficial ownership of 1/100 of a Security
and entitles the owner to such proportion of all the rights and preferences of
the Security represented thereby (see "Description of Depositary Shares").
The summary of the terms of the Securities contained herein and in the
accompanying Prospectus, including those terms applicable to all shares of
Preferred Stock (as defined below), does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of the Company's
Amended Articles of Incorporation, and the amendment thereto designating the
Securities ("Articles Amendment"), copies of which are filed as exhibits to
the Registration Statement.
The Articles of Incorporation authorize the issuance of 2,135,988 shares of
preferred stock, no par value per share (the "Preferred Stock"), and the
Securities constitutes a series of the Preferred Stock. See "Description of
Capital Stock" in the accompanying Prospectus for a description of certain
terms applicable to all series of Preferred Stock and to the Common Stock of
the Company.
DIVIDENDS
Holders of Securities (and thereby holders of Depositary Shares) shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds of the Company legally available for payment, cash dividends from the
date of initial issuance of the Securities at the rate of $ per annum or
$ per quarter for each Security (equivalent to $ per annum or $ per
quarter for each Depositary Share), payable quarterly in arrears on the 1st
day of January, April, July and October or, if any such date is not a business
day, on the next succeeding business day. The first dividend payment will be
for the period from the date of initial issuance of the Securities to October
1, 1995, and will be paid on October 1, 1995. Dividends will cease to accrue
in respect of the Securities on the Mandatory Conversion Date or on the date
of their earlier conversion. Dividends (or cash amounts equal to accrued and
unpaid dividends) payable on the Securities for any period less than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months.
Dividends on the Securities will accrue whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared. Accrued but unpaid dividends on the Securities shall
cumulate as of the dividend payment date on which they first become payable,
but no interest shall accrue on accumulated but unpaid dividends on the
Securities.
The only outstanding series of Preferred Stock is the Series AA Preferred
Stock, which is entitled to payment of annual per share dividends as follows:
$237.50 ($2.375 per Depositary Share) through January 2, 1996 and $325.00
($3.25 per Depositary Share) thereafter.
So long as any shares of Preferred Stock, including the Securities, are
outstanding, the Company may not (a) declare or pay any dividends (other than
dividends payable in Common Stock or other shares of the Company ranking
junior to the Preferred Stock) to holders of Common Stock or shares of the
Company of any other class ranking on a parity with or junior to the Preferred
Stock, or (b) make any distributions of assets (directly or indirectly, by
purchase, redemption or otherwise) to the holders
S-14
<PAGE>
of Common Stock or shares of the Company of any other class ranking on a
parity with or junior to the 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 Preferred Stock received by
the Company, subsequent to January 1, 1968):
(a) Unless all accrued and unpaid dividends on shares of 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 Preferred Stock from any sinking fund provided therefor.
No dividends may be paid upon or declared or set apart for any of the
Preferred Stock, including the Securities, 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 Preferred
Stock of all series then issued and outstanding and entitled to receive such
dividend.
AUTOMATIC CONVERSION OF SECURITIES
On October 1, 1998 (the "Mandatory Conversion Date"), unless previously
converted at the option of the holder, each of the outstanding Securities will
automatically convert into a number of shares of Common Stock of the Company
equal to 100 times the Exchange Rate. The Exchange Rate is equal to (a) if the
Current Market Price is greater than or equal to $ per share (the
"Threshold Price"), . of a share of Common Stock per Depositary Share, (b)
if the Current Market Price is less than the Threshold Price but greater than
the Initial Price, a fractional share of Common Stock per Depositary Share
having a value (determined at the Current Market Price) equal to the Initial
Price, and (c) if the Current Market Price is less than or equal to the
Initial Price, one share of Common Stock per Depositary Share, subject in each
case to adjustment in certain events.
The "Initial Price" is $ per share of Common Stock. The "Current Market
Price" means the average Closing Price per share of the Common Stock of the
Company on the 20 Trading Days immediately prior to, but not including, the
Mandatory Conversion Date. The "Closing Price" of a share of Common Stock on
any date of determination means the closing sale price (or, if no closing
price is reported, the last reported sale price) of such share on the NYSE on
such date or, if the Common Stock is not listed for trading on the NYSE on any
such date, as reported in the composite transactions for the principal United
States securities exchange on which the Common Stock is so listed, or if it is
not so listed on a United States national or regional securities exchange, as
reported by The Nasdaq Stock Market, or, if it is not so reported, the last
quoted bid price for the Common Stock in the over-the-counter market as
reported by the National Quotation Bureau or similar organization, or, if such
bid price is not available, the market value of a share of Common Stock on
such date as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Company. A "Trading Day" is
defined as a day on which the Common Stock (a) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (b) has traded at least once on
the national or regional securities exchange or association or over-the-
counter market that is the primary market for the trading of such security.
Because the price of the Common Stock is subject to market fluctuations, the
value of the Common Stock received by a holder of Securities upon automatic
conversion of the Securities on the Mandatory Conversion Date may be more or
less than the Current Market Price used to compute the Exchange Rate.
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<PAGE>
CONVERSION AT OPTION OF HOLDER
The Securities (and the related Depositary Shares) are convertible, in whole
or in part, at the option of the holders thereof, at any time after September
1995 and prior to the Mandatory Conversion Date, into shares of Common Stock
at a rate (the "Optional Conversion Rate") of shares of Common Stock for
each Security, ( . of a share of Common Stock per Depositary Share),
equivalent to a conversion price equal to the Threshold Price, subject to
adjustment as described below.
The Depositary Shares may be voluntarily converted by the holders thereof
upon the same terms and conditions as the Securities represented by such
Depositary Shares, adjusted to reflect the fact that 100 Depositary Shares are
the equivalent of one Security. See "Description of Depositary Shares--
Conversion Provisions."
Holders of Securities at the close of business on a record date for any
payment of dividends will be entitled to receive the dividend payable on such
Securities on the corresponding dividend payment date notwithstanding the
optional conversion of such Securities following such record date and prior to
such dividend payment date. However, Securities surrendered for conversion
after the close of business on a record date for any payment of dividends and
before the opening of business on the next succeeding dividend payment date
must be accompanied by payment of an amount equal to the dividend thereon
which is to be paid on such dividend payment date. Except as provided above,
upon any optional conversion of Securities, the Company will make no payment
or allowance for unpaid dividends, whether or not in arrears, on such
Securities, or for dividends or distributions on the shares of Common Stock
issued upon such conversion.
ENHANCED DIVIDEND YIELD; LESS EQUITY APPRECIATION
Holders of Securities (or Depositary Shares representing Securities) will
receive dividends at a proportionately higher annual rate than the current
annual rate of dividends paid on the Common Stock. The opportunity for equity
appreciation afforded by an investment in the Securities (and in the
Depositary Shares), however, is less than that afforded by an investment in
Common Stock. Holders of Securities (or the related Depositary Shares) will
realize no equity appreciation if at the Mandatory Conversion Date the Current
Market Price of the Common Stock is below the Threshold Price, and less than
all of such appreciation if at such time the Current Market Price of the
Common Stock is above the Threshold Price. Holders of Securities (or the
related Depositary Shares) will realize the entire decline in equity value if
at such time the Current Market Price of the Common Stock is less than the
Initial Price.
CONVERSION ADJUSTMENTS
The Exchange Rate and the Optional Conversion Rate are subject to adjustment
as appropriate in certain circumstances, including if the Company shall (a)
pay a stock dividend or make a distribution with respect to its Common Stock
in shares of Common Stock, (b) subdivide or split its outstanding Common
Stock, (c) combine its outstanding Common Stock into a smaller number of
shares, (d) issue by reclassification of its shares of Common Stock any shares
of Common Stock, (e) issue certain rights or warrants to all holders of its
Common Stock, or (f) pay a dividend or distribute to all holders of its Common
Stock evidences of its indebtedness or other assets (including capital stock
of the Company but excluding any cash dividends or distributions and dividends
referred to in clause (a) above). In addition, the Company will be entitled to
make upward adjustments in the Exchange Rate and the Optional Conversion Rate
as the Company, in its discretion, shall determine to be advisable, in order
that any stock dividend, subdivision of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into
or exchangeable for stock (or any transaction which could be treated as any of
the foregoing transactions pursuant to Section 305 of the Internal Revenue
Code of 1986, as amended) hereafter made by the Company to its stockholders
will not be taxable. All adjustments to the Exchange Rate and the Optional
Conversion Rate will be calculated to the nearest
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<PAGE>
1/100th of a share of Common Stock. No adjustment in the Exchange Rate or the
Optional Conversion Rate will be required unless such adjustment would require
an increase or decrease of at least one percent in the Exchange Rate,
provided, however, that any adjustments which, by reason of the foregoing, are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Exchange Rate and the Optional Conversion Rate are adjusted as
provided in the preceding paragraph, the Company will file with each transfer
agent for the Securities a certificate with respect to such adjustment, make a
prompt public announcement thereof and mail a notice to holders of the
Securities providing specified information with respect to such adjustment.
At least 10 days prior to taking any action which could result in an
adjustment in the Exchange Rate and the Optional Conversion Rate, the Company
will notify each holder of Securities concerning such proposed action.
ADJUSTMENT FOR CERTAIN CONSOLIDATIONS OR MERGERS
In case of any consolidation or merger to which the Company is a party
(other than a merger or consolidation in which the Company is the continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged), or in case of any sale or transfer
to another corporation of the property of the Company as an entirety or
substantially as an entirety, or in case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), each Security shall, after consummation of such transaction, be
subject to (i) conversion at the option of the holder into the kind and amount
of securities, cash, or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which
such Security might have been converted immediately prior to consummation of
such transaction and (ii) conversion on the Mandatory Conversion Date into the
kind and amount of securities, cash, or other property receivable upon
consummation of such transaction by a holder of the number of shares of Common
Stock into which such Security would have been converted if the conversion on
the Mandatory Conversion Date had occurred immediately prior to the date of
consummation of such transaction assuming in each case that such holder of
Common Stock failed to exercise rights of election, if any, as to the kind or
amount of securities, cash, or other property receivable upon consummation of
such transaction (provided that if the kind or amount of securities, cash, or
other property receivable upon consummation of such transaction is not the
same for each nonelecting share, then the kind and amount of securities, cash,
or other property receivable upon consummation of such transaction for each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares). The kind and amount of
securities into which the Securities shall be convertible after consummation
of such transaction shall be subject to adjustment as described above under
the caption "Conversion Adjustments" following the date of consummation of
such transaction. The Company may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing.
FRACTIONAL SHARES
No fractional shares of Common Stock will be issued upon conversion of
Securities. In lieu of any fractional share otherwise issuable in respect of
the aggregate number of Securities of any holder which are converted upon
mandatory conversion or any optional conversion, such holder shall be entitled
to receive an amount in cash equal to the same fraction of the Closing Price
of the Common Stock determined (a) as of the fifth Trading Day immediately
preceding the Mandatory Conversion Date, in the case of automatic conversion,
or (b) as of the second Trading Day immediately preceding the effective date
of conversion, in the case of an optional conversion by a holder.
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COMMON STOCK PURCHASE RIGHTS
Reference is made to the "Description of Capital Stock--Common Stock
Purchase Rights" in the accompanying Prospectus for a description of the
common stock purchase rights issued by the Company (the "Rights"). The method
of calculation of the Current Market Price of the Common Stock does not take
into account the separate value of any rights such as the Rights, except to
the extent any such value may be reflected in the Current Market Price.
Because, subject to limitations contained therein, the holders of Securities
are provided with the benefits of the rights agreement relating to the Common
Stock, to the extent the Securities are converted into Common Stock additional
Rights may be issued.
LIQUIDATION RIGHTS
The holders of Securities will be entitled to receive in the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, $ per Security (equivalent to $ per Depositary Share) plus
an amount per Security equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final distribution to such
holders (the "liquidation preference"), and no more.
VOTING RIGHTS
The holders of Preferred Stock, including the Securities, are entitled to
one vote per share (equivalent to 1/100 vote per Depositary Share), and except
as otherwise provided by specific provisions of the Company's Articles of
Incorporation or by Ohio law, to vote on all matters together with the holders
of Common Stock as one class. The holders of Preferred Stock are not entitled
to cumulate votes in electing directors. The Articles of Incorporation of Alco
provide that in the event of default in the payment, in whole or in part, of
six quarterly dividends on the Preferred Stock, whether or not consecutive,
the holders of shares of Preferred Stock will be entitled to elect two
directors of the Company, to serve in addition to the directors otherwise
elected. Such right to elect additional directors is in lieu of the other
rights of the holders of Preferred Stock to vote for directors, and will
remain in effect until no quarterly dividend is in default. It is also
provided that the vote or written consent of at least two-thirds of the
outstanding shares of Preferred Stock voting as a class is necessary to effect
(i) any amendment or repeal of any of the provisions of the Articles of
Incorporation or the Code of Regulations of Alco which affects the voting
powers, rights, privileges or preferences of the holders of the Preferred
Stock, (ii) the authorization or issue of any stock, or any security
convertible into any stock, ranking prior to the Preferred Stock, (iii) the
purchase or redemption of less than all the Preferred Stock then outstanding
(except in accordance with a stock purchase offer made to all holders of
Preferred Stock) when any dividends or sinking fund obligations on the
Preferred Stock are in arrears, or (iv) the sale, lease or conveyance by Alco
of all or substantially all of its property or business, its voluntary
liquidation or dissolution, or its consolidation with or merger into any other
corporation, unless the resulting corporation will have no shares authorized
or outstanding ranking prior to or on a parity with the Preferred Stock except
the same number with the same rights and preferences as those of the Company
authorized and outstanding immediately preceding such consolidation or merger,
and unless each holder of Preferred Stock immediately prior thereto receives
the same number of shares, with the same rights and preferences, of the
resulting corporation. It is further provided that the vote or written consent
of two-thirds of the holders of shares of a series of the Preferred Stock is
necessary to amend the Articles of Incorporation or Code of Regulations of the
Company in such a way as to affect adversely and particularly the preferences,
rights, powers or privileges of such series. No such vote or consent of the
holders of Preferred Stock or any series thereof is required if provision has
been made for the redemption of all of the Preferred Stock (or any series
thereof). In addition, the Company may not create additional classes of stock
or increase the authorized number of shares of Preferred Stock ranking on a
parity with the Preferred Stock with
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respect, in each case, to the payment of dividends and amounts upon
liquidation, dissolution and winding up without the vote or written consent of
at least a majority of the outstanding shares of Preferred Stock voting as a
class.
MISCELLANEOUS
Upon issuance, the Securities will be fully paid and nonassessable. Holders
of Securities have no preemptive rights. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock,
solely for issuance upon the conversion of Securities, such number of shares
of Common Stock as shall from time to time be issuable upon the conversion of
all the Securities then outstanding. Securities converted into Common Stock of
the Company or otherwise reacquired by the Company shall resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series,
and shall be available for subsequent issuance.
TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT
National City Bank will act as transfer agent, registrar, and paying agent
for the payment of dividends for the Securities.
DESCRIPTION OF DEPOSITARY SHARES
Each Depositary Share represents 1/100 of a Security deposited under the
Deposit Agreement dated as of July , 1995 (the "Deposit Agreement"), among
the Company, National City Bank, as Depositary (the "Depositary"), and all
holders from time to time of depositary receipts issued thereunder (the
"Depositary Receipts"). Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share is entitled, proportionately, to all the rights,
preferences and privileges of the Security represented thereby (including
dividend, conversion, voting, and liquidation rights), and is subject to all
of the limitations of the fractional Security represented thereby, which are
summarized above under "Description of Securities" or in the accompanying
Prospectus under "Description of Capital Stock." The Depositary Shares are
evidenced by Depositary Receipts.
The following summary of the terms and provisions of the Deposit Agreement,
Depositary Shares and Depositary Receipts does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all of the
provisions of the Deposit Agreement (which contains the form of the Depositary
Receipts), a form of which is filed as an exhibit to the Registration
Statement of which the accompanying Prospectus is a part. Copies of the forms
of Deposit Agreement and Depositary Receipt may be obtained from the Company
or the Depositary at the principal office of the Depositary at which at any
particular time its depositary business shall be administered, which on the
date hereof is 1900 East 9th Street, Corporate Trust, 3rd Floor Annex,
Cleveland, Ohio 44114, upon request.
ISSUANCE OF DEPOSITARY RECEIPTS AND WITHDRAWAL OF SECURITIES
Immediately following the issuance of the Securities by the Company, the
Company will deposit the Securities with the Depositary, which will then issue
and deliver the Depositary Receipts to the Company. The Company will, in turn,
deliver the Depositary Receipts to the Underwriters. Depositary Receipts will
be issued evidencing only whole Depositary Shares.
Upon surrender of Depositary Receipts at the Corporate Office (as defined in
the Deposit Agreement) of the Depositary (or such other office as the
Depositary may designate), the owner of the Depositary Shares evidenced
thereby is entitled to delivery at such Corporate Office of certificates
evidencing the number of Securities (but only in whole Securities) and any
money and other property represented by such Depositary Receipts. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of whole Securities to be withdrawn, the
Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such
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excess number of Depositary Shares. The Company does not expect that there
will be any public trading market for the Securities except as represented by
the Depositary Shares.
CONVERSION PROVISIONS
Automatic Conversion. As described under "Description of Securities--
Automatic Conversion of Securities," the Securities are subject to automatic
conversion into shares of Common Stock on the Mandatory Conversion Date. The
Depositary Shares are subject to automatic conversion upon the same terms and
conditions as the Securities held by the Depositary, except that the number of
shares of Common Stock received upon automatic conversion of each Depositary
Share will be equal to the number of shares of Common Stock received upon
automatic conversion of each Security divided by 100.
Conversion at Option of Holder. As described under "Description of
Securities--Conversion at Option of Holder," the Securities may be converted,
in whole or in part, into shares of Common Stock at the option of the holders
of Securities at any time prior to the Mandatory Conversion Date. The
Depositary Shares may, at the option of holders thereof, be converted into
shares of Common Stock upon the same terms and conditions as the Securities,
except that the number of shares of Common Stock received upon conversion of
each Depositary Share will be equal to the number of shares of Common Stock
received upon conversion of each Security divided by 100. To effect such an
optional conversion, a holder of Depositary Shares must deliver Depositary
Receipts evidencing the Depositary Shares to be converted, together with a
written notice of conversion and a proper assignment of the Depositary
Receipts to the Company, to any transfer agent for the Depositary Shares, or
in blank (and, if applicable, payment of an amount equal to the dividend
payable on such Depositary Shares), to the Depositary or its agent. Each
optional conversion of Depositary Shares shall be deemed to have been effected
immediately prior to the close of business on the date on which the foregoing
requirements shall have been satisfied. The conversion shall be at the
Optional Conversion Rate in effect at such time and on such date, adjusted to
reflect the fact that 100 Depositary Shares are the equivalent of one
Security.
Fractional Shares. No fractional shares of Common Stock will be issued to
any holder of Depositary Shares upon the conversion of Depositary Shares. If
any such conversion would result in a fractional share of Common Stock being
issued, an amount will be paid in cash by the Company equal to the value of
the fractional interest.
To the extent that Depositary Shares are converted into shares of Common
Stock and all of such shares of Common Stock cannot be distributed to the
record holders of Depositary Receipts without creating fractional interests in
such shares, the Depositary may, with the consent of the Company, sell such
shares of Common Stock, and the net proceeds of any such sale shall be
distributed or made available for distribution to such record holders that
would otherwise have received fractional interests in such shares of Common
Stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Securities to the record holders of
Depositary Shares in proportion, insofar as possible, to the number of
Depositary Shares owned by such holders, subject to obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the Depositary.
In the event of a distribution other than cash in respect of the Securities,
the Depositary will distribute property received by it to the record holders
of Depositary Shares in proportion, insofar as possible, to the number of
Depositary Shares owned by such holder, subject to obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the
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Depositary, unless the Depositary determines that it is not feasible to make
such distribution, in which case the Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences, or privileges shall be offered with respect to the Securities, or
(ii) the Depositary shall receive notice of any meeting at which holders of
Securities are entitled to vote or of which holders of Securities are entitled
to notice, the Depositary shall in each such instance fix a record date (which
shall be the same date as the record date for the Securities) for the
determination of the holders of Depositary Receipts (x) who shall be entitled
to receive such dividend, distribution, rights, preferences, or privileges, or
the net proceeds of the sale thereof or (y) who shall be entitled to give
instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting.
VOTING OF SECURITIES
Upon receipt of notice of any meeting at which the holders of Securities are
entitled to vote, the Depositary will mail the information contained in such
notice of meeting to the record holders of Depositary Shares. Each record
holder of Depositary Shares on the record date (which will be the same date as
the record date for the Securities) will be entitled to instruct the
Depositary as to the exercise of voting rights pertaining to the number of
Securities (or fraction thereof) represented by such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the
number of Securities (or fractions thereof) represented by such Depositary
Shares in accordance with such instructions, and the Company has agreed to
take all action which may be deemed necessary by the Depositary in order to
enable the Depositary to do so. The Depositary will abstain from voting the
Securities to the extent it does not receive specific written instructions
from the holders of Depositary Shares representing such Securities.
Each Depositary Share shall entitle the holder to instruct the Depositary to
cast 1/100th of the vote of a Security on each matter submitted to a vote of
the stockholders of the Company.
AMENDMENT OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit Agreement
may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which imposes or increases any fees, taxes,
or other charges upon holders of Depositary Receipts (other than taxes and
other governmental charges, fees, and other expenses payable by such holders
as stated under "Charges of Depositary"), or which otherwise prejudices any
substantial existing right of holders of Depositary Receipts, will not take
effect as to outstanding Depositary Receipts until the expiration of 30 days
after notice of such amendment has been mailed to the record holders of
outstanding Depositary Receipts. Every holder of Depositary Receipts at the
time any such amendment becomes effective shall be deemed to consent and agree
to such amendment and to be bound by the Deposit Agreement.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements, the
initial deposit of the Securities, withdrawals of the Securities, and the
issuance of shares of Common Stock upon conversion. The Company will pay the
charges of the Depositary in connection with the initial deposit of the
Securities of the Securities. Holders of Depositary Shares will pay all other
transfer and other taxes and governmental charges, and, in addition, such
other charges as are expressly provided in the Deposit Agreement to be for
their accounts.
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RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary will be appointed by the Company within 45 days after delivery of
the notice of resignation or removal. The Deposit Agreement may be terminated
at the direction of the Company or by the Depositary if a period of 45 days
shall have expired after the Depositary has delivered to the Company written
notice of its election to resign and a successor depositary shall not have
been appointed. Upon termination of the Deposit Agreement, the Depositary will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement except that the Depositary will continue to collect
dividends and other distributions pertaining to the Securities, will sell
rights, preferences or privileges as provided in the Deposit Agreement and
will continue to deliver Securities certificates together with such dividends
and distributions and the net proceeds of any sales of rights, preferences,
privileges, or other property in exchange for Depositary Receipts surrendered.
At any time after the expiration of two years from the date of termination,
the Depositary may sell the Securities and hold the proceeds of such sale,
without interest, for the benefit of the holders of Receipts who have not then
surrendered their Receipts. After making such sale, the Depositary will be
discharged from all obligations under the Deposit Agreement except to account
for such proceeds. In the event the Deposit Agreement is terminated, the
Company will use its best efforts to list the underlying Securities on any
stock exchange on which such Depositary Shares were listed.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depository for the Depositary Shares. The
information in this section concerning DTC and DTC's book-entry system is
based upon information obtained from DTC. The Depositary Shares will be issued
only as fully-registered Depositary Receipts registered in the name of Cede &
Co. (as nominee for DTC). One or more fully-registered global Depositary
Receipts will be issued, evidencing in the aggregate the total number of
Depositary Shares, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants").
Purchases of Depositary Shares within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Depositary
Shares on DTC's records. The ownership interest of each actual purchaser of a
Depositary Share ("Beneficial Owner") is in turn to be recorded on the Direct
or Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchases, but Beneficial Owners are expected
to receive written confirmations providing details of the transactions, as
well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Depositary Shares.
Transfers
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of ownership interests in Depositary Shares are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
DTC has no knowledge of the actual Beneficial Owners of the Depositary
Shares; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Depositary Shares are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Dividend payments on the Depositary Shares will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC or Alco, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of dividends to DTC is the responsibility of Alco, disbursement of
such payments to Direct Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
No Depositary Shares evidenced by global Depositary Receipts may be
exchanged in whole or in part for Depositary Receipts registered, and no
transfer of global Depositary Receipts in whole or in part may be registered,
in the name of any person other than DTC or any nominee of DTC unless DTC has
notified the Company that it is unwilling or unable to continue as depositary
for such global Depositary Receipts. All Depositary Shares evidenced by one or
more global Depositary Receipts or any portion thereof will be registered in
such names as DTC may direct.
The laws of some jurisdictions require that certain potential purchasers of
Depositary Shares take physical delivery of such Depositary Shares in
definitive form. Such laws may impair the ability to transfer beneficial
interests in Depositary Shares so long as such Depositary Shares are evidenced
by global Depositary Receipts.
As long as DTC, or its nominee, is the registered owner of the global
Depositary Receipts, DTC or such nominee, as the case may be, will be
considered the sole owner and holder of the global Depositary Receipts and all
Depositary Shares evidenced thereby for all purposes under the Depositary
Shares. Except in the limited circumstances referred to above, owners of
beneficial interests in global Depositary Shares will not be entitled to have
the global Depositary Receipts evidencing such Shares or such Depositary
Shares registered in their names, will not receive or be entitled to receive
physical delivery of Depositary Shares in exchange therefor and will not be
considered to be owners or holders of such global Depositary Receipts or any
Depositary Shares evidenced thereby for any purpose under the Depositary
Shares.
MISCELLANEOUS
The Depositary will, with the approval of the Company, appoint a Registrar
for registration of the Receipts or Depositary Shares in accordance with any
requirements of any applicable stock exchange on which the Receipts or the
Depositary Shares are listed. The Registrar will maintain books at the
Corporate Office for the registration and registration of transfer of
Depositary Receipts or at such other place as is approved by the Company and
of which the holders of Depositary Receipts are given reasonable notice.
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The Company will deliver to the Depositary and the Depositary will forward
to holders of Depositary Shares all notices and reports required by law, the
rules of any national securities exchange upon which the Securities, the
Depositary Shares or the Depositary Receipts are listed or by the Company's
Articles of Incorporation or Code of Regulations to be furnished by the
Company to holders of the Securities.
Neither the Depositary nor the Company will be liable if either is by law or
certain other circumstances beyond its control prevented from or delayed in
performing its obligations under the Deposit Agreement. Neither the Depositary
nor the Company assumes any obligation or will be subject to any liability
under the Deposit Agreement to holders of Depositary Receipts other than to
use its best judgment and good faith in the performance of such duties as are
specifically set forth in the Deposit Agreement. The Depositary will not be
obligated to appear in, prosecute or defend any legal proceeding in respect of
any Depositary Shares or any Securities unless satisfactory indemnity is
furnished. The Company and the Depositary may rely on advice of counsel or
accountants, or information provided by persons presenting Securities for
deposit, holders of Depositary Shares or other persons believed to be
authorized or competent and on documents believed to be genuine.
The Depositary will act as transfer agent and registrar for, and paying
agent for the payment of dividends with respect to, the Depositary Shares.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal U.S. federal income tax consequences
relevant to the holding of the Series BB Conversion Preferred Stock, the
conversion of the Series BB Conversion Preferred Stock into Common Stock and
to the disposition of the Series BB Conversion Preferred Stock is based on the
Internal Revenue Code of 1986, as amended (the "Code"), regulations of the
Treasury Department, administrative rulings and pronouncements of the Internal
Revenue Service (the "IRS"), and judicial decisions, all as of the date
hereof. The Company does not intend to seek a ruling from the IRS with respect
to any of these tax consequences. The summary is presented for informational
purposes only and is limited to a summary of the U.S. federal income tax
consequences to investors who are citizens or residents of the United States
or that are U.S. corporations. State, local, and foreign tax consequences are
not summarized, nor are tax consequences to special classes of investors,
including tax-exempt organizations, insurance companies, banks, or dealers in
securities. Tax consequences may vary depending upon the particular status of
an investor. The summary is limited to taxpayers who will hold the Depositary
Shares and any Securities or Common Stock received in exchange therefor as
"capital assets" within the meaning of Section 1221 of the Code. There can be
no assurance that future changes in applicable law or administrative and
judicial interpretations thereof will not adversely affect the tax
consequences summarized herein or that there will not be differences of
opinion as to the interpretation of applicable law.
The following summary does not constitute, and should not be considered as,
legal or tax advice to prospective investors. Each potential investor should
consult with its own tax adviser before determining whether to purchase the
Depositary Shares.
DEPOSITARY SHARES
The owners of the Depositary Shares will be treated for federal income tax
purposes as if they were the owners of the Securities represented thereby.
Accordingly, the tax treatment for the owners of the Depositary Shares will be
the same as the tax treatment for the owners of Securities described below. In
addition, no gain or loss will be recognized upon the withdrawal of Securities
in exchange for Depositary Shares pursuant to the Deposit Agreement, an
owner's tax basis in the withdrawn Securities will be the same as the tax
basis in the Depositary Shares surrendered therefor, and such
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owner's holding period of the withdrawn Securities will include the period
during which the owner held the surrendered Depositary Shares.
DIVIDENDS
Dividends paid on Securities will be taxable as ordinary income to the
extent of the Company's current or accumulated earnings and profits. Corporate
holders of the Securities should consider the 46-day holding period required
by Section 246(c) of the Code for the 70% dividends received deduction, the
rules in Section 246A of the Code that reduce the 70% dividends received
deduction for dividends on certain debt-financed stock and the rules in
Section 1059 of the Code that reduce the basis of stock in respect of certain
extraordinary dividends. Under a special rule in Section 1059(f), any dividend
with respect to "disqualified preferred stock" is treated as an extraordinary
dividend. "Disqualified preferred stock" is defined to include stock that has
a dividend rate that declines in the future. While the issue is not free from
doubt due to the lack of authority directly on point, the Securities should
not constitute "disqualified preferred stock."
DISPOSITIONS
A holder will generally recognize capital gain or loss on a sale or exchange
of Securities equal to the difference between the amount realized upon the
sale or exchange and the holder's tax basis in the Securities sold or
exchanged. Such capital gain or loss will be long-term capital gain or loss if
the holder has held the Securities for more than one year.
CONVERSION INTO COMMON STOCK
As a general rule, no gain or loss will be recognized by a holder on the
conversion of Securities into shares of Common Stock. Gain may be recognized
upon the receipt by a holder of cash in lieu of a fractional share of Common
Stock.
The tax basis of the shares of Common Stock received upon conversion will
generally be equal to the tax basis of the Securities converted (adjusted to
reflect any income or gain recognized on the conversion). The holding period
of the shares of such Common Stock will generally include the holding period
of the Securities converted.
CONVERSION PREMIUM
Under certain circumstances, Section 305 of the Code requires that any
excess of the redemption price of preferred stock over its issue price is
includable in income, prior to receipt, as a constructive dividend. While the
issue is not free from doubt due to a lack of authority directly on point, a
holder of Securities should not be required to include any conversion premium
in income as a redemption premium under Section 305 of the Code in respect of
the conversion into Common Stock.
ADJUSTMENT OF CONVERSION RATE
Holders of Securities might be treated as receiving a constructive
distribution from the Company if (i) a conversion rate is adjusted and as a
result of such adjustment the proportionate interest of holders of Securities
in the assets or earnings and profits of the Company is increased, and (ii)
the adjustment is not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in a conversion rate would not be considered made
pursuant to such a formula if the adjustment were made to compensate for
certain taxable distributions with respect to Common Stock. Thus, under
certain circumstances, an increase in a conversion rate would be likely to be
taxable to holders of Securities as a dividend to the extent of the current or
accumulated earnings and profits of the Company. Holders of Securities would
be required to include their allocable share of such constructive dividend in
gross income but would not receive any cash related thereto.
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BACKUP WITHHOLDING
Certain noncorporate holders may be subject to backup withholding at a rate
of 31 percent on dividends and certain consideration received upon the
conversion of the Securities. Generally, backup withholding applies only when
the taxpayer (i) fails to furnish or certify a proper Taxpayer Identification
Number, (ii) is notified by the IRS that the taxpayer has failed to report
payments of interest and dividends properly or (iii) under certain
circumstances fails to certify that the taxpayer has not been notified by the
IRS that the taxpayer is subject to backup withholding for failure to report
interest and dividend payments. Holders should consult their tax advisers
regarding their qualification for exemption from backup withholding and the
procedure for obtaining any applicable exemption.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of such Underwriters has severally agreed to
purchase from the Company, the respective number of Depositary Shares set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER DEPOSITARY SHARES
- ----------- -----------------
<S> <C>
Goldman, Sachs & Co...........................................
Lehman Brothers Inc...........................................
Prudential Securities Incorporated............................
---------
Total....................................................... 3,400,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Depositary Shares
offered hereby, if any are taken.
The Underwriters propose to offer the Depositary Shares in part directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus Supplement, and in part to certain securities dealers at such
price less a concession of $. per Depositary Share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $. per
Depositary Share to certain brokers and dealers. After the Depositary Shares
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Company has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of an additional Depositary Shares to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of the Depositary Shares to be
purchased by each of them, as shown in the foregoing table, bears to the
Depositary Shares offered hereby. The Underwriters may exercise such option
only to cover over-allotments in connection with the sale of the Depositary
Shares offered hereby.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Preferred Stock or depositary shares representing the
same or Common Stock or any rights to purchase or other securities convertible
into or any securities of the Company substantially similar to any such shares
for a period of 90 days after the date of this Prospectus Supplement without
the prior written consent of the Underwriters, except for (i) the Securities,
Depositary Shares and shares of Common Stock and the related rights issuable
upon conversion of the Securities offered in connection with the offering,
(ii) shares of Common Stock issued pursuant to existing employee and dividend
reinvestment plans, and (iii) up to 400,000 shares of Common Stock issued in
acquisition transactions.
The Depositary Shares will be a new issue of securities with no established
trading market. The Underwriters have advised the Company that they intend to
make a market in the Depositary Shares, but the Underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market
for the Depositary Shares.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, or contribute to payments the
Underwriters may be required to make in respect thereof.
S-27
<PAGE>
Certain of the Underwriters and their affiliates engage in transactions with
and perform services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Depositary Shares, the Securities, and the Common Stock
issuable upon conversion thereof will be passed upon for the Company by its
Vice President, General Counsel and Secretary, J. Kenneth Croney, and for the
Underwriters by Sullivan & Cromwell, New York, New York. As of March 31, 1995,
Mr. Croney beneficially owned 32,921 shares of Common Stock of Alco, including
18,000 shares over which he has the right to acquire beneficial ownership
through the exercise of stock options granted under Alco's 1981 Stock Option
Plan or 1986 Stock Option Plan. Sullivan & Cromwell from time to time performs
legal services for Alco. Mr. Croney and Sullivan & Cromwell will rely as to
matters of Ohio law upon the opinion of Thompson, Hine and Flory, Cleveland,
Ohio.
EXPERTS
The consolidated financial statements of Alco Standard Corporation
incorporated by reference in the Company's Annual Report (Form 10-K) for the
year ended September 30, 1994 (as amended by its Form 10-K/A's filed on
November 30, 1994 and March 17, 1995) have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
S-28
<PAGE>
ALCO STANDARD CORPORATION
DEBT SECURITIES, PREFERRED STOCK
AND COMMON STOCK
----------------
Alco Standard Corporation (the "Company" or "Alco") may from time to time
offer Debt Securities consisting of debentures, notes and/or other unsecured
evidences of indebtedness in one or more series; Preferred Stock in one or
more series (which may include Depositary Shares representing fractional
interests in shares of Preferred Stock); and shares of Common Stock
(collectively, the "Securities"), from which the Company will receive proceeds
of up to an aggregate of $300,000,000. The Debt Securities, Preferred Stock
and Common Stock may be offered independently or together in any combination
for sale directly to purchasers or through dealers, underwriters or agents to
be designated. The Securities will be offered to the public on terms
determined by market conditions.
The specific designation, aggregate principal amount, purchase price,
maturity, rate (or method of calculation thereof) and time of payment of
interest, if any, any conversion or exchange provisions, any redemption
provisions, any subordination provisions and other specific terms not set
forth herein of the Debt Securities in respect of which this Prospectus is
being delivered; the specific title, number of shares, dividend rate (or
method of calculation), liquidation preferences, any conversion or exchange
provisions, any redemption provisions, any other specific terms of the
Preferred Stock and any Depositary Shares in respect of which this Prospectus
is being delivered; any listing on a securities exchange of the Securities in
respect of which this Prospectus is being delivered; and the names of any
underwriters, dealers or agents, and the other terms and manner of the sale
and distribution of such Securities, are set forth in the accompanying
Prospectus Supplement. See "Description of Debt Securities", "Description of
Capital Stock", "Description of Depositary Shares" and "Plan of Distribution".
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS MAY 18, 1994.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
THE PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ALCO OR
ANY UNDERWRITER. THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
----------------
AVAILABLE INFORMATION
Alco is subject to the informational requirements of the Securities Exchange
Act of 1934 (the "1934 Act") and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by Alco with the Commission can be inspected and copied at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, New York, New York 10048, and
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material can
also be inspected at the New York, Philadelphia and Chicago Stock Exchanges on
which Alco's common stock is listed.
DOCUMENTS INCORPORATED BY REFERENCE
Alco's Annual Report on Form 10-K for the fiscal year ended September 30,
1993 and its quarterly report for the quarter ended December 31, 1993,
heretofore filed by Alco with the Commission, are incorporated herein by
reference.
All documents filed by Alco pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. This Prospectus does not contain all
information set forth in the Registration Statement and Exhibits thereto which
Alco has filed with the Commission and to which reference is made hereby.
Alco will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been incorporated in this Prospectus by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed
to: Corporate Communications Department, Alco Standard Corporation, P.O. Box
834, Valley Forge, Pennsylvania 19482 (telephone number: (610) 296-8000).
2
<PAGE>
THE COMPANY
Alco Standard Corporation ("Alco" or the "Company") markets and distributes
office equipment and paper through two business segments, Alco Office Products
("AOP") and Unisource Worldwide, Inc. ("Unisource"). Alco's fiscal 1993
revenues were $6.5 billion and its operating income (before restructuring
charges) was $276 million.
Alco Office Products ("AOP") is the largest independent copier distribution
network in North America and has a growing presence in Europe. AOP has over
550 locations in 45 states, four Canadian provinces, the United Kingdom and
Germany. AOP sells, rents and leases copiers, fax machines and other automated
office equipment. AOP also provides equipment services and supplies,
reprographic facilities management and specialized document copying services.
Through its captive leasing company, AOP finances equipment leases for
customers of AOP companies throughout the United States. In fiscal 1993, AOP's
revenues were $1.6 billion and operating income was $139 million.
Unisource, formerly Paper Corporation of America, is the largest distributor
of printing paper in North America, with facilities in every major
metropolitan market in the United States and Canada. Unisource sells quality
printing papers for commercial use and also markets and distributes paper for
office and reprographic use. In addition, Unisource is a leading distributor
of industrial products, including paper and plastic packaging supply items for
food retailers and food processors, commercial sanitary and maintenance
products, and industrial packaging equipment, closure systems and supplies. In
fiscal 1993, Unisource's revenues were $4.9 billion and its operating income
was $137 million (before restructuring charges).
In September 1993, Alco announced a restructuring plan for Unisource in
order to adapt to the changing environment in the paper industry. The plan
will accomplish the following: installation of a customer-focused information
system, re-engineering of warehouse and transportation functions,
regionalization of management and administrative support functions, and
consolidation of service center locations. In connection with certain elements
of the restructuring plan, Alco recorded a pre-tax charge of $175 million
during the fourth quarter of fiscal 1993 to provide for facility
consolidation, severance costs and other expenses. As part of the
restructuring plan, the single name "Unisource" will be adopted for 25 North
American paper companies formerly operating under various names as part of
Alco's "Paper Corporation of America."
Alco is managed as the "The Corporate Partnership." Under this
entrepreneurial philosophy, field executives maintain a high degree of
operating autonomy over issues that affect the Company's ability to serve
customers, while financial and administrative support are provided on a
centralized basis.
The address of Alco's principal executive offices is P.O. Box 834, Valley
Forge, Pennsylvania 19482, telephone number (610) 296-8000.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of Alco for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED SEPTEMBER 30
DECEMBER 31, ------------------------
1993 1993 1992 1991 1990 1989
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 3.2 1.3 3.5 2.8 2.7 2.9
Ratio of Earnings to Fixed Charges
(Excluding Captive Finance Subsidi-
aries).............................. 3.8 1.4 4.2 3.3 3.0 3.3
</TABLE>
For purposes of calculating this ratio, earnings consist of income from
continuing operations before provisions for income taxes and excluding the
loss from unconsolidated affiliate, plus fixed charges. Fixed charges include
interest expense on indebtedness, and an estimate of the interest component of
rental expense. The first ratio gives effect to the consolidation of the
captive finance subsidiaries of Alco's Office Products Group. The second ratio
excludes the income from continuing operations before provision for income
taxes, and the fixed charges, attributable to those captive finance
subsidiaries. The 1993 ratios include the Unisource $175 million restructuring
charge ($113 million net of taxes); if the restructuring charge were excluded
for 1993, the ratios would be 3.3 (including captive finance subsidiaries) and
4.2 (excluding captive finance subsidiaries).
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the historical ratios of earnings to fixed
charges and preferred stock dividends of Alco for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED SEPTEMBER 30
DECEMBER 31, ------------------------
1993 1993 1992 1991 1990 1989
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends....... 2.7 1.1 3.5 2.8 2.7 2.9
Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends
(Excluding Captive Finance
Subsidiaries)....................... 3.0 1.1 4.2 3.2 3.0 3.2
</TABLE>
For purposes of calculating this ratio, earnings consist of income from
continuing operations before provisions for income taxes and preferred stock
dividends and excluding the loss from unconsolidated affiliate, plus fixed
charges. Fixed charges include interest expense on indebtedness, and an
estimate of the interest component of rental expense. Preferred stock
dividends include the pretax earnings required to cover preferred stock
dividend requirements. The first ratio gives effect to the consolidation of
the captive finance subsidiaries of Alco's Office Products Group. The second
ratio excludes the income from continuing operations before provision for
income taxes, and the fixed charges and any preferred stock dividends
attributable to those captive finance subsidiaries. The 1993 ratios include
the Unisource $175 million ($113 million net of taxes) restructuring charge;
if the restructuring charge were excluded for 1993, the ratio would be 2.8
(including captive finance subsidiaries) and 3.4 (excluding captive finance
subsidiaries).
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities will be
added to the general funds of Alco and may be used to finance the acquisition
of new companies and for general corporate purposes, including capital
expenditures and working capital requirements.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth the material terms and provisions of
the Debt Securities to which the accompanying Prospectus Supplement may
relate. The particular terms and provisions of any series of Debt Securities
offered by the Prospectus Supplement, and the extent to which such general
terms and provisions described below may apply thereto, are described in the
Prospectus Supplement relating to such series of Debt Securities.
The Debt Securities will be issued under an Indenture (the "Indenture"),
dated as of April 1, 1986, between Alco and The Chase Manhattan Bank (National
Association), as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement filed with the Commission. Wherever
particular sections or defined terms of the Indenture are referred to, it is
intended that such sections or defined terms shall be incorporated herein by
reference.
GENERAL
The Indenture does not limit the amount of Debt Securities which can be
issued thereunder and provides that Debt Securities may be issued thereunder
up to the aggregate principal amount which may be authorized from time to time
by Alco. Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to any
Debt Securities being offered thereby: (i) the designation, aggregate
principal amount and authorized denominations of such Debt Securities; (ii)
the percentage of the principal amount at which such Debt Securities will be
issued; (iii) the date or dates on which such Debt Securities will mature;
(iv) the rate or rates per annum at which such Debt Securities will bear
interest, if any, or the method of determination of such rate; (v) the time or
times at which any such interest will be payable, the record dates for such
interest payments and the date or dates from which interest will accrue;
(vi) the place or places where the principal (and premium, if any) and
interest will be payable; (vii) whether such Debt Securities will be
convertible into or exchangeable for Common Stock or other securities of Alco,
and the terms and conditions of any such conversions or exchanges; (viii)
whether such Debt Securities will be subordinated to other indebtedness of the
Company, and the terms and conditions of any such subordination; and (ix) any
redemption or sinking fund provisions, additional restrictive covenants or
other terms of such Debt Securities. (Section 301)
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, principal, premium, if any, and interest, if any, are to be
payable at the Corporate Trust Office of the Trustee or its successors in The
City of New York, or at any other office or agency maintained by Alco for such
purposes, provided that payment of interest, if any, may be made at the option
of Alco by check mailed to the persons in whose names the Debt Securities are
registered at the close of business on the day specified in the Prospectus
Supplement accompanying this Prospectus. (Sections 202 and 1002)
The Debt Securities will be issued only in fully registered form, without
coupons. (Section 302) The Debt Securities will be exchangeable for other Debt
Securities of the same series of a like aggregate principal amount in
authorized denominations and will be transferable at any time or from time to
time at the Corporate Trust Office of the Trustee or at any other office or
agency of Alco maintained for that purpose. No service charge will be made for
any such exchange or transfer of Debt Securities, but Alco may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. (Section 305)
Debt Securities of a single series may be issued at various times with
different maturity dates, may bear interest at different rates and may
otherwise vary.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Federal
5
<PAGE>
income tax consequences and special considerations applicable to any such
series will be described in the Prospectus Supplement relating thereto.
SENIOR DEBT
The Debt Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of Alco. Unless otherwise
indicated in the Prospectus Supplement relating to the Debt Securities, the
covenants contained in the Indenture and the Debt Securities would not
necessarily afford Holders of the Debt Securities protection in the event of a
highly leveraged or other transaction involving Alco or a sudden and dramatic
decline in credit quality resulting from an acquisition of Alco, or a
recapitalization or similar restructuring of Alco, that may adversely affect
Holders.
CERTAIN RESTRICTIVE PROVISIONS
Alco covenants in the Indenture that so long as any of the Debt Securities
remain outstanding, it will not, nor will it permit any Restricted Subsidiary
(as defined, see "Definition of Certain Terms" below) to create or assume any
mortgage, security interest, pledge or lien of or upon any Principal Property
(as defined) or shares of capital stock or indebtedness of any Restricted
Subsidiary (whether such Principal Property, shares of stock or indebtedness
are now owned or hereafter acquired) without making effective provision
whereby the Outstanding Debt Securities shall be secured equally and ratably
with any and all other indebtedness or obligations thereby secured. This
restriction, however, shall not apply to: (i) liens on any Principal Property
existing at the time that it is acquired, or liens on any Principal Property
acquired, constructed or improved by Alco or a Restricted Subsidiary which are
created or assumed contemporaneously with, or within 180 days after (or in
certain cases, 360 days after) the completion of such acquisition,
construction or improvement to secure the purchase price of such property or
the cost of such construction or improvement; (ii) liens on property or shares
of capital stock or indebtedness of a corporation existing at the time such
corporation is merged into or consolidated with Alco or a Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially as an entirety to
Alco or a Restricted Subsidiary; (iii) liens on property or shares of capital
stock or indebtedness of a corporation existing at the time such corporation
becomes a Restricted Subsidiary; (iv) liens to secure indebtedness of a
Restricted Subsidiary to Alco or to another Restricted Subsidiary; (v) liens
in favor of the United States of America or any state thereof, or any
department, agency or political subdivision of the United States of America or
any state thereof, to secure partial, progress, advance or other payments
pursuant to any contract or statute, including, without limitation, liens to
secure indebtedness represented by pollution control or industrial revenue
bonds, or to secure any indebtedness incurred for the purpose of financing all
or any part of the purchase price or the cost of constructing or improving the
property subject to such liens; (vi) liens in favor of any customer arising in
respect of partial, progress, advance or other payments made by or on behalf
of such customer for goods produced for or services rendered to such customer
in the ordinary course of business not exceeding the amount of such payments;
(vii) liens existing at the date of the Indenture; (viii) mechanics',
workers', repairmen's, materialmen's, warehousemen's, carriers' or other
similar liens arising in the ordinary course of business; (ix) pledges or
deposits under the workers' compensation laws or similar legislation and liens
of judgments thereunder which are not currently dischargeable, or good faith
deposits in connection with bids, tenders, contracts (other than for the
payment of money) or leases to which Alco or any Restricted Subsidiary is a
party, or deposits in connection with obtaining or maintaining self-insurance
or to obtain the benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar matters,
or deposits of cash or obligations of the United States of America to secure
surety, appeal or customs bonds to which Alco or any Restricted Subsidiary is
a party, or deposits in litigation or other proceedings such as, but not
limited to, interpleader proceedings; (x) liens created by or resulting from
any litigation or proceedings which are being contested in good faith; liens
arising out of judgments or awards against Alco or any Restricted Subsidiary
with respect to which Alco or such Restricted Subsidiary is in good faith
prosecuting an appeal or proceedings for review; or liens incurred by Alco or
any Restricted Subsidiary for the purpose of obtaining a stay or discharge in
the course of any legal proceeding to which Alco or such Restricted Subsidiary
is a party; (xi) liens for taxes or assessments or governmental charges
6
<PAGE>
or levies not yet due or delinquent, or which can thereafter be paid without
penalty, or which are being contested in good faith by appropriate
proceedings; landlord's liens on property held under lease, and tenants'
rights under leases; and easements; (xii) other liens incidental to the
conduct of the business or the ownership of the property and assets of Alco or
a Restricted Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and which do not,
in the opinion of Alco, materially detract from the value of the property or
assets or materially impair the use thereof in the operation of the business
of Alco and its Restricted Subsidiaries taken as a whole; or (xiii) any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any liens referred to in the foregoing
clauses (i) through (xii), inclusive. (Section 1006)
Sale and leaseback transactions by Alco or any Restricted Subsidiary of any
Principal Property owned for more than 180 days (except for leases of not more
than three years and except for leases between Alco and a Restricted
Subsidiary or between Restricted Subsidiaries) are prohibited unless (i) Alco
or such Restricted Subsidiary would be entitled to incur indebtedness secured
by a lien on such property without equally and ratably securing the Debt
Securities pursuant to the restrictions on liens described above, or (ii) Alco
shall apply an amount equal to the Attributable Debt (as defined) of such
transaction to (a) the acquisition of one or more Principal Properties of
equal or greater aggregate fair market value and/or (b) the retirement of
indebtedness for borrowed money, including the Debt Securities, incurred by
Alco or any Restricted Subsidiary (other than indebtedness for borrowed money
owed to Alco or any Restricted Subsidiary), provided that the amount to be
applied to the retirement of such indebtedness shall be reduced by (1) the
principal amount of any Debt Securities delivered within 180 days after such
sale to the Trustee for retirement or cancellation, and (2) the principal
amount of such indebtedness, other than Debt Securities, voluntarily retired
by Alco within 180 days after such sale. No retirement referred to in the
foregoing clause (ii)(b), however, may be effected by payment at maturity or
pursuant to any mandatory sinking fund payment or mandatory prepayment
provision. (Section 1007)
Notwithstanding the foregoing restrictions on liens and sale and leaseback
transactions, Alco and its Restricted Subsidiaries may, without securing the
Debt Securities, acquiring one or more Principal Properties or retiring
indebtedness for borrowed money, create or assume liens and enter into sale
and leaseback transactions if the aggregate amount of all such liens and sale
and leaseback transactions outstanding at the time such lien is assumed or
created or such sale and leaseback transaction is entered into, as measured by
all indebtedness secured by all such liens then outstanding or to be so
created or assumed (and after giving effect to the retirement of any
indebtedness or obligations which are concurrently being retired) and the
Attributable Debt of all such sale and leaseback transactions then outstanding
or to be so entered into, would not exceed 10% of Alco's Consolidated Net
Assets (as defined), as determined in accordance with the most recent
published balance sheet of Alco and after giving effect to the receipt and
application of any proceeds of all indebtedness secured by all such liens to
be created or assumed and of any sale and leaseback transactions to be entered
into. (Section 1008)
DEFINITION OF CERTAIN TERMS
"Attributable Debt" is defined as the present value (discounted as provided
in the Indenture) of the obligation of a lessee for rental payments during the
remaining term of any lease. (Section 1006)
"Consolidated Net Assets" is defined as the total of all assets (after
deducting all current liabilities) appearing on a consolidated balance sheet
of Alco and its consolidated subsidiaries, prepared in accordance with
generally accepted accounting principles, with the assets determined at their
net book values (after deducting related depreciation, depletion, amortization
and other valuation reserves). (Section 1006)
"Principal Property" is defined as any manufacturing plant, research
facility or warehouse located within the United States of America owned or
leased by Alco or any Restricted Subsidiary which has a net book value
exceeding 2 1/2% of Alco's Consolidated Net Assets, unless, in the opinion of
the board of directors of Alco, such property (or a portion thereof) is not of
material importance to the total business conducted by Alco as an entirety.
(Section 1006)
7
<PAGE>
"Restricted Subsidiary" is defined to mean any Subsidiary which owns a
Principal Property. (Section 1006)
"Subsidiary" is defined to mean a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by Alco
and/or by one or more of its other Subsidiaries. (Section 101)
MERGER AND CONSOLIDATION
The Indenture provides that Alco may, without the consent of the Holders of
Debt Securities of any series, consolidate with or merge with or into any
other corporation, or convey, transfer or lease its properties and assets
substantially as an entirety to any person, provided that in any such case (i)
the successor corporation shall be a domestic corporation and such corporation
shall assume by a supplemental indenture Alco's obligations under the
Indenture, (ii) immediately after giving effect to such transaction, no
default shall have occurred and be continuing, and (iii) if, as a result of
any such transaction, the properties or assets of Alco would be subject to any
lien not permitted under the restrictions on liens described above, the Debt
Securities will be secured equally and ratably with (or prior to) all
indebtedness secured thereby. Upon compliance with these provisions by a
successor corporation. Alco (except in the case of a lease) would be relieved
of its obligations under the Indenture and the Debt Securities. (Sections 801
and 802)
MODIFICATION AND AMENDMENT
The rights and obligations of Alco and the rights of the Holders may be
modified with respect to one or more series of Debt Securities issued under
the Indenture with the consent of the Holders of not less than 66 2/3% in
principal amount of the Outstanding Debt Securities of each series so
affected, provided that no such modification or amendment may, without the
consent of the Holder of each Debt Security affected thereby: (i) change the
Stated Maturity of the principal of, or any installment of principal of or
interest on, any such Debt Security; (ii) reduce the principal amount of, or
the rate of interest, if any, on, or any premium payable upon the redemption
of any Debt Security; (iii) reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof; (iv) change the place of payment where,
or the coin or currency in which, any Debt Security or any premium or interest
thereon is payable; (v) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (vi) reduce the
above stated percentage of Outstanding Debt Securities necessary to modify or
amend the Indenture; (vii) reduce the percentage of aggregate principal amount
of Outstanding Debt Securities for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults; or (viii)
modify (with certain exceptions) any provisions of the Indenture relating to
modification and amendment of the Indenture or waiver of compliance with
conditions and defaults thereunder. (Section 902)
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to any series of Debt
Securities as being any one of the following events and such other event as
may be established for the Debt Securities of a particular series: (i) failure
to pay principal of (or premium, if any, on) any Debt Security of that series
when due; (ii) failure to pay any interest installment on any Debt Security of
that series when due, continued for 30 days; (iii) failure to deposit any
sinking fund payment on any Debt Security of that series when due; (iv)
failure to perform any other covenant of Alco (other than a covenant included
in the Indenture solely for the benefit of series of Debt Securities other
than that series), continued for 60 days after receipt of written notice by
Alco; (v) failure to pay when due, or acceleration pursuant to the terms of
any agreement or instrument of the maturity of, any indebtedness of Alco for
borrowed money, if such indebtedness aggregates $10,000,000 or more and such
indebtedness is not discharged or such acceleration is not rescinded or
annulled within 10 days after receipt of written notice by Alco; (vi) certain
events in bankruptcy, insolvency or reorganization in respect of Alco; and
(vii) any other defaults provided with respect to Debt Securities of that
series. (Section 501) An Event of Default with respect to a particular series
of Debt Securities issued under the Indenture does not necessarily constitute
an Event of Default with respect to any other series of Debt Securities issued
thereunder. The Trustee may withhold
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notice to the Holders of any series of Debt Securities of any default with
respect to such series (except in the payment of principal, premium or
interest or the making of any sinking fund payment) if it considers such
withholding in the interests of such Holders. (Section 602)
If an Event of Default (as defined) shall occur and be continuing with
respect to any series of Debt Securities, either the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Debt Securities of such
series (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) may accelerate the maturity of such series; provided,
however, that after such acceleration, but before a judgment or decree based
on such acceleration, the Holders of a majority in principal amount of such
series may rescind and annul such acceleration under certain circumstances.
(Section 502) The Holders of a majority in principal amount of the Outstanding
Debt Securities of such series may waive any past default under the Indenture,
except a default in the payment of principal, premium, if any, or interest or
in the making of any sinking fund payment or in respect of a covenant or
provision which cannot be modified or amended without the consent of each of
the Holders of affected Debt Securities. (Section 513)
Except as otherwise provided in the provisions of the Indenture relating to
the duties of the Trustee in case an Event of Default (as defined) shall occur
and be continuing, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request or direction of any of
the Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity. (Section 603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in principal amount
of the Outstanding Debt Securities of any series affected shall have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Debt Securities of such series. (Section 512)
Alco is required to furnish to the Trustee annually a statement as to any
default under the Indenture. (Section 1009)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Indenture, that Alco
may elect either (i) to defease and be discharged from any and all obligations
with respect to such Debt Securities (except for the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of the Debt Securities and to hold moneys for payment in
trust) ("defeasance") or (ii) to be released from its obligations with respect
to such Debt Securities under the covenants described above under "Certain
Restrictive Provisions," in which case the events specified above in clauses
(iv) (insofar as it relates to such covenants) and (v) under "Events of
Default" shall no longer be Events of Default in respect of such Debt
Securities ("covenant defeasance"), in either case upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money,
and/or U.S. Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities and any mandatory sinking fund or analogous
payments thereon on the scheduled due dates therefor. Such a trust may only be
established if, among other things, Alco has delivered to the Trustee an
opinion of counsel (as specified in the Indenture) to the effect that the
Holders of such Debt Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred. Such opinion, in the case
of defeasance under clause (i) above, must refer to and be based upon a ruling
of the Internal Revenue Service or a change in applicable Federal income tax
law occurring after the date of the Indenture. (Sections 1301, 1302, 1303 and
1304)
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REGARDING THE TRUSTEE
From time to time, the Trustee extends credit to, and performs other
customary banking services for, Alco in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
The Company is currently authorized to issue 75,000,000 shares of Common
Stock and 2,138,539 shares of Serial Preferred Stock ("Preferred Stock"). Both
classes are without par value. The Common Stock is subject to the express
terms of the Preferred Stock. The Preferred Stock may be issued from time to
time in one or more series, without stockholder approval, with such
designations, preferences and relative rights, and qualifications,
limitations, or restrictions thereof as shall be adopted by the Board of
Directors. Three series of Preferred Stock are outstanding, one of which
(Series 11) will be redeemed as of March 1, 1994. The particular terms and
provisions of any series of Preferred Stock offered by the Prospectus
Supplement, and the extent to which such general terms and provisions
described below may apply thereto, are described in the Prospectus Supplement
relating to such series of Preferred Stock.
DIVIDEND RIGHTS
Common Stock. Dividends and other distributions of assets may be made with
respect to the Common Stock from time to time by the Board of Directors within
the limits and from the sources permitted by law after payment or provision
for payment of all accrued and unpaid dividends (which are cumulative) on the
Preferred Stock, so long as there is no default in any sinking fund provisions
for the Preferred Stock. Certain loan agreements limit the amount of
consolidated retained earnings from which the Company may pay dividends. At
December 31, 1993, such amount was approximately $418 million.
Preferred Stock. The outstanding Preferred Stock is entitled to payment of
annual per share dividends as follows: Series 2, $5.00; and Series AA, $237.50
($2.375 per Depositary Share) through January 2, 1996 and $325.00 ($3.25 per
Depositary Share) thereafter.
So long as any shares of Preferred Stock are outstanding, the Company may
not (a) declare or pay any dividends (other than dividends payable in Common
Stock or other shares of the Company ranking junior to the Preferred Stock) to
holders of Common Stock or shares of the Company of any other class ranking on
a parity with or junior to the 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 Company of any other class
ranking on a parity with or junior to the 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 Preferred Stock
received by the Company, subsequent to January 1, 1968):
(a) Unless all accrued and unpaid dividends on shares of 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 Preferred Stock from any sinking fund provided therefor.
No dividends may be paid upon or declared or set apart for any of the
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 Preferred Stock of all series then
issued and outstanding and entitled to receive such dividend.
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PREEMPTIVE RIGHTS
Common Stock. The holders of Common Stock do not have any preemptive right
to purchase or have offered to them for purchase any shares or other
securities of the Company.
Preferred Stock. The only preemptive right of holders of Preferred Stock is
to participate in certain distributions, if any were to be made by the
Company, to holders of Common Stock of options or rights to acquire Common
Stock, or of evidences of the Company's debt or assets (other than cash).
COMMON STOCK PURCHASE RIGHTS
In February 1988, the Company declared and paid a dividend distribution of
one right for each outstanding share of Common Stock. The Rights become
exercisable ten days (or such later date, not beyond thirty days, as is fixed
by the Board of Directors) after the earlier of: (a) public announcement that
an individual or group has acquired or obtained the right to acquire 20% or
more of the Company's Common Stock or (b) an individual or group commences or
announces an intention to commence a tender or exchange offer that could
result in the acquisition of 30% or more of such securities (the "Separation
Date"). When exercisable, each Right entitles the holder to purchase one one-
hundredth of a share of Alco's Series 12 Preferred Stock for $75 (the
"Exercise Price"), subject to adjustment. Further, if any person or group
owning 20% or more of Alco's outstanding Common Stock (a) engages in certain
self-dealing practices with the Company, or (b) causes the Company to forego
or reduce quarterly dividends or take an action which would result in a more
than 2% increase in the other entity's proportionate share of the Company's
outstanding shares; or if any person or group acquires 30% or more of the
Company's outstanding stock, each Right would entitle the holder thereof to
acquire for the Exercise Price shares of Common Stock having a market value
equal to twice the Right's exercise price.
If the Company were acquired in a merger or other business combination, or
if more than 50% of its earning power or assets were sold in one transaction
or a series of transactions, each Right would entitle the holder thereof to
purchase shares of the acquiring company's common stock having a market value
equal to twice the Right's exercise price. The Rights that are or were held by
a person or group owning 20% or more of Alco's outstanding voting securities
become void if such person or group engages in an event which entitles holders
of the Rights to purchase Common Stock or common stock of the acquiring
company having a market value equal to twice the Right's exercise price.
The Rights, which expire on February 10, 1998, are non-voting and may be
redeemed by Alco at a price of $.05 per Right any time prior to ten days after
public announcement that a person has acquired 20% or more of the Company's
outstanding voting securities. Until the Separation Date, the Rights are
transferable with and only with the Common Stock.
VOTING RIGHTS
Common Stock. Subject to certain voting rights of holders of the Preferred
Stock to vote in certain circumstances and with respect to certain matters as
a class, the holders of the Common Stock currently have full voting rights
upon all matters presented for shareholder action. Shareholders do not have
the right to cumulate votes in electing directors.
Preferred Stock. The holders of Preferred Stock are entitled to one vote per
share, and except as otherwise provided by specific provisions of the
Company's Articles of Incorporation or by Ohio law, to vote on all matters
together with the holders of Common Stock as one class. The holders of
Preferred Stock are not entitled to cumulate votes in electing directors. The
Articles of Incorporation of Alco provide that in the event of default in the
payment, in whole or in part, of six quarterly dividends on the Preferred
Stock, whether or not consecutive, the holders of shares of Preferred Stock
will be entitled to elect two directors of the Company, to serve in addition
to the directors otherwise elected. Such right to elect additional directors
is in lieu of the other rights of the holders of Preferred Stock to vote for
directors, and will remain in effect until no quarterly dividend is in
default. It is also provided that the vote or written consent of at least two-
thirds of the outstanding shares of
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Preferred Stock voting as a class is necessary to effect (i) any amendment or
repeal of any of the provisions of the Articles of Incorporation or the Code
of Regulations of Alco which affects the voting powers, rights, privileges or
preferences of the holders of the Preferred Stock, (ii) the authorization or
issue of any stock, or any security convertible into any stock, ranking prior
to the Preferred Stock, (iii) the purchase or redemption of less than all the
Preferred Stock then outstanding (except in accordance with a stock purchase
offer made to all holders of Preferred Stock) when any dividends or sinking
fund obligations on the Preferred Stock are in arrears, or (iv) the sale,
lease or conveyance by Alco of all or substantially all of its property or
business, its voluntary liquidation or dissolution, or its consolidation with
or merger into any other corporation, unless the resulting corporation will
have no shares authorized or outstanding ranking prior to or on a parity with
the Preferred Stock except the same number with the same rights and
preferences as those of the Company authorized and outstanding immediately
preceding such consolidation or merger, and unless each holder of Preferred
Stock immediately prior thereto receives the same number of shares, with the
same rights and preferences, of the resulting corporation. It is further
provided that the vote or written consent of two-thirds of the holders of
shares of any series is necessary to amend the Articles of Incorporation or
Code of Regulations of the Company in such a way as to affect adversely and
particularly the preferences, rights, powers or privileges of such series. No
such vote or consent of the holders of Preferred Stock or any series thereof
is required if provision has been made for the redemption of all of the
Preferred Stock (or any series thereof). In addition, the Company may not
create additional classes of stock or increase the authorized number of shares
of Preferred Stock ranking on a parity with the Preferred Stock with respect,
in each case, to the payment of dividends and amounts upon liquidation,
dissolution and winding up (a "Parity Stock") without the vote or written
consent of at least a majority of the outstanding shares of Preferred Stock
voting as a class.
REDEMPTION PROVISIONS AND SINKING FUND
Common Stock. The Common Stock is not redeemable.
Preferred Stock. The directors are empowered to determine any redemption
rights and price of each series of the Preferred Stock. The outstanding shares
of Preferred Stock (except Series AA) are redeemable in whole or in part, at
Alco's option, at any time after five years from the date of issue, at the
redemption price set forth as follows, plus accrued unpaid dividends: Series
2, $100; and Series 11, $95. Alco is not obligated to provide a sinking fund
for the redemption of Series 11. With respect to Series 2, Alco is required to
provide a sinking fund for the redemption of these shares. Alco has determined
to redeem the Series 2 shares in equal annual installments through 1995 at the
redemption price stated above. With respect to Series 11, Alco has determined
that it will redeem all remaining shares on March 1, 1994. The foregoing
references in this paragraph are to calendar years.
The Series AA Preferred Stock and the Depositary Shares representing such
stock are not redeemable prior to January 9, 1996. On and after January 9,
1996 and until January 9, 2000, the Series AA Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, for such number
of shares of Common Stock as are issuable at a conversion rate of 1.1201
shares of Common Stock for each Depositary Share, subject to adjustment in
certain circumstances. The Company may exercise this option only if for 20
trading days within any period of 30 consecutive trading days, including the
last trading day of such 30 trading day period, the closing price of the
Common Stock on the New York Stock Exchange ("NYSE") exceeds $58.03, subject
to adjustment in certain circumstances. On and after January 9, 2000 the
Series AA Preferred Stock will be redeemable, in whole or in part at the
option of the Company, for cash at a redemption price equivalent to $50.00 per
Depositary Share, plus accrued and unpaid dividends. The Series AA Preferred
Stock will not be entitled to the benefit of any sinking fund.
CONVERSION RIGHTS
Common Stock. The Common Stock is not convertible into any other security.
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Preferred Stock. The directors are empowered to determine whether the shares
of any series of the Preferred Stock will be convertible into Common Stock,
and, if so, the conversion price or prices and the other terms or provisions
of such rights. Each outstanding share of Series 2 and Series 11 is
convertible, at the option of the holder, at any time prior to the close of
business on the second day preceding the redemption date thereof, into the
following number of shares of Common Stock: Series 2, 8.0; and Series 11, 4.0.
Series AA is convertible at any time prior to the close of business on the
redemption date thereof into 112.01 shares of Common Stock (1.1201 shares per
Depositary Share). The conversion rights with respect to the outstanding
Preferred Stock are subject to proportionate adjustment if Alco combines or
splits the outstanding shares of Common Stock or pays a dividend in Common
Stock. Shares of Common Stock issuable upon the exercise of outstanding stock
options are similarly subject to proportionate adjustment in such events.
Shares of Preferred Stock which have been converted must be retired and may
not be reissued.
LIQUIDATION RIGHTS
Common Stock. The holders of Common Stock are entitled pro rata to the
assets of Alco in the event of voluntary or involuntary liquidation, subject
to the rights of creditors and the rights of the holders of the Preferred
Stock to receive certain per share amounts plus accrued unpaid dividends.
Preferred Stock. In the event of voluntary or involuntary liquidation, the
holders of the outstanding Preferred Stock are entitled to receive the
following per share amounts plus accrued and unpaid dividends: Series 2, $100;
Series 11, $95; and Series AA, $5,000.00 ($50.00 per Depositary Share). At
December 31, 1993, the preference upon liquidation of the shares of Preferred
Stock of Series 2, Series 11 and Series AA aggregated $201,504,000. After
provision for the liquidation preference of Preferred Stock at December 31,
1993, the portion of shareholders' equity applicable to Common Stock was
$1,150,000,000. In the opinion of counsel for Alco, there are no restrictions
upon the payment of dividends or other distributions out of surplus solely by
reason of the excess of the liquidation preference over the carrying value of
the Preferred Stock, and there are no remedies available to security holders
before or after the payment of any dividend or distribution solely because
such dividend may reduce surplus to an amount less than the amount of such
excess. The Preferred Stock has priority over the Common Stock on any
liquidation, dissolution or winding up to the extent of the liquidation price
plus any accrued and unpaid dividends. The directors have authority in
establishing any series to determine the liquidation price for each series in
the event of any liquidation, dissolution or winding up.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement and of the Depositary Shares and
Depositary Receipts (as those terms are defined below) does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
form of Deposit Agreement and form of Depositary Receipts which are filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to offer fractional shares, rather
than full shares, of any series of Preferred Stock. Each such fractional share
of Preferred Stock will be represented by a depositary share (collectively,
the "Depositary Shares") pursuant to the terms of a Deposit Agreement (the
"Deposit Agreement") among the Company, a bank or trust company selected by
the Company (the "Depositary") and all holders from time to time of depositary
receipts issued thereunder (the "Depositary Receipts"). The Depositary Shares
will be evidenced by Depositary Receipts. Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, proportionately,
to all the rights, preferences and privileges of the fractional share of
Preferred Stock represented thereby (including dividend, voting and
liquidation rights), and subject to all of the limitations of the fractional
share of Preferred Stock represented thereby, which are either
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summarized above under "Description of Capital Stock" or set forth in the
Prospectus Supplement relating to such series of Preferred Stock.
ISSUANCE OF DEPOSITARY RECEIPTS AND WITHDRAWAL OF PREFERRED STOCK FROM DEPOSIT
Immediately following the issuance by the Company of the shares of any
series of Preferred Stock to be represented by Depositary Shares, the Company
will deposit such shares of Preferred Stock with the Depositary, which will
then issue and deliver the Depositary Receipts to the Company. The Company
will, in turn, deliver the Depositary Receipts to the purchasers of the
Preferred Stock. Depositary Receipts will be issued evidencing only whole
Depositary Shares.
Upon surrender of Depositary Receipts at the Corporate Office (as defined in
the Deposit Agreement) of the Depositary (or such other office as the
Depositary may designate), the owner of the Depositary Shares evidenced
thereby is entitled at such office to certificates evidencing the number of
shares of Preferred Stock (but only in whole shares of Preferred Stock)
represented by such Depositary Receipts. If the Depositary Receipts delivered
by the holder evidence a number of Depositary Shares in excess of the number
of whole shares of Preferred Stock to be withdrawn, the Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing
such excess number of Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares representing such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the
proceeds received by the Depositary resulting from the redemption, in whole or
in part, of such series of the Preferred Stock held by the Depositary. The
redemption price per Depositary Share will be equal to the applicable fraction
of the redemption price per share payable with respect to such series of the
Preferred Stock. If less than all the Depositary Shares are to be redeemed,
the Depositary Shares to be redeemed will be selected by lot or pro rata.
After the date fixed for redemption (which will be the same date as the
redemption date for the Preferred Stock), the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which
the holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
VOTING
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the
exercise of the voting rights pertaining to the number of shares of Preferred
Stock underlying such holder's Depositary Shares. The Depositary will
endeavor, insofar as practicable, to vote the number of shares of Preferred
Stock underlying such Depositary Shares in accordance with such instructions,
and the Company will agree to take all action which may be deemed necessary by
the Depositary in order to enable the Depositary to
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do so. The Depositary will abstain from voting shares of Preferred Stock to
the extent the Depositary does not receive specific instructions from the
holders of Depositary Shares relating to such shares.
AMENDMENT OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which imposes
or increases any fees, taxes, or other changes upon holders of Depositary
Receipts (other than taxes and other governmental charges, fees, and other
expenses payable by such holders as stated under "Charges of Depositary"), or
which otherwise prejudices any substantial existing right of holders of
Depositary Receipts, will not take effect as to outstanding Depositary
Receipts until the expiration of 30 days after notice of such amendment has
been mailed to the record holders of outstanding Depositary Receipts. Every
holder of Depositary Receipts at the time any such amendment becomes effective
shall be deemed to consent and agree to such amendment and to be bound by the
Deposit Agreement.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements. The
Company will pay the charges of the Depositary in connection with the initial
deposit of the Preferred Stock and any redemption of the Preferred Stock.
Holders of Depositary Shares will pay all other transfer and other taxes and
governmental charges, and, in addition, such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which the Company is required to furnish
to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceedings in respect of any Depositary Shares
or Preferred Stock unless satisfactory indemnity is furnished. They may rely
upon written advice of counsel or accountants, or information provided by
persons presenting Preferred Stock for deposit, holders of Depositary Shares
or other persons believed to be competent and on documents believed to be
genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary will be appointed by the Company within 45 days after delivery of
the notice of resignation or removal. The Deposit Agreement may be terminated
at the direction of the Company or by the Depositary if a period of 45 days
shall have expired after the Depositary has delivered to the Company written
notice of its election to resign and a successor depositary shall not have
been appointed. Upon termination of the Deposit Agreement, the Depositary will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement except that the Depositary will continue to collect
dividends and other distributions pertaining to the Preferred Stock, will sell
rights, preferences or privileges as provided in the Deposit Agreement and
will continue to deliver Preferred Stock certificates together with such
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges, or other property in exchange for Depositary Receipts
surrendered. At any time after the expiration of two years from the date of
termination, the Depositary may sell
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the Preferred Stock and hold the proceeds of such sale, without interest, for
the benefit of the holders of Receipts who have not then surrendered their
Receipts. After making such sale, the Depositary will be discharged from all
obligations under the Deposit Agreement except to account for such proceeds.
In the event the Deposit Agreement is terminated, the Company will use its
best efforts to list the underlying shares of Preferred Stock on any stock
exchange on which such Depositary Shares were listed.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Sales of shares of Common Stock offered hereby may be effected from time to
time in one or more transactions on the NYSE or in negotiated transactions or
a combination of such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at other
negotiated prices. In connection with distributions of shares of Common Stock
or otherwise, the Company may enter into hedging transactions with broker-
dealers in connection with which such broker-dealers may sell shares of Common
Stock registered hereunder in the course of hedging through short sales the
positions they assume with the Company.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for
whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers, and any discounts or
commissions received by them from the Company and any profit on the resale of
Securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933 (the "Act"). Any such underwriter or agent
will be identified, and any such compensation received from the Company will
be described, in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Company. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of such Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
16
<PAGE>
EXPERTS
The consolidated financial statements of Alco Standard Corporation appearing
in the Company's Annual Report (Form 10-K) for the year ended September 30,
1993 have been audited by Ernst & Young, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for Alco by its Vice
President-Law and Secretary, J. Kenneth Croney, and for any underwriters by
Sullivan & Cromwell, New York, New York. As of January 31, 1994, Mr. Croney
beneficially owned 30,099 shares of Common Stock of Alco, including 16,640
shares over which he has the right to acquire beneficial ownership through the
exercise of stock options granted under Alco's 1981 Stock Option Plan or 1986
Stock Option Plan. Sullivan & Cromwell from time to time performs legal
services for Alco.
17
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CRE-
ATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company................................................................ S-2
Recent Developments........................................................ S-3
Use of Proceeds............................................................ S-3
Capitalization............................................................. S-4
Price Range of Common Stock and Dividends.................................. S-5
Selected Financial Information............................................. S-5
Management's Discussion and Analysis....................................... S-7
Business................................................................... S-11
Description of Securities.................................................. S-14
Description of Depositary Shares........................................... S-19
Certain Federal Income Tax Considerations.................................. S-24
Underwriting............................................................... S-27
Legal Matters.............................................................. S-28
Experts.................................................................... S-28
PROSPECTUS
Available Information...................................................... 2
Documents Incorporated By Reference........................................ 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 4
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends........... 4
Use of Proceeds............................................................ 4
Description of Debt Securities............................................. 5
Description of Capital Stock............................................... 10
Description of Depositary Shares........................................... 13
Plan of Distribution....................................................... 16
Experts.................................................................... 17
Validity of Securities..................................................... 17
</TABLE>
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3,400,000 SHARES
ALCO STANDARD CORPORATION
$ DEPOSITARY SHARES EACH REPRESENTING 1/100 OF A SHARE OF CONVERSION
PREFERRED STOCK, SERIES BB (AUTOMATICALLY CONVERTIBLE EQUITY SECURITIES) (NO
PAR VALUE)
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
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