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Alco Standard Corporation
SEC FORM 10-K
SEPTEMBER 30, 1995
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1995
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934)
COMMISSION FILE NUMBER 1-5964
ALCO STANDARD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 23-0334400
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
BOX 834, VALLEY FORGE, PENNSYLVANIA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
Registrant's telephone number, including area code: (610) 296-8000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF CLASS REGISTERED
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Common Stock, no par value New York Stock Exchange
(with Preferred Share Purchase Rights) Philadelphia Stock
Exchange
Chicago Stock Exchange
Series AA Convertible Preferred Stock New York Stock Exchange
(Depositary Shares)
Series BB Conversion Preferred Stock New York Stock Exchange
(Depositary Shares)
Securities registered pursuant to Section 12(g) of the Act: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF NOVEMBER 10, 1995 WAS APPROXIMATELY $5,208,831,084 BASED UPON
THE CLOSING SALES PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE OF
$46.75 PER COMMON SHARE (ON NOVEMBER 10, 1995), $104.75 PER DEPOSITARY SHARE
OF SERIES AA CONVERTIBLE PREFERRED STOCK (ON NOVEMBER 10, 1995), AND $86.75
PER DEPOSITARY SHARE OF SERIES BB CONVERSION PREFERRED STOCK (ON NOVEMBER 10,
1995). FOR PURPOSES OF THE FOREGOING SENTENCE ONLY, ALL DIRECTORS AND OFFICERS
OF THE REGISTRANT AND THE TRUSTEES OF THE REGISTRANT'S PENSION PLAN AND STOCK
PURCHASE PLANS WERE ASSUMED TO BE AFFILIATES.
THE NUMBER OF SHARES OF COMMON STOCK, NO PAR VALUE, OF THE REGISTRANT
OUTSTANDING AS OF NOVEMBER 10, 1995 WAS 112,375,514.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II--REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR FISCAL YEAR
ENDED SEPTEMBER 30, 1995
PART III--REGISTRANT'S PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF
SHAREHOLDERS
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PART I
ITEM 1. BUSINESS.
Alco Standard Corporation ("Alco" or the "Company") was incorporated in Ohio
in 1952 and is the successor to a business incorporated under a similar name
in 1928. The term "Alco" generally includes Alco Standard Corporation and its
subsidiaries and divisions. The address of Alco's principal executive offices
is P.O. Box 834, Valley Forge, Pennsylvania 19482 (telephone number: (610)
296-8000).
Alco markets and distributes office equipment, paper and supply systems. In
fiscal 1995, Alco had annual revenues of approximately $9.9 billion. The
information concerning revenues, income before taxes and assets attributable
to each of Alco's business segments for each of the three years in the period
ended September 30, 1995 set forth under "Segment Data" in the consolidated
financial statements included on page 46 of Alco's Annual Report to
Shareholders for the fiscal year ended September 30, 1995 ("1995 Annual
Report") is incorporated herein by reference.
Alco was founded and continues to operate as "The Corporate Partnership."
Under this entrepreneurial principle, Alco field executives maintain a high
degree of operating autonomy, which enhances the Company's ability to serve
and support its customers. The following describes Alco's two business
segments.
ALCO OFFICE PRODUCTS
Alco Office Products ("AOP") sells, rents and leases photocopiers, fax
machines and other automated office equipment for use in both traditional and
integrated office environments. AOP also provides equipment service and
supplies, equipment financing and reprographic facilities management and
specialized document copying services.
AOP has locations throughout the United States and Canada, and in Europe
(primarily in the United Kingdom). These companies comprise the largest
network of independent copier and office equipment dealers in North America
and in the United Kingdom, and represent the only independent distribution
network with national scope. AOP competes against numerous competitors over a
wide range of markets, competing on the basis of quality customer service,
price and product performance.
AOP distributes the products of numerous manufacturers, including Canon,
Oce, Ricoh and Sharp, throughout forty-eight states, six Canadian provinces
and in Europe. Customers include large and small businesses, professional
firms and government agencies.
During fiscal 1993, 1994 and 1995, AOP accounted for approximately 25%, 28%
and 29%, respectively, of Alco's consolidated revenues, and 50%, 55% and 53%,
respectively, of Alco's operating income (excluding Unisource restructuring
costs in 1993).
During fiscal 1995, AOP acquired 102 office products companies in the United
States, Canada, and Europe, with an aggregate of over $578 million in
annualized revenues. In May 1995, AOP acquired CopyAmerica, the largest copy
center in the country, which specializes in on-demand manuals and other short-
run documents. AOP's European expansion during fiscal 1995 included the
acquisition of seven companies in the United Kingdom, the largest of which was
Southern Business Group (renamed A: Copy (UK) PLC), with annualized revenues
of approximately $86 million.
UNISOURCE
Unisource Worldwide, Inc. ("Unisource") markets and distributes quality
printing and imaging products for office and reprographic use. Through its
supply systems segment, Unisource also distributes disposable paper and
plastic products, packaging systems and maintenance supplies.
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During fiscal 1993, 1994 and 1995 Unisource accounted for approximately 75%,
72%, and 71%, respectively, of Alco's consolidated revenues from continuing
operations, and 50%, 45% and 47%, respectively, of Alco's operating income
(excluding Unisource restructuring costs in 1993).
Unisource focuses on five market segments: printing and publishing,
corporate 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 has locations in forty-five states, every province of Canada and
in Mexico. Unisource's operations constitute the largest independent network
of paper distributors in the United States and Canada. Although substantial in
the aggregate, these operations compete separately in many different markets
against numerous competitors, including both independent distributors and
those owned by major paper manufacturers. Although its business is highly
competitive and its competitors numerous, Unisource believes that its
competitive position is strong. Unisource competes principally on the basis of
quality customer service, price and the range of products maintained in
inventory.
In fiscal 1995, Unisource acquired twelve companies, primarily in supply
systems target markets, with $152 million in annualized revenues, including
four companies in Mexico.
INFORMATION CONCERNING ALCO'S BUSINESS IN GENERAL
STOCK SPLIT
On November 9, 1995, the Company effected a two-for-one split of its common
stock in the form of a stock dividend to shareholders of record on October 27,
1995. All common share and per share amounts reported by Alco in its
consolidated financial statements have been adjusted to give retroactive
effect to the stock split.
UNISOURCE RESTRUCTURING PLAN
In September 1993, the Company adopted a plan to restructure Unisource's
distribution network, which included the following: installation of a
customer-focused information system, redesigning of warehouse and
transportation management functions, regionalization of management and
administrative support functions and consolidation of service center
locations. As a result of the restructuring, the Company recorded a pretax
charge of $175 million in the fourth quarter of fiscal 1993. At September 30,
1995, the remaining restructuring reserve was approximately $39 million, which
management believes is adequate to complete the restructuring plan in fiscal
1997.
BOARD AND MANAGEMENT CHANGES
In November 1995, John E. Stuart, who was appointed President and Chief
Executive Officer of Alco in August 1993, was named Chairman of the Board of
Directors, succeeding Ray B. Mundt. Mr. Mundt retired as an active employee of
Alco effective December 31, 1994 and will continue to serve as a member of the
Board.
In August 1995, Kurt E. Dinkelacker (who had been serving as Executive Vice
President and Chief Financial Officer of Alco) was named President of the Alco
Office Products Group. Mr. Dinkelacker will continue as an Executive Vice
President of Alco.
In January 1995, William T. Leith was named President of Unisource, and a
Vice President of Alco. Mr. Leith, who had been serving as Executive Vice
President for Unisource's U.S. Operations, now directs all of Unisource's
operations throughout the United States, Canada and Mexico.
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Among other executive changes during fiscal 1995, Yves Montmarquette was
named President of Unisource Canada, succeeding Raymond (Pike) Peterson,
Donald R. Smallwood was appointed President of Unisource Distribuidora, and
William M. Laughlin was named Vice President, Acquisitions of Unisource.
In August 1995, Elisabeth H. Barrett was appointed Vice President--
Administrative Services of Alco.
In August 1995, Barbara Barnes Haupfuhrer, a member of the Board since 1988,
was named Chairman of the Independent Directors. J. Mahlon Buck, Jr., who has
been a director since 1984, retires from the Board in January 1996.
EQUITY OFFERINGS
In July 1995, Alco completed a public offering of 3,877,200 depositary
shares, each representing 1/100 of a share of Series BB conversion preferred
stock, and used the net proceeds of approximately $290 million to reduce
outstanding debt.
DIVESTITURES
In September, 1995, the Company sold its Central Products Company to
Spinnaker Industries, Inc. Central Products, which manufactures paper-based
carton sealing tapes, has annualized revenues of approximately $120 million.
SUPPLIERS AND CUSTOMERS
Products distributed by Alco are purchased from numerous domestic and
overseas suppliers. There has been no significant difficulty in obtaining
products from these suppliers. Supplier relationships are good and are
expected to continue. Neither AOP nor Unisource is dependent upon a single
customer, or a few customers, the loss of any one or more of which would have
a material adverse effect on Alco's business taken as a whole.
Many of Alco's operations are required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. At September 30,
1995, inventories accounted for approximately 35% of Alco's total current
assets.
PROPRIETARY MATTERS
Alco has a number of patents, licenses and trademarks. Alco does not
believe, however, that any one patent, license or trademark is material to its
operations as a whole.
ENVIRONMENTAL REGULATION
Environmental laws and liabilities relating to Alco's current businesses
(which are primarily distribution operations) have not had and are not
expected to have a material adverse effect upon Alco's capital expenditures,
earnings or competitive position. Certain environmental claims, however, are
now pending against Alco for manufacturing or landfill sites relating to
predivestiture activities of discontinued operations. As a result of several
recent environmental remediation claims, and increased estimated costs
associated with existing environmental remediation sites (primarily related to
discontinued manufacturing operations divested by the Company in 1991 and
prior), the Company took a fourth quarter charge in fiscal 1995 to increase
its liabilities for environmental remediation. The discontinued operations
charge was approximately $24 million (approximately $17 million net of tax) or
$.14 per share. The adjustment reflects management's best estimate, based on
information currently available, of costs to be incurred for existing and
probable claims relating to discontinued operations.
While it is not possible to estimate what expenditures may be required in
order for Alco to comply with environmental laws or discharge environmental
liabilities in the future, Alco does not believe that such expenditures will
have a material adverse effect on it or its operations as a whole.
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EMPLOYEES
At September 30, 1995, Alco had approximately 36,500 employees.
FOREIGN OPERATIONS
Alco's operations in Canada distribute paper, industrial supplies and
packaging products, and distribute and service office equipment. Alco's
European operations distribute and service office equipment. In June 1995,
Erskine Limited, a U.K. subsidiary of Alco, purchased all of the outstanding
shares of Southern Business Group PLC (SBG) and changed SBG's name to A:Copy
(UK) PLC ("A:Copy"). A:Copy has annualized revenues of approximately $86
million, and sells, leases, services and remanufactures copiers and other
office equipment in Southern England. In September 1995, AOP further expanded
its presence in the United Kingdom by acquiring Copymore PLC, an office
equipment distributor with approximately $52 million in annualized revenues.
Unisource expanded into Mexico during fiscal 1995, acquiring four new
companies with 18 locations.
Information concerning revenues, income before taxes and identifiable assets
of Alco's foreign operations for each of the three years in the period ended
September 30, 1995 set forth in note 9 to the consolidated financial
statements included on page 36 of Alco's 1995 Annual Report is incorporated
herein by reference. Revenues from exports during the last three fiscal years
were not significant.
There are additional risks attendant to foreign operations, such as possible
currency fluctuations and unsettled political conditions.
ITEM 2. PROPERTIES.
At September 30, 1995, Alco owned or leased facilities in fifty states, nine
Canadian provinces, in Europe and in Mexico. These properties occupy a total
of approximately 23 million square feet of which approximately 7 million
square feet are owned and the balance are leased under lease agreements with
various expiration dates. Alco believes that none of its properties is
materially important to its operations as a whole, and believes that its
facilities are suitable and adequate for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
During 1995, Alco agreed to pay $10 million to settle a claim by a former
subsidiary which had asserted that Alco was liable to it for certain employee
liabilities. This amount was primarily charged against existing reserves for
discontinued operations. The Company paid $5 million during 1995 with the
remaining $5 million to be paid over the next four years.
Alco does not believe that the outcome of lawsuits or other legal
proceedings to which it is a party will materially affect Alco or its
operations as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(No response to this item is required.)
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EXECUTIVE OFFICERS OF ALCO
The following is a list of Alco's executive officers, their ages and their
positions with Alco or its subsidiaries for the last five years.
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NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
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John E. Stuart................... 51 Chairman (1995), Chief Executive Officer and
President (1993); Vice President (1989-1993) and
Group President (1985-1993)
William F. Drake, Jr. ........... 63 Vice Chairman (1984)
Kurt E. Dinkelacker.............. 42 Group President--Alco Office Products (1995) and
Executive Vice President (1993); Chief Financial
Officer (1993-1995); Executive Vice President--
Finance, Alco Office Products (1989-1991); Group
Controller, Alco Office Products (1987-1989)
Hugh G. Moulton.................. 62 Executive Vice President (1992); General Counsel
(1979-1994); Senior Vice President--
Administration (1983-1992)
Elisabeth H. Barrett............. 50 Vice President--Administrative Services (1995);
Director--Administrative Services (1994-1995);
Director--Corporate MIS/HR (1992-1993)
O. Gordon Brewer, Jr. ........... 58 Vice President--Finance (1986)
Kathleen M. Burns................ 43 Vice President (1994) and Treasurer (1989);
Assistant Treasurer (1987-1989)
J. Kenneth Croney................ 53 Vice President (1983), General Counsel (1994)
and Secretary (1983)
Stephen K. Deay.................. 48 Vice President--Tax (1993); Director--Taxes
(1989-1993)
Michael J. Dillon................ 42 Vice President (1994) and Controller (1993);
Group Controller, Alco Office Products (1991-
1993); Associate Audit Director (1991); Senior
Audit Manager (1987-1991)
William T. Leith................. 48 Group President--Unisource and Vice President
(1995); Executive Vice President--Unisource,
U.S. Operations (1994-1995); President--PCA
Central (1991-1994); President--Distribix (an
Alco Standard company) (1988-1991)
Charles R. Tilden................ 42 Vice President--Corporate Affairs (1994); Vice
President--Communications, Gencorp (1988-1994)
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The New York Stock Exchange is the principal market on which Alco's common
stock is traded (ticker symbol ASN). Alco's common stock is also traded on the
Philadelphia and Chicago Stock Exchanges. As of November 10, 1995, there were
approximately 14,561 holders of record of Alco's common stock. The information
regarding the quarterly market price ranges of Alco's common stock and
dividend payments under "Quarterly Data" on page 48 of the 1995 Annual Report
is incorporated herein by reference.
Alco currently expects to continue its policy of paying regular cash
dividends, although there can be no assurance as to future dividends because
they are dependent upon future operating results, capital requirements and
financial condition and may be limited by covenants in certain loan
agreements.
ITEM 6. SELECTED FINANCIAL DATA.
Information appearing under "Corporate Financial Summary" for fiscal 1991
through 1995 regarding revenues, income from continuing operations, income
from continuing operations per common share, total assets, total debt, serial
preferred stock and cash dividends per common share on pages 44 and 45 of the
1995 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information appearing under "Financial Review" on pages 40 through 43 of the
1995 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Report of Independent Auditors and Consolidated Financial Statements of
Alco and its subsidiaries on pages 24 through 39 and the information appearing
under "Quarterly Data" for fiscal 1995 and 1994 on page 48 of the 1995 Annual
Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(No response to this item is required)
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors appearing in Alco's Notice of Annual Meeting
of Shareholders and Proxy Statement for the January 25, 1996 annual meeting of
shareholders (the "1996 Proxy Statement") is incorporated herein by reference.
Information regarding executive officers is set forth in Part I of this report
and additional information regarding executive officers appearing under
"Executive Compensation" in the 1996 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Executive Compensation" in the 1996 Proxy
Statement is incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management appearing under "Security Ownership" in the 1996 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Certain Transactions" in the 1996 Proxy
Statement is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) List of Financial Statements and Financial Statement
Schedules.
The response to this portion of Item 14 is submitted on page F-1 hereof as a
separate section of this report.
(a) (3) List of Exhibits.*
The following exhibits are filed as a part of this report (listed by numbers
corresponding to the Exhibit Table of Item 601 in Regulation S-K):
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3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco").
3.2 Code of Regulations of Alco, as amended February 9, 1982, filed as
Exhibit 3(b) to Alco's 1982 Form 10-K, is incorporated herein by
reference.
4.1 1993 Credit Agreement, dated as of September 30, 1993, among Alco,
Alco Office Products (U.K.) and various institutional lenders, filed
as Exhibit 4.1 to Alco's 1993 Form 10-K, is incorporated herein by
reference.
4.2 Revolving Credit and Acceptance Agreement, dated as of April 21,
1993, among Alco, Unisource Canada Inc. and The Toronto Dominion
Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10-K, is incorporated
herein by reference. Amendment No. 1 to Revolving Credit and
Acceptance Agreement, filed as Exhibit 4.2 to Alco's 1994 10-K, is
incorporated herein by reference.
4.3 Credit Agreement, dated December 1, 1994, among Alco and various
institutional lenders, filed as Exhibit 4.8 to Alco's Registration
Statement No. 33-56437, is incorporated herein by reference.
Amendment No. 1 dated February 1, 1995.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco and Bank of Montreal, filed as
Exhibit 4.4 to Alco's 1992 10-K, is incorporated herein by
reference. Amendment dated September 30, 1994 to Receivables
Purchase Agreement, filed as Exhibit 4.4 to Alco's 1994 10-K, is
incorporated herein by reference.
4.5 Credit Agreement dated as of October 13, 1995 among Alco Office
Systems Canada, Inc., Deutsche Bank Canada, Chemical Bank of Canada
and Royal Bank of Canada.
4.6 Participation Agreement dated as of November 8, 1994 among Unisource
Worldwide, Inc. and AOP, Inc. as Lessees, Alco, as Guarantor, PPI
SPV, L.P., as Lessor, Pitcairn SPV Inc., as General Partner of
Lessor and Trust Company Bank, as Lender and Agent.
4.7 Rights Agreement dated as of February 10, 1988 between Alco and
National City Bank, filed on February 11, 1988 as Exhibit 1 to
Alco's Registration Statement on Form 8-A, is incorporated herein by
reference.
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4.8 Assumption Agreement and Amended and Restated Note Agreement dated
as of May 13, 1994 between Alco and the Prudential Insurance
Company of America, filed as Exhibit 4.5 to Alco's 1994 10-K, is
incorporated herein by reference. Amendment No. 1 dated September
30, 1995.
4.9 Note Purchase Agreement between Alco and various purchasers dated
July 15, 1995 for $55 million in 7.15% Notes due November 15, 2005.
4.10 Pursuant to Regulation S-K item 601(b)(iii), Alco agrees to furnish
to the Commission, upon request, a copy of other instruments
defining the rights of holders of long-term debt of Alco and its
subsidiaries.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco and
certain institutional investors, filed as Exhibit 4.2 to Alco's
Current Report, dated July 1, 1988, on Form 8-K, is incorporated
herein by reference.
10.2 Alco Standard Corporation Amended and Restated Long Term Incentive
Compensation Plan.**
10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit 10.3
to Alco's 1994 10-K, is incorporated herein by reference.**
10.4 Alco Standard Corporation Partners' Stock Purchase Plan, filed as
Exhibit 10.4 to Alco's 1994 10-K, is incorporated herein by
reference.**
10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as Exhibit
10.5 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.6 Alco Standard Corporation Amended and Restated 1986 Stock Option
Plan.**
10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan, filed
as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan, filed
as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated herein by
reference.**
10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as Exhibit
94 to Alco's Registration Statement No. 33-56469 on Form S-8, is
incorporated herein by reference.**
10.10 Alco Standard Corporation 1980 Deferred Compensation Plan, filed as
Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.11 Alco Standard Corporation 1985 Deferred Compensation Plan, filed as
Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.12 Alco Standard Corporation 1991 Deferred Compensation Plan, filed as
Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.13 Alco Standard Corporation Retirement Plan for Non-Employee
Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is
incorporated herein by reference.**
10.14 Alco Standard Corporation Amended and Restated 1994 Deferred
Compensation Plan.**
10.15 Indenture, dated as of April 1, 1986 between Alco and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to Alco's
Registration Statement No. 30-4829, is incorporated herein by
reference.
10.16 Support Agreement dated as of June 1, 1994 between Alco and Alco
Capital Resource, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.4 to Alco Capital Resource's Amended Registration
Statement in Form 10-12G/A dated May 27, 1994, is incorporated
herein by reference.
10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.2 to Alco Capital Resource's Registration Statement on
Form 10 dated May 4, 1994, is incorporated herein by reference.
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10.18 Operating Agreement, dated as of August 15, 1991 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.3 to Alco Capital Resource's Registration Statement on
Form 10 dated May 4, 1994, is incorporated herein by reference.
10.19 Agreement effective January 1, 1994 between Unisource Worldwide,
Inc. and Integrated Systems Solution Corporation, a subsidiary of
IBM, portions of which contain confidential material, filed as
Exhibit 10.20 to Alco's 1994 Form 10-K/A filed on March 17, 1995,
is incorporated herein by reference.
10.20 Receivables Transfer Agreement dated as of September 23, 1994 Among
Alco Capital Resource, Inc., Twin Towers, Inc. and Deutsche Bank
AG, New York Branch, portions of which contain confidential
material, filed as Exhibit 10.21 to Alco's 1994 10-K/A filed on
March 17, 1995, is incorporated herein by reference.
10.21 Distribution Agreement dated as of June 30, 1995 between Alco
Capital Resource, Inc. and various distribution agents.
10.22 Indenture dated as of July 1, 1994 between Alco Capital Resource,
Inc. and Nations Bank, N.A., as Trustee, filed as Exhibit 4 to Alco
Capital Resource's Registration Statement No. 33-53779, is
incorporated herein by reference.
10.23 Indenture dated as of July 1, 1995 between Alco Capital Resource,
Inc. and Chemical Bank, N.A., as Trustee.
11 Statement re: Computation of earnings per share.
12.1 Ratio of Earnings to Fixed Charges.
12.2 Ratio of Earnings to Fixed Charges Excluding Captive Finance
Subsidiaries.
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Excluding Captive Finance Subsidiaries.
13 Financial Section of Alco's Annual Report to Shareholders for the
fiscal year ended September 30, 1995 (which, except for those
portions thereof expressly incorporated herein by reference, is
furnished for the information of the Commission and is not "filed"
as part of this report).
21 Subsidiaries of Alco.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
27 Financial Data Schedule.
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* Copies of the exhibits will be furnished to any security holder of Alco
upon payment of the reasonable cost of reproduction.
**Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
On July 21, 1995, Alco filed a Current Report on Form 8-K to report under
Item 5 that its Articles of Incorporation had been amended to add a series of
preferred stock (Series BB).
On October 12, 1995, Alco filed a Current Report on Form 8-K to report under
Item 5 a pretax charge to discontinued operations for environmental
liabilities of approximately $24 million (approximately $17 million net of
tax) in the fourth quarter of fiscal 1995.
On October 18, 1995, Alco filed a Current Report on Form 8-K to report under
Item 5 certain information included in its October 17, 1995 press release,
including its fourth quarter earnings, a two-for-one common stock split and an
increase in its quarterly common stock dividend.
(c) The response to this portion of Item 14 is submitted in response to Item
14(a)(3) above.
(d) The response to this portion of Item 14 is contained on page S-1 of this
report.
9
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ALCO STANDARD CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A)(1) AND (2) AND 14(D)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS: The following consolidated financial statements of
Alco Standard Corporation and its subsidiaries included in the 1995 Annual
Report to Shareholders are incorporated by reference in Item 8 of Part II of
this report:
Consolidated Statements of Income
--Fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993
Consolidated Balance Sheets
--September 30, 1995 and September 30, 1994
Consolidated Statements of Cash Flows
--Fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993
Consolidated Statements of Changes in Shareholders' Equity
--Fiscal years ended September 30, 1995, September 30, 1994 and
September 30, 1993
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES: The following consolidated financial
statement schedules of Alco Standard Corporation and its subsidiaries are
submitted in response to Item 14(d):
Schedule II--Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
F-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1995 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED.
Alco Standard Corporation
Date: November 14, 1995
/s/ Michael J. Dillon
By___________________________________
(MICHAEL J. DILLON) VICE PRESIDENT
AND CONTROLLER (PRINCIPAL
ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
AMENDMENT ON FORM 10-K/A HAS BEEN SIGNED BELOW ON NOVEMBER 14, 1995 BY THE
FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
*John E. Stuart Chairman, President, and Chief
- - ------------------------------------- Executive Officer (Principal
(JOHN E. STUART) Executive Officer)
/s/ Kurt E. Dinkelacker Executive Vice President and Chief
- - ------------------------------------- Financial Officer (Principal
(KURT E. DINKELACKER) Financial Officer)
/s/ Michael J. Dillon Vice President and Controller
- - ------------------------------------- (Principal Accounting Officer)
(MICHAEL J. DILLON)
*Ray B. Mundt Director
- - -------------------------------------
(RAY B. MUNDT)
*J. Mahlon Buck, Jr. Director
- - -------------------------------------
(J. MAHLON BUCK, JR.)
*Paul J. Darling Director
- - -------------------------------------
(PAUL J. DARLING)
*William F. Drake, Jr. Director
- - -------------------------------------
(WILLIAM F. DRAKE, JR.)
*James J. Forese Director
- - -------------------------------------
(JAMES J. FORESE)
*Frederick S. Hammer Director
- - -------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director
- - -------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Dana G. Mead Director
- - -------------------------------------
(DANA G. MEAD)
*Paul C. O'Neill Director
- - -------------------------------------
(PAUL C. O'NEILL)
*Rogelio G. Sada Director
- - -------------------------------------
(ROGELIO G. SADA)
*James W. Stratton Director
- - -------------------------------------
(JAMES W. STRATTON)
*By his signature set forth below, Hugh G. Moulton, pursuant to duly
executed Powers of Attorney duly filed with the Securities and Exchange
Commission, has signed this Form 10-K on behalf of the persons whose
signatures are printed above, in the capacities set forth opposite their
respective names.
/s/ Hugh G. Moulton November 14, 1995
- - -------------------------------------
(HUGH G. MOULTON)
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------------ -----------
ADDITIONS
-----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ----------- ----------- ----------- ------------ -----------
YEAR ENDED SEPTEMBER 30,
1995
- - ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $29,428,000 $21,900,000 $17,249,000(1) $19,949,000(2) $48,628,000
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994
- - ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $27,528,000 $19,668,000 $ 836,000(1) $18,604,000(2) $29,428,000
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1993
- - ------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $23,947,000 $19,702,000 $ 4,768,000(1) $20,889,000(2) $27,528,000
</TABLE>
- - --------
(1) Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
S-1
<PAGE>
ALCO STANDARD CORPORATION
VALLEY FORGE, PENNSYLVANIA 19482-0834
(610) 296-8000
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco").
3.2 Code of Regulations of Alco, as amended February 9, 1982, filed
as Exhibit 3(b) to Alco's 1982 Form 10-K, is incorporated
herein by reference.
4.1 1993 Credit Agreement, dated as of September 30, 1993, among
Alco, Alco Office Products (U.K.) and various institutional
lenders, filed as Exhibit 4.1 to Alco's 1993 Form 10-K, is
incorporated herein by reference.
4.2 Revolving Credit and Acceptance Agreement, dated as of April
21, 1993, among Alco, Unisource Canada Inc. and The Toronto
Dominion Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10-K,
is incorporated herein by reference. Amendment No. 1 to
Revolving Credit and Acceptance Agreement, filed as Exhibit 4.2
to Alco's 1994 10-K, is incorporated herein by reference.
4.3 Credit Agreement, dated December 1, 1994, among Alco and
various institutional lenders, filed as Exhibit 4.8 to Alco's
Registration Statement
No. 33-56437, is incorporated herein by reference. Amendment
No. 1 dated February 1, 1995.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco and Bank of Montreal, filed
as Exhibit 4.4 to Alco's 1992 10-K, is incorporated herein by
reference. Amendment dated September 30, 1994 to Receivables
Purchase Agreement, filed as Exhibit 4.4 to Alco's 1994 10-K,
is incorporated herein by reference.
4.5 Credit Agreement dated as of October 13, 1995 among Alco Office
Systems Canada, Inc., Deutsche Bank Canada, Chemical Bank of
Canada and Royal Bank of Canada.
4.6 Participation Agreement dated as of November 8, 1994 among
Unisource Worldwide, Inc. and AOP, Inc. as Lessees, Alco, as
Guarantor, PPI SPV, L.P., as Lessor, Pitcairn SPV Inc., as
General Partner of Lessor and Trust Company Bank, as Lender and
Agent.
4.7 Rights Agreement dated as of February 10, 1988 between Alco and
National City Bank, filed on February 11, 1988 as Exhibit 1 to
Alco's Registration Statement on Form 8-A, is incorporated
herein by reference.
4.8 Assumption Agreement and Amended and Restated Note Agreement
dated as of May 13, 1994 between Alco and the Prudential
Insurance Company of America, filed as Exhibit 4.5 to Alco's
1994 10-K, is incorporated herein by reference. Amendment No. 1
dated September 30, 1995.
4.9 Note Purchase Agreement between Alco and various purchasers
dated July 15, 1995 for $55 million in 7.15% Notes due November
15, 2005.
4.10 Pursuant to Regulation S-K item 601(b)(iii), Alco agrees to
furnish to the Commission, upon request, a copy of other
instruments defining the rights of holders of long-term debt of
Alco and its subsidiaries.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco
and certain institutional investors, filed as Exhibit 4.2 to
Alco's Current Report, dated July 1, 1988, on Form 8-K, is
incorporated herein by reference.
10.2 Alco Standard Corporation Amended and Restated Long Term
Incentive Compensation Plan.**
10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit
10.3 to Alco's 1994 10-K, is incorporated herein by
reference.**
10.4 Alco Standard Corporation Partners' Stock Purchase Plan, filed
as Exhibit 10.4 to Alco's 1994 10-K, is incorporated herein by
reference.**
10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as
Exhibit 10.5 to Alco's 1992 Form 10-K, is incorporated herein
by reference.**
10.6 Alco Standard Corporation Amended and Restated 1986 Stock
Option Plan.**
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan,
filed as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated
herein by reference.**
10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan,
filed as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated
herein by reference.**
10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as
Exhibit 94 to Alco's Registration Statement No. 33-56469 on
Form S-8, is incorporated herein by reference.**
10.10 Alco Standard Corporation 1980 Deferred Compensation Plan,
filed as Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated
herein by reference.**
10.11 Alco Standard Corporation 1985 Deferred Compensation Plan,
filed as Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated
herein by reference.**
10.12 Alco Standard Corporation 1991 Deferred Compensation Plan,
filed as Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated
herein by reference.**
10.13 Alco Standard Corporation Retirement Plan for Non-Employee
Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is
incorporated herein by reference.**
10.14 Alco Standard Corporation Amended and Restated 1994 Deferred
Compensation Plan.**
10.15 Indenture, dated as of April 1, 1986 between Alco and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to
Alco's Registration Statement No. 30-4829, is incorporated
herein by reference.
10.16 Support Agreement dated as of June 1, 1994 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed
as Exhibit 10.4 to Alco Capital Resource's Amended Registration
Statement in Form 10-12G/A dated May 27, 1994, is incorporated
herein by reference.
10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco
and Alco Capital Resource, Inc. (Alco's leasing subsidiary),
filed as Exhibit 10.2 to Alco Capital Resource's Registration
Statement on Form 10 dated May 4, 1994, is incorporated herein
by reference.
10.18 Operating Agreement, dated as of August 15, 1991 between Alco
and Alco Capital Resource, Inc. (Alco's leasing subsidiary),
filed as Exhibit 10.3 to Alco Capital Resource's Registration
Statement on Form 10 dated May 4, 1994, is incorporated herein
by reference.
10.19 Agreement effective January 1, 1994 between Unisource
Worldwide, Inc. and Integrated Systems Solution Corporation, a
subsidiary of IBM, portions of which contain confidential
material, filed as Exhibit 10.20 to Alco's 1994 Form 10-K/A
filed on March 17, 1995, is incorporated herein by reference.
10.20 Receivables Transfer Agreement dated as of September 23, 1994
Among Alco Capital Resource, Inc., Twin Towers, Inc. and
Deutsche Bank AG, New York Branch, portions of which contain
confidential material, filed as Exhibit 10.21 to Alco's 1994
10-K/A filed on March 17, 1995, is incorporated herein by
reference.
10.21 Distribution Agreement dated as of July 1, 1995 between Alco
Capital Resource, Inc. and various distribution agents.
10.22 Indenture dated as of July 1, 1994 between Alco Capital
Resource, Inc. and Nations Bank, N.A., as Trustee, filed as
Exhibit 4 to Alco Capital Resource's Registration Statement No.
33-53779, is incorporated herein by reference.
10.23 Indenture dated as of July 1, 1995 between Alco Capital
Resource, Inc. and Chemical Bank, N.A., as Trustee.
11 Statement re: Computation of earnings per share.
12.1 Ratio of Earnings to Fixed Charges.
12.2 Ratio of Earnings to Fixed Charges Excluding Captive Finance
Subsidiaries.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends.
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends Excluding Captive Finance Subsidiaries.
13 Financial Section of Alco's Annual Report to Shareholders for
the fiscal year ended September 30, 1995 (which, except for
those portions thereof expressly incorporated herein by
reference, is furnished for the information of the Commission
and is not "filed" as part of this report).
21 Subsidiaries of Alco.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of
Attorney.
27 Financial Data Schedule.
</TABLE>
- - --------
**Management contract or compensatory plan or arrangement.
3
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ALCO STANDARD CORPORATION
FIRST: The name of the Corporation shall be ALCO STANDARD CORPORATION.
SECOND: The principal office of the Corporation in the State of Ohio is to be
located at Cleveland in Cuyahoga County.
THIRD: The purposes for which, and for any of which, the Corporation is formed
are as follows:
1. To develop, manufacture, service, repair, treat, finish, buy, sell and
generally deal in, in every manner, articles, materials and products of every
kind and description, to own, hold and deal in, in every manner, all real and
personal property, and to do all things necessary or incidental to the foregoing
purposes.
2. In general to carry on any other lawful business whatsoever which is
calculated, directly or indirectly, to promote the interests of the Corporation
or to enhance the value of its properties; and to have and exercise all rights,
powers and privileges which are now or may hereafter be conferred upon
corporations by the laws of Ohio; provided, however, that nothing contained in
this Article Third shall be construed as authorizing the Corporation to carry on
the business of a public utility or railroad as defined by the public utility
laws of the State of Ohio.
The Corporation reserves the right at any time and from time to time to
substantially change its purposes in any manner now or hereafter permitted by
statute. Any change of the purposes of the Corporation authorized or approved by
the holders of shares entitled to exercise the proportion of the voting power of
the Corporation now or hereafter required by statute for such authorization or
approval shall be binding and conclusive upon every shareholder of the
Corporation as fully as if such shareholder had voted therefor; and no
shareholder, notwithstanding that he may have voted against such change of
purposes or may have objected in writing thereto, shall be entitled to payment
of the fair cash value of his shares.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 152,135,878 consisting of 2,135,878 shares of Serial Preferred
Stock of no par value (hereinafter called "Serial Preferred Stock"), and
150,000,000 shares of Common Stock of no par value (hereinafter called "Common
Stock"). The shares of such classes shall have the following express terms:
Division A
EXPRESS TERMS OF THE SERIAL PREFERRED STOCK
1. Series and Rank. The Serial Preferred Stock may be issued from time
---------------
to time in one or more series. All shares of Serial Preferred Stock shall
be of equal
<PAGE>
- 2 -
rank and shall be identical, except in respect of the matters that may be fixed
by the Board of Directors as hereinafter provided, and each share of each series
shall be identical with all other shares of such series, except as to the date
from which dividends are cumulative. Subject to the provisions of Sections 2 to
7, both inclusive, of this Division, which provisions shall apply to all Serial
Preferred Stock, the Board of Directors hereby is authorized to cause such
shares to be issued in one or more series and with respect to each such series
prior to the issuance thereof to fix:
(a) The designation of the series, which may be by distinguishing number,
letter or title.
(b) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding).
(c) The annual dividend rate of the series.
(d) The dates at which dividends, if declared, shall be payable, and the
dates from which dividends shall be cumulative.
(e) The redemption rights and price or prices, if any, for shares of the
series.
(f) The terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
liquidation, dissolution or winding up of the affairs of the Corporation, which
amount may vary depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary.
(h) Whether the shares of the series shall be convertible into Common
Stock, and, if so, the conversion price or prices, any adjustments thereof, and
all other terms and conditions upon which such conversion may be made.
(i) Restrictions on the issuance of shares of the same series or of any
other class or series.
The Board of Directors is authorized to adopt from time to time amendments
to the Articles of Incorporation fixing, with respect to each such series, the
matters described in clauses (a) to (i), both inclusive, of this Section 1.
2. Dividends. The holders of the Serial Preferred Stock of each series
---------
shall be entitled to receive, when and as declared by the Board of Directors,
out of funds of the Corporation legally available for dividends, dividends in
cash at the rate for such series fixed in accordance with the provisions of
Section 1 of this Division, and no more, payable quarterly on the dates fixed
for such series. Such dividends on each share of Serial Preferred Stock shall
accrue and be cumulative, whether or
<PAGE>
- 3 -
not earned or declared, from and after the date or dates fixed with respect to
such series. No dividends may be paid upon or declared or set apart for any of
the Serial Preferred Stock for any quarterly dividend period unless at the same
time a like proportionate dividend for the same quarterly dividend period,
ratably in proportion to the respective annual dividend rates fixed therefor,
shall be paid upon or declared or set apart for all Serial Preferred Stock of
all series then issued and outstanding and entitled to receive such dividend.
3. Dividends on or Distributions to Holders of Junior Stock.
--------------------------------------------------------
So long as any shares of Serial Preferred Stock are outstanding, the Corporation
shall not (a) declare or pay any dividends (other than dividends payable in
Common Stock or other shares of the Corporation ranking junior to the Serial
Preferred Stock) to holders of Common Stock or shares of the Corporation of any
other class ranking on a parity with or junior to the Serial Preferred Stock, or
(b) make any distributions of assets (directly or indirectly, by purchase;
redemption or otherwise) to the holders of Common Stock or shares of the
Corporation of any other class ranking on a parity with or junior to the Serial
Preferred Stock (except in the case of shares purchased in compromise of claims
or to prevent loss on doubtful debts and except in the case of shares purchased
out of the proceeds of the sale of Common Stock or other shares ranking junior
to the Serial Preferred Stock received by the Corporation, subsequent to
January 1, 1968):
(a) Unless all accrued and unpaid dividends on shares of Serial Preferred
Stock, including the full dividends for the then quarterly dividend period,
shall have been paid or declared and funds sufficient for payment thereof set
apart; and
(b) Unless there shall be no arrearages with respect to redemption of
shares of Serial Preferred Stock from any sinking fund provided for shares of
such series in accordance with provisions of Section 1 of this Division.
4. Voting Rights. The holders of Serial Preferred Stock shall be
-------------
entitled at all times to one vote for each share, and except as otherwise
required by law, the holders of the Serial Preferred Stock and Common Stock of
the Corporation shall vote together as one class on all matters, subject,
however, to the special voting rights conferred upon the holders of the Serial
Preferred Stock as hereinafter provided.
If and when the Corporation shall be in default in the payment, in whole or
in part, of each of six quarterly dividends (whether or not consecutive) accrued
on any series of Serial Preferred Stock whether or not earned or declared, the
holders of the Serial Preferred Stock of all series, voting separately as a
single class, shall be entitled to elect two Directors of the Corporation, to
serve in addition to the Directors otherwise elected.
Such rights to elect additional Directors may be exercised at any annual
meeting of shareholders or, within the limitation hereinafter provided, at a
special meeting of shareholders held for such purpose. If such default shall
occur more than 90 days preceding the date of the next annual meeting of
shareholders as fixed by
<PAGE>
- 4 -
the Regulations of the Corporation, then a special meeting of the holders of the
Serial Preferred Stock shall be called by the Secretary of the Corporation upon
the written request of the holders of not less than 10% of the Serial Preferred
Stock then outstanding, such meeting to be held within 60 days after the
delivery to the Secretary of such request or such later time as may be
reasonably required to obtain clearance from the Securities and Exchange
Commission. Such additional Directors, whether elected at an annual meeting or
at a special meeting, shall serve until the next annual meeting and until their
successors shall be duly elected and qualified, unless their terms shall sooner
terminate pursuant to the provisions of this Section 4. At any meeting for the
purpose of electing such additional Directors, the holders of 35% of the Serial
Preferred Stock then outstanding shall constitute a quorum, and any such meeting
shall be valid, notwithstanding that a quorum of the outstanding shares of any
other class or classes shall not be present or represented thereat. At the time
of any such meeting at which a quorum shall be present, the number of Directors
constituting the whole Board of Directors shall be deemed to be increased by
two.
If and when all dividends in default on the Serial Preferred Stock shall be
paid or declared and funds sufficient for the payment thereof irrevocably set
aside for payment, the right of the holders of the Serial Preferred Stock as a
class to elect two Directors shall then cease and if any Directors were elected
by the holders of the Serial Preferred Stock, as a class, the term of such
Directors shall terminate, and the number of Directors constituting the whole
Board of Directors shall be accordingly reduced. The above provisions for the
vesting of such voting rights in the holders of the Serial Preferred Stock, as a
class, shall apply, however, in case of any subsequent default or failure under
this Section 4.
The rights of the holders of Serial Preferred Stock to elect two Directors
provided by this Section 4 shall, when in effect, be in lieu of, and not in
addition to, all other rights otherwise held by the holders of Serial Preferred
Stock to vote as a class with the Common Stock for the election of Directors.
5. Action Requiring Serial Preferred Stock Consent.
-----------------------------------------------
(a) So long as any shares of Serial Preferred Stock shall be outstanding,
the Corporation shall not, without (i) the affirmative vote of the holders of at
least two-thirds of the shares of Serial Preferred Stock at the time
outstanding, given in person or by proxy, either at a special meeting called for
the purpose, or at any annual meeting of shareholders if appropriate notice of
such proposed action is given, at which all of the shares of Serial Preferred
Stock shall vote separately as a single class, or (ii) the written consent of
the holders of at least two-thirds of the shares of Serial Preferred Stock at
the time outstanding:
A) Amend or repeal any of the provisions of the Articles or Regulations of
the Corporation so as to affect adversely the preferences, rights, powers or
privileges of the Serial Preferred Stock or the holders thereof.
<PAGE>
- 5 -
B) Authorize or issue any class or series of any class of the stock of the
Corporation ranking prior to the Serial Preferred Stock, or authorize or issue
any obligations or securities convertible into any such class.
C) Purchase or redeem (for sinking fund purposes or otherwise) less than
all of the Serial Preferred Stock then outstanding except in accordance with a
stock purchase offer made to all holders of record of Serial Preferred Stock,
unless all accrued and unpaid dividends on the Serial Preferred Stock, including
all dividends for the then quarterly dividend period, shall have been paid or
declared and funds sufficient for the payment thereof set apart, and unless all
accrued sinking fund obligations applicable thereto shall have been complied
with.
D) Sell, lease or convey all or substantially all of the property or
business of the Corporation, or voluntarily liquidate or dissolve the
Corporation, or consolidate or merge the Corporation with or into any other
corporation; provided, however, that no such class vote or consent of the
holders of the Serial Preferred Stock shall be required for consolidation or
merger of the Corporation if (i) each holder of shares of Serial Preferred Stock
immediately prior to such consolidation or merger shall, upon the occurrence
thereof, possess the same or an equivalent number of shares of the resulting
corporation (which may be the Corporation or another corporation) having
substantially the same or equivalent terms and provisions as the shares of
Serial Preferred Stock, and (ii) the resulting corporation will have,
immediately after such consolidation or merger, no stock either authorized or
outstanding ranking prior to or on a parity with such shares, other than stock
of the Corporation theretofore authorized ranking prior to or on a parity with
the Serial Preferred Stock (or stock of the resulting corporation into which
such stock of the Corporation is changed pursuant to the merger or
consolidation).
(b) So long as any shares of Serial Preferred Stock shall be outstanding,
the Corporation shall not, without (i) the affirmative vote of the holders of at
least a majority of the shares of Serial Preferred Stock at the time
outstanding, given in person or by proxy, either at a special meeting called for
the purpose, or at any annual meeting of shareholders if appropriate notice of
such proposed action is given, at which all of the shares of Serial Preferred
Stock shall vote separately as a single class, or (ii) the written consent of
the holders of at least a majority of the shares of Serial Preferred Stock at
the time outstanding: A) authorize or issue any class of the stock of the
Corporation ranking on a parity with the Serial Preferred Stock, with respect to
the payment of dividends or upon liquidation, dissolution and winding up of the
Corporation, or authorize or issue any obligations or securities convertible
into any such class, or B) increase the authorized number of shares of the
Serial Preferred Stock or increase the authorized number of shares of any class
ranking on a parity with the Serial Preferred Stock, with respect to the payment
of dividends or upon liquidation, dissolution and winding up of the Corporation,
or authorize or issue any obligations or securities convertible into any such
class.
(c) So long as any shares of a series of Serial Preferred Stock shall be
outstanding, the Corporation shall not, without (i) the affirmative vote of the
holders
<PAGE>
- 6 -
of at least two-thirds of the shares of such series at the time outstanding,
given in person or by proxy, either at a special meeting or at any annual
meeting of shareholders if appropriate notice of such proposed action is given,
at which all of the shares of such series shall vote separately as a single
class, or (ii) the written consent of the holders of at least two-thirds of the
shares of such series at the time outstanding, amend or repeal any of the
provisions of the Articles or Regulations of the Corporation so as to affect
adversely and particularly the preferences, rights, powers or privileges of such
series of Serial Preferred Stock or the holders thereof.
(d) Notwithstanding the foregoing, (i) no such vote or consent of the
holders of the Serial Preferred Stock shall be required if, prior to or
contemporaneously with the happening of any of the events listed in
subparagraphs (a) or (b) above, provision has been made in accordance with the
provisions fixed by the Directors for the redemption of all of the Serial
Preferred Stock at the time outstanding and (ii) no such vote or consent of the
holders of any series of Serial Preferred Stock shall be required if, prior to
or contemporaneously with the happening of any of the events listed in
subparagraph (c) above, provision has been made in accordance with the
provisions fixed by the Directors for the redemption of all shares of such
series of Serial Preferred Stock at the time outstanding.
6. Liquidation Rights. In the event of the liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, the holders of
Serial Preferred Stock shall be entitled to receive out of the assets of the
Corporation, before any payment or distribution shall be made to the holders of
Common Stock or any other class of stock junior to the Serial Preferred Stock as
to rights upon liquidation, payment of the amount per share provided for in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such shares, plus an amount equal to all dividends accrued to the
date of such payment and unpaid, whether or not earned or declared but without
interest, and no more.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets available for distribution shall be insufficient to pay the holders of
all outstanding shares of Serial Preferred Stock the amounts to which they shall
respectively be entitled, the holders of Serial Preferred Stock of all series
shall share ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares held by them upon such
distribution if all amounts payable in respect of the Serial Preferred Stock of
all series were paid in full. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations, nor the sale or
transfer by the Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of any of the
provisions of this Section 6.
7. Definitions. For the purpose of this Division:
------------
Whenever reference is made to shares "ranking prior to the Serial Preferred
Stock" or "on a parity with the Serial Preferred Stock" such reference shall
mean and
<PAGE>
- 7 -
include all shares of the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as to distributions in the
event of any involuntary liquidation, dissolution or winding up of the
Corporation are given preference over, or rank on an equality with, (as the case
may be) the rights of the holders of the Serial Preferred Stock; and whenever
reference is made to shares "ranking junior to the Serial Preferred Stock" such
reference shall mean and include all shares of the Corporation in respect of
which the rights of the holders as to the payment of dividends and as to
distributions in the event of an involuntary liquidation, dissolution or winding
up of the Corporation are junior and subordinate to the rights of the holders of
the Serial Preferred Stock.
8. Express Terms of the Series 12 Preferred Stock
----------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series 12 Preferred Stock to which all of the Express Terms of the
Serial Preferred Stock set forth in 1 through 7 above as well as the following
provisions shall be applicable:
(a) The designation of the series is Series 12 Preferred Stock;
(b) The number of shares of the series, which number the Board of
Directors may increase or decrease (but not below the number of shares then
outstanding) is 480,000 shares;
(c) The annual dividend rate of the series shall be in an amount per share
(rounded to the nearest cent) equal to, but no more than, the greater of (x)
$6.80 or (y) subject to the provision for adjustment thereinafter set forth, one
hundred times the aggregate per share amount of all cash dividends, and one
hundred times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock of the Corporation
since the immediately preceding Quarterly Dividend Payment Date (as defined in
subparagraph (d) below), or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of a share or fraction of a share of
Series 12 Preferred Stock (the "Original Issue Date"). In the event the
Corporation shall at any time on or after the Original Issue Date declare or pay
any dividend on the shares of Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series 12 Preferred Stock are
entitled (without giving effect to such event) under clause (y) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
<PAGE>
- 8 -
The Corporation shall declare a dividend or distribution on the Series 12
Preferred Stock as provided in the paragraph above immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $6.80 per share on the Series 12 Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date. The record date for any such dividend or distribution shall be the tenth
Trading Day prior to the Quarterly Dividend Payment Date.
(d) The dividends provided above shall be payable quarterly on January 1,
April 1, July 1, and October 1 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date");
(e) The Corporation, at the option of the Board of Directors, may at any
time redeem all and may from time to time redeem any part of the outstanding
shares of Series 12 Preferred Stock on any date fixed by the Board of Directors,
upon notice given as hereinafter provided, by paying in cash for each share
thereof to be redeemed an amount equal to the Market Price (as hereinafter
defined) of the Common Stock on the Trading Day (as hereinafter defined)
immediately prior to the date fixed for redemption, multiplied by one hundred
(the "Multiplier"), plus, in each case, an amount equal to all dividends thereon
accrued to the date fixed for redemption and unpaid whether or not earned or
declared but without interest (such amounts being in this subparagraph (e)
sometimes referred to as the "redemption price"). In case of the redemption of
a part only of the outstanding shares of Series 12 Preferred, the shares to be
redeemed shall be selected by lot in such manner as the Board of Directors shall
determine. Not less than thirty (30) nor more than ninety (90) days prior
written notice shall be given by mail, first class postage prepaid, to the
holders of record of the shares of Series 12 Preferred to be redeemed.
On or after the date fixed for redemption and stated in such notice, the
holder of each share of Series 12 Preferred Stock called for redemption shall
surrender the certificate therefor at the place designated in such notice and
shall thereupon be entitled to receive payment of the redemption price.
If such notice of redemption shall have been duly given as provided above
and if on the date fixed for redemption funds sufficient to redeem the shares
called for redemption shall be irrevocably set aside for the payment thereof,
then, notwithstanding that the certificate for any share of Series 12 Preferred
Stock so called for redemption shall not have been surrendered, from and after
such date the shares so called for redemption shall no longer be deemed to be
outstanding and dividends thereon shall cease to accrue and all rights with
respect to the shares so called for redemption, including rights, if any, to
receive notices and to vote, shall forthwith on such date cease and determine,
except only the right of the holders thereof to receive the redemption price
without interest upon surrender of the certificates therefor; provided, however,
that if such notice of redemption shall have
<PAGE>
- 9 -
been duly given as provided above and if on or prior to the date fixed for
redemption there shall have been deposited with a bank or trust company having a
capital and surplus of more than $5,000,000 named in such notice of redemption,
in trust for the account of the holders of the shares so called for redemption,
funds sufficient to redeem, on the date fixed for redemption, the shares called
for redemption, then upon the making of such deposit in trust (although made
prior to the date fixed for redemption), the shares so called and with respect
to which such deposit shall have been made shall no longer be deemed to be
outstanding and all rights with respect to such shares, including rights, if
any, to receive notices and to vote, shall forthwith cease and determine, except
only the right of the holders thereof to receive, out of the funds so deposited
in trust, forthwith and without awaiting the date fixed for redemption, the
redemption price thereof, without interest, upon surrender of the certificates
therefor, upon to but not after the close of business on the second business day
prior to the date fixed for redemption of such shares. Any interest accrued on
such funds shall belong to the Corporation and shall be paid to it from time to
time. In case any shares called for redemption shall be converted after deposit
of the redemption price thereof, the redemption price of the shares so converted
shall be returned to the Corporation. Any other funds so deposited and unclaimed
at the end of two years after the date fixed for redemption shall be repaid to
the Corporation upon its request, and thereafter the holders of the shares so
called for redemption shall be entitled to receive payment of the redemption
price, but without interest only from the Corporation.
In the event the Corporation shall at any time on or after the Original
Issue Date declare or pay any dividend on the shares of Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders of
Series 12 Preferred Stock were entitled (without giving effect to such event),
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
As used herein the term "Market Price" per share of the Common Stock on any
date of determination shall mean the average of the daily closing prices per
share of the Common Stock (determined as described below) on each of the 20
consecutive Trading Days through and including the Trading Day immediately
preceding such date; provided, however, that if the Company shall at any time
-------- -------
(i) declare a dividend on the Common Stock payable in Common Stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of Common Stock or (iv) issue any shares
in a reclassification of the Common Stock, and such event or an event of a type
analogous to any such event shall have caused the closing prices used to
determine the Market Price on any Trading Days not to be fully comparable with
the closing price on such date of determination, each such closing price so used
shall be
<PAGE>
- 10 -
appropriately adjusted in order to make it fully comparable with the closing
price on such date of determination. The closing price per share of the Common
Stock on any date shall be the last sale price, regular way, or, in case no such
sale takes place on such date, the average of the closing bid and asked prices,
regular way, for each share of the Common Stock, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the average of the high bid and low asked prices for each share of Common Stock
in the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the securities
elected by the Board of Directors of the Corporation; provided, however, that if
-------- -------
on any such date the Common Stock is not listed or admitted for trading on a
national securities exchange or traded in the over-the-counter market, the
closing price per share of the Common Stock on such date shall mean the fair
value per share of Common Stock on such date as determined in good faith by the
Board of Directors of the Corporation, after consultation with a nationally
recognized investment banking firm with respect to the fair value per share of
such securities, and set forth in a certificate delivered to the Corporation.
As used herein, the term "Trading Day," when used with respect to the
Common Stock, shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a Business Day (defined to mean any
day other than a Saturday, Sunday or a day on which banking institutions in New
York, New York are generally authorized or obligated by law or executive order
to close.)
(f) Except as otherwise provided herein, the holders of shares of this
Series 12 Preferred Stock shall not have any rights herein to convert such
shares into or exchange such shares for shares of any other class or classes or
of any other series of any class or classes of capital stock of the Corporation.
(g) In case the Corporation shall enter into any consolidation, merger
combination, reclassification or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or securities, cash and/or
any other property, then in any such case the shares of Series 12 Preferred
Stock shall at the same time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
one hundred times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is
<PAGE>
- 11 -
changed or exchanged. In the event the Corporation shall at any time on or after
the Original Issue Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series 12 Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(h) Upon the liquidation, dissolution or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive and amount
equal to the greater of (x) $7,500 or (y) 100 times the aggregate per share
amount received by the holders of Common Stock upon such liquidation,
dissolution or winding up.
(i) Series 12 Preferred Stock may be issued in fractions of a share which
shall entitle the holder, in proportion to such holders fractional shares to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series 12 Preferred Stock.
9. Express Terms of the Series AA Preferred Stock
----------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series AA Convertible Preferred Stock to which all of the Express Terms
of the Serial Preferred Stock set forth in 1 through 7 above as well as the
following provisions shall be applicable:
(a) The designation of the series is Series AA Convertible Preferred
Stock;
(b) The number of shares of the series, which number the Board of
Directors may increase or decrease (but not below the number of shares then
outstanding) is 40,250 shares;
(c) The annual dividend rate of the series shall be in an amount per share
equal to, but no more than, $237.50 through January 2, 1996 and $325.00
thereafter.
(d) The dividends provided above shall accrue from the date of original
issue of the Series AA Preferred Stock and be payable quarterly on January 2,
April 1, July 1 and October 1 of each year, commencing April 1, 1993 (each such
date being referred to herein as a "Dividend Payment Date"), to holders of
record as they appear on the stock records of the Corporation at the close of
business on such record dates, not exceeding 60 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors. Dividends payable
<PAGE>
- 12 -
on the Series AA Preferred Stock for any period greater or less than a full
dividend period will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends payable on the Series AA Preferred Stock for
each full dividend period will be computed by dividing the annual dividend rate
by four.
(e)(i) The Series AA Preferred Stock shall not be redeemable by the
Corporation prior to January 9, 1996. On and after that date, the Corporation,
at its option, may redeem the shares of Series AA Preferred Stock, in whole or
in part, as set forth herein, subject to the provisions described below.
(ii)(A) The Series AA Preferred Stock may be redeemed for Common Stock,
in whole or in part, at the option of the Corporation, at any time on or after
January 9, 1996, until January 9, 2000 only if for 20 Trading Days, within any
period of 30 consecutive Trading Days, including the last Trading Day of such
period, the Current Market Price of the Common Stock on each of such 20 Trading
Days exceeds 130% of the Conversion Price in effect on such Trading Day. In
order to exercise this redemption option, the Corporation must issue a press
release announcing the redemption (the "Press Release") prior to the opening of
business on the second Trading Day after the condition in the preceding sentence
has been met. The Press Release shall announce the redemption and set forth the
number of shares of Series AA Preferred Stock which the Corporation intends to
redeem.
(B) Upon redemption of Series AA Preferred Stock by the Corporation on the
date specified in the notice to holders required under paragraph (C) of this
clause (ii) (the "Stock Call Date"), each share of Series AA Preferred Stock so
redeemed shall be converted into a number of shares of Common Stock equal to the
liquidation preference of the shares of Series AA Preferred Stock being redeemed
divided by the Conversion Price as of the opening of business on the Stock Call
Date. The Stock Call Date shall be selected by the Corporation, shall be
specified in the notice of redemption and shall be not less than 30 days or more
than 60 days after the date on which the Corporation issues the Press Release.
Upon any redemption of Series AA Preferred Stock for Common Stock, the
Corporation shall pay any accrued and unpaid dividends in arrears for any
Dividend Period ending on or prior to the Stock Call Date. If a Stock Call Date
falls after a dividend payment record date and prior to the corresponding
dividend payment date, then each holder of Series AA Preferred Stock at the
close of business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding dividend payment date
notwithstanding the redemption of such shares before such dividend payment date.
In the case of any Stock Call Date occurring prior to the record date for the
April 1, 1996 Dividend Payment Date, the holders of the Series AA Preferred
Stock to be redeemed on such Stock Call Date shall be entitled to any accrued
and unpaid dividends through January 2, 1996 but not thereafter. Except as
provided above, the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on shares of Series AA Preferred Stock
called for redemption for Common Stock or on the shares of Common Stock issued
upon such redemption.
<PAGE>
- 13 -
(C) If the Corporation elects to redeem shares of Series AA Preferred
Stock pursuant to paragraph (A) of this clause (ii), notice of such redemption
shall be given not more than four Business Days after the date on which the
Corporation issues the Press Release, to each holder of record of the shares to
be redeemed. Such notice shall be provided by first class mail, postage prepaid,
at such holder's address as the same appears on the stock records of the
Corporation, and shall state, as appropriate: (1) the Stock Call Date; (2) the
number of shares of Series AA Preferred Stock (expressed in 1/100 of a share of
Series AA Preferred Stock) to be redeemed and, if fewer than all the shares held
by such holder are to be redeemed, the number of such shares (expressed in 1/100
of a share of Series AA Preferred Stock) to be redeemed from such holder;
(3) the number of shares of Common Stock to be issued with respect to each 1/100
of a share of Series AA Preferred Stock; (4) the place or places at which
certificates for such shares are to be surrendered for certificates representing
shares of Common Stock; (5) the then-current Conversion Price; and (6) that
dividends on the shares to be redeemed shall cease to accrue on such Stock Call
Date, except as otherwise provided herein.
At the close of business on the Stock Call Date, each holder of Series AA
Preferred Stock to be redeemed (unless the Company defaults in the delivery of
the shares of Common Stock or cash payable on such Stock Call Date) shall be
deemed to be the record holder of the number of shares of Common Stock into
which such Series AA Preferred Stock is to be redeemed, regardless of whether
such holder has surrendered the certificates representing the Series AA
Preferred Stock. As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and the
notice shall so state), such shares shall be exchanged for certificates of
shares of Common Stock and any cash (without interest thereon) for which such
shares have been redeemed.
(D) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon redemption of the Series AA Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the redemption of a share of Series AA Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) based upon the Current Market Price of Common
Stock on the Trading Day immediately preceding the Stock Call Date. If more
than one share shall be surrendered for redemption at one time by the same
holder, the number of full shares of Common Stock issuable upon redemption
thereof shall be computed on the basis of the aggregate number of shares of
Series AA Preferred Stock so surrendered.
(E) The Corporation covenants that any shares of Common Stock issued upon
redemption of the Series AA Preferred Stock shall be validly issued, fully paid
and non-assessable. The Corporation shall endeavor to list the shares of Common
Stock required to be delivered upon redemption of the Series AA Preferred Stock,
prior to such redemption, upon each national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such delivery.
<PAGE>
- 14 -
The Corporation shall endeavor to take any action necessary to ensure that
any shares of Common Stock issued upon the redemption of Series AA Preferred
Stock are freely transferable and not subject to any resale restrictions under
the Securities Act of 1933, as amended (the "Act"), or any applicable state
securities or blue sky laws.
(iii)(A) The Series AA Preferred Stock may be redeemed for cash, in whole
or in part, at the option of the Corporation, at any time on or after January 9,
2000 at the Redemption Price.
(B) At least 30 days but not more than 60 days prior to the date fixed for
the redemption of the Series AA Preferred Stock for cash, a written notice will
be mailed to each holder of record of the Series AA Preferred Stock to be
redeemed, notifying such holder of the Company's election to redeem such shares
stating the date fixed for redemption thereof, and calling upon such holder to
surrender to the Company on the redemption date at the place designated in such
notice the certificate or certificates representing the number of shares
specified therein. On or after the redemption date, each holder of the Series
AA Preferred Stock to be redeemed must present and surrender his certificate or
certificates for such shares to the Company at the place designated in such
notice and thereupon the redemption price of such shares will be paid to or on
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate will be cancelled.
(iv)(A) If full cumulative dividends on the Series AA Preferred Stock
and any other class or series of stock of the Corporation ranking, as to
dividends and amounts distributable on liquidation, dissolution or winding up,
on a parity with the Series AA Preferred Stock have not been paid or declared
and set apart for payment, the Series AA Preferred Stock may not be redeemed in
part and the Corporation may not purchase or acquire shares of Series AA
Preferred Stock, otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of shares of Series AA Preferred Stock.
(B) If fewer than all the outstanding shares of Series AA Preferred Stock
are called for redemption, shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series AA Preferred Stock not previously
called for redemption by lot or pro rata (as nearly as may be). If fewer than
all the shares represented by any certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof. Neither the failure to mail any notice of redemption required by this
Section (e), nor any defect therein or in the mailing thereof, to any particular
holder, shall affect the sufficiency of the notice or the validity of the
proceedings for redemption with respect to the other holders. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given on the date mailed whether or not the holder receives the
notice.
<PAGE>
- 15 -
(C) Notice of any redemption pursuant to this Section (e) having been duly
mailed, from and after the Stock Call Date or other redemption date (unless the
Corporation shall fail to make available a number of shares of Common Stock or
amount of cash necessary to effect such redemption), (i) except as otherwise
provided herein, dividends on the shares of the Series AA Preferred Stock so
called for redemption shall cease to accrue, (ii) said shares shall no longer be
deemed to be outstanding, and (iii) all rights of the holders thereof as holders
of Series AA Preferred Stock of the Corporation shall cease (except the rights
to receive the shares of Common Stock or cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon). The Corporation's
obligation to provide shares of Common Stock or cash in accordance with the
preceding sentence shall be deemed fulfilled if, on or before the Stock Call
Date, the Corporation shall deposit with a bank or trust company that has an
office in the Borough of Manhattan, City of New York, and that has, or is an
affiliate of a bank or trust company that has, a capital and surplus of at least
$50,000,000, any shares of Common Stock and cash necessary for such redemption,
in trust, with irrevocable instructions that such shares of Common Stock and
cash be applied to the redemption of the shares of Series AA Preferred Stock so
called for redemption.
No interest shall accrue for the benefit of the holders of Series AA
Preferred Stock to be redeemed on any cash so set aside by the Corporation.
Subject to applicable escheat laws, any such cash unclaimed at the end of two
years from the Stock Call Date or other redemption date shall revert to the
general funds of the Corporation, after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
(f) Holders of shares of Series AA Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as follows:
(A) Subject to and upon compliance with the provisions of this Section
(f), a holder of shares of Series AA Preferred Stock shall have the right, at
his or her option, at any time, to convert such shares into the number of fully
paid and nonassessable shares of Common Stock obtained by dividing the aggregate
liquidation preference of such shares by the Conversion Price (as in effect at
the time and on the date provided for in the last paragraph of paragraph (B) of
this Section (f)) by surrendering such shares to be converted, such surrender to
be made in the manner provided in paragraph (B) of this Section (f); provided
--------
however, that the right to convert shares called for redemption pursuant to
- - -------
Section (e) shall terminate at the close of business on the date fixed for such
redemption, unless the Corporation shall default in making payment of any shares
of Common Stock and any cash payable upon such redemption under Section (e)
hereof. Any share of Series AA Preferred Stock may be converted, at the request
of its holder, in part into Common Stock. If a part of a share of Series AA
Preferred Stock is converted, then the Corporation will convert such share into
the requested shares of Common Stock
<PAGE>
- 16 -
(subject to paragraph (C) of this Section (f)) and issue a fractional share of
Series AA Preferred Stock evidencing the remaining interest of such holder.
(B) In order to exercise the conversion right, the holder of each share of
Series AA Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent in the Borough of Manhattan, City of
New York, accompanied by written notice to the Corporation that the holder
thereof elects to convert Series AA Preferred Stock or a specified portion
thereof. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such share of Series AA Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the holder
or such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Series AA Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date notwithstanding the
conversion thereof following such dividend payment record date and prior to such
dividend payment date. However, shares of Series AA Preferred Stock surrendered
for conversion during the period between the close of business on any dividend
payment record date and the opening of business on the corresponding dividend
payment date (except shares converted after the issuance of a notice of
redemption with respect to a Stock Call Date or other redemption date during
such period, which shall be entitled to such dividend on the dividend payment
date) must be accompanied by payment of an amount equal to the dividend payable
on such shares on such dividend payment date. A holder of shares of Series AA
Preferred Stock on a dividend payment record date who (or whose transferee)
tenders any such shares for conversion into shares of Common Stock on such
dividend payment date will receive the dividend payable by the Corporation on
such shares of Series AA Preferred Stock on such date, and the converting holder
need not include payment of the amount of such dividend upon surrender of shares
of Series AA Preferred Stock for conversion. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Series AA Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with provisions of
this Section (f), and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in paragraph (C)
of this Section (f).
<PAGE>
- 17 -
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
AA Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares presented thereby at such time on such date and
such conversion shall be at the Conversion Price in effect at such time on such
date, unless the stock transfer books of the Corporation shall be closed on that
date, in which event such person or persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation.
(C) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series AA Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series AA Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one share shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series AA Preferred Stock so
surrendered.
(D) The Conversion Price shall be adjusted from time to time as follows:
(i) If the Corporation shall after the Issue Date (A) pay a dividend or
make a distribution on its capital stock in shares of its Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares, (C)
combine its outstanding Common Stock into a smaller number of shares or (D)
issue any shares of capital stock by reclassification of its Common Stock,
the Conversion Price in effect at the opening of business on the day next
following the date fixed for the determination of stockholders entitled to
receive such dividend or distribution or at the opening of business on the
day next following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted
so that the holder of any share of Series AA Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock that such holder would have owned or have been
entitled to receive after the happening of any of the events described
above had such share been converted immediately prior to the record date in
the case of a dividend or distribution or the effective date in the case of
a subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph (i) shall become effective immediately after
the opening of
<PAGE>
- 18 -
business on the day next following the record date (except as provided in
paragraph (H) below) in the case of a dividend or distribution and shall
become effective immediately after the opening of business on the day next
following the effective date in the case of a subdivision, combination or
reclassification.
(ii) If the Corporation shall issue after the Issue Date rights or
warrants (in each case, other than the Rights) to all holders of Common
Stock entitling them (for a period expiring within 45 days after the record
date mentioned below) to subscribe for or purchase Common Stock at a price
per share less than the Fair Market Value per share of Common Stock on the
record date for the determination of stockholders entitled to receive such
rights or warrants, then the Conversion Price in effect at the opening of
business on the day next following such record date shall be adjusted to
equal the price determined by multiplying (I) the Conversion Price in
effect immediately prior to the opening of business on the day next
following the date fixed for such determination by (II) a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common
Stock outstanding on the close of business on the date fixed for such
determination and (B) the number of shares that the aggregate proceeds to
the Corporation from the exercise of such rights or warrants for Common
Stock would purchase at such Fair Market Value, and the denominator of
which shall be the sum of (A) the number of shares of Common Stock
outstanding on the close of business on the date fixed for such
determination and (B) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or warrants.
Such adjustment shall become effective immediately after the opening of
business on the day next following such record date (except as provided in
paragraph (H) below). In determining whether any rights or warrants
entitle the holders of Common Stock to subscribe for or purchase shares of
Common Stock at less than such Fair Market Value, there shall be taken into
account any consideration received by the Corporation upon issuance and
upon exercise of such rights or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors.
(iii) If the Corporation shall distribute to all holders of its Common
Stock any shares of capital stock of the Corporation (other than Common
Stock) or evidences of its indebtedness or assets (excluding cash dividends
or distributions paid from profits or surplus of the Corporation) or rights
or warrants (in each case, other than the Rights) to subscribe for or
purchase any of its securities (excluding those rights and warrants issued
to all holders of Common Stock entitling them for a period expiring within
45 days after the record date referred to in subparagraph (ii) above to
subscribe for or purchase Common Stock, which rights and warrants are
referred to in and treated under subparagraph (ii) above) (any of the
foregoing being hereinafter in this subparagraph (iii) called the
"Securities"), then in each such case the Conversion Price shall be
adjusted so that it shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior
<PAGE>
- 19 -
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by (II) a fraction, the
numerator of which shall be the Fair Market Value per share of the Common
Stock on the record date mentioned below less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive) of the portion of the capital stock or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to one
share of Common Stock, and the denominator of which shall be the Fair
Market Value per share of the Common Stock on the record date mentioned
below. Such adjustment shall become effective immediately at the opening of
business on the Business Day next following (except as provided in
paragraph (H) below) the record date for the determination of shareholders
entitled to receive such distribution. For the purpose of this clause
(iii), the distribution of a Security, which is distributed not only to the
holders of the Common Stock on the date fixed for the determination of
stockholders entitled to such distribution of such Security, but also is
distributed with each share of Common Stock delivered to a person
converting a share of Series AA Preferred Stock after such determination
date or is distributed prior to conversion to persons holding shares of
Series AA Preferred Stock (as though they had converted their Series AA
Preferred Stock into Common Stock immediately prior to close of business on
the date fixed for the determination of stockholders entitled to receive
such distribution), shall not require an adjustment of the Conversion Price
pursuant to this clause (iii); provided that on the date, if any, on which
--------
a Person converting a share of Series AA Preferred Stock would no longer be
entitled to receive such Security with a share of Common Stock (other than
as a result of the termination of all such Securities), a distribution of
such Securities shall be deemed to have occurred and the Conversion Price
shall be adjusted as provided in this clause (iii) (and such day shall be
deemed to be "the date fixed for the determination of the stockholders
entitled to receive such distribution" and "the record date" within the
meaning of the two preceding sentences).
(iv) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1%
in such price; provided, however, that any adjustments that by reason of
-------- -------
this subparagraph (iv) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
-------- -------
accordance with the provisions of this Section (f) (other than this
subparagraph (iv)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of shares of
Common Stock. Notwithstanding any other provisions of this Section (f),
the Corporation shall not be required to make any adjustment of the
Conversion Price for the issuance of any shares of Common Stock pursuant to
any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under
<PAGE>
- 20 -
such plan. All calculations under this Section (f) shall be made to the
nearest 1/100 of a cent (with $.00005 being rounded upward) or to the
nearest 1/10,000 of a share (with .00005 of a share being rounded upward),
as the case may be. Anything in this paragraph (D) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted
by law, to make such reductions in the Conversion Price, in addition to
those required by this paragraph (D), as it in its discretion shall
determine to be advisable in order that any stock dividends, subdivision of
shares, reclassification or combination of shares, distribution of rights
or warrants to purchase stock or securities, or a distribution of other
assets (other than cash dividends) hereafter made by the Corporation to its
stockholders shall not be taxable.
(E) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or substantially all of
the Corporation's assets or recapitalization of the Common Stock and excluding
any transaction as to which subparagraph (D) (i) of this Section (f) applies)
(each of the foregoing being referred to herein as a "Transaction"), in each
case as a result of which shares of Common Stock shall be converted into the
right to receive stock, securities or other property (including cash or any
combination thereof), receivable upon the consummation of such Transaction by a
holder of that number of shares or fraction thereof of Common Stock into which
one share of Series AA Preferred Stock was convertible immediately prior to such
Transaction, assuming such holder of Common Stock (i) is not a Person with which
the Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer was made, as the
case may be ("Constituent Person"), or an affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of stock, securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock securities and other
property (including cash) receivable upon such Transaction is not the same for
each share of Common Stock of the Corporation held immediately prior to such
Transaction by other than a Constituent Person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised ("non-
electing share"), then for the purpose of this paragraph (E) the kind and amount
of stock, securities and other property (including cash) receivable upon such
Transaction by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). The
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (E) and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series AA
Preferred Stock that will contain provisions enabling the holders of the Series
AA Preferred Stock that remains outstanding after such Transaction to convert
into the consideration received by holders of Common Stock at the Conversion
Price in effect immediately prior to such Transaction. The provisions of this
paragraph (E) shall similarly apply to successive Transactions.
<PAGE>
- 21 -
(F) If:
(i) the Corporation shall declare a dividend (or any other distribution)
on the Common Stock (other than in cash out of profits or surplus and other
than the Rights); or
(ii) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants (other than the Rights) to subscribe for
or purchase any shares of any class or any other rights or warrants (other
than the Rights); or
(iii) there shall be any reclassification of the Common Stock (other
than an event to which subparagraph (D) (i) of this Section (f) applies) or
any consolidation or merger to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required, or the
sale or transfer of all or substantially all of the assets of the
Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of shares of the Series AA Preferred
Stock at their addresses as shown on the stock records of the Corporation, as
promptly as possible, but at least 15 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or rights or warrants
are to be determined or (B) the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation merger, sale, transfer, liquidation, dissolution
or winding up. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section (f).
(G) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be prima facie evidence of the correctness of such adjustment. Promptly after
delivery of such certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series AA
Preferred Stock at such holder's last address as shown on the stock records of
the Corporation.
<PAGE>
- 22 -
(H) In any case in which paragraph (D) of this Section (f) provides that
an adjustment shall become effective on the day next following a record date for
an event, the Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Series AA Preferred Stock converted after
such record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any amount in cash in lieu of any fraction pursuant to paragraph (C) of this
Section (f).
(I) For purposes of this Section (f), the number of shares of Common Stock
at any time outstanding shall not include any shares of Common Stock then owned
or held by or for the account of the Corporation. The Corporation shall not pay
a dividend or make any distribution on shares of Common Stock held in the
treasury of the Corporation.
(J) There shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section (f).
If any action or transaction would require adjustment of the Conversion Price
pursuant to more than one paragraph of this Section (f), only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has the
highest absolute value.
(K) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section (f), that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of the shares of Series AA Preferred Stock, the Conversion Price for
the Series AA Preferred Stock may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances.
(L) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Series AA
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series AA Preferred Stock not
theretofore converted. For purposes of this paragraph (L), the number of shares
of Common Stock that shall be deliverable upon the conversion of all outstanding
shares of Series AA Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Series AA Preferred Stock shall be validly issued, fully paid
and non-assessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then-par value of the shares of Common
Stock deliverable upon conversion of the Series AA Preferred Stock, the
Corporation will
<PAGE>
- 23 -
take any corporate action that, in the opinion of its counsel, may be necessary
in order that the Corporation may validly and legally issue fully-paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
The Corporation shall endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Series AA Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Series AA Preferred Stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(M) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of the Series AA
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
-------- -------
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock or other securities
or property in a name other than that of the holder of the Series AA Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the Corporation
the amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
(g) For purposes of the Series AA Preferred Stock, the following terms
shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Conversion Price" shall mean the conversion price per share of Common
Stock for which the Series AA Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to Section (f). The initial conversion price
will be $44.64.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sales price, regular way on such
day, or, if no sale takes place on such day, the average of the reported closing
bid and asked prices on such day, regular way, in either case as reported on the
New York Stock Exchange or, if such security is not listed or admitted for
trading on the New York Stock Exchange ("NYSE"), on the principal national
securities exchange on which such security is listed or admitted for trading or,
if not listed or admitted for trading on any national securities exchange, on
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ")
<PAGE>
- 24 -
or, if such security is not quoted on such National Market System, the average
of the closing bid and asked prices on such day in the over-the-counter market
as reported by NASDAQ or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive Trading Days
selected by the Corporation commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. The term "'ex' date", when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.
"Redemption Price" shall mean the redemption price per share of Series AA
Preferred Stock, which shall be subject to reduction from time to time in an
amount equal to the per share fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of any Securities
distributed to holders of Series AA Preferred Stock as described in Section
(f)(D)(iii). The initial Redemption Price shall be $5,000.
"Rights" shall mean the rights of the Corporation which are issuable under
the Corporation's Stockholder Rights Plan adopted on February 10, 1988 and as
amended from time to time, or rights to purchase any capital stock of the
Corporation under any successor shareholder rights plan or plan adopted in
replacement of the Corporation's Stockholder Rights Plan.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class of Common Stock
-------- -------
or Series Preferred Stock or any class or series of stock ranking on a parity
with the Series AA Preferred Stock as to the payment of dividends are placed in
a separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then "set apart for payment" with respect to the Series AA
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE, or if such securities are not listed or admitted for trading
on the NYSE, on the principal national securities
<PAGE>
- 25 -
exchange on which such securities are listed or admitted, or if not listed or
admitted for trading on any national securities exchange, on the National Market
System of the NASDAQ, or if such securities are not quoted on such National
Market System, in the applicable securities market in which the securities are
traded.
"Transfer Agent" means National City Bank or such other agent or agents of
the Corporation as may be designated by the Board of Directors as the transfer
agent for the Series AA Preferred Stock.
(h) Upon the liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of this Series AA
Preferred Stock shall be entitled to receive an amount equal to $5,000 per
share, plus accrued and unpaid dividends thereon (whether or not earned or
declared) at the date of final distribution to such holders.
(i) Series AA Preferred Stock may be issued in fractions of a share which
shall entitle the holder, in proportion to such holder's fractional shares to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series AA Preferred Stock.
10. Express Terms of the Series BB Preferred Stock
----------------------------------------------
There is hereby established a series of the Serial Preferred Stock to be
known as Series BB Conversion Preferred Stock to which all of the Express Terms
of the Serial Preferred Stock set forth in 1 through 7 above as well as the
following provisions shall be applicable:
I. Designation and Number. The designation of the series is Series BB
----------------------
Conversion Preferred Stock. The number of shares of the series, which number
the Board of Directors may increase or decrease (but not below the number of
shares then outstanding) is 38,772 shares.
II. Dividend Rate and Dividend Payment Dates. The annual dividend rate of
----------------------------------------
the series shall be in an amount per share equal to, but no more than, $504.00.
The dividends provided above shall accrue from the date of original issue of the
Series BB Preferred Stock and be payable quarterly on January 1, April 1, July 1
and October 1 of each year, commencing October 1, 1995 (each such date being
referred to herein as a "Dividend Payment Date"), to holders of record as they
appear on the stock records of the Corporation at the close of business on such
record dates, not exceeding 60 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors. Dividends payable on the Series BB
Preferred Stock for any period greater or less than a full dividend period will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends payable on the Series BB Preferred Stock for each full dividend period
will be computed by dividing the annual dividend rate by four.
<PAGE>
- 26 -
III. Conversion.
----------
(a) Mandatory Conversion. Unless earlier converted at the option of the
--------------------
holder in accordance with the provisions of paragraph (b), on October 1, 1998
(the "Mandatory Conversion Date"), each outstanding share of the Series BB
Preferred Stock shall convert automatically (the "Automatic Conversion") into
(i) shares of authorized Common Stock (the "Common Stock") at the Exchange Rate
(as hereinafter defined) in effect on the Mandatory Conversion Date and (ii) the
right to receive an amount in cash equal to all accrued and unpaid dividends on
such share to the Mandatory Conversion Date, whether or not earned or declared,
out of funds legally available therefor. The Exchange Rate is equal to (a) if
the Current Market Price is greater than or equal to $94.40 per share (the
"Threshold Price"), 81.965 shares of Common Stock (the "Upper Exchange Rate"),
(b) if the Current Market Price is less than the Threshold Price but greater
than the Initial Price, the number of shares of Common Stock having a value
(determined at the Current Market Price) equal to 100 times the Initial Price
(the "Middle Exchange Rate"), and (c) if the Current Market Price is less than
or equal to the Initial Price, 100 shares of Common Stock (the "Lower Exchange
Rate") per share of Series BB Preferred Stock, and is subject to adjustment as
set forth in paragraph (c) below. Dividends on the shares of Series BB
Preferred Stock shall cease to accrue and such shares of Series BB Preferred
Stock shall cease to be outstanding on the Mandatory Conversion Date. The
Corporation shall make such arrangements as it deems appropriate for the
issuance of certificates representing shares of Common Stock and for the payment
of cash in respect of such accrued and unpaid dividends, if any, or cash in lieu
of fractional shares, if any, in exchange for and contingent upon surrender of
certificates representing the shares of Series BB Preferred Stock, and the
Corporation may defer the payment of dividends on such shares of Common Stock
and the voting thereof until, and make such payment and voting contingent upon,
the surrender of such certificates representing the shares of Series BB
Preferred Stock, provided that the Corporation shall give the holders of the
shares of Series BB Preferred Stock such notice of any such actions as the
Corporation deems appropriate or is legally required and upon such surrender
such holders shall be entitled to receive such dividends declared and paid on
such shares of Common Stock subsequent to the Mandatory Conversion Date.
Amounts payable in cash in respect of the shares of Series BB Preferred Stock or
in respect of such shares of Common Stock shall not bear interest.
(b) Optional Conversion. Shares of Series BB Preferred Stock are
-------------------
convertible, in whole or in part, at the option of the holders thereof
("Optional Conversion"), at any time after September 25, 1995 and prior to the
Mandatory Conversion Date, into shares of Common Stock at a rate of 81.965
shares of Common Stock for each share of Series BB Preferred Stock (the
"Optional Conversion Rate"), subject to adjustment as set forth below.
Optional Conversion of shares of Series BB Preferred Stock may be effected
by delivering certificates evidencing such shares, together with written notice
of conversion and a proper assignment of such certificates to the Corporation or
in
<PAGE>
- 27 -
blank (and, if applicable, payment of an amount equal to the dividend payable on
such shares), to the office of any transfer agent for the Series BB Preferred
Stock or to any other office or agency maintained by the Corporation for that
purpose and otherwise in accordance with Optional Conversion procedures
established by the Corporation. Each Optional Conversion 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 Optional Conversion
shall be at the Optional Conversion Rate in effect at such time and on such
date.
Holders of shares of Series BB Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
Optional Conversion of such shares following such record date and prior to such
Dividend Payment Date. However, shares of Series BB Preferred Stock surrendered
for Optional Conversion after the close of business on a dividend payment record
date and before the opening of business on the next succeeding Dividend Payment
Date must be accompanied by payment in cash of an amount equal to the dividend
payable on such shares on such Dividend Payment Date. Except as provided above,
upon any Optional Conversion of shares of Series BB Preferred Stock, the
Corporation shall make no payment or allowance for unpaid Preferred Dividends,
whether or not in arrears, on such shares of Series BB Preferred Stock as to
which Optional Conversion has been effected or for dividends or distributions on
the shares of Common Stock issued upon such Optional Conversion.
(c) Adjustments to the Exchange Rate and the Optional Conversion Rate.
-----------------------------------------------------------------
The Exchange Rate and the Optional Conversion Rate shall each be subject to
adjustment from time to time as provided below in this paragraph (c).
(i) If the Corporation shall pay or make a dividend or other
distribution with respect to its Common Stock in shares of Common
Stock (including by way of reclassification of any shares of its
Common Stock), the Exchange Rate and the Optional Conversion Rate in
effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such
dividend or other distribution shall each be increased by multiplying
such Exchange Rate and Optional Conversion Rate by a fraction of which
the numerator shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the total number of shares of Common Stock
constituting such dividend or other distribution, and of which the
denominator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination,
such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination.
<PAGE>
- 28 -
(ii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Exchange Rate and the Optional Conversion Rate in effect at the
opening of business on the day following the day upon which such
subdivision becomes effective shall each be proportionately increased,
and, conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Exchange
Rate and the Optional Conversion Rate in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall each be proportionately reduced, such
increases or reductions, as the case may be, to become effective
immediately after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(iii) If the Corporation shall, after the date hereof, issue
rights or warrants, in each case other than the Rights, to all holders
of its Common Stock entitling them (for a period not exceeding 45 days
from the date of such issuance) to subscribe for or purchase shares of
Common Stock at a price per share less than the Fair Market Value of
the Common Stock on the record date for the determination of
stockholders entitled to receive such rights or warrants, then in each
case the Exchange Rate and the Optional Conversion Rate shall each be
adjusted by multiplying the Exchange Rate and the Optional Conversion
Rate in effect on such record date, by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights or warrants, immediately prior to
such issuance, plus the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or
warrants, and of which the denominator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or
warrants, immediately prior to such issuance, plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at such
Fair Market Value (determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing
the product so obtained by such Fair Market Value). Shares of Common
Stock owned by the Corporation or by another company of which a
majority of the shares entitled to vote in the election of directors
are held, directly or indirectly, by the Corporation shall not be
deemed to be outstanding for purposes of such computation. Such
adjustment shall become effective at the opening of business on the
business day next following the record date for the determination of
stockholders entitled to receive such rights or warrants. To the
extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Exchange Rate and the
Optional Conversion Rate shall each be readjusted to
<PAGE>
- 29 -
the Exchange Rate and the Optional Conversion Rate which would then be
in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of the issuance of rights or
warrants in respect of only the number of shares of Common Stock
actually delivered.
(iv) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock consisting of
evidences of its indebtedness or other assets (including shares of
capital stock of the Corporation other than Common Stock but excluding
any cash dividends or any dividends or other distributions referred to
in clauses (i) and (ii) above), or shall issue to all holders of its
Common Stock rights or warrants to subscribe for or purchase any of
its securities (other than those referred to in clause (iii) above),
then in each such case the Exchange Rate and the Optional Conversion
Rate shall each be adjusted by multiplying the Exchange Rate and the
Optional Conversion Rate in effect on the record date for such
dividend or distribution or for the determination of stockholders
entitled to receive such rights or warrants, as the case may be, by a
fraction of which the numerator shall be the Fair Market Value per
share of the Common Stock on such record date), and of which the
denominator shall be such Fair Market Price per share of Common Stock
less the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive) as of such record date of the
portion of the assets or evidences of indebtedness so distributed, or
of such subscription rights or warrants, applicable to one share of
Common Stock. Such adjustment shall become effective on the opening of
business on the business day next following the record date for such
dividend or distribution or for the determination of stockholders
entitled to receive such rights or warrants, as the case may be.
(v) Any shares of Common Stock issuable in payment of a dividend
or other distribution shall be deemed to have been issued immediately
prior to the close of business on the record date for such dividend or
other distribution for purposes of calculating the number of
outstanding shares of Common Stock under subparagraph (ii) above.
(vi) Anything in this subsection III notwithstanding, the
Corporation shall be entitled to make such upward adjustments in the
Exchange Rate and the Optional Conversion Rate, in addition to those
required by this subsection III as the Corporation in its sole
discretion shall determine to be advisable, in order that any stock
dividends, 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
<PAGE>
- 30 -
Revenue Code of 1986, as amended) hereafter made by the Corporation to
its stockholders shall not be taxable.
(vii) In any case in which this paragraph (c) shall require that an
adjustment as a result of any event become effective at the opening of
business on the business day next following a record date and the date
fixed for conversion pursuant to paragraph (a) occurs after such
record date, but before the occurrence of such event, the Corporation
may in its sole discretion elect to defer the following until after
the occurrence of such event: (A) issuing to the holder of any shares
of Series BB Preferred Stock surrendered for conversion the additional
shares of Common Stock issuable upon such conversion over the shares
of Common Stock issuable before giving effect to such adjustment; and
(B) paying to such holder any amount in cash in lieu of a fractional
share of Common Stock pursuant to paragraph (g).
(viii) For purposes hereof, an "adjustment in the Exchange Rate"
means, and shall be implemented by, an adjustment of the nature and
amount specified, effected in the manner specified, in each of the
Upper Exchange Rate, the Middle Exchange Rate and the Lower Exchange
Rate. If an adjustment is made to the Exchange Rate pursuant to this
paragraph (c), an adjustment shall also be made to the Current Market
Price solely to determine which of clauses (a), (b) or (c) of the
definition of Exchange Rate in paragraph (a) will apply on the
Mandatory Conversion Date. Such adjustment shall be made by
multiplying the Current Market Price by a fraction of which the
numerator shall be the Exchange Rate immediately after such adjustment
pursuant to paragraph (c) and the denominator shall be the Exchange
Rate immediately before such adjustment. All adjustments to the
Exchange Rate and the Optional Conversion Rate shall be calculated to
the nearest 1/10,000th of a share of Common Stock. No adjustment in
the Exchange Rate or in the Optional Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least one percent in the Lower Exchange Rate; provided, however, any
adjustments which by reason of this subparagraph are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments to the Exchange Rate and the
Optional Conversion Rate shall be made successively.
(ix) Before taking any action that would cause an adjustment
increasing the Exchange Rate or the Optional Conversion Rate such that
the conversion price (for purposes of this paragraph (c), an amount
equal to the liquidation value per share of Series BB Preferred Stock
divided by the Optional Conversion Rate, respectively, as in effect
from time to time) would be below the then par value of the Common
Stock, the Corporation will take any corporate action which
<PAGE>
- 31 -
may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at the Optional Conversion Rate as so adjusted.
(d) Adjustment for Certain Consolidations or Mergers. In case of any
------------------------------------------------
consolidation or merger to which the Corporation is a party (other than a merger
or consolidation in which the Corporation 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 Corporation 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), proper
provision shall be made so that each share of the Series BB Preferred Stock
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 share of the Series BB
Preferred Stock 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 share of the Series BB Preferred Stock 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 shares of the Series BB Preferred
Stock shall be convertible after consummation of such transaction shall be
subject to adjustment as described in paragraph (c) following the date of
consummation of such transaction. The Corporation may not become a party to any
such transaction unless the terms thereof are consistent with the foregoing.
(e) Notice of Adjustments. Whenever the Exchange Rate and Optional
---------------------
Conversion Rate are adjusted as provided in paragraph (c), the Corporation
shall:
(i) Forthwith compute the adjusted Exchange Rate and Optional
Conversion Rate and prepare a certificate signed by the Chief
Financial Officer, any Vice President, the Treasurer or the Controller
of the Corporation setting forth the adjusted Exchange Rate and
Optional Conversion Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon
which such
<PAGE>
- 32 -
adjustment is based, which certificate shall be prima facie evidence
of the correctness of the adjustment, and file such certificate
forthwith with the Transfer Agent;
(ii) Make a prompt public announcement stating that the Exchange
Rate and Optional Conversion Rate have been adjusted and setting forth
the adjusted Exchange Rate and Optional Conversion Rate; and
(iii) Promptly mail a notice stating that the Exchange Rate and
Optional Conversion Rate have been adjusted, the facts requiring such
adjustment and upon which such adjustment is based and setting forth
the adjusted Exchange Rate and Optional Conversion Rate, to the
holders of record of the outstanding shares of the Series BB Preferred
Stock at or prior to the time the Corporation mails an interim
statement to its stockholders covering the fiscal quarter period
during which the facts requiring such adjustment occurred but in any
event within 45 days of the end of such fiscal quarter period.
(f) Notices of Proposed Actions. In case, at any time while any of the
---------------------------
shares of Series BB Preferred Stock are outstanding,
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock, (other than in cash out of profits
or surplus and other than the Rights), or
(ii) the Corporation shall authorize the issuance to all holders
of the Common Stock of rights or warrants (other than the Rights) to
subscribe for or purchase shares of the Common Stock or of any other
subscription rights or warrants, or
(iii) of any reclassification of the Common Stock (other than a
Subdivision or combination thereof) or of any consolidation or merger
to which the Corporation is a party and for which approval of any
stockholders of the Corporation is required (except for a merger of
the Corporation into one of its subsidiaries solely for the purpose of
changing the corporate domicile of the Corporation to another state of
the United States and in connection with which there is no substantive
change in the rights or privileges of any securities of the
Corporation other than changes resulting from differences in the
corporate statutes of the then existing and the new state of
domicile), or of the sale or transfer of all or substantially all of
the assets of the Corporation,
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of Series BB Preferred
Stock, and shall cause to be mailed to the holders of shares of Series BB
Preferred Stock at their last addresses as they shall appear on the stock
register, as promptly as possible, but at least 15 days before the date
hereinafter specified (or the earlier
<PAGE>
- 33 -
of the dates hereinafter specified, in the event that more than one date is
specified), a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants are to be
determined, or (B) the date on which any such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for securities
or other property (including cash), if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. The failure to give or receive the notice required by
this paragraph (f) or any defect therein shall not affect the legality or
validity of any such dividend, distribution, right or warrant or other action.
(g) No Fractional Shares. No fractional shares of Common Stock shall be
--------------------
issued upon the conversion of any shares of the Series BB Preferred Stock. In
lieu of any fraction of a share of Common Stock which would otherwise be
issuable in respect of the aggregate number of shares of the Series BB Preferred
Stock surrendered by the same holder upon Automatic Conversion or Optional
Conversion, such holder shall have the right to receive an amount in cash
(computed to the nearest cent) 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 immediately preceding the effective date of
conversion, in the case of an Optional Conversion by a holder. If more than one
share of Series BB Preferred Stock shall be surrendered for conversion at one
time by or for the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of the Series BB Preferred Stock so surrendered.
(h) Treasury Shares. For the purposes of this subsection III, the number
---------------
of shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Corporation but shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of shares of Common Stock.
The Corporation will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.
(i) Other Action. If the Corporation shall take any action affecting the
------------
Common Stock, other than action described in this subsection III, that in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Series BB Preferred stock, the
Exchange Rate and/or the Optional Conversion Rate for the Series BB Preferred
Stock may be adjusted, to the extent permitted by law, in such manner, if any,
and at such time, as the Board of Directors may determine to be equitable in the
circumstances.
(j) Conversion. The Corporation covenants that it will at all times
----------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but
<PAGE>
- 34 -
unissued shares of Common Stock for the purpose of effecting conversion of the
Series BB Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all outstanding shares of Series BB Preferred Stock not
theretofore converted. For purposes of this paragraph (j), the number of shares
of Common Stock that shall be deliverable upon the conversion of all outstanding
shares of Series BB Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Series BB Preferred Stock shall be validly issued, fully paid
and non-assessable.
The Corporation shall endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Series BB Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Series BB Preferred stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(k) Taxes. The Corporation will pay any and all documentary stamp or
-----
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock or other securities or property on conversion of the
Series BB Preferred Stock pursuant thereto; provided, however, that the
-------- -------
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the
Series BB Preferred Stock to be converted and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the Corporation the amount of any of such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
IV. Definition. For purposes of the Series BB Preferred Stock, the
----------
following terms shall have the meanings indicated:
"business day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the state of New York are authorized or obligated
by law or executive order to close.
"Initial Price" shall mean $77.375 per share of Common Stock.
"Current Market Price" per share of the Common Stock shall mean the average
Closing Price per share of the Common Stock of the Company on the 20
<PAGE>
- 35 -
Trading Days immediately prior to, but not including, the Mandatory Conversion
Date.
"Closing Price" of a share of Common Stock on any date of determination
shall mean the closing sale price (or, if no closing sale price is reported, the
last reported sale price) of such share on the New York Stock Exchange (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.
"Fair Market Value" on any day shall mean the average of the daily Closing
Prices of a share of Common Stock of the Company on the five (5) consecutive
Trading Days selected by the Corporation commencing not more than 20 Trading
Days before, and ending not later than, the earlier of the day in question and
the day before the "ex" date with respect to the issuance or distribution
requiring such computation. The term "'ex' date", when used with respect to any
issuance or distribution, means the first day on which the Common Stock trades
regular way, without the right to receive such issuance or distribution, on the
exchange or in the market, as the case may be, used to determine that day's
Closing Price.
"Rights" shall mean the rights of the Corporation which are issuable under
the Corporation's Stockholder Rights Plan adopted on February 10, 1988 and as
amended from time to time, or rights to purchase any capital stock of the
Corporation under any successor shareholder rights plan or plan adopted in
replacement of the Corporation's Stockholder Rights Plan.
"Trading Day" shall mean 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.
"Transfer Agent" means National City Bank or such other agent or agents of
the Corporation as may be designated by the Board of Directors as the transfer
agent for the Series BB Preferred Stock.
V. Liquidation, etc.. Upon the liquidation, dissolution or winding up of
-----------------
the Corporation, whether voluntary or involuntary, the holders of the shares of
this Series BB Preferred Stock shall be entitled to receive an amount equal to
$77.375 per share, plus accrued and unpaid dividends thereon (whether or not
earned or declared) at the date of final distribution to such holders.
<PAGE>
- 36 -
VI. Issuance of Fractional Shares. Series BB Preferred Stock may be
-----------------------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series BB Preferred Stock.
Division B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Serial
Preferred Stock. Each share of Common Stock shall be equal to every other share
of Common Stock. The holders of shares of Common Stock shall be entitled to one
vote for each share of such stock upon all matters presented to the
shareholders.
FIFTH: No holders of any class of shares of the Corporation shall have any
preemptive right to purchase or have offered to them for purchase any shares or
other securities of the Corporation.
SIXTH: The Corporation may from time to time, pursuant to authorization by
the Board of Directors and without action by the shareholders, purchase or
otherwise acquire shares of the Corporation of any class or classes in such
manner, upon such terms and in such amounts as the Board of Directors shall
determine; subject, however, to such limitation or restriction, if any, as is
contained in the express terms of any class of shares of the Corporation
outstanding at the time of the purchase or acquisition in question.
SEVENTH: A director or officer of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as a
vendor, purchaser, employee, agent or otherwise; nor shall any transaction,
contract or other act of the Corporation be void or voidable or in any way
affected or invalidated by reason of the fact that any director or officer, or
any firm in which such director or officer is a member, or any corporation of
which such director or officer is a member, or any corporation of which such
director or officer is a shareholder, director or officer, is in any way
interested in such transaction, contract or other act, provided the fact that
such director, officer, firm or corporation is so interested shall be disclosed
or shall be known to the Board of Directors or such members thereof as shall be
present at any meeting of the Board of Directors at which action upon any such
transaction, contract or other act shall be taken; nor shall any such director
or officer be accountable or responsible to the Corporation for or in respect of
any such transaction, contract or other act of the Corporation or for any gains
or profits realized by him by reason of the fact that he or any firm of which he
is a member or any corporation of which he is a shareholder, director or officer
is interested in such transaction, contract or other act; and any such director
may be counted in determining the existence of a quorum at any meeting of the
Board of Directors of the Corporation which shall authorize or take action in
respect of any such
<PAGE>
- 37 -
transaction, contract or other act, and may vote thereat to authorize, ratify or
approve any such transaction, contract or other act with like force and effect
as if he or any firm of which he is a member or any corporation of which he is a
shareholder, director or officer were not interested in such transaction,
contract or other act.
EIGHTH: Notwithstanding any provision of the Ohio Revised Code now or
hereafter in force requiring for any purpose the vote, consent, waiver or
release of the holders of shares entitling them to exercise two-thirds, or any
other proportion, of the voting power of the Corporation or of any class or
classes of shares thereof, such action, unless otherwise expressly required by
statute or by these Articles, may be taken by the vote, consent, waiver or
release of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation or of such class or classes.
NINTH: No shareholder of the Corporation may cumulate such shareholder's
voting power in the election of directors of the Corporation.
TENTH: Any and every statute of the State of Ohio hereafter enacted,
whereby the rights, powers or privileges of corporations or of the shareholders
of corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding not only upon the
Corporation but upon every shareholder of the Corporation to the same extent as
if such statute had been in force at the date of filing these Amended and
Restated Articles of Incorporation of the Corporation in the office of the
Secretary of the State of Ohio.
ELEVENTH: These Amended and Restated Articles of Incorporation shall
supersede and take the place of the heretofore existing Amended Articles of
Incorporation as amended of the Corporation.
<PAGE>
EXHIBIT 4.3
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement, dated as of February 1, 1995, is
between and among ALCO STANDARD CORPORATION, an Ohio Corporation (the
"Company"), those subsidiaries of the Company set forth in Exhibit A hereto (the
"Subsidiary Borrowers"), the banking institutions set forth in Exhibit B hereto
(the "Banks") and CORESTATES BANK, N.A., as agent for the Banks (the "Agent").
BACKGROUND
The Company, the Subsidiary Borrowers, the Banks and the Agent are parties
to a Credit Agreement dated December 1, 1994 (the "Agreement"). Such parties
wish to amend the Agreement in the manner set forth in this First Amendment to
Credit Agreement (the "First Amendment").
NOW THEREFORE, in consideration of the premises and intending to be legally
bound, the parties hereto agree as follows:
1. The definition of "Finance Leasing Subsidiaries" contained in Section
1.1 of the Agreement is hereby amended in its entirety so that such definition,
as so amended, shall read as follows:
"Finance Leasing Subsidiaries" shall mean Alco Capital Resource, Inc.,
----------------------------
a Delaware corporation, Alco Capital Resource Canada Limited, a
Canadian corporation, TNL Financial, Inc., a Texas corporation,
Erskine Capital Limited, an English company, and their respective
successor corporations.
2. Section 5.2 of the Agreement, entitled "Funded Debt to Net Worth
Ratio," shall be amended by inserting at the end of such section the following
additional sentence:
"For purposes of calculating such ratio, Finance Leasing Subsidiaries
shall be excluded from the definition of `Consolidated Subsidiaries.'"
3. This First Amendment shall be effective once each of the Company, the
Subsidiary Borrowers, the Banks and the Agent have executed and delivered this
First Amendment (which may be in counterparts) to the Agent.
4. Each of the Company and the Subsidiary Borrowers represents and
warrants to the Banks that the execution and delivery of this First Amendment
have been duly authorized by all necessary corporate or company action on its
part and this First Amendment is the legal, valid and binding obligation of such
corporation or company, enforceable against such corporation or company in
accordance with its terms.
<PAGE>
5. Except as expressly amended hereby, all of the terms and conditions of
the Agreement shall remain in effect, and the amendments provided for herein
shall be limited precisely as set forth herein.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed by their respective officers of the date first above written.
ALCO STANDARD CORPORATION
By: /s/ Signature
----------------------------
Title: [Title]
ERSKINE HOUSE GROUP PLC ERSKINE LIMITED
By: /s/ Signature By: /s/ Signature
----------------------------- ----------------------------
Title: [Title] Title: [Title]
CORESTATES BANK, N.A.,
BANK ONE, COLUMBUS, NA for itself and as Agent
By: /s/ Signature By: /s/ Signature
----------------------------- ----------------------------
Title: [Title] Title: [Title]
FIRST BANK NATIONAL
ASSOCIATION SHAWMUT BANK CONNECTICUT, N.A.
By: /s/ Signature By: /s/ Signature
----------------------------- ----------------------------
Title: [Title] Title: [Title]
CHEMICAL BANK NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Signature By: /s/ Signature
----------------------------- ----------------------------
Title: [Title] Title: [Title]
-2-
<PAGE>
THE CHASE MANHATTAN
BANK, N.A. TRUST COMPANY BANK
By: /s/ Signature By: /s/ Signature
------------------------------- -----------------------------
Title: [Title] Title: [Title]
FIRST FIDELITY BANK,
THE TORONTO-DOMINION BANK NATIONAL ASSOCIATION
By: /s/ Signature By: /s/ Signature
------------------------------- -----------------------------
Title: [Title] Title: [Title]
BANK OF AMERICA ILLINOIS SOCIETY NATIONAL BANK
By: /s/ Signature By: /s/ Signature
------------------------------- -----------------------------
Title: [Title] Title: [Title]
FIRST INTERSTATE BANK OF DEUTSCHE BANK AG, NEW YORK BRANCH
CALIFORNIA AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Signature By: /s/ Signature
------------------------------- -----------------------------
Title: [Title] Title: [Title]
By: /s/ Signature By: /s/ Signature
------------------------------- -----------------------------
Title:[Title] Title: [Title]
-3-
<PAGE>
EXHIBIT A
SUBSIDIARY BORROWERS
Erskine Limited
Erskine House Group PLC
A-1
<PAGE>
EXHIBIT B
BANKING INSTITUTIONS
CoreStates Bank, N.A.
Deutsche Bank AG
The Toronto-Dominion Bank
Bank of America Illinois
The Chase Manhattan Bank, N.A.
Chemical Bank
NationsBank of North Carolina, N.A.
Shawmut Bank Connecticut, N.A.
Trust Company Bank
Bank One, Columbus, NA
First Bank National Association
First Fidelity Bank, National Association
First Interstate Bank of California
Society National Bank
B-1
<PAGE>
DEUTSCHE BANK CANADA, as Agent
and
ALCO OFFICE SYSTEMS-CANADA, INC.
SYNDICATED CREDIT FACILITY
========================================
CREDIT AGREEMENT
DATED OCTOBER 13, 1995
========================================
Blake, Cassels & Graydon
Box 25, Commerce Court West
Toronto, Ontario
M5L 1A9
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. INTERPRETATION................................................... 1
1.1 Defined Terms.................................................... 1
1.2 Accounting Terms................................................. 5
1.3 General.......................................................... 5
1.4 Currency......................................................... 5
1.5 Event of Default................................................. 5
1.6 General Provisions as to Certificates and Opinions, etc.......... 5
1.7 Law of Contract.................................................. 7
2. REPRESENTATIONS AND WARRANTIES................................... 7
2.1 Borrower......................................................... 7
3. THE CREDIT AND DRAWDOWNS......................................... 9
3.1 Establishment of Credit.......................................... 9
3.2 Utilization of the Credit........................................ 9
3.3 Drawdowns........................................................ 10
3.4 Mandatory Reduction of Credit.................................... 10
3.5 Optional Prepayment.............................................. 11
3.6 Standby Fee...................................................... 11
3.7 Cancellation of Credit........................................... 11
3.8 Intentionally deleted............................................ 11
3.9 Agency Fee....................................................... 11
3.10 Pro Rata Treatment and Payments.................................. 11
4. ACCEPTANCES...................................................... 13
4.1 Creation and Purchase of Acceptances............................. 13
4.2 Delivery by Borrower............................................. 13
4.3 Intentionally deleted............................................ 13
4.4 Discharge of Acceptances......................................... 13
4.4A Rollover......................................................... 14
4.5 Acceptances Outstanding upon Default............................. 14
4.6 Retirement of Acceptances........................................ 14
4.7 Choice of Acceptance Periods..................................... 15
5. INTEREST......................................................... 15
5.1 Computation...................................................... 15
5.2 Accrual and Payment.............................................. 15
5.3 Default Interest and Indemnity................................... 15
5.4 Agent's Certificate.............................................. 16
5.5 Limitation on Interest........................................... 16
- i -
<PAGE>
6. CHANGE IN CIRCUMSTANCES.......................................... 16
6.1 Increased Costs.................................................. 16
6.2 Unlawful, etc.................................................... 17
7. PAYMENTS......................................................... 17
7.1 Place and Manner of Payments..................................... 17
7.2 Net Payments, etc................................................ 18
7.3 Repayment by Banks to Agent...................................... 18
8. CONDITIONS PRECEDENT............................................. 19
8.1 Closing.......................................................... 19
8.2 Conditions Precedent to Closing.................................. 19
8.3 Conditions Precedent to Each Drawdown............................ 20
9. COVENANTS........................................................ 20
9.1 General Covenants................................................ 20
9.2 Accounting, Financial Statements and Other Information........... 21
10. DEFAULT AND ENFORCEMENT.......................................... 23
10.1 Events of Default................................................ 23
10.2 Legal Proceedings................................................ 25
10.3 No Prejudice, etc................................................ 25
10.4 Appropriation of Moneys Received................................. 25
10.5 Currency Indemnity............................................... 25
10.6 Bank's Contributions............................................. 26
11. THE AGENT AND AGENCY ARRANGEMENTS................................ 27
11.1 Actions.......................................................... 27
11.2 Directions....................................................... 28
11.3 Indemnity........................................................ 28
11.4 Liability of Agent, etc.......................................... 28
11.5 Dealings by Agent................................................ 29
11.6 Exculpation...................................................... 29
11.7 Notice, Copies, etc.............................................. 29
11.8 Funding Reliance, etc............................................ 30
11.9 Payment Reliance................................................. 30
11.10 Successor........................................................ 30
11.11 Loans and Acceptances by the Agent............................... 31
11.12 Deutsche Bank Canada as the Agent................................ 31
11.13 Changes.......................................................... 31
11.14 Waivers.......................................................... 31
11.15 Termination Action by Agent...................................... 32
11.16 Notice........................................................... 32
11.17 Representations and Agreements of the Banks...................... 32
11.18 Application...................................................... 33
- ii -
<PAGE>
12. ASSIGNMENT....................................................... 33
12.1 Benefit and Burden of this Agreement............................. 33
12.2 Assignment by Borrower........................................... 33
12.3 Assignment....................................................... 33
12.4 Limitation on Assignment......................................... 33
12.5 Borrower's Documents............................................. 34
13. MISCELLANEOUS.................................................... 34
13.1 Payment of Expenses.............................................. 34
13.2 Rights and Waivers............................................... 34
13.3 Communication.................................................... 34
13.4 Survival of Representations, Warranties and Covenants of
the Borrower................................................... 34
13.5 Further Assurances............................................... 35
13.6 Severability..................................................... 35
13.7 Counterparts..................................................... 35
13.8 Determination of Materiality..................................... 35
13.9 Submissions to Jurisdiction...................................... 35
13.10 Partnership...................................................... 35
13.11 Entire Agreement................................................. 35
13.12 Evidence of Indebtedness......................................... 36
13.13 Survival of Covenants, etc....................................... 37
- iii -
<PAGE>
CREDIT AGREEMENT
----------------
THIS AGREEMENT is dated as of October 13, 1995 and is entered into
between ALCO OFFICE SYSTEMS-CANADA, INC. (the "Borrower"), DEUTSCHE BANK CANADA,
--------
as agent (the "Agent"), and the banks (collectively, the "Banks") listed on the
----- -----
execution pages of this Agreement.
In consideration of the mutual agreements herein contained, the
parties agree as follows:
1. INTERPRETATION
1.1 DEFINED TERMS. In this Agreement or any amendment hereto or supplement
-------------
hereof, unless the context otherwise requires, the following words and phrases
will have the meanings set forth below.
"Acceptance" means a bill of exchange (i) drawn by the Borrower and
----------
accepted by a Bank, (ii) denominated in Cdn. Dollars, (iii) payable by such Bank
only within Canada, and (iv) of a term of one, two or three months or of such
other period as the parties agree and maturing on or before the Repayment Date.
"Agent" means Deutsche Bank Canada or any successor agent of the Banks
-----
under this Agreement.
"Agreement" or "agreement" will mean this Credit Agreement, as amended,
--------- ---------
supplemented or otherwise modified from time to time.
"Auditors" means (i) Ernst & Young, chartered accountants, or (ii) a
--------
firm of chartered accountants who at the relevant time (a) are the duly
appointed auditors of the Borrower, (b) are in fact independent of the Borrower,
and (c) have been approved in writing by the Majority Banks.
"Banking Day" means any day on which the Agent and each of the Banks are
-----------
open for business in Toronto, Ontario.
"Bank's Proportion" means, in the case of a Bank, the percentage shown
-----------------
opposite the name of such Bank on Schedule A (as amended from time to time) of
the aggregate amount in question for which the Banks are responsible for or
entitled to, and "Banks' Proportions" means, collectively, the Bank's Proportion
------------------
of each of the Banks.
"Banks" mean those banks listed on the execution page(s) of this
-----
Agreement and their respective successors in title and assigns which are for the
time being participating in the Credit or a Drawdown.
<PAGE>
- 2 -
"Borrowing Amount" means, in the case of (i) a Prime Loan, any amount,
----------------
and (ii) an Acceptance, $100,000 or $100,000 plus any whole multiple thereof.
"Borrowing Date" is defined in Section 3.10(c).
--------------
"Branch of Account" means with respect to a Bank, the branch or office
-----------------
of such Bank at the address set out opposite such Bank's name on the signature
pages of this Agreement or such other branch in Canada as such Bank may advise
the Borrower and the Agent in writing.
"Cdn. Dollars", "Dollars", "$", and "$Cdn." mean lawful currency of
------------ ------- - -----
Canada.
"Closing Date" means October 13, 1995 or such other date as the parties
------------
may agree upon in writing.
"Commitment", as to any Bank at any time, means such Bank's obligation
----------
to make Drawdowns available to the Borrower pursuant to Section 3.1(2) in an
aggregate principal amount equal to its Bank's Proportion multiplied by the
principal amount of the Credit at such time.
"Credit" means, at the date of determination, the principal Dollar
------
amount of the credit established by Section 3.1, as reduced or cancelled from
time to time in accordance with the provisions hereof.
"DBAR" means the sum of (i) the rate of discount per annum, rounded
----
upward, if necessary, to the nearest integral multiple of 1/16 of 1%, quoted by
the Agent to the Borrower upon request from time to time as being the Agent's
discount rate then in effect for purchasing bills of exchange accepted by the
Agent in a specified amount of Canadian Dollars and for a specified term, plus
(ii) 3/10ths of 1% (0.3%).
"Designated Office" means the office of the Agent at Suite 1200, 222
-----------------
Bay Street, Toronto, Ontario, M5K 1H6, or such other office within Ontario as
the Agent may from time to time designate.
"Documents" means this Agreement, the Guarantee and all certificates
---------
and other documents delivered or to be delivered to the Agent or the Banks
pursuant hereto or thereto.
"Drawdown" means an availment by the Borrower of the Credit, and may
--------
take the form of a Prime Loan or an Acceptance.
"Drawdown Notice" means a notice in the form of Schedule B.
---------------
<PAGE>
- 3 -
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Guarantee" means a guarantee in the form of Schedule C.
---------
"Guarantor" means Alco Standard Corporation.
---------
"Indebtedness", with respect to any Person means, at the date of
------------
determination, the aggregate, without duplication, of:
(a) all indebtedness, obligations and liabilities of such Person which, in
accordance with GAAP (but on an unconsolidated basis), would be included
in determining total liabilities as shown in the liability section of the
balance sheet of such Person, including indebtedness, obligations and
liabilities for borrowed money (whether on account of principal, interest
or otherwise) or in respect of any bankers' or trade acceptance credit
facility;
(b) all indebtedness, obligations and liabilities of such Person secured
by any Lien on any property or asset owned or held by such Person,
whether or not any other Person has assumed or is liable for the
indebtedness, obligations or liabilities so secured and whether or not
the rights and remedies of the secured party thereunder are limited to
repossession or sale of property or assets covered thereby;
(c) any liability under any instrument of guarantee or indemnity or
arising under any guarantee, endorsement or undertaking made or issued by
any Person to others for the account of such Person and at the request of
such Person, including any accommodation extended with respect to
applications for letters of credit or acceptances;
(d) all indebtedness, obligations and liabilities of others which such
Person has directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business), discounted
with recourse or other obligation to pay or under agreement (contingently
or otherwise) to purchase, repurchase or otherwise acquire or become
liable, or in respect of which such Person has provided a comfort letter
or agreed to supply or advance funds (whether by way of loan, share
purchase or capital contribution, through a commitment to pay for
property or services regardless of the non-delivery of such property or
the non-furnishing of such services or otherwise) or in respect of which
such Person has otherwise become directly or indirectly liable; and the
amount of each such indebtedness, obligation or liability (each a
"Guarantee Liability") will be deemed to be the amount of the
-------------------
Indebtedness in
<PAGE>
- 4 -
respect of which the Guarantee Liability relates, unless the Guarantee
Liability is limited to a determinable amount, in which case the amount
of the Guarantee Liability will be deemed to be the lesser of the amount
of the Indebtedness in respect of which the Guarantee Liability relates
and such determinable amount;
(e) all liabilities of such Person as lessee in respect of all rentals
under any lease of (or other arrangement conveying the right to use) real
or personal property, or a combination thereof, which, in accordance with
GAAP (but on an unconsolidated basis) applied on a consistent basis, have
been or are required to be capitalized on the books of the lessee; the
term "rentals" to mean all payments which the lessee is required to make
-------
by the terms of such lease or other arrangement;
(f) all deferred taxes of such Person;
(g) all liabilities of such Person as a partner or venturer in any
partnership, joint venture or other enterprise;
(h) all items of indebtedness convertible into, or exchangeable for,
shares in the capital of such Person; and
(i) all shares in the capital of, or partnership units in, such Person
which are redeemable or retractable at the option of any Person (other
than the Person in respect of whom a determination of Indebtedness is
being made).
"Loan" means, as the context requires, (i) the principal amount of
----
each borrowing hereunder, (ii) the principal amount thereof from time to time
outstanding, or (iii) the aggregate principal amount of all borrowings hereunder
from time to time outstanding.
"Majority Banks" means at any time Banks participating in the
--------------
aggregate in excess of 66 2/3% of the amount of the Drawdowns outstanding at
such time or (if no Drawdown has been made) the Credit.
"Person" includes an individual, a partnership, a corporation, a
------
trust, an unincorporated organization, a government or any department or agency
thereof and the heirs, executors, administrators or other legal representatives
of an individual.
"Prime Loan" means a Loan on which interest is calculated by reference
----------
to the Prime Rate.
"Prime Rate" means the prime lending rate per annum as quoted publicly
----------
by the Agent from time to time for Cdn. Dollar loans made in Canada to prime
commercial borrowers, as changed by the Agent from time to time without notice
to the Borrower.
<PAGE>
- 5 -
"Repayment Date" means the date that is the fifth anniversary of the
--------------
Closing Date.
"this Agreement", "herein", "hereof", "hereto" and similar expressions
-------------- ------ ------ ------
mean and refer to this Agreement and include any instrument amending or
supplementing the same, and the expressions "article", and "Section" followed by
------- -------
a number mean and refer to the specified article or Section of this Agreement.
"Unutilized Portion" means, in respect of the Credit, at the date of
------------------
determination, the maximum permitted amount of the Credit minus the Utilized
Portion of the Credit at such date.
"U.S.$" means lawful currency of the United States of America.
-----
"Utilized Portion" means, in respect of the Credit, at the date of
----------------
determination, the aggregate of all Drawdowns outstanding under the Credit at
such date.
1.2 ACCOUNTING TERMS. All accounting terms not otherwise defined herein
----------------
have the meanings assigned to them in accordance with generally accepted
accounting principles in Canada. Where the character or amount of any asset or
liability or item of revenue or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement or any Document, such determination or calculation
will, to the extent applicable and except as otherwise specified herein or as
otherwise agreed in writing by the parties, be made in accordance with generally
accepted accounting principles in Canada (or, in the case of the Guarantee, the
United States) applied on a basis consistent with those at the time in effect.
1.3 GENERAL. The division of this Agreement into Sections and the
-------
insertion of headings are for convenience of reference only and will not affect
the interpretation of this Agreement. Any reference in this Agreement to any Act
or statute or Section thereof will be deemed to be a reference to such Act or
statute or Section as amended or re-enacted from time to time. Words importing
the singular number include the plural and vice versa. Any reference in this
Agreement to a party to this Agreement will include the permitted successors and
assigns of such party.
1.4 CURRENCY. Unless otherwise specified herein, all statements of or
--------
references to dollar amounts (without more) in any Document will mean lawful
money of Canada.
1.5 EVENT OF DEFAULT. Any reference in this Agreement to an Event of
----------------
Default means an event described in Section 10.1 and includes a reference to any
event which, with the giving of notice and/or a lapse of time and/or a
determination being made under the relevant provisions hereof, would constitute
an event described in Section 10.1.
1.6 GENERAL PROVISIONS AS TO CERTIFICATES AND OPINIONS, ETC. Each
-------------------------------------------------------
certificate of the Auditors, each officers' certificate, and each opinion of
counsel furnished to the Agent or
<PAGE>
- 6 -
any Bank pursuant to any provision of any Document will specify the Section or
Sections under which such certificate or opinion is furnished and will include a
statement that the Person making such certificate or giving such opinion has
read the provisions of such Document relevant thereto. Each such certificate and
opinion which evidences, attests or confirms compliance with any covenant or
condition precedent provided for in any Document will, in addition, include a
statement:
(a) that, in the opinion of such Person, such Person has made such
examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or
condition has been complied with;
(b) that, in the opinion of such Person, such covenant or condition has
been complied with; and
(c) that (unless the context otherwise requires) to the knowledge of such
Person, no Event of Default has occurred and is continuing or, if an
Event of Default has occurred and is continuing, specifying the same.
Whenever the delivery of a certificate or opinion is a condition
precedent to the taking of any action by the Agent or the Banks under any
Document, the truth and accuracy of the facts and opinions stated in such
certificate or opinion will in each case be conditions precedent to the right of
the Borrower to have such action taken, and each statement of fact contained
therein will be deemed to be a representation and warranty of the Borrower for
the purposes of this Agreement.
Any Auditors certificate or officer's certificate may be based, insofar
as it relates to legal matters, upon an opinion of counsel, unless the Person or
Persons giving such certificate knows, or in the exercise of reasonable care
should know, that the opinion of counsel with respect to the matters upon which
such certificate may be based as aforesaid is erroneous.
Any opinion of counsel may be based, insofar as it relates to factual
matters, information with respect to which is in possession of the Borrower,
upon an officers' certificate, unless the counsel giving such opinion knows, or
in the exercise of reasonable care should know, that the officers' certificate
with respect to the matters upon which his opinion may be based as aforesaid is
erroneous. Insofar as any opinion of counsel covers matters relating to the laws
of jurisdictions other than those in which such counsel is qualified to
practice, such counsel may rely upon opinions of counsel located in such other
jurisdictions as to such matters. In rendering any opinion, counsel may qualify
such opinion with respect to the enforceability of any agreement or obligation
referred to therein by stating that enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and that specific performance may not be available as a remedy.
<PAGE>
- 7 -
1.7 LAW OF CONTRACT. Except as otherwise provided therein, all Documents
---------------
will be deemed to be contracts and/or instruments made pursuant to the laws of
Ontario and will be governed by and construed in accordance with such laws.
2. REPRESENTATIONS AND WARRANTIES
2.1 BORROWER. To induce the Banks to enter into this Agreement, to
--------
establish the Credit and to permit Drawdowns hereunder and to induce the Banks
and the Agent to enter into this Agreement, the Borrower represents and warrants
to the Banks and the Agent, upon each of which representations and warranties
the Banks and the Agent specifically rely, as follows:
(1) Good Standing, etc. It is a corporation duly amalgamated under the
------------------
laws of Ontario, is validly subsisting under such laws and is duly authorized
and licensed to own its properties and to carry on its businesses as presently
owned and carried on by it in each jurisdiction in which the failure to qualify
would have a material adverse effect on its business or financial condition. It
has the corporate power and authority to enter into and perform its obligations
under the Documents.
(2) Qualification, Licences etc. It has obtained all necessary material
---------------------------
licenses, material permits, material consents, material authorizations and
material approvals from any and all governments, governmental commissions,
boards or other agencies required as at the date hereof in respect of its
present operations, and it has no reason to believe that any such necessary
material licenses, material permits, material consents, material authorizations
and material approvals required in the future cannot be obtained without any
unduly burdensome provision or provisions inconsistent with the terms of this
Agreement.
(3) Due Execution, etc. Each Document to which it is a party has been duly
------------------
authorized, executed and delivered by it and constitutes a valid and binding
obligation of it, enforceable in accordance with its terms, subject to the
qualifications set out in the opinion delivered pursuant to Section 8.2(7).
(4) Litigation. There is no litigation or governmental proceeding pending or
----------
threatened against it which could have a material adverse effect on its
financial condition.
(5) Burdensome Provisions, etc. It is not a party to any agreement or
--------------------------
instrument, or subject to any corporate restriction or any judgment, order,
writ, injunction, decree, award, rule or regulation, which materially adversely
affects or in the future may materially and adversely affect, its business,
operations, prospects, properties or assets, or condition, financial or
otherwise, or its ability to perform its obligations under the Documents.
(6) Default. It is not in default beyond any period of grace with respect
-------
thereto under any instrument or instruments evidencing any Indebtedness which
would in the aggregate exceed U.S.$5,000,000 or under the terms of any
instrument pursuant to which an
<PAGE>
- 8 -
instrument evidencing any Indebtedness which would in the aggregate exceed
U.S.$5,000,000 has been issued or made and delivered, except for defaults (if
any) as are being contested in good faith by appropriate proceedings of which
the Agent has been notified in writing and for which a reserve satisfactory to
the Banks has been provided. No event has occurred which constitutes an Event of
Default nor will any such Event of Default occur by reason of the Borrower
entering into any Document or performing its obligations thereunder or entitling
itself to the benefits available to it thereunder.
(7) Contingent Liabilities and Debt. It does not have any contingent
-------------------------------
liabilities, nor has it, except as contemplated by this Agreement, incurred any
Indebtedness for money borrowed or credit advanced.
(8) Full Disclosure. No statements or materials furnished by or on behalf of
---------------
the Borrower to the Agent or the Banks in connection with the negotiation or
confirmation of the transactions contemplated hereby contained, as of the time
such statements were so furnished, any untrue statement of a material fact or
omitted as of such time, a material fact necessary to make the statements
contained therein not misleading, and all such statements, taken as a whole,
together with this Agreement, do not contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained herein
or therein not misleading, and all expressions of expectation, intention, belief
and opinion contained therein were honestly made on reasonable grounds after due
and careful inquiry by the Borrower (and any other person who furnished such
material). There is no fact which the Borrower has not disclosed to the Agent
and to each of the Banks in writing which materially adversely affects, or so
far as the Borrower can now reasonably foresee, will materially adversely affect
its assets, liabilities, affairs, business, prospects, operations or conditions,
financial or otherwise, or its ability to perform its obligations under the
Documents.
(9) No Default, etc. Neither the execution nor the delivery of any Document,
---------------
the consummation of the transactions therein contemplated, nor compliance with
the terms, conditions and provisions thereof conflicts with, or will conflict
with, or results or will result in, any breach of, or constitutes a default
under any of the provisions of the charter documents or by-laws of the Borrower
or of any agreement or instrument to which it is a party or by which it is, or
any of its property or assets are, bound or results or will result in the
contravention of any law or rule or regulation to which the Borrower or its
property or assets are subject.
(10) Tax Returns. It (and each of its predecessors) has filed all tax returns
-----------
which are required to be filed and has paid all taxes which have become due as
shown on such returns or any assessments received by it and its predecessors
except such taxes (if any) as are being contested in good faith by appropriate
proceedings. The Borrower is not aware of any proposed additional tax assessment
against it.
(11) Consents. No consent, approval or authorization of, or declaration,
--------
registration, filing or qualification with, or giving of notice to, or taking of
any other action
<PAGE>
- 9 -
in respect of, any governmental authority or agency on the part of the Borrower
is required in connection with the execution and delivery and enforcement of the
Documents or the consummation of any of the transactions contemplated hereby or
thereby.
(12) Events of Default. No event has occurred which constitutes an Event of
-----------------
Default nor will any such Event of Default occur by reason of the Borrower
entering into any Document or performing its obligations thereunder or entitling
itself to any benefits available to it thereunder.
(13) No Material Adverse Change. The business, operations, assets and
--------------------------
condition (financial or otherwise) of the Borrower have not been materially
adversely affected as a result of any act or event (including, without
limitation, fire, accident, strike, expropriation or act of any government in
Canada or elsewhere).
3. THE CREDIT AND DRAWDOWNS
3.1 ESTABLISHMENT OF CREDIT.
-----------------------
(1) The Banks hereby establish in favour of the Borrower on the terms and
conditions hereof a credit in the principal amount of $110,000,000.
(2) Subject to the terms and conditions hereof, each Bank will participate in
each Drawdown in a proportion equal to its Bank's Proportion of such Drawdown.
(3) The rights and obligations of each of the Banks under this Agreement are
several. The failure of a Bank to perform its obligations under this Agreement
will neither:
(a) result in the Agent or any other Bank incurring any liability
whatsoever; nor
(b) relieve the Agent or any other Bank from their respective
obligations under any Document.
Nothing contained herein or in any other Document nor any action taken pursuant
hereto or thereto will be deemed to constitute the Banks a partnership, joint
venture or any other similar such entity.
3.2 UTILIZATION OF THE CREDIT. Subject to the terms and conditions
-------------------------
hereof, the Borrower may avail itself of the Credit at any time, commencing on
the Closing Date and from time to time thereafter up to (but not including) the
Repayment Date, by way of Drawdowns provided that:
(a) the proceeds of each Drawdown (other than a Drawdown made pursuant to
Section 3.8) will be used for general corporate purposes;
<PAGE>
- 10 -
(b) all Drawdowns will be in a Borrowing Amount; and
(c) if after giving effect thereto, the Utilized Portion of the Credit
does not exceed the then principal amount of the Credit.
3.3 DRAWDOWNS.
---------
(1) The Borrower will deliver a Drawdown Notice to the Agent no later than
10:00 a.m. (Toronto time) on or before the first Banking Day prior to the day on
which the Borrower wishes to receive any Drawdown.
(2) When the Agent receives a Drawdown Notice, the Agent will notify each of
the Banks of the amount and particulars of the proposed Drawdown and the date on
which it is to be made, and each Bank will, subject to the provisions of this
Agreement, make available to the Agent at the Designated Office on that date its
participation in that Drawdown.
(3) Intentionally deleted.
(4) Each Bank will open and maintain on its books accounts evidencing the
Indebtedness of the Borrower to it hereunder. Each Bank will debit therein the
amount of all such Indebtedness and will credit therein each payment on account
of such Indebtedness by appropriate entries. The accounts kept by a Bank will
constitute, in the absence of manifest error, conclusive evidence of (i) the
Indebtedness of the Borrower to such Bank hereunder, (ii) the date each Drawdown
was made by the Borrower, and (iii) the amounts from time to time paid by the
Borrower on account of such Indebtedness.
(5) A Drawdown Notice will be irrevocable and the Borrower will borrow the
stated amount on the stated date in accordance with the Drawdown Notice.
(6) Intentionally deleted.
(7) All amounts to be advanced by the Banks to the Borrower under this
Agreement in respect of Drawdowns will be remitted not later than 10.00 a.m.
(Toronto time) on the relevant day to the account of the Agent at the Designated
Office, and the Agent will make available to the Borrower the amounts so
remitted on the same day to the account in the name of the Borrower maintained
by the Agent of which the Borrower has notified to the Agent in writing. If the
Agent makes available to the Borrower any amount which has not been made
unconditionally available to the Agent the Borrower will forthwith on notice
from the Agent repay to the Agent any such amount.
(8) Intentionally deleted.
3.4 MANDATORY REDUCTION OF CREDIT. The Borrower will reduce permanently
-----------------------------
the Utilized Portion of the Credit to nil on the Repayment Date, and the
Borrower will pay
<PAGE>
- 11 -
concurrently with such reduction all interest accrued hereunder but unpaid prior
to the Repayment Date. The Credit will be permanently cancelled on the Repayment
Date.
3.5 OPTIONAL PREPAYMENT. The Borrower will not be entitled to prepay all
-------------------
or any part of a Drawdown except as provided below:
(a) any partial prepayment is in a Borrowing Amount;
(b) the Borrower pays concurrently with such prepayment all interest
accrued on the amount thereof;
(c) the Agent receives written notice of such prepayment 5 Banking Days
prior to the intended date of prepayment; any notice of prepayment given
by the Borrower pursuant hereto will be irrevocable and the Borrower will
be bound to prepay in accordance with such notice; and
(d) in the case of an Acceptance, the prepayment is made on the maturity
date applicable to such Acceptance.
3.6 STANDBY FEE. The Borrower will pay to the Agent for the account of
-----------
each Bank on the last Banking Day of each calendar quarter, commencing December
29, 1995, a standby fee of 1/10th of 1% (i.e., 0.1%) per annum calculated daily
on the Unutilized Portion of the Credit and on the basis of a year of 365 or 366
days, as the case may be, such fee to be computed commencing on the date hereof.
3.7 CANCELLATION OF CREDIT. The Borrower may, upon five Banking Days
----------------------
prior written notice to the Agent, permanently cancel the Credit in whole or
from time to time in part provided that the Borrower concurrently reduces, in
accordance with Section 3.5, the Utilized Portion of the Credit so that such
Utilized Portion does not exceed the reduced amount of the Credit.
3.8 Intentionally deleted.
3.9 AGENCY FEE. The Borrower will pay to the Agent in arrears on the last
----------
Banking Day of each calendar quarter, commencing December 29, 1995, a quarterly
agency fee of $1,250.
3.10 PRO RATA TREATMENT AND PAYMENTS.
-------------------------------
(a) Each borrowing by the Borrower from the Banks, each payment (including
each prepayment) by the Borrower on account of principal and interest hereunder,
and any reduction of the Commitments of the Banks hereunder, will be made pro
rata according to the Banks' Proportions at the time of such borrowing, payment
or reduction. All payments (including prepayments) to be made by the Borrower on
account of principal, interest and
<PAGE>
- 12 -
fees will be made without set-off or counterclaim and will be made to the Agent
on behalf of the Banks at the Designated Office in lawful money of Canada and in
immediately available funds. The Agent will distribute such payments to the
Banks promptly upon receipt in like funds as received. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment will be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest thereon will be payable at the then applicable rate during
such extension.
(b) Notwithstanding Section 3.10(a) above, the parties hereto agree that
the provisions of this Section 3.10(b) will apply in circumstances in which the
pro rata share of any Bank or Banks in respect of a proposed Drawdown by way of
Acceptances (which Drawdown complies in all respects with the terms of this
Agreement) is in an amount which is not a Borrowing Amount in respect of
Acceptances. In such circumstances, the excess (a "Bank's Excess Amount") of (i)
--------------------
the pro rata share of a particular Bank of such proposed Drawdown, over (ii) the
Borrowing Amount in respect of Acceptances which is closest to, but which does
not exceed, such pro rata share, shall be added to the Bank's Excess Amount of
each of the other two Banks relating to such proposed Drawdown (the aggregate of
all three Bank's Excess Amounts in respect of a particular proposed Drawdown
being hereinafter referred to as the "Aggregate Excess Amount"). If the
-----------------------
Aggregate Excess Amount is less than $100,000, then each Bank shall advance a
Prime Loan to the Borrower in an amount equal to such Bank's Excess Amount in
respect of such proposed Drawdown. If the Aggregate Excess amount is equal to or
exceeds $100,000, then (i) Deutsche Bank Canada will accept and purchase a bill
of exchange (in the manner contemplated by Section 4.1) in a principal amount
equal to the Borrowing Amount in respect of Acceptances which is closest to, but
which does not exceed, the Aggregate Excess Amount, and (ii) each Bank shall
advance a Prime Loan to the Borrower in an amount equal to such Bank's pro rata
share of the positive difference, if any, resulting from the subtraction of the
principal amount of a bill of exchange accepted and purchased by Deutsche Bank
Canada pursuant to the preceding clause (i) from the Aggregate Excess Amount.
Any bill of exchange accepted and purchased by Deutsche Bank Canada pursuant to
this Section 3.10(b) is hereinafter referred to as a "Section 3.10(b)
---------------
Acceptance". Each Bank agrees that if the Borrower does not provide the Agent
- - ----------
at the Designated Office for the account of Deutsche Bank Canada with
immediately available funds to discharge in full the liabilities of Deutsche
Bank Canada in respect of a Section 3.10(b) Acceptance by 10:30 a.m. on the
maturity date of such Section 3.10(b) Acceptance, each Bank will by 12:00 p.m.
on such maturity date provide the Agent with immediately available funds to
discharge in full such Bank's pro rata share of the liabilities of Deutsche Bank
Canada in respect of such Section 3.10(b) Acceptance (it being agreed that (i)
the amount of each such payment will be discounted to reflect the 30 basis point
margin on an amount equivalent to the undiscounted amount of such payment
realized by Deutsche Bank Canada at the time of Deutsche Bank Canada's
acceptance and purchase of the relevant Section 3.10(d) Acceptance, and (ii)
upon any such payment, the payor Bank will be subrogated, to the extent of such
payment, to the rights of Deutsche Bank Canada in respect of the liabilities of
the Borrower relating to such Section 3.10(b) Acceptance).
<PAGE>
- 13 -
(c) The Agent may (unless notified to the contrary by a Bank prior to the
date of any proposed Drawdown (in this Section 3.10(c), the "Borrowing Date"))
--------------
assume that each Bank has made available to the Agent on such Borrowing Date
such Bank's Proportion of the Drawdown to be made on such Borrowing Date, and
the Agent may (but it will not be required to), in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available to the Agent on a date after such Borrowing Date, such
Bank will pay to the Agent on demand an amount equal to the product of (i) the
average, computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for funds acquired by the Agent
during each day included in such period, times (ii) the amount of such Bank's
Proportion of such borrowing, times (iii) a fraction, the numerator of which is
the number of days that elapse from and including such Borrowing Date to the
date on which such Bank's Proportion of such borrowing will become immediately
available to the Agent, and the denominator of which is 365. A statement of the
Agent submitted to any Bank with respect to any amounts owing under this
subsection 3.10(c) will be conclusive and binding in the absence of manifest
error. If such Bank's Proportion of such Drawdown is not in fact made available
to the Agent by such Bank within three Banking Days of such Borrowing Date, the
Agent will be entitled to recover such amount with interest thereon, on demand,
at the rate per annum applicable to Prime Loans hereunder.
4. ACCEPTANCES
4.1 CREATION AND PURCHASE OF ACCEPTANCES. Upon receipt of a Drawdown
------------------------------------
Notice given in accordance with Section 3.3(1) and subject to the provisions of
this Agreement, each Bank will accept and purchase from time to time such bills
of exchange as the Borrower will request within the scope of the Credit. The
purchase price for each such accepted bill of exchange will be equal to (i) the
principal amount of such bill of exchange, minus (ii) the principal amount of
such bill of exchange multiplied by the DBAR. The Agent will verbally inform
each of the Banks of the DBAR applicable to each Drawdown by way of Acceptances
hereunder no later than 10:00 a.m. on the day on which a Drawdown is to be made
by way of Acceptances hereunder, and such DBAR will not be communicated to the
Borrower any earlier than 10:30 a.m. on such day.
4.2 DELIVERY BY BORROWER. Each bill of exchange to be accepted by a Bank
--------------------
will be tendered by the Borrower to such Bank on or before 11.00 a.m. (Toronto
time) at the Branch of Account of such Bank on the date the Borrower wishes such
Bank to accept such bill.
4.3 Intentionally deleted.
4.4 DISCHARGE OF ACCEPTANCES. The Borrower agrees that prior to 10:30 a.m.
------------------------
on each date on which an Acceptance matures (in this Section, a "maturity
--------
date"), it will provide the Agent at the Designated Office for the account of
- - ----
each Bank with immediately available funds (in this Section, the "discharge
---------
funds") to discharge in full the liabilities of a
- - -----
<PAGE>
- 14 -
Bank in respect of such Acceptance. The Borrower agrees that it will take
whatever steps are necessary to ensure that it is entitled to obtain a Drawdown
on the maturity date pursuant to the provisions hereof in an amount at least
equal to the discharge funds. If the Borrower does not in fact provide the Agent
with the discharge funds, the Banks may (but will not be obliged to) make loans,
according to the Banks' Proportions, to the Borrower, which loans the Borrower
hereby requests the Banks to make and which, if made, will be made on a demand
basis and will bear interest as Prime Loans. To the extent not inconsistent with
the demand nature of such demand loans, the terms and conditions of this
Agreement pertinent to Prime Loans outstanding hereunder will apply to such
demand loans.
4.4A ROLLOVER. The Borrower may at any time deliver a notice to the Banks
--------
requesting a Drawdown (the "Rollover Drawdown") the proceeds of which
-----------------
will be used to discharge in whole or in part its obligations hereunder with
respect to one or more outstanding Drawdowns (the "Outstanding Drawdown"),
---------------------
provided that:
(a) the notice identifies the Outstanding Drawdown or Outstanding
Drawdowns to be discharged;
(b) the Rollover Drawdown would otherwise be permitted hereunder and the
Borrower complies with each provision hereof relative to the obtaining
of a Drawdown in the form requested including, without limitation,
those relative to notice;
(c) the aggregate principal amount of the Rollover Drawdowns then
requested is not greater than the aggregate principal amount of such
Outstanding Drawdowns;
(d) the entire proceeds of the Rollover Drawdowns are used in full to
retire the liability of the Borrower in respect to such Outstanding
Drawdowns;
(e) each Rollover Drawdown is made contemporaneously with the retirement
of the Outstanding Drawdowns; and
(f) the Borrower will pay all costs and expenses incurred by the Bank
incidental to the exercise by the Borrower of any of its rights under
this Section.
4.5 ACCEPTANCES OUTSTANDING UPON DEFAULT. If any Acceptance is
------------------------------------
outstanding upon the occurrence of an Event of Default, the Borrower will
forthwith upon such occurrence pay to the Agent, for the rateable benefit of the
Banks, an amount equal to the principal amount of such Acceptance, such amount
to be held by the Banks for set off against the Indebtedness owing by the
Borrower to the Banks in respect to such Acceptance or in respect to any other
amount payable under the Documents.
4.6 RETIREMENT OF ACCEPTANCES. The Borrower will not retire any
-------------------------
Indebtedness with respect to the face amount of an Acceptance until the maturity
date of such Acceptance.
<PAGE>
- 15 -
4.7 CHOICE OF ACCEPTANCE PERIODS. Subject to the next sentence, all
----------------------------
Drawdowns hereunder by way of Acceptances will mature one, two or three months
after their issuance. The Borrower will choose Acceptances of such duration so
as to ensure that the Borrower complies in all respects with its reduction
obligations hereunder.
5. INTEREST
5.1 COMPUTATION. The Borrower will pay to the Agent, for the rateable
-----------
benefit of the Banks, interest on each Prime Loan, which interest will be
calculated daily at the rate of interest per annum equal to the Prime Rate.
5.2 ACCRUAL AND PAYMENT. Interest on each Prime Loan will accrue from day
-------------------
to day, be payable monthly in arrears on the last Banking Day of each month, and
be calculated on the basis of the actual number of days in the relevant calendar
year. The principle of deemed reinvestment of interest will not apply to this
Agreement or to any computation of interest payable hereunder.
5.3 DEFAULT INTEREST AND INDEMNITY.
------------------------------
(1) In the event that the Borrower fails to pay any amount payable under
any Document to the Agent, whether for its own account or that of the Banks on
its due date and irrespective of any notice to the Borrower in respect of such
failure, the Borrower will pay to the Agent for the account of the appropriate
party interest on such amount, which interest will be calculated daily according
to the regular practice of the Agent, for the period commencing on the date of
such failure and ending on the date of actual payment (both before and after
demand, default and judgment) at a rate of interest per annum equal to the Prime
Rate plus 3%, such interest to be compounded on the last Banking Day of each
month during the period of arrears.
(2) The Borrower will fully indemnify and hold the Agent and each Bank
harmless from and against any loss, expense, damage or liability incurred by it
with respect to any Drawdown or proposed Drawdown which the Agent or such Bank
may sustain or incur as a result of (i) the failure of the Borrower to utilize
the Credit in the manner specified in a Drawdown Notice (including if such
failure was caused by its failure to meet all conditions precedent), (ii) the
failure of the Borrower to pay any sum on its due date, (iii) any prepayment
under this Agreement or otherwise in connection with this Agreement, or (iv) any
Event of Default. Without prejudice to the generality of the foregoing, the
foregoing indemnity will extend to any interest, fees or other sums whatsoever
paid or payable on account of any funds borrowed by a Bank in order to carry any
unpaid amount and to any loss (including loss of profit), premium, penalty or
expense which may be incurred by such Bank in liquidating or employing deposits
from third parties acquired to make, maintain or fund a drawdown or any part
thereof or any amount due or to become due under this Agreement.
<PAGE>
- 16 -
5.4 AGENT'S CERTIFICATE. The Agent's certificate as to each amount or
-------------------
each rate of interest payable hereunder will, in the absence of manifest error,
be conclusive evidence of such amount or rate.
5.5 LIMITATION ON INTEREST. If the payment of any amount pursuant hereto
----------------------
on account of interest (the "Required Interest") would result in the
-----------------
Borrower paying interest at a rate or in an amount greater than that
which any Bank is entitled under any applicable law ("The Usury Law") to
-------------
charge the Borrower (provided that such law is not pre-empted or superseded by
any other law or provision of any Document) (the "Permitted Interest Rate"),
-----------------------
then the difference (the "Surplus Amount") between the Required Interest and the
--------------
Permitted Interest will be deducted automatically from the principal amount of
the Drawdown to which such payment relates, or, if such payment does not relate
to any particular Drawdown, to the last amount payable hereunder, with the
result that the Borrower will be deemed for all purposes not to have paid
interest in any amount in excess of the Permitted Interest. Notwithstanding the
foregoing, if at any time when there exists a Surplus Amount, the amount of
interest payable hereunder or pursuant hereto by the Borrower is less than the
maximum amount that the Bank is otherwise permitted to charge the Borrower under
the Usury Law, the Borrower will pay interest at the Permitted Interest Rate,
without regard to the rates set out herein, until the total amount of all
interest and other charges actually paid by the Borrower is equal to the amount
that would have been payable were it not for such Usury Law. This provision will
not be interpreted and is not intended to prevent or impair the Bank from
challenging the validity or applicability of any Usury Law before any Court or
government authority of any kind.
6. CHANGE IN CIRCUMSTANCES
6.1 INCREASED COSTS. If at any time a Bank determines in good faith
---------------
(which determination will be conclusive) and notifies the Borrower through the
Agent that any present or future law, regulation, order, treaty or official
directive (whether or not having the force of law), or any change therein or in
the interpretation or application thereof by any authority charged with the
administration thereof or by any court or any compliance by such Bank with any
request or directive of any applicable monetary, fiscal or other governmental
agency or authority (whether or not having the force of law), has the effect in
respect of any Drawdown of:
(a) increasing the cost to such Bank of making, maintaining or funding its
participation in such Drawdown;
(b) reducing the amount of principal, interest or other amount received or
receivable by such Bank hereunder or its effective return hereunder;
or
(c) causing such Bank to make any payment, or to forego any interest or
other return on or calculated by reference to, any sum received or
receivable by it hereunder;
<PAGE>
- 17 -
then, in any such case, upon demand being made from time to time to the Borrower
by such Bank through the Agent, the Borrower will forthwith pay to the Agent for
the account of such Bank such amount as will compensate such Bank for such
additional cost, reduction, payment, foregone interest or other return. The
certificate of the relevant Bank as to any amount payable pursuant to this
Section will, in the absence of manifest error, be conclusive evidence thereof.
6.2 UNLAWFUL, ETC. Notwithstanding anything herein contained, if at any
-------------
time any Bank determines in good faith (which determination will be conclusive)
and notifies the Borrower through the Agent that, by reason of any law,
regulation, order, treaty or official directive, or any change therein or in the
reasonable interpretation or reasonable application thereof, by any authority
charged with the administration thereof or by any court, it is unlawful, or
impracticable or contrary to the direction of any competent authority for such
Bank to make, maintain or fund any Drawdown or to give effect to any of its
other obligations as contemplated hereby, such Bank, by such notice, may declare
that such obligations will be terminated and the Borrower, if such Drawdown is a
Prime Loan, will repay such Prime Loan to the Agent for the account of such Bank
forthwith or at the end of such period as such Bank will in its discretion have
agreed, the whole of such Prime Loan together with all unpaid interest accrued
thereon to the date of repayment and all other unpaid amounts payable to such
Bank hereunder. If such Drawdown is an Acceptance, the Borrower will provide
such Bank, on the maturity date of such Acceptance or such earlier date
requested by such Bank, with the amount of dollars required by such Bank to
discharge its obligations with respect to such Acceptance. Upon the giving of
such notice by a Bank, the obligation of such Bank to participate in any further
Drawdown will terminate and the Credit will be cancelled to such extent.
7. PAYMENTS
7.1 PLACE AND MANNER OF PAYMENTS.
----------------------------
(1) All payments to be made by the Borrower under the Documents will be made
to the Agent in Cdn. Dollars. All such payments will be made in immediately
available funds and received by the Agent not later than 10:00 a.m. (Toronto
time) on the due date at the Designated Office. Whenever any payment hereunder
is due on a day which is not a Banking Day, the due date thereof will be
extended to the next succeeding Banking Day unless such Banking Day falls in the
next calendar month in which event the due date will be the next preceding
Banking Day. During any extension of the due date for the payment of any
principal of any Drawdown hereunder, interest shall be payable on such principal
at the rate payable on such due date in respect of such Drawdown.
(2) The Agent will, before the close of business in Toronto on the date of
receipt, remit to each Bank in the currency of payment, in same day funds, such
Bank's portion of the payment so made by remitting such portion to any account
of such Bank with any bank in Toronto which such Bank will have previously
notified to the Agent in writing. In the event
<PAGE>
- 18 -
that any payment hereunder is received by the Agent too late on any day for the
Agent acting with due dispatch to execute such remittance, such payment will be
deemed for the purposes of interest and fee computations as between the Agent
and the Banks to have been received by the Agent on the next following Banking
Day and the Borrower will indemnify the Agent or the Banks, as the case may be,
for any loss incurred thereby.
(3) Except as otherwise provided herein or in any other agreement in writing
among the Banks, each and every payment of principal and interest on outstanding
Prime Loans, payment on maturity of an Acceptance, the stand-by fees and all
other payments hereunder will be made to the Agent for the account of each Bank
pro rata according to its respective Bank's Proportion.
7.2 NET PAYMENTS, ETC. All payments by the Borrower under a Document,
-----------------
whether in respect of principal, interest, fees or any other item, will be made
in full without any deduction or withholding (whether in respect of set off,
counterclaim, duties, taxes, charges or otherwise whatsoever) unless the
Borrower is prohibited by law from doing so, in which event the Borrower will:
(a) ensure that the deduction or withholding does not exceed the minimum
amount legally required;
(b) forthwith pay to the Agent for the account of each affected Bank such
additional amount so that the net amount received by such Bank will
equal the full amount which would have been received by it had no such
deduction or withholding been made;
(c) pay to the relevant taxation or other authorities within the period
for payment permitted by applicable law the full amount of the
deduction or withholding (including, but without prejudice to the
generality of the foregoing, the full amount of any deduction or
withholding from any additional amount paid pursuant to this
subsection), and
(d) furnish to the Agent for the account of such Bank, within the period
for payment permitted by applicable law, an official receipt of the
relevant taxation or other authorities involved for all amounts
deducted or withheld as aforesaid.
7.3 REPAYMENT BY BANKS TO AGENT. Unless the Agent has been notified in
---------------------------
writing by the Borrower not less than one (1) Business Day prior to the date on
which any payment to be made by the Borrower hereunder is due, that the Borrower
does not intend to remit such payment, the Agent may, at its discretion, assume
that the Borrower has remitted such payment when so due and the Agent may, at
its discretion and in reliance upon such assumption, make available to each Bank
on such payment date an amount equal to such Bank's proportionate share of such
assumed payment. If it proves to be the case that the Borrower has not in fact
remitted such payment to the Agent, each Bank will forthwith on
<PAGE>
- 19 -
demand repay to the Agent the amount of such assumed payment made available to
such Bank, together with interest thereon until the date of repayment thereof at
a rate determined by the Agent (such rate to be conclusive and binding on such
Bank) in accordance with its usual banking practice for advances in the currency
in which such payment is due to banks of like standing to such Bank.
8. CONDITIONS PRECEDENT
8.1 CLOSING. The closing of the transaction contemplated herein will take
-------
place on the Closing Date at the offices of Messrs. Blake, Cassels & Graydon,
Commerce Court West, Toronto, Ontario.
8.2 CONDITIONS PRECEDENT TO CLOSING. The obligation of the Banks to
-------------------------------
establish the Credit and to permit the first Drawdown is subject to the
fulfilment of the following conditions precedent to the satisfaction of the
Agent on or prior to the Closing Date (each of which conditions may be waived by
the Banks in the Banks' discretion):
(1) Intentionally deleted.
(2) Other Documentation. The Borrower will have entered into and
-------------------
delivered to the Agent and each Bank their customary documentation concerning
the administration of this Agreement and the Drawdowns.
(3) Alco Standard Corporation Guarantee. The Guarantor will have entered
-----------------------------------
into and delivered to the Agent the Guarantee.
(4) Representations and Warranties. The representations and warranties of
------------------------------
the Borrower contained in Section 2 will be true on and as of the Closing Date,
and the Borrower will have delivered to the Bank a certificate to such effect,
dated such date and signed on its behalf by a senior executive officer.
(5) Corporate Proceedings. All proceedings to be taken in connection with
---------------------
the transactions contemplated by the Documents will be satisfactory in form and
substance to the Agent, and the Agent will have received certified copies of all
documents which it may reasonably request in connection with such transactions
and of the records of all corporate proceedings in connection therewith.
(6) No Change in Applicable Law. The Agent will be satisfied that there
---------------------------
will not have occurred on or before the Closing Date any change in any
applicable law or regulation thereunder or interpretation thereof by any
authority charged with the administration thereof or by any court which in the
opinion of counsel for the Agent would make it unlawful or impossible for any
Bank to advance or make any Drawdown.
<PAGE>
- 20 -
(7) Opinion from Borrower's Counsel. The Agent will have received from
-------------------------------
general counsel for the Borrower, an opinion, dated the Closing Date and in form
and substance satisfactory to the Agent as to such matters as the Agent will
reasonably require.
(8) Opinions from Guarantor's Counsel. The Agent will have received from
---------------------------------
external counsel to the Guarantor in each of Ohio and New York an opinion, dated
the Closing Date and in form and substance satisfactory to the Agent, as to such
matters as the Agent may reasonably require.
(9) Opinions of Agent's Counsel. The Agent will have received from each
---------------------------
of Messrs. Blake, Cassels & Graydon, Canadian counsel for the Agent, and Messrs.
White & Case, U.S. counsel for the Agent, an opinion, dated the Closing Date and
in form and substance satisfactory to the Agent, with respect to such matters,
if any, relating to the transaction contemplated hereby as the Agent may
reasonably request.
(10) Agent for Service of Process. The Agent and the Banks will have
----------------------------
received evidence satisfactory to the Agent and the Banks of the acceptance by a
duly-appointed agent of the Guarantor of such agent's appointment as agent for
service of process in any legal action or proceeding with respect to the
Guarantee in the courts of the State of New York or of the United States of
America for the Southern District of New York.
8.3 CONDITIONS PRECEDENT TO EACH DRAWDOWN. The obligation of the Banks to
-------------------------------------
make each Drawdown is subject to the fulfilment of the following conditions
precedent on or prior to the date of such Drawdown:
(1) All representations and warranties of the Borrower contained in
Article 2 will be true and correct on and as of such date both before and after
giving effect to the proposed Drawdown with the same effect as if those
representations and warranties had been made on and as of such date.
(2) The Agent will be satisfied that no Event of Default has occurred or
would occur as a result of the making of the Drawdown.
(3) The Agent will have received a Drawdown Notice within the time
specified in Section 3.3(1) and in the form of Schedule B.
9. COVENANTS
9.1 GENERAL COVENANTS. The Borrower covenants with the Agent and the
-----------------
Banks that until the Credit is cancelled and there is outstanding no Drawdown,
the Borrower will:
(1) Corporate Existence. Do or cause to be done all things necessary to
-------------------
keep in full force and effect its corporate existence and all rights,
franchises, licenses and
<PAGE>
- 21 -
qualifications to carry on its business or own property in each jurisdiction in
which it carries on business or owns property.
(2) Insurance. Maintain insurance of such type, in such amounts and
---------
against such risks as is customary in the case of companies of an established
reputation engaged in a similar business and similarly situated as the Borrower
with insurers and in form and substance satisfactory to the Banks.
(3) Compliance with Laws etc. Comply with all applicable governmental
------------------------
restrictions and regulations and obtain and maintain in good standing all
licenses, permits and approvals from any and all governments, governmental
commissions, boards or agencies required in respect of its operations, if the
failure to comply therewith or to obtain or maintain the same would materially
adversely affect (i) its financial condition or (ii) its ability to carry on its
business or a significant part thereof.
(4) Payment. Duly and punctually pay or cause to be paid to the Agent for
-------
the Account of each Bank all principal and interest payable hereunder and the
other Documents and all other amounts payable hereunder and thereunder on the
dates, at the places and in the moneys and manner set forth herein and therein.
(5) Use of Credit. Use the entire proceeds of the Credit for general
-------------
corporate purposes.
9.2 ACCOUNTING, FINANCIAL STATEMENTS AND OTHER INFORMATION.
------------------------------------------------------
(1) General. The Borrower will maintain a system of accounting
-------
established and administered in accordance with accounting principles generally
accepted in Canada, consistently applied, and will set aside on its books all
such proper reserves as such accounting principles will require. The Borrower
will permit persons designated by the Agent to visit and inspect at the expense
of the Borrower any properties of the Borrower, to examine the books and
financial records of the Borrower and to discuss its affairs, finances and
accounts, all at such reasonable times and as often as may reasonably be
requested by the Agent. The Persons designated by the Agent pursuant to this
Section may include accountants or management consultants appointed by the Agent
to examine all or any aspect of the operations of the Borrower, and the Borrower
agrees to answer any inquiries which such Persons may have fully and fairly to
the best of its ability. The Borrower further acknowledges that such Persons may
prepare reports to the Agent concerning its financial position and business
prospects and the Agent will have no obligation to disclose the content of such
reports to the Borrower. Neither the Agent nor the Banks will have a duty to
make any such visits, inspections or examinations or to have any such
discussions and will not incur any liability or obligation nor lose any rights
for not making the same.
<PAGE>
- 22 -
(2) Reports. The Borrower will furnish to the Agent:
-------
(a) promptly upon availability and in any event within 60 days after the
end of each of its first three fiscal quarters in each fiscal year
commencing with the fiscal quarter in which the Closing Date falls,
unaudited financial statements of the Borrower (consisting of a
balance sheet and a statement of profit and loss) for such quarterly
fiscal period prepared in accordance with generally accepted
accounting principles and certified by the chief accounting officer or
one or more of the senior executive officers of the Borrower to be
prepared on a consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis, subject to audit;
(b) promptly upon availability and in any event within 90 days after the
end of a fiscal year of the Borrower commencing with the fiscal year
in which the Closing Date falls, the annual financial statements of
the Borrower (consisting of a balance sheet and a statement of profit
and loss) for such fiscal year prepared in accordance with generally
accepted accounting principles consistently applied and certified by
the chief accounting officer or one or more of the senior executive
officers of the Borrower to be prepared on a consolidated basis in
accordance with generally accepted accounting principals applied on a
consistent basis, subject to audit;
(c) together with each delivery of financial statements pursuant to
Section 9.2(2)(b), an officers' certificate, stating that the signers
have reviewed the relevant terms of the Documents and have made, or
caused to be made under their supervision, a review of the
transactions and condition of the Borrower during the period covered
by such statements and that such review has not disclosed the
existence during such period, and that the signers do not have
knowledge of the existence, as at the date of such certificate, of any
condition or event which constitutes an Event of Default or, if any
such condition or event existed or exists, specifying the nature and
period of existence thereof and the action which the Borrower has
taken or proposes to take with respect thereto;
(d) promptly upon the Borrower obtaining knowledge of any condition or
event which constitutes an Event of Default, a certificate of the
Borrower specifying the nature and occurrence of an Event of Default
and what action the Borrower has taken or proposes to take with
respect thereto;
(e) promptly upon any senior officer of the Borrower obtaining knowledge
of any action, suit or proceedings pending or threatened affecting the
Borrower before any court or before any governmental department,
commission or agency or any arbitrator, in Canada, the United States
of America or elsewhere, which could result in any material adverse
change in the business operations, prospects, properties or assets, or
condition, financial or otherwise, of the
<PAGE>
- 23 -
Borrower, a certificate of such senior officer specifying the nature
of such action, suit or proceeding and the proposed response of the
Borrower thereto; and
(f) promptly, such other information as the Agent or a Bank may from time
to time reasonably request.
The Borrower will furnish to the Agent sufficient copies of each of the
above documents so that one copy may be distributed to each Bank. Each of the
statements required by Section 9.2(2)(a) and (b) will set forth in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal period (if any), all in reasonable detail.
10. DEFAULT AND ENFORCEMENT
10.1 EVENTS OF DEFAULT. Upon the occurrence of any one or more of the
-----------------
following events, the Agent may and, upon the request of the Majority Banks,
will, without notice to the Borrower, forthwith cancel the Credit and declare
all the Indebtedness of the Borrower under the Documents to be immediately due
and payable, whereupon all such Indebtedness will become immediately due and
payable without any notice or demand, and the Borrower expressly waives
presentation, protest or other notice of any kind:
(1) If the Borrower fails to pay when due any Prime Loan or the amount due on
the maturity of any Acceptance or any part thereof and such default continues
for ten days or more;
(2) If the Borrower fails to pay when due any other amount payable under this
Agreement or under any other Document and such default continues for ten days or
more;
(3) If the Borrower or the Guarantor fails to duly perform or observe any
other term, condition or covenant contained (i) in any Document or (ii) in any
other document, agreement or instrument made between the Borrower or the
Guarantor and any Bank or delivered to any Bank and, in the case of a failure
capable of being remedied, the Agent does not determine, within 30 days after
the Borrower or the Guarantor became aware of the failure, that such failure has
been remedied to the satisfaction of the Agent;
(4) If the Borrower or the Guarantor defaults in (i) the payment when due,
whether by acceleration or otherwise, of any Indebtedness (other than under the
Documents) in an aggregate principal amount greater than U.S.$5,000,000, or (ii)
the payment, performance or observance of any obligation or condition with
respect or relating to any such Indebtedness or if any other event occurs in
respect of such Indebtedness and the effect of such default is to accelerate the
maturity of such Indebtedness or to permit the holder or holders thereof, or any
trustee or agent for such holder or holders, to cause such Indebtedness to
become due and payable prior to its expressed maturity;
<PAGE>
- 24 -
(5) If any representation, warranty or statement which is made or deemed to
have been made or acknowledged to have been made by or on behalf of the Borrower
or the Guarantor in any Document or which is contained in any certificate,
statement, legal opinion or notice provided under or in connection with any
Document is materially untrue or materially incorrect in any respect at any time
(or if repeated at any time with reference to the facts and circumstances
subsisting at such time would be materially untrue or materially incorrect in
any respect at such time);
(6) If a final judgment in respect of an amount exceeding U.S.$5,000,000 is
rendered against the Borrower or the Guarantor and within 30 days after entry
thereof such judgment will not have been discharged or execution thereof stayed
pending appeal or, within 10 days after the expiration of any such stay, such
judgment will not have been discharged;
(7) If an encumbrancer takes possession of any property or asset of the
Borrower or the Guarantor which, in the opinion of the Agent, is material or if
a distress or execution or any similar process be levied or enforced
thereagainst and remain unsatisfied for the shorter of a period of 10 days or
such period as would permit such property or such part thereof to be sold
thereunder;
(8) If any obligation or other provision in any Document to which the
Borrower is a party terminates or ceases to be the legally valid, binding and
enforceable obligation of the Borrower or if the Borrower contests in any
manner, the legality, validity, binding nature or enforceability of any Document
to which the Borrower is a party;
(9) If any governmental or other consent, license, or authorization required
to make any Document legal, valid, binding and enforceable or required in order
to enable the Borrower to perform its obligations thereunder is withdrawn or
ceases to be in full force and effect;
(10) If an order is made or an effective resolution passed for the winding-up,
liquidation or dissolution of the Borrower or the Guarantor;
(11) If the Borrower or the Guarantor institutes proceedings for its winding-
up, liquidation, or dissolution or consents to the filing of any petition with
respect thereto or files a petition or answer or consent seeking reorganization,
readjustment, arrangements, composition or similar relief under any American,
Canadian or other applicable law or consents to the filing of any such petition
or to the appointment of a receiver, liquidator, trustee or similar officer of
itself or any part of its property or makes an assignment for the benefit of
creditors or is unable, or admits in writing its inability, to pay its debts as
they become due or otherwise acknowledges its insolvency or is deemed for the
purposes of any applicable law to be insolvent or voluntarily suspends
transaction of its usual business or any action is taken by the Borrower or the
Guarantor in furtherance of any of the aforesaid purposes or if the Borrower or
the Guarantor takes any action pursuant to the Winding-Up Act (Canada) or
similar Canadian or United States legislation;
<PAGE>
- 25 -
(12) If a court having jurisdiction in the premises enters a decree or order
for the winding-up, liquidation or dissolution of the Borrower or the Guarantor
or adjudging the Borrower or the Guarantor to be insolvent or enters a decree or
order which remains in force undischarged or unstayed for a period of 60 days or
more approving, as properly filed, a petition seeking reorganization,
readjustment, arrangement, composition or similar relief for the Borrower or the
Guarantor under any American or Canadian or other applicable law, or the
appointment of any receiver, liquidator, trustee or similar officer of the
Borrower or the Guarantor of all or any part of the Borrower's or the
Guarantor's property;
(13) If any application is made with respect to the Borrower or the Guarantor
under the Companies' Creditors Arrangement Act (Canada) or similar legislation
or if a proceeding is instituted for the winding up of the Borrower or the
Guarantor or a petition in bankruptcy is presented against the Borrower or the
Guarantor under a bankruptcy or similar statute and if in any such case such
application, proceeding or petition is not dismissed, stayed or withdrawn within
60 days after the Borrower or the Guarantor has notice or knowledge of the
institution thereof;
(14) If there occurs any change in the ownership of the Borrower such that the
Guarantor ceases to be the direct or indirect holder of all of the issued and
outstanding share capital of the Borrower; or
(15) If the Guarantee or any provision thereof shall cease to be in full force
or effect, or if the Guarantor or any Person acting by or on behalf of the
Guarantor shall deny or disaffirm the Guarantor's obligations under the
Guarantee, or if the Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to the Guarantee.
10.2 LEGAL PROCEEDINGS. After an Event of Default has occurred, the Agent
-----------------
and the Banks may commence such legal action or other proceedings as they in
their sole discretion deem expedient in respect of the Indebtedness of the
Borrower hereunder, all without any additional notice, presentation, demand, or
protest, all of which the Borrower hereby expressly waives.
10.3 NO PREJUDICE, ETC. Nothing contained in any Document, nor any act or
-----------------
omission of any Bank with respect to such Document will in any way prejudice or
affect the rights, remedies and powers of the Banks with respect to any other
Document.
10.4 APPROPRIATION OF MONEYS RECEIVED. The Agent and each Bank may from
--------------------------------
time to time, when an Event of Default has occurred, appropriate any moneys
received by it from the Borrower or from the proceeds of any security given in
or towards payment of such portion of the Indebtedness of the Borrower to the
Agent or such Bank as in its discretion it may see fit, and the Borrower will
have no right to require any inconsistent appropriation.
10.5 CURRENCY INDEMNITY. Any payment on account of an amount payable under
------------------
any Document made to or for the account of the Agent or any Bank by the Borrower
in a
<PAGE>
- 26 -
currency (an "Other Currency") other than Canadian Dollars pursuant to a
--------------
judgment or order of a court or tribunal of any jurisdiction will constitute a
discharge of the obligation of the Borrower under such Document only to the
extent of the amount of Canadian Dollars which the Agent or such Bank, as the
case may be, is able, on the date of its receipt of such payment, to purchase in
accordance with its normal practice at the Designated Office with the amount of
the Other Currency so received by it. If the amount of Canadian Dollars which
the Agent or such Bank, as the case may be, is so able to purchase is less than
the amount of Canadian Dollars originally due to it, the Borrower will indemnify
and save the Agent or such Bank, as the case may be, harmless from and against
all loss or damage arising as a result of such deficiency. This indemnity will
constitute an obligation separate and independent from the other obligations
contained in this Agreement, will give rise to a separate and independent cause
of action, will apply irrespective of any indulgence granted by the Agent or
such Bank from time to time and will continue in full force and effect
notwithstanding any judgment or orders for a liquidated sum in respect of an
amount due hereunder or under any judgment or order.
10.6 BANK'S CONTRIBUTIONS.
--------------------
(1) If a Bank receives or recovers any amount (other than from the Agent) in
respect of sums due from the Borrower under this Agreement (whether by set off
or otherwise) it will promptly notify the Agent of such amount and the manner of
its receipt or recovery.
(2) Following receipt of notice under Section 10.6(1) the Agent will, as soon
as practicable, having regard to the circumstances, consult with the Banks to
establish the aggregate amount of sums received or recovered by the Banks and
what payments are necessary amongst the Banks for such aggregate amount to be
divided amongst the Banks in proportion to their participations.
(3) The Banks will promptly make such payments to each other, through the
Agent, as the Agent will direct to effect the proportionate division referred to
in Section 10.6(2).
(4) If a Bank makes a payment or payments pursuant to Section 10.6(3), any
payment previously received by that Bank as described in Section 10.6(1) will,
subject to Section 10.6(5), be deemed to have been made by the Borrower on the
understanding that the procedure described above would be followed and the
liabilities of the Borrower to each of the Banks will accordingly be determined
on the basis that such payment or payments pursuant to Section 10.6(3) would be
made as a distribution on behalf of the Borrower.
(5) Section 10.6(4) will not apply to any amount received or recovered by a
Bank if, as a result, the Indebtedness of the Borrower to the Bank has been
extinguished, discharged or satisfied by the amount received or recovered (for
example because of set off); in this event, if the Bank is required to make a
payment or payments pursuant to Section 10.6(3), then for the purpose only of
determining the liabilities of the Borrower to the Banks
<PAGE>
- 27 -
(other than the Bank making the said payment or payments) and the liabilities of
the Banks to each other, the said payment or payments by the Bank will be deemed
to have been made on behalf of the Borrower in respect of its obligations under
this Agreement and to the extent Indebtedness of the Borrower is thereby
discharged the Borrower will fully indemnify the Bank for such payment or
payments.
(6) Any moneys payable by the Borrower under Section 10.6(5) will be payable
from the date the Bank makes the payment or payments under Section 10.6(3), will
carry interest from such date and for such purpose and all other purposes of
this Agreement be treated in the same way as other amounts payable under this
Agreement as though such moneys were payable in respect of the participation of
the Bank which has the benefit of the indemnity contained in Section 10.6(3)
(whether or not the Indebtedness attributable to such participation has been
distinguished, discharged or satisfied in whole or in part).
(7) The parties will make such payments and take such steps as may be just
and equitable to re-adjust the position of the parties if a Bank, having
followed the procedures required above, is required to return any sum to the
Borrower as referred to in Section 10.6(1).
(8) If any Bank (a "benefitted Bank") will at any time receive any payment of
---------------
all or any part of its Prime Loans or Acceptances, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Bank, if any, in respect of such other Bank's
Prime Loans or Acceptances, or interest thereon, such benefitted Bank will
purchase for cash from the other Banks such portion of each such other Bank's
Prime Loans or Acceptances, or will provide such other Banks with the benefits
of any such collateral, or the proceeds thereof, as will be necessary to cause
such benefitted Bank to share the excess payment or benefits of such collateral
or proceeds ratably with each of the Banks; provided, however, that if all or
any portion of such excess payment or benefits is thereafter recovered from such
benefitted Bank, such purchase will be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that each Bank so purchasing a portion of another Bank's Prime
Loans or Acceptances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Bank were the direct holder of such portion.
11. THE AGENT AND AGENCY ARRANGEMENTS
11.1 ACTIONS. Subject to this Agreement, each Bank authorizes the Agent to
-------
act on behalf of such Bank under this Agreement and the other Documents and, in
the absence of other written instructions from the Majority Banks received from
time to time by the Agent, to exercise such powers hereunder and thereunder as
are specifically delegated to or required of the Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto,
provided that (i) any action to be taken by "the Banks" may
<PAGE>
- 28 -
only be taken by the Agent with the approval of the Majority Banks, (ii) any
requirement that any matter must be satisfactory to "the Banks" must be approved
by the Majority Banks, and (iii) any reference to "each Bank" or "each of the
Banks" or "all of the Banks" will require the approval of all Banks. In each
case such approval will be written, will be specific to the matter addressed
therein, and may not be relied upon by the Borrower unless it is expressly
addressed to the Borrower. The Borrower will be entitled to assume that any
action taken by the Agent has the required approval unless the Borrower has
knowledge to the contrary. In the event that the Agent receives express notice
of the occurrence of any Event of Default, the Agent will give notice thereof to
the Banks and will consult with the Banks with respect to the action to be
taken. The Agent will take such action with respect to such Event of Default as
will be reasonably directed by the Majority Banks, provided that unless and
until the Agent will have received such directions, the Agent may (but will not
be obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default as it will deem advisable in the best interests
of the Banks.
11.2 DIRECTIONS. The Agent agrees that, subject to Section 11.3, it will
----------
comply in good faith with all written instructions received from the Majority
Banks, or, where required, all of the Banks, and it will not take any action
which requires the approval of the Banks or the Majority Banks without first
receiving such approval.
11.3 INDEMNITY. Each Bank agrees (which agreement will survive any
---------
termination of this Agreement) to indemnify the Agent, pro rata according to
such Bank's Proportion, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of any Document or the enforcement of any of the Documents, including,
without limitation, the reimbursement of the Agent for all reasonable out-of-
pocket expenses (including reasonable solicitor's fees, inclusive of
disbursements and taxes) incurred by the Agent under or in respect of the
Documents or in enforcing payment of the Indebtedness of the Borrower under any
of the Documents, in all cases as to which the Agent is not reimbursed by the
Borrower (collectively, the "Liabilities"); provided, however, that no Bank will
----------- -------- -------
be liable for the payment of any portion of the Liabilities determined by a
court of competent jurisdiction in a final proceeding to have resulted from the
Agent's gross negligence or wilful misconduct. The Agent will not be required to
take any action under any Document, or to prosecute or defend any suit in
respect of any Document, unless it is indemnified to its satisfaction by the
Banks against all Liabilities. If any indemnity in favour of the Agent will
become impaired or will be insufficient, the Agent may call for additional
indemnity and cease to do the acts indemnified against until such additional
indemnity is given.
11.4 LIABILITY OF AGENT, ETC. Neither the Agent nor any of its directors,
-----------------------
officers, employees or agents will be liable:
(a) for the execution, validity, enforceability or effectiveness of any
Document;
<PAGE>
- 29 -
(b) for any failure of the Borrower or any Bank to duly and punctually
observe and perform any of their respective obligations under any
Document;
(c) for any statements, representations or warranties made or referred to
in any Document or in any certificate, report, statement, other
document or information given to any of the Banks in connection with
any Document;
(d) for any action taken or omitted by any of them under or in connection
with any Document unless such action is directly due to their own
gross negligence or wilful misconduct;
(e) for the consequences of relying on any communication or document
believed by any of them to be genuine and correct and to have been
communicated or signed by the person by whom it purports to be
communicated or signed; or
(f) for the consequences of relying on the advice of any professional
advisers selected by any of them in connection with this Agreement.
11.5 DEALINGS BY AGENT. With respect to its own participation in the
-----------------
Credit and the Drawdowns, Deutsche Bank Canada will have the same rights and
powers under any Document as any other Bank and may exercise them as though it
were not also acting as agent for the Banks. The Agent and its associates and
affiliates may, without liability to disclose or account, engage in any kind of
financial, trust or commercial business with, or acquire or dispose of any kind
of security of, the Borrower or any of the Borrower's associates or affiliates
as if the Agent were not the agent for the Banks and neither the Agent nor any
of its associates nor affiliates will have any obligation to disclose or account
for any dealings which it may have had with the Borrower or any of its
associates or affiliates prior to the date of this Agreement.
11.6 EXCULPATION. Neither the Agent nor any of its directors, officers'
-----------
employees or agents will be liable to any Bank for any action taken or omitted
to be taken by it under this Agreement or any other Document, or in connection
herewith or therewith, except for its own wilful misconduct or gross negligence,
nor responsible for any representations or warranties herein or therein, nor for
the effectiveness, enforceability, validity or due execution of this Agreement
or any other Document, nor to make any inquiry respecting the performance by the
Borrower of its obligations hereunder or thereunder. The Agent will be entitled
to rely upon advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement, or writing which it believes to be genuine and
to have been presented by a proper Person.
11.7 NOTICE, COPIES, ETC. The Agent will give prompt notice to each Bank
-------------------
of each notice or request received by the Agent which is required or permitted
to be given to the Agent by the Borrower pursuant to the terms of any Document.
The Agent will promptly distribute to each Bank copies of all communications
received by the Agent from the Borrower for distribution to the Banks by the
Agent. If the Agent is notified under this
<PAGE>
- 30 -
Agreement of the occurrence of an Event of Default it will inform each
of the Banks of such notice.
11.8 FUNDING RELIANCE, ETC. Unless the Agent will have been notified by
---------------------
telephone, confirmed in writing, by any Bank by 5:00 p.m., Toronto time, on the
day prior to a Drawdown under the Credit that such Bank will not make available
the amount which would constitute its Bank's Proportion of the Drawdown on the
date specified therefor, the Agent may assume that such Bank has made such
amount available to the Agent on such date and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available by such Bank to the Agent on a date after the date of
the relevant Drawdown, such Bank will pay to the Agent on demand interest on
such amount at the rate of interest applicable to the Drawdown. A statement of
the Agent submitted to any Bank with respect to any amounts owing under this
Section will in the absence of manifest error, be conclusive evidence of the
requirement for the payment of such amount by the relevant Bank to the Agent. If
such amount is not in fact made available to the Agent by such Bank within three
Banking Days after the date of the relevant Drawdown, the Agent will be entitled
to recover such amount, with interest thereon at the rate per annum applicable
to the Drawdown, forthwith upon demand from the Borrower.
11.9 PAYMENT RELIANCE. Unless the Agent will have been notified by
----------------
telephone, confirmed in writing, by the Borrower prior to the time fixed for
payment by the Borrower of any amount under the Documents, that the Borrower
will not make the required payment on the date specified therefor, the Agent
may, but will not be obligated to, assume that the Borrower has made such
payment on such date and, in reliance on such assumption, make available to the
Banks their respective Bank's Proportions of such amount. If such payment is not
made by the Borrower forthwith upon request by the Agent each Bank will return
the amount received by it in respect thereof, with interest at the usual rate of
interest for inter-bank settlements.
11.10 SUCCESSOR. The Agent may resign as such at any time upon at least 30
---------
days' prior notice to the Borrower and all the Banks. If the Agent at any time
will resign, the Majority Banks may appoint another Bank as a successor Agent
which will thereupon become the Agent hereunder. If no successor Agent will have
been so appointed by the Majority Banks, and will have accepted such
appointment, within 30 days after the retiring Agent's giving notice of
resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which will be one of the Banks. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent will
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and will thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent will be discharged from its duties
and obligations under this Agreement. After any retiring Agent's resignation
hereunder as the Agent, the provisions of this Article 11 will inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement.
<PAGE>
- 31 -
11.11 LOANS AND ACCEPTANCES BY THE AGENT. The Agent will have the same
----------------------------------
rights and powers with respect to the Prime Loans and Acceptances made by it as
any Bank and may exercise the same as if it were not the Agent.
11.12 DEUTSCHE BANK CANADA AS THE AGENT. In acting as Agent for the Banks,
---------------------------------
the credit and treasury divisions of Deutsche Bank Canada will be treated as
entities separate from any of Deutsche Bank Canada's other divisions or
subsidiaries. Without detracting from the generality of the foregoing, in the
event that any of the other divisions or subsidiaries of the Agent should act
for the Borrower or any of its affiliates in an advisory capacity in relation to
any other matter, any information given by the Borrower or any of its affiliates
to such divisions or subsidiaries for the purpose of obtaining advice will be
treated as confidential and will not be available to the Banks without the
consent of the Borrower.
11.13 CHANGES. Any provision of any Document may from time to time be
-------
amended, restated, modified or waived (a "Change"), if such Change is in
------
writing and consented to by the Borrower and the Majority Banks; provided that
each of the following Changes will require the prior written consent of each
Bank and will not be effective until each such consent is received by the Agent:
(a) any Change to any requirement of this Agreement or any other Document
that any particular action be taken by each of the Banks or by each
Bank or by all of the Banks or by the Majority Banks;
(b) any Change to this Section 11.13 or to the definition of "Majority
Bank" or "Bank's Proportion";
(c) any increase in the aggregate amount of the Commitments or the amount
of the Commitment of any Bank;
(d) any reduction in the amount of any payment or prepayment of principal,
interest, fees or other amounts provided for in this Agreement or any
other Document;
(e) any reduction in the outstanding principal amount of or rate of
interest or fees payable in respect of any Prime Loan or Acceptance
under the Credit;
(f) any extension in the due date for any payment or prepayment of
principal, interest or fees payable in respect of the Credit; and
(g) any waiver of an Event of Default.
11.14 WAIVERS. No waiver or approval by a Bank or under any Document will,
-------
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions, nor will any such waiver or approval require any
similar or dissimilar waiver or approval by such Bank to be granted thereafter.
<PAGE>
- 32 -
11.15 TERMINATION ACTION BY AGENT. Subject to receipt of any indemnity
---------------------------
required by the Agent in accordance with this Agreement, the Agent will take or
refrain from taking any action in respect of demanding or terminating the Credit
as the Majority Banks may direct in writing from time to time.
11.16 NOTICE. Each Bank, in its capacity as a lender of the Credit, agrees
------
to provide each other Bank with at least one Banking Day's prior written notice
of its intention to direct the Agent to take any action in respect of demanding
or terminating the Credit, provided that such notice may be waived in writing by
the Banks.
11.17 REPRESENTATIONS AND AGREEMENTS OF THE BANKS. Each Bank represents,
-------------------------------------------
warrants to and in favour of, and agrees with, the Agent as follows:
(1) It has independently of the Agent and each other Bank, and based on
the financial and other information provided by the Borrower and such other
documents, information and investigations as it has deemed appropriate, made its
own credit decision to extend its Commitment. Each Bank also acknowledges that
it will, independently of the Agent and each other Bank, and based on such other
documents, information and investigations as it will deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under any
Document.
(2) It has itself been, and will continue to be, solely responsible for
making its own independent appraisal of and investigations into the financial
condition, creditworthiness, affairs, status and nature of the Borrower and its
business and the Documents.
(3) It has not relied, and will not hereafter rely, on the Agent, its
directors, officers, employees, agents, auditors or legal counsel (collectively
"the Agent and its representatives"), to appraise or keep under review on its
---------------------------------
behalf, or inform the Bank of the financial condition, creditworthiness,
affairs, status or nature of the Borrower or its business or any Default or
Event of Default except in respect of which the Agent has received notice from
the Borrower.
(4) The Commitment of such Bank is at the entire risk of such Bank.
(5) The Agent and its representatives have not made any representation or
warranty or assumed (nor will the Agent assume) any responsibility with respect
to the due execution, legality, validity, adequacy, enforceability,
collectability, priority, perfection or any other matter relating to any
Document, the financial condition of the Borrower, the performance by the
Borrower of its obligations under any Document or the accuracy of any
information supplied to the Bank.
(6) The Agent and its representatives may consult with legal counsel,
independent public accountants and other experts selected by them or the
Borrower in connection with the
<PAGE>
- 33 -
Documents, including this Agreement, and will not be liable for any action taken
or omitted to be taken in good faith by any of them in accordance with the
advice of such Persons.
(7) The Agent and its representatives will incur no liability under or in
respect of this Agreement or any other Document by acting upon any notice,
consent, advice, writing (whether by letter, telephone, telegram, cable, telex,
facsimile or otherwise) believed by them to be genuine or signed by the proper
party or by acting upon any representation or warranty made by the Borrower or
any other such Person in connection with the Borrower.
11.18 APPLICATION. The Borrower expressly consents to the arrangements
-----------
among the Banks provided for in this Article 11 and agrees that each Bank may
exercise the rights provided herein with respect to any and all obligations of
the Borrower to such Bank under the Documents.
12. ASSIGNMENT
12.1 BENEFIT AND BURDEN OF THIS AGREEMENT. This Agreement will enure to
------------------------------------
the benefit of and be binding on the parties hereto, their respective successors
and any permitted assignees or transferees of some or all of the parties' rights
or obligations hereunder.
12.2 ASSIGNMENT BY BORROWER. This Agreement will be binding upon and enure
----------------------
to the benefit of the Borrower and its successors and assigns, provided that
neither this Agreement, nor the benefit hereof, may be assigned by the Borrower
without the prior written consent of each of the Banks.
12.3 ASSIGNMENT BY BANKS. From time to time a Bank may, with the prior
-------------------
written consent of the Borrower, assign all or any part of its rights to, and
may have its obligations in respect of, the Credit assumed by any other Person.
An assignment will become effective when the Borrower has been notified of it by
the Bank and has received from the assignee an instrument of adhesion in the
form of Schedule D (addressed to all the parties to this Agreement), pursuant to
which such assignee shall have agreed to be bound by this Agreement and to
perform the obligations assigned to it. Any assignee will be and be treated as
if it were a Bank for all purposes of this Agreement, will be entitled to the
full benefit hereof and will be subject to the obligations of the assigning Bank
to the same extent as if it were an original party in respect of the rights or
obligations assigned to it and the assigning Bank will be released and
discharged accordingly and to the same extent. For the purposes of any such
assignment the Bank may disclose on a confidential basis to a potential assignee
such information about the Borrower as the Bank may see fit.
12.4 LIMITATION ON ASSIGNMENT. A Bank will not be entitled, without the
------------------------
prior written consent of all the Banks and the Borrower, to grant an assignment
pursuant to Section 12.3 if this would, immediately following such assignment,
increase the cost of this credit facility to the Borrower.
<PAGE>
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12.5 BORROWER'S DOCUMENTS. The Borrower agrees to execute and deliver, at
--------------------
the Banks' request and expense, such further documentation as the Banks consider
necessary or advisable to put into effect any syndication, sale or assignment
permitted by this Article 12.
13. MISCELLANEOUS
13.1 PAYMENT OF EXPENSES. Whether or not the transactions contemplated by
-------------------
this Agreement will be consummated, the Borrower will on demand by the Agent pay
to the Agent for its own account or for the account of the Banks, as the case
may be, all reasonable out-of-pocket expenses of the Agent and the Banks
including the fees and disbursements of any experts or advisers (including,
without limitation, lawyers and independent consultants) retained by the Agent
and the Banks in connection with the preparation and enforcement of the
Documents, any syndication of the Credit, any amendment, modification or waiver
of any of the provisions thereof and also in connection with the protection and
enforcement of the rights of the Agent and the Banks provided for in the
Documents.
13.2 RIGHTS AND WAIVERS. The respective rights and remedies of the Agent
------------------
and each Bank under the Documents and in connection therewith (i) are
cumulative, (ii) may be exercised as often as they consider appropriate, (iii)
are in addition to their rights and remedies under the general law and (iv) will
not be capable of being waived or varied except by virtue of an express waiver
or variation in writing signed by an officer; and in particular any failure to
exercise or any delay in exercising any of such rights and remedies will not
operate as a waiver or variation of that or any other such right or remedy; any
defective or partial exercise of any of such rights will not preclude any other
or future exercise of that or any other such right or remedy; and no act or
course of conduct or negotiation on the part of the Agent or a Bank or on its
behalf will in any way preclude it from exercising any such right or remedy or
constitute a suspension or variation of any such right or remedy.
13.3 COMMUNICATION. Subject to the express provisions of this Agreement,
-------------
all communications provided for or permitted hereunder will be in writing,
personally delivered to an officer or other responsible employee of the
addressee or sent by registered mail, charges prepaid, or by telex or telegram
or other similar means of recorded communication, charges prepaid, to the
applicable address set forth on the signature pages of this Agreement or to such
other address as the recipient hereto may from time to time designate to the
other in such manner.
Any communication so personally delivered will be deemed to have been
validly and effectively given on the date of such delivery. A communication so
sent by mail, telex, telegram or other means mentioned above will be deemed to
have been validly and effectively given on the Banking Day next following the
day on which it is sent.
13.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
---------------------------------------------------------------------
All agreements, representations, warranties and covenants made by or on behalf
of the Borrower in any Document or otherwise with respect thereto or any
transactions
<PAGE>
- 35 -
contemplated thereby are material, will be considered to have been relied upon
by the Agent and each Bank and will survive the execution and delivery of the
Documents or any investigation made at any time by or on behalf of the Agent and
each Bank and any reduction of the Utilized Portion of a Credit until repayment
in full of the Drawdowns and of all other amounts owing under the Documents and
cancellation of the Credit. All statements contained in any certificate or other
instrument delivered by or on behalf of the Borrower pursuant to the Documents
or in connection with the transactions contemplated hereby will be deemed
representations and warranties made by the Borrower pursuant hereto.
13.5 FURTHER ASSURANCES. The Borrower will do, execute and deliver, or
------------------
will cause to be done, executed and delivered, all such further acts, documents
(including certificates, declarations, affidavits, reports and opinions) and
things as the Agent or any Bank may reasonably request for the purpose of giving
effect to this Agreement or for the purpose of establishing compliance with the
representations, warranties and conditions of any Document.
13.6 SEVERABILITY. Any provision in any Document which is prohibited or
------------
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
13.7 COUNTERPARTS. This Agreement may be simultaneously executed in any
------------
number of counterparts, each of which will be deemed to be an original, and it
will not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
13.8 DETERMINATION OF MATERIALITY. In any Document, except where
----------------------------
specifically stated otherwise, whether any act, occurrence, conduct, event or
state of affairs or other similar event is "material", "adverse" or "materially
adverse" or any grammatical variation of such words, will be determined by the
Banks in their sole discretion.
13.9 SUBMISSIONS TO JURISDICTION. This Agreement will be construed in
---------------------------
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable in Ontario and the Borrower irrevocably submits to the non-
exclusive jurisdiction of the courts of Ontario, waives any objections on the
ground of venue or forum non conveniens or any similar grounds, and consents to
service of process by mail or in any other manner permitted by relevant law.
13.10 PARTNERSHIP. Nothing contained or in any Document nor any action
-----------
taken pursuant hereto or thereto will be deemed to constitute the Banks a
partnership, joint venture or any other similar such entity.
13.11 ENTIRE AGREEMENT. This Agreement, including the Schedules hereto,
----------------
constitute the entire agreement between the parties and except as stated herein
or in the
<PAGE>
- 36 -
Documents or the instruments and documents to be executed and delivered pursuant
hereto, contains all the representations and warranties of the respective
parties.
13.12 EVIDENCE OF INDEBTEDNESS. In any proceedings relating to any
------------------------
Document, any statement as to any amount due to the Banks thereunder which is
certified as being correct by an officer of the Agent and any statement as to
any amount due to a Bank under any Document which is certified as being correct
by an officer of such Bank will, unless otherwise provided herein, be conclusive
evidence that such amount is in fact due and payable.
<PAGE>
- 37 -
13.13 SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
--------------------------
representations and warranties made pursuant hereto or to any Documents, will
survive the execution and delivery of each Document and continue in full force
and effect until the full payment of all Indebtedness of the Borrower to the
Bank as provided in the Documents.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date and year first above written.
Alco Office Systems-Canada, Inc. ALCO OFFICE SYSTEMS-CANADA,
Suite 6600 INC.
100 King Street West
1 First Canadian Place By: /s/ Signature
Toronto, Ontario ---------------------------------
M5X 1B8 Name: [Name]
Title: [Title]
By: /s/ Signature
---------------------------------
Name: [Name]
Title: [Title]
Deutsche Bank Canada DEUTSCHE BANK CANADA, as Agent
Suite 1200 and as Bank
222 Bay Street
Toronto, Ontario
M5K 1H6 By: /s/ Signature
---------------------------------
Name: [Name]
Title: [Title]
By: /s/ Signature
---------------------------------
Name: [Name]
Title: [Title]
<PAGE>
- 38 -
Chemical Bank of Canada CHEMICAL BANK OF CANADA, as
Suite 900 Bank
100 Yonge Street
Toronto, Ontario By: /s/ Signature
M5C 2W1 ---------------------------------
Name: [Name]
Title: [Title]
Branch of Account Address ROYAL BANK OF CANADA, as Bank
Royal Bank of Canada
14th Floor South Tower By: /s/ Signature
Royal Bank Plaza ---------------------------------
Toronto, Ontario Name: [Name]
M5J 2J5 Title: [Title]
Communications Address By: /s/ Signature
---------------------------------
Royal Bank of Canada Name: [Name]
One Financial Square Title: [Title]
24th Floor
New York, New York
U.S.A. 10005-3531
SCHEDULES
- - ------------
Schedule A - Banks' Proportions
Schedule B - Form of Drawdown Notice
Schedule C - Form of Guarantee
Schedule D - Instrument of Adhesion
<PAGE>
SCHEDULE A
BANKS' PROPORTIONS
------------------
<TABLE>
<CAPTION>
================================================================================
BANK PERCENTAGE
- - --------------------------------------------------------------------------------
<S> <C>
Deutsche Bank Canada 50%
- - --------------------------------------------------------------------------------
Chemical Bank of Canada 20%
- - --------------------------------------------------------------------------------
Royal Bank of Canada 30%
- - --------------------------------------------------------------------------------
TOTAL 100%
================================================================================
</TABLE>
<PAGE>
SCHEDULE B
DRAWDOWN NOTICE
---------------
TO: Deutsche Bank Canada (the "Agent")
-----
Attention: ___
[Date]
RE: Credit agreement (the "Credit Agreement") dated as of October _, 1995
----------------
made between the undersigned (the "Borrower"), the Agent and the Banks
--------
Drawing Number: ___
- - --------------------------------------------------------------------------------
We refer to the facility constituted by the Credit Agreement and we
hereby:
(1) Give you notice that on _____, 199_, we wish to obtain the following
Drawdown:
(a) Prime Loan in the amount
of $_______________
(b) Canadian Dollar denominated
Bankers Acceptance to be drawn
under the Credit in the principal
amount of $_______________ and
having a term (subject to the
Credit Agreement) of ___ months;
and $_______________
(2) Confirm that each of the representations referred to and warranties
contained in Section 2 of the Credit Agreement remains accurate as if given on
the date hereof by reference to the facts and circumstances now existing.
All terms defined in the Credit Agreement and used herein will have the meanings
ascribed thereto in the Credit Agreement.
ALCO OFFICE SYSTEMS-CANADA, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE C
FORM OF GUARANTEE
-----------------
ATTACHED
<PAGE>
SCHEDULE D
INSTRUMENT OF ADHESION
----------------------
THIS INSTRUMENT OF ADHESION is made as of the ____ day of _, 199_
between _____ (the "Assignee") and each of the parties (the "Parties") to the
-------- -------
credit agreement (as amended, restated, supplemented or otherwise modified the
"Credit Agreement") dated as of October 13, 1995 between Alco Office Systems-
----------------
Canada, Inc., as Borrower, Deutsche Bank Canada, as Agent, and the Banks listed
in Schedule A to the Credit Agreement.
BACKGROUND
- - ----------
A. The Assignee is the assignee of a portion of the Bank's Proportion of
[SPECIFY ASSIGNOR] under the Credit Agreement such that, after giving effect to
such assignment, the Banks' Proportions under the Credit Agreement are as set
forth on the attached Schedule A.
B. As contemplated by Section 12.3 of the Credit Agreement, the Assignee
wishes to enter into this Agreement in favour and for the benefit of each of the
Parties.
C. The Assignee and the Parties wish to confirm the amendment and
supplement of the Credit Agreement to reflect the Assignee's status as a party
to the Credit Agreement.
AGREEMENT
- - ---------
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
1. The Assignee agrees, as of the date hereof, to be bound by each of the
terms and conditions of the Credit Agreement, all as if the Assignee was an
original party thereto.
2. The parties hereto other than the Assignee agree, as of the date
hereof, to recognize the Assignee as a party to the Credit Agreement as if the
Assignee was an original party thereto.
3. All parties hereto agree that the Credit Agreement is hereby amended
and supplemented to give full effect to the arrangements contemplated hereby,
and that Schedule A to the Credit Agreement is hereby amended to reflect the
Banks' Proportions specified on Schedule A hereto.
4. This Instrument of Adhesion is made pursuant to the laws of Ontario
and the federal laws of Canda applicable therein, and shall be governed by and
construed in accordance with such laws.
<PAGE>
- 2 -
Capitalized terms used but not defined in this Instrument of Adhesion
(included in the "Background" portion hereof) have the meanings given to them by
the Credit Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Instrument of
Adhesion as of the date and year first written above.
[SIGNATURE LINES TO BE ADDED FOR BORROWER, AGENT,
BANKS AND ASSIGNEE]
<PAGE>
===============================================================================
PARTICIPATION AGREEMENT
Dated as of November 8, 1994
among
UNISOURCE WORLDWIDE, INC. and AOP INC.,
as Lessees,
ALCO STANDARD CORPORATION, as Guarantor
PPI SPV, L.P., as Lessor,
PITCAIRN SPV, INC., as General Partner of Lessor,
and
TRUST COMPANY BANK, as Lender and Agent
______________________________________________
Distribution Centers
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
SECTION 1 DEFINITIONS; INTERPRETATION............................ 2
SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE;
FUNDINGS; NATURE OF TRANSACTION........................ 2
SECTION 2.1 Agreement to Acquire, Construct, Fund and
Lease................................................ 2
SECTION 2.2 Fundings of Purchase Price, Development
Costs and Construction Costs......................... 3
SECTION 2.3 Funded Amounts and Interest and Yield
Thereon................................................ 5
SECTION 2.4 Lessee Owner for Tax Purposes.......................... 5
SECTION 2.5 Amounts Due Under Lease................................ 6
SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS........................ 6
SECTION 3.1 Conditions to the Obligations of the
Participants on each Closing Date.................... 6
SECTION 3.2 Additional Conditions for the Initial
Closing Date......................................... 11
SECTION 3.3 Conditions to the Obligations of Lessee................ 13
SECTION 3.4 Conditions to the Obligations of the
Participants on each Funding Date.................... 13
SECTION 3.5 Completion Date Conditions............................. 14
SECTION 4 REPRESENTATIONS........................................ 16
SECTION 4.1 Representations of each Lessee......................... 16
SECTION 4.2 Representations of the Lessor.......................... 19
SECTION 4.3 Representations of each Lender......................... 21
SECTION 5 COVENANTS OF THE LESSEES, THE GUARANTOR AND
THE LESSOR............................................. 21
SECTION 5.1 Qualification to do Business........................... 21
SECTION 5.2 Further Assurances..................................... 21
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 5.3 Financial Statements and Information................... 21
SECTION 5.4 Additional Required Appraisals......................... 23
SECTION 5.5 Lessor's and General Partner's Covenants............... 23
SECTION 6 TRANSFERS BY LESSOR AND LENDER......................... 23
SECTION 6.1 Lessor Transfers....................................... 23
SECTION 6.2 Lender Transfers....................................... 23
SECTION 7 INDEMNIFICATION........................................ 23
SECTION 7.1 General Indemnification................................ 23
SECTION 7.2 Environmental Indemnity................................ 25
SECTION 7.3 Proceedings in Respect of Claims....................... 27
SECTION 7.4 General Tax Indemnity.................................. 28
SECTION 7.5 Increased Costs, etc................................... 35
SECTION 7.6 End of Term Indemnity.................................. 38
SECTION 8 MISCELLANEOUS.......................................... 39
SECTION 8.1 Survival of Agreements................................. 39
SECTION 8.2 Notices................................................ 39
SECTION 8.3 Counterparts........................................... 40
SECTION 8.4 Amendments............................................. 40
SECTION 8.5 Headings, etc.......................................... 41
SECTION 8.6 Parties in Interest.................................... 41
SECTION 8.7 GOVERNING LAW.......................................... 41
SECTION 8.8 Expenses............................................... 41
SECTION 8.9 Severability........................................... 42
SECTION 8.10 Liabilities of the Participants........................ 42
SECTION 8.11 Submission to Jurisdiction; Waivers.................... 42
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 8.12 Liabilities of the Agent............................... 43
</TABLE>
-iii-
<PAGE>
APPENDIX A Definitions and Interpretation
SCHEDULES
SCHEDULE 1 Initial Land Interests
SCHEDULE 2.2 Commitments
SCHEDULE 8.2 Notice Information
EXHIBITS
EXHIBIT A Form of Funding Request
EXHIBIT B Form of Deed
EXHIBIT C Form of Security Agreement and Assignment
EXHIBIT D Mortgage
EXHIBIT E Form of Officer's Certificate Accompanying
Financial Reports
EXHIBIT F Form of Environmental Audit Reliance Letter
EXHIBIT G Forms of Opinions of Counsel
EXHIBIT H Form of Lessee Certification of Construction
Completion
iv
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of November 8, 1994 (as it may be
amended or modified from time to time in accordance with the provisions hereof,
this "Participation Agreement"), is among UNISOURCE WORLDWIDE, INC., a Delaware
-----------------------
corporation ("Unisource"), as Lessee, AOP INC., a Delaware corporation ("AOP"),
--------- ---
as Lessee, ALCO STANDARD CORPORATION, an Ohio corporation ("Alco"), as
----
Guarantor, PPI SPV, L.P., a Pennsylvania limited partnership, as Lessor,
PITCAIRN SPV, INC., a Pennsylvania corporation, as General Partner of Lessor
(the "General Partner"), and TRUST COMPANY BANK, a Georgia banking corporation,
---------------
as the sole initial Lender and as Agent.
PRELIMINARY STATEMENT
In accordance with the terms and provisions of this Participation
Agreement, the Leases, the Loan Agreement and the other Operative Documents, (i)
the Lessor contemplates acquiring the three Land Interests described in Schedule
--------
1 (namely, the Pleasanton Land Interest, the Houston Land Interest and the St.
- - -
Louis Land Interest) and leasing such Land to Unisource (in the case of the
Pleasanton Land Interest, the Houston Land Interest and the St. Louis Land
Interest), (ii) with respect to the Pleasanton Land Interest and the St. Louis
Land Interest, Unisource wishes to construct a Building on such Land for the
Lessor and, when completed, to lease such Building from the Lessor as part of
the Leased Property under the related Lease, (iii) with respect to the Houston
Land Interest, the Lessor contemplates acquiring the Building which already
exists on such Land together with such Land Interest and Unisource wishes to
lease such Building on such Land from the Lessor as part of the Leased Property
under the related Lease, (iv) the Lessor may from time to time acquire
additional Land Interests and Buildings at the request of a Lessee to lease to
such Lessee pursuant to the related Lease, (v) each Lessee wishes to obtain, and
the Lessor is willing to provide, funding for the acquisition of Land
Interest(s) and Building(s) and in the case of certain Land Interests, the
construction of Buildings, (vi) the Lessor wishes to obtain, and the Lender is
willing to provide, financing of a portion of the funding of the acquisition of
the Land Interests and Buildings and the construction of the Buildings, and
(vii) the Guarantor is willing to provide its Guaranty to the Lender and the
Lessor.
In consideration of the mutual agreements contained in this Participation
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1
DEFINITIONS; INTERPRETATION
Unless the context shall otherwise require, capitalized terms used and not
defined herein shall have the meanings assigned thereto in Appendix A hereto for
----------
all purposes hereof; and the rules of interpretation set forth in Appendix A
----------
hereto shall apply to this Participation Agreement.
2
ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;
NATURE OF TRANSACTION
2.1 Agreement to Acquire, Construct, Fund and Lease.
-----------------------------------------------
(a) Land. Subject to the terms and conditions of this Participation
----
Agreement, with respect to each Land Interest, on the related Closing Date (i)
the Lessor agrees to acquire such interest in the related Land from the
applicable Seller as is transferred, sold, assigned and conveyed to the Lessor
pursuant to the applicable Purchase Agreement, (ii) the Lessor hereby agrees to
lease such Land to the related Lessee pursuant to the related Lease, and (iii)
such Lessee hereby agrees to lease such Land from the Lessor pursuant to such
Lease.
(b) Building. With respect to the Pleasanton Land Interest, the
--------
St. Louis Land Interest and any other Land Interest accepted by the Participants
and identified by the related Lessee in the request for such acceptance as
requiring construction funding (a "Construction Land Interest") subject to the
--------------------------
terms and conditions of this Participation Agreement, from and after the Closing
Date relating to such Land Interest (i) the related Lessee agrees, pursuant to
the terms of the related Lease, to construct and install the Building on such
Land Interest for the Lessor prior to the Scheduled Construction Termination
Date, (ii) the Lessor and the Lender agree to fund all or a portion of the costs
of such construction and installment (and interest and yield thereon), such
fundings not to exceed in the aggregate the related Construction Funding Limit
during the period from such Closing Date to the Scheduled Construction
Termination Date, (iii) the Lessor hereby agrees to lease such Building as part
of such Leased Property to such Lessee pursuant to such Lease, and (iv) such
Lessee hereby agrees to lease such Building from the Lessor pursuant to such
Lease.
2
<PAGE>
2.2 Fundings of Purchase Price, Development Costs and Construction Costs.
--------------------------------------------------------------------
(a) Initial Funding and Payment of Purchase Price for Land and
----------------------------------------------------------
Development Costs on Closing Date. Subject to the terms and conditions of this
- - ---------------------------------
Participation Agreement, on the Closing Date for any Land Interest, Lender shall
make available to the Lessor its initial Loan with respect to such Land Interest
in an amount equal to the product of such Lender's Commitment Percentage times
purchase price for the Land and the development costs incurred by the related
Lessee through such Closing Date, which funds the Lessor shall use, together
with its own funds (which shall be the initial Lessor's Invested Amount with
respect to such Land Interest) in an amount equal to the product of the Lessor's
Commitment Percentage times the purchase price for the related Land and the
development costs incurred by such Lessee through such Closing Date, to purchase
the Land Interest from the applicable Seller pursuant to the applicable Purchase
Agreement and to pay to such Lessee the amount of such development costs, and
the Lessor shall lease such Land Interest to such Lessee pursuant to the Lease.
(b) Subsequent Fundings and Payments of Construction Costs during
-------------------------------------------------------------
Construction Term. Subject to the terms and conditions of this Participation
- - -----------------
Agreement, on each Funding Date following the Closing Date for each Construction
Land Interest until the related Construction Term Expiration Date, (i) each
Lender shall make available to the Lessor a Loan in an amount equal to the
product of such Lender's Commitment Percentage times the amount of Funding
requested by the related Lessee for such Funding Date, which funds the Lessor
hereby directs such Lender to pay over to the related Lessee as set forth in
paragraph (d), and (ii) Lessor shall pay over to such Lessee, its own funds
- - -------------
(which shall constitute a part of and an increase in the Lessor's Invested
Amount) in an amount equal to the product of the Lessor's Commitment Percentage
times the amount of Funding requested by such Lessee for such Funding Date.
(c) Aggregate Limits on Funded Amounts. The aggregate amount that
----------------------------------
the Participants shall be committed to provide as Funded Amounts under this
Participation Agreement shall not exceed (x) with respect to each Leased
Property the lesser of (i) the costs of purchase and construction of such Leased
Property and the related closing and financing costs, and (ii) the estimated
Fair Market Sales Value of such Leased Property on the related Completion Date
as set forth in the related Appraisal (determined by excluding from such value
the amount of assessments on such Leased Property not being funded by Funded
Amounts hereunder), or (y) $16,000,000 in the aggregate for the
3
<PAGE>
three initial Leased Properties or $25,000,000 in the aggregate for all Leased
Properties. The aggregate amount that any Participant shall be committed to fund
under this Participation Agreement shall not exceed the lesser of (i) such
Participant's Commitment and (ii) such Participant's Commitment Percentage of
the aggregate Fundings requested under this Participation Agreement.
(d) Notice, Time and Place of Fundings. With respect to each
----------------------------------
Funding, the applicable Lessee shall give the Lessor and the Agent an
irrevocable prior written notice not later than 12:00 noon, Atlanta, Georgia,
three Business Days prior to the proposed Closing Date or Funding Date, as the
case may be, pursuant, in each case, to a Funding Request in the form of Exhibit
-------
A (a "Funding Request"), specifying the Closing Date or subsequent Funding Date,
- - - ---------------
as the case may be, and the amount of Funding requested. All documents and
instruments required to be delivered on such Closing Date pursuant to this
Participation Agreement shall be delivered at the offices of Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60603, or at such other
location as may be determined by the Lessor, such Lessee and the Agent. Each
Funding shall occur on a Closing Date or a Payment Date and shall be in an
amount equal to $500,000 or an integral multiple of $25,000 in excess thereof.
All remittances made by any Lender and the Lessor for any Funding shall be made
in immediately available funds by wire transfer to or, as is directed by, such
Lessee with receipt by such Lessee not later than 1:00 p.m., Atlanta, Georgia
time, on the applicable Funding Date, upon satisfaction or waiver of the
conditions precedent to such Funding set forth in Section 3; such funds shall
---------
(1) in the case of the initial Funding on a Closing Date, be used to pay the
purchase price to the applicable Seller for the related Land Interest and pay
such Lessee such development costs, and (2) in the case of each subsequent
Funding in respect of a Construction Land Interest be used to pay to the related
Lessee for payment or reimbursement of Construction costs.
(e) Lessee's Deemed Representation for Each Funding. Each Funding
-----------------------------------------------
Request by a Lessee shall be deemed a representation by such Lessee to the
Lessor, the Agent and the Lenders that on the proposed Closing Date or Funding
Date, as the case may be, (i) the amount of Funding requested represents amounts
owing in respect of the purchase price of the related Land Interest and
development costs in respect of the Leased Property (in the case of the initial
Funding on a Closing Date) or amounts that such Lessee reasonably believes will
be due in the 60 days following such Funding from such Lessee to third parties
in respect of the Construction, or amounts paid by such Lessee to third parties
in respect of the Construction for which such Lessee has not
4
<PAGE>
previously been reimbursed by a Funding (in the case of any Funding), (ii) no
Event of Default or Potential Event of Default exists, and (iii) the
representations of such Lessee set forth in Section 4.1 are true and correct in
-----------
all material respects as though made on and as of such Funding Date except to
the extent such representations or warranties relate solely to an earlier date,
in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date.
2.3 Funded Amounts and Interest and Yield Thereon.
---------------------------------------------
(a) During the period from and including the Closing Date for any
Land Interest to but excluding the date on which Lessor's Invested Amount in
respect of such land Interest is paid in full, Lessor's Invested Amount in
respect of such Land Interest shall accrue yield ("Yield") at a rate per annum
----- --- -----
equal to 12% per annum, computed using the actual number of days elapsed and a
365- (or, if applicable, 366-) day year.
(b) Lender's Funded Amount for any Land Interest outstanding from
time to time shall accrue interest as provided in the Loan Agreement.
(c) During the Construction Term, in lieu of paying accrued interest,
on each Payment Date, the Lender's Funded Amount in respect of each Construction
Land Interest shall automatically be increased by the amount of interest accrued
on the related Loans pursuant to the Loan Agreement during the quarter ending
immediately prior to such Payment Date (except to the extent that at any time
such increase would cause the Lender's Funded Amount to exceed Lender's
Commitment, in which event the related Lessee shall pay such excess amount to
the Lender). Similarly, during the Construction Term, in lieu of paying accrued
Yield, on each Payment Date, the Lessor's Funded Amount in respect of each
Construction Land Interest shall automatically be increased by the amount of
Yield accrued on the Lessor's Funded Amount in respect of such Land Interest
during the quarter ending immediately prior to such Payment Date (except to the
extent that at any time such increase would cause the Funded Amount of the
Lessor to exceed the Lessor's Commitment, in which event such Lessee shall pay
such excess amount to the Lessor). Such increases in Funded Amounts shall occur
without any disbursement of funds by the Participants.
2.4 Lessee Owner for Tax Purposes. With respect to each Leased Property,
-----------------------------
it is the intent of the related Lessee and the Participants that for federal,
state and local tax purposes (A) such Lessee owns such Leased Property and will
be entitled to all tax benefits ordinarily available to an owner of property
5
<PAGE>
similar to such Leased Property, (B) the related Lease will be treated as a
financing arrangement, and (C) the Lessor will be treated as a lender making
loans to such Lessee. Nevertheless, each Lessee acknowledges and agrees that no
Participant or any other Person has made any representations or warranties
concerning the tax, financial, accounting or legal characteristics or treatment
of the Operative Documents and that such Lessee has obtained and relied solely
upon the advice of its own tax, accounting and legal advisors concerning the
Operative Documents and the accounting, tax, financial and legal consequences of
the transactions contemplated therein.
2.5 Amounts Due Under Lease. With respect to each Leased Property,
-----------------------
anything else herein or elsewhere to the contrary notwithstanding, it is the
intention of the related Lessee and the Participants that: (i) the amount and
timing of such of Basic Rent due and payable from time to time from the related
Lessee under the related Lease shall be equal to the aggregate payments due and
payable with respect to interest on, and principal of, the Loans in respect of
such Leased Property and Yield on the Lessor's Invested Amount in respect of
such Leased Property on each Payment Date; (ii) if such Lessee elects the
Purchase Option or becomes obligated to purchase such Leased Property under such
Lease, the Funded Amounts in respect of such Leased Property, all interest and
Yield thereon and all other obligations of such Lessee owing to the Participants
in respect of such Funded Property shall be paid in full by such Lessee, (iii)
if such Lessee properly elects the Remarketing Option or the Surrender Option,
the principal amount of, and accrued interest on, the A Loans in respect of such
Leased Property will be paid out of the Recourse Deficiency Amount, and such
Lessee shall only be required to pay to the Lenders in respect of the principal
amount of the B Loans in respect of such Leased Property and to the Lessor in
respect of the Lessor's Invested Amount in respect of such Leased Property the
proceeds of the sale of such Leased Property; and (iv) upon an Event of Default
resulting in an acceleration of such Lessee's obligation to purchase such Leased
Property under such Lease, the amounts then due and payable by such Lessee under
the Lease shall include all amounts necessary to pay in full the Loans in
respect of such Leased Property and accrued interest thereon, the Lessor's
Invested Amount in respect of such Leased Property and accrued Yield thereon and
all other obligations of such Lessee owing to the Participants in respect of
such Leased Property.
6
<PAGE>
3
CONDITIONS PRECEDENT; DOCUMENTS
3.1 Conditions to the Obligations of the Participants on each Closing
-----------------------------------------------------------------
Date. The obligations of the Lessor and each Lender to carry out their
----
respective obligations under Section 2 of this Participation Agreement to be
---------
performed on the Closing Date with respect to any Leased Property shall be
subject to the fulfillment to the satisfaction of, or waiver by, each such party
hereto (acting directly or through its counsel) on or prior to such Closing Date
of the following conditions precedent, provided that the obligations of any
--------
Participant shall not be subject to any conditions contained in this Section 3.1
-----------
which are required to be performed by such Participant:
(a) Documents. The following documents shall have been executed and
---------
delivered by the respective parties thereto:
(i) Deed and Purchase Agreement. The related Deed duly
---------------------------
executed by the applicable Seller and in recordable form, and the
related Purchase Agreement, duly executed by such Seller and the
related Lessee, shall each have been delivered to each Participant.
(ii) Lease Supplement. The original of the related Lease
----------------
Supplement, duly executed by such Lessee and the Lessor and in
recordable form, shall have been delivered to the Agent.
(iii) Mortgage and Assignment of Lease and Rents. Counterparts
------------------------------------------
of the Mortgage in the form of Exhibit D attached hereto, duly
---------
executed by the Lessor and in recordable form, shall have been
delivered to the Agent; and the Assignment of Lease and Rents in
recordable form, duly executed by the Lessor, shall have been
delivered to the Agent.
(iv) Security Agreement and Assignment. In the case of a
---------------------------------
Construction Land Interest, counterparts of the Security Agreement and
Assignment (substantially in the form of Exhibit C), duly executed by
---------
such Lessee, with an acknowledgement and consent thereto satisfactory
to the Lessor and the Agent duly executed by the related General
Contractor and the related Architect, as applicable, and complete
copies of the related Construction Contract and the related
Architect's Agreement certified by such Lessee, shall have been
delivered to the Lessor and the Agent (it being understood and agreed
that if no related
7
<PAGE>
Construction Contract or Architect's Agreement exists on such Closing
Date such Lessee shall deliver such Security Agreement and Assignment
and consents concurrently with such Lessee's entering into such
contracts).
(v) Survey. Such Lessee shall have delivered, or shall have
------
caused to be delivered, to the Lessor and the Agent, at such Lessee's
expense, an accurate survey certified to the Lessor and the Agent in a
form satisfactory to the Lessor and the Agent and showing no state of
facts unsatisfactory to the Lessor or the Agent and prepared within
ninety (90) days of the Closing Date by a Person reasonably
satisfactory to the Lessor and the Lender. Such survey shall (1) be
acceptable to the Title Insurance Company, (2) show no encroachments
on such Land by structures owned by others, and no encroachments from
any part of such Leased Property onto any land owned by others, and
(3) disclose no state of facts objectionable to the Lessor, the Agent
or the Title Insurance Company, and be acceptable to each such Person.
(vi) Title and Title Insurance. On such Closing Date, the
-------------------------
Lessor shall receive from a title insurance company acceptable to the
Lessor and the Agent an ALTA Form B-1970 Owner's Policy of Title
Insurance issued by such title insurance company and the Lender shall
receive from such title insurance company an ALTA Form B-1970
Mortgagee's Policy of Title Insurance issued by such title insurance
company, in each case, in the amount of the projected cost of
acquisition (and, if applicable, construction) of such Leased
Property, acceptable in form and substance to the Lessor and the
Agent, respectively (collectively, the "Title Policy"). The Title
------------
Policy shall be dated as of the Closing Date, and, to the extent
permitted under Applicable Law, shall include coverage over the
general exceptions to such policy and shall contain such affirmative
endorsements as to mechanic's liens, easements and rights-of-way,
encroachments, the non-violation of covenants and restrictions, survey
matters and other matters as the Lessor or the Agent shall reasonably
request.
(vii) Appraisal. Each Participant shall have received a report
---------
of the Appraiser (an "Appraisal"), paid for by such Lessee, which
---------
shall meet the requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, shall be
8
<PAGE>
satisfactory to such Participant and shall state in a manner
satisfactory to such Participant the following:
(A) the Fair Market Sales Value of such Land as of a
date no earlier than six months prior to such Closing Date;
(B) the estimated Fair Market Sales Value of such Land
and such Building on the Completion Date; and
(C) the estimated Fair Market Sales Value of such Leased
Property at the end of the related Lease Term.
Such Appraisal must show that (1) the estimated Fair Market Sales
Value of the Leased Property (determined as if the Building had
already been completed in accordance with the related Plans and
Specifications and by excluding from such value the amount of
assessments on such Leased Property) at the commencement of the Lease
Term with respect thereto is equal to the projected cost of
acquisition (and, if applicable, construction) of such Leased
Property, and (2) the estimated Fair Market Sales Value of such Leased
Property at the end of the related Lease Term (determined by excluding
from such value the amount of assessments on such Leased Property) is
at least 50% of the projected cost of acquisition (and, if applicable,
construction) of such Leased Property. If the Participants waive
delivery on such Closing Date of an Appraisal, then no subsequent
Funding shall occur until such Appraisal has been delivered. If the
related Building is not completed within 12 months after such Closing
Date, such Lessee agrees to pay in full all Funded Amounts and accrued
interest and Yield thereon with respect to such Leased Property on
such 12-month anniversary of such Closing Date and purchase such
Leased Property pursuant to Section 15.5 of the Lease.
(viii) Reliance Letter regarding Environmental Audit. The firm
---------------------------------------------
that prepared the Environmental Audit for such Leased Property shall
have delivered to the Lessor and the Agent a letter (substantially in
the form of Exhibit F) stating that the Lessor, the Agent and the
---------
Lenders may rely upon such firm's Environmental Audit of such Land, a
copy of which has previously been delivered to the Lessor and the
Agent.
9
<PAGE>
(ix) Evidence of Insurance. The Lessor and the Agent shall have
---------------------
received from such Lessee certificates of insurance evidencing
compliance with the provisions of Article IX of such Lease (including
the naming of the Lessor, the Agent and the Lenders as additional
insured or loss payee with respect to such insurance), in form and
substance satisfactory to the Lessor and the Agent.
(x) Officer's Certificate. Each of the Agent and the Lessor
---------------------
shall have received an Officer's Certificate of such Lessee stating
that, to the best of such officer's knowledge, (A) each and every
representation and warranty of such Lessee contained in the Operative
Documents is true and correct in all material respects on and as of
such Closing Date as though made on and as of such Closing Date,
except to the extent such representations or warranties relate solely
to an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects on and as of
such earlier date; (B) no Event of Default, Potential Event of Default
or Force Majeure Event has occurred and is continuing; (C) each
Operative Document to which such Lessee is a party is in full force
and effect with respect to it; and (D) no event that could have a
Material Adverse Effect has occurred since June 30, 1994.
(xi) UCC Financing Statement; Recording Fees; Transfer Taxes.
-------------------------------------------------------
Each Participant shall have received satisfactory evidence of (i) the
filing of such Uniform Commercial Code financing statements as any
Participant deems necessary or desirable in order to protect such
Participant's interests and (ii) the payment of all recording and
filing fees and taxes with respect to any recordings or filings made
of the related Deed, the related Lease, the related Mortgage and the
related Assignment of Lease and Rents.
(xii) Opinions. The opinion of local counsel for such Lessee
--------
qualified in the jurisdiction in which such Leased Property is
located, substantially in the form set forth in Exhibit G-2, and
-----------
containing such other matters as the parties to who they are addressed
shall reasonably request, shall have been delivered and addressed to
each of the Lessor, the Agent and the Lenders, and to the extent
requested by the Agent, opinions supplemental to those delivered under
Section 3.2(vii) and satisfactory to the Agent shall have been
----------------
10
<PAGE>
delivered and addressed to each of the Lessor, the Agent and the
Lenders.
(b) Litigation. No action or proceeding shall have been instituted
----------
or threatened nor shall any governmental action, suit, proceeding or
investigation be instituted or threatened before any Governmental Authority, nor
shall any order, judgment or decree have been issued or proposed to be issued by
any Governmental Authority, to set aside, restrain, enjoin or prevent the
performance of this Participation Agreement or any transaction contemplated
hereby or by any other Operative Document or which is reasonably likely to
materially adversely affect the Leased Property or any transaction contemplated
by the Operative Documents or which could reasonably be expected to result in a
Material Adverse Effect.
(c) Legality. In the opinion of such Participant or its counsel, the
--------
transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in Applicable
Law that would make it illegal for such Participant to participate in any of the
transactions contemplated by the Operative Documents.
(d) No Events. (i) No Event of Default, Potential Event of Default,
---------
Event of Loss or Event of Taking shall have occurred and be continuing, (ii) no
action shall be pending or threatened by a Governmental Authority to initiate a
Condemnation or an Event of Taking, and (iii) there shall not have occurred any
event that could reasonably be expected to have a Material Adverse Effect since
June 30, 1994.
(e) Representations. Each representation and warranty of the parties
---------------
hereto or to any other Operative Document contained herein or in any other
Operative Document shall be true and correct in all material respects as though
made on and as of the Closing Date.
(f) Cutoff Date. The initial Closing Date shall occur on or prior to
-----------
November 30, 1994.
(g) Transaction Expenses. The Lessees shall have paid the
--------------------
Transaction Costs then accrued and invoiced which the Lessees agree to pay
pursuant to Section 8.8.
-----------
3.2 Additional Conditions for the Initial Closing Date. The obligations
--------------------------------------------------
of the Lessor and each Lender to carry out their respective obligations under
Section 2 of this Participation Agreement to be performed on the initial Closing
- - ---------
Date shall be subject to the satisfaction of, or waiver by, each such party
hereto (acting directly or through its counsel) on or prior to
11
<PAGE>
the initial Closing Date of the following conditions precedent in addition to
those set forth in Section 3.1, provided that the obligations of any Participant
----------- --------
shall not be subject to any conditions contained in this Section 3.2 which are
-----------
required to be performed by such Participant:
(i) Leases. The original of each Lease, duly executed by the
------
related Lessee and the Lessor shall have been delivered to the Agent.
(ii) Guaranty. Counterparts of the Guaranty, duly executed by
--------
the Guarantor, shall have been delivered to each Participant.
(iii) Loan Agreement. Counterparts of the Loan Agreement, duly
--------------
executed by the Lessor, the Agent and the Lender, shall have been
delivered to each of the Lessor and Lender.
(iv) Notes. The A Note and the B Note, each payable to the
-----
order of each Lender, duly executed by the Lessor, shall have been
delivered to the Agent. and
(v) Participation Agreement. Counterparts of this Participation
-----------------------
Agreement, duly executed by the parties hereto, shall have been
delivered to each of the parties hereto.
(vi) Lessees' and Guarantor's Resolutions and Incumbency
---------------------------------------------------
Certificate, etc. Each of the Agent and the Lessor shall have
----------------
received (x) a certificate of the Secretary or an Assistant Secretary
of each of each Lessee and the Guarantor, respectively, attaching and
certifying as to (i) the Board of Directors' resolution duly
authorizing the execution, delivery and performance by it of each
Operative Document to which it is or will be a party, (ii) the
incumbency and signatures of persons authorized to execute and deliver
such documents on its behalf, (iii) its certificate of incorporation,
certified as of a recent date by the Secretary of State of the state
of its incorporation and (iv) its by-laws, and (y) good standing
certificates from the appropriate offices of the States of Delaware,
California, Missouri, Ohio and Texas and good standing certificates
for each Lessee and good standing certificates for the Guarantor from
the appropriate offices of the States of such Person's incorporation
and principal place of business.
(vii) Opinions of Counsel. The following opinions, each dated
-------------------
the initial Closing Date,
12
<PAGE>
substantially in the form set forth in the Exhibit noted below, and
containing such other matters as the parties to whom they are
addressed shall reasonably request, shall have been delivered and
addressed to each of the Lessor, the Agent and the Lenders:
(1) the opinion of J. Kenneth Croney, General Counsel of the
Lessees and the Guarantor (Exhibit G-1); and
-----------
(2) the opinion of special counsel for the Lessor (Exhibit G-
---------
3).
(viii) Lessor's Incumbency Certificate. The Agent shall have
-------------------------------
received a certificate of secretary of the Lessor attaching and
certifying as to (A) the Board of Directors' resolution authorizing
the execution, delivery and performance by it of each Operative
Document to which it is or will be a party, and (B) the incumbency and
signatures of persons authorized to execute and deliver such documents
on its behalf.
3.3 Conditions to the Obligations of Lessee. The obligations of each
---------------------------------------
Lessee to lease from the Lessor and construct its related Leased Property are
subject to the fulfillment on the related Closing Date to the satisfaction of,
or waiver by, such Lessee, of the following conditions precedent:
(a) General Conditions. The conditions set forth in Section 3.1 that
------------------ -----------
require fulfillment by the Lessor or the Lenders shall have been satisfied.
(b) Legality. In the opinion of such Lessee or its counsel, the
--------
transactions contemplated by the Operative Documents shall not violate any
Applicable Law, and no change shall have occurred or been proposed in Applicable
Law that would make it illegal for such Lessee to participate in any of the
transactions contemplated by the Operative Documents.
3.4 Conditions to the Obligations of the Participants on each Funding
-----------------------------------------------------------------
Date. The obligations of the Lessor and each Lender to carry out their
----
respective obligations under Section 2 of this Participation Agreement to be
---------
performed on each Funding Date shall be subject to the fulfillment to the
satisfaction of, or waiver by, each such party hereto (acting directly or
through their respective counsel) or prior to each such Funding Date of the
following conditions precedent, provided that the obligations of any Participant
--------
shall not be subject to any conditions contained in this Section 3.4 which are
-----------
required to be performed by such Participant:
13
<PAGE>
(a) Funding Request. The Lessor and the Agent shall have received
---------------
from such Lessee the Funding Request therefor pursuant to Section 2.2.
-----------
(b) Condition Fulfilled. As of such Funding Date, the condition set
-------------------
forth in Section 3.1(d)(i) shall have been satisfied.
-----------------
(c) Representations. As of such Funding Date, both before and after
---------------
giving effect to the Funding requested by such Lessee on such date, the
representations and warranties that such Lessee is deemed to make pursuant to
Section 2.2(e) shall be true and correct in all material respects on and as of
- - --------------
such Funding Date as though made on and as of such Funding Date, except to the
extent such representations or warranties relate solely to an earlier date, in
which case such representations and warranties shall have been true and correct
in all material respects on and as of such earlier date.
(d) No Bonded Stop Notice or Filed Mechanics Lien. As of each
---------------------------------------------
Funding Date, and as to any Loan funds requested for any Land Interest on each
such Funding Date, (i) neither the Agent nor any Lender has received (with
respect to such Land Interest) a bonded notice to withhold Loan funds which has
not been discharged by the Lessee, and (ii) no mechanic's liens or materialman's
liens have been filed against such Land Interest that have not been discharged
by the Lessee.
3.5 Completion Date Conditions. The occurrence of the Completion Date
--------------------------
with respect to any Leased Property shall be subject to the fulfillment to the
satisfaction of, or waiver by, each party hereto (acting directly or through its
counsel) of the following conditions precedent:
(a) Title Policy Endorsements; Architect's Certificate. The related
--------------------------------------------------
Lessee shall have furnished to each Participant (1) the following endorsements
to the related Title Policy (each of which shall be subject to no exceptions
other than those acceptable to the Agent): a date-down endorsement (redating
and confirming the coverage provided under the Title Policy and each endorsement
thereto) and a "Form 9" endorsement, in each case, effective as of a date not
earlier than the date of completion of the Construction, and (2) a certificate
of the Architect dated at or about the Completion Date and stating that (i) the
Building has been completed substantially in accordance with the Plans and
Specifications, and the Leased Property is ready for occupancy, (ii) the Plans
and Specifications comply in all material respects with all Applicable Laws in
effect at such time, and (iii) to the best of the Architect's knowledge, the
14
<PAGE>
Leased Property, as so completed, complies in all material respects with all
Applicable Laws in effect at such time, and certifying that attached thereto are
true and complete copies of: (A) an "as built" or "record" set of the Plans and
Specifications, and a plat of survey of the Leased Property "as built" showing
all paving, driveways, fences and exterior improvements, and (B) copies of all
licenses and permits required by any Governmental Authority having jurisdiction
over the use and occupancy of the Leased Property and for the operation thereof,
including copies of a certificate or certificates of occupancy for the Leased
Property or other legally equivalent permission to occupy the Leased Property.
(b) Construction Completion. The Construction shall have been
-----------------------
completed substantially in accordance with the Plans and Specifications, the
related Deed and all Applicable Laws, and the Leased Property shall be ready for
occupancy and operation. All fixtures, furniture, furnishings, equipment and
other property contemplated under the Plans and Specifications to be
incorporated into or installed in the Leased Property shall have been
incorporated or installed, free and clear of all Liens except for Permitted
Liens.
(c) Lessee Certification. Such Lessee shall have furnished the
--------------------
Lessor, the Agent and each Lender with both (1) a certification of such Lessee
(substantially in the form of Exhibit H) that:
---------
(i) all amounts owing to third parties for the Construction
have been paid in full (other than contingent obligations for which such
Lessee has made adequate reserves), and no litigation or proceedings are
pending, or to the best of such Lessee's knowledge, are threatened, against
the Leased Property or such Lessee which could reasonably be expected to
materially adversely affect (A) the enforceability or priority of this
Participation Agreement or the other Operative Documents and (B) the
ability of such Lessee to fully perform its obligations pursuant to and as
contemplated by the terms and provisions of this Participation Agreement
and the other Operative Documents;
(ii) all consents, licenses and permits and other governmental
authorizations or approvals required for the Construction and operation of
the Leased Property have been obtained and are in full force and effect;
(iii) the Leased Property has available all services of public
facilities and other utilities necessary for use and operation of the
Leased Property for its
15
<PAGE>
intended purposes including, without limitation, adequate water, gas and
electrical supply, storm and sanitary sewerage facilities, telephone, other
required public utilities and means of access between the Building and
public highways for pedestrians and motor vehicles;
(iv) all material agreements, easements and other rights, public
or private, which are necessary to permit the lawful use and operation of
the Leased Property as such Lessee intends to use the Leased Property under
the related Lease and which are necessary to permit the lawful intended use
and operation of all then intended utilities, driveways, roads and other
means of egress and ingress to and from the same have been obtained and are
in full force and effect and such Lessee has no knowledge of any pending
modification or cancellation of any of the same; and the use of the Leased
Property does not depend on any variance, special exception or other
municipal approval, permit or consent that has not been obtained and is in
full force and effect for its continuing legal use;
(v) all of the requirements and conditions set forth in Section
-------
3.5(b) hereof have been completed and fulfilled;
------
(vi) the Leased Property is in compliance with all applicable
zoning laws and regulations; and
(2) copies of all final lien waivers regarding the Construction, together with
sworn statements from contractors, subcontractors and material suppliers.
(d) Completion Date Appraisal. Within 90 days after the issuance of
-------------------------
the certificate of occupancy for the Building, the Lessor and the Agent shall
have received a report of the Appraiser (the "Completion Date Appraisal"), which
-------------------------
shall meet the requirements of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 and shall state the Fair Market Sales Value of the
Leased Property as of the Completion Date. The cost of such appraisal shall be
paid by the related Lessee.
4
REPRESENTATIONS
4.1 Representations of each Lessee. Effective as of the date of
------------------------------
execution hereof, as of each Closing Date and as of each Funding Date, each
Lessee represents and warrants to each of the other parties hereto as follows:
16
<PAGE>
(a) Organization; Corporate Powers. Such Lessee (i) is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) is duly qualified as a foreign
corporation and in good standing (A) in each jurisdiction where its Leased
Property is located and (B) under the laws of each jurisdiction where such
qualification is required and where the failure to be duly qualified and in good
standing would have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to own, operate and encumber its property and
assets and to conduct its business as presently conducted and as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Operative Documents.
(b) Authority. (i) Such Lessee has the requisite corporate power
---------
and authority to execute, deliver and perform the Operative Documents executed
by it, or to be executed by it.
(i) The execution, delivery and performance (or recording or filing,
as the case may be) of the Operative Documents, and the consummation of the
transactions contemplated thereby, have been duly approved by the Board of
Directors of such Lessee and no other corporate proceedings on the part of such
Lessee are necessary to consummate the transactions so contemplated.
(c) The Operative Documents executed by such Lessee, have been duly
executed and delivered (or recorded or filed, as the case may be) by such
Lessee, and constitute its legal, valid and binding obligation, enforceable
against it in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or limiting creditors' rights generally or by equitable principles
generally.
(d) No Conflict. The execution, delivery and performance by such
-----------
Lessee of each Operative Document to which it is a party and each of the
transactions contemplated thereby do not and will not (i) violate any Applicable
Law or Contractual Obligation of any Person the consequences of which violation,
singly or in the aggregate, would have a Material Adverse Effect, (ii) result in
or require the creation or imposition of any Lien whatsoever on such Leased
Property or upon any of the properties or assets of its Lessee or any of its
Subsidiaries (other than Permitted Liens), or (iii) require any approval of
stockholders which has not been obtained.
(e) Governmental Consents. Except as have been made, obtained or
---------------------
given, and are in full force and effect, no filing or registration with, consent
or approval of, notice to, with or by
17
<PAGE>
any Governmental Authority, is required to authorize, or is required in
connection with, the execution, delivery and performance by such Lessee of the
Operative Documents, the use of the proceeds of the Fundings made to effect the
purchase of the Land and the Construction, or the legality, validity, binding
effect or enforceability of any Operative Document.
(f) Governmental Regulation. Neither such Lessee nor any Subsidiary
-----------------------
of such Lessee is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
(g) Requirements of Law. Such Lessee and each Subsidiary of such
-------------------
Lessee and each Person acting on behalf of any of them is in compliance with all
Requirements of Law applicable to them and their respective businesses, in each
case where the failure to so comply would have a Material Adverse Effect, either
individually or together with other such cases.
(h) Rights in Respect of the Leased Property. Such Lessee is not a
----------------------------------------
party to any contract or agreement to sell any interest in such Leased Property
or any part thereof, other than pursuant to this Participation Agreement and
such Lease.
(i) Hazardous Materials. (i) To the best knowledge of such Lessee,
-------------------
on the Closing Date for its Leased Property, there are no Hazardous Materials
present at, upon, under or within such Leased Property or released or
transported (except in full compliance with all Applicable Law) to or from such
Leased Property.
(i) On the related Closing Date, no Governmental Actions have
been taken or are in process or have been threatened, which could reasonably be
expected to subject such Leased Property, the Lender or such Lessor with respect
to such Leased Property to any Claims or Liens under any Environmental Law which
would have a materially adverse effect on the Lessor, the Lender or such Leased
Property.
(ii) Such Lessee has all Environmental Permits necessary to
operate such Leased Property in accordance with Environmental Laws and is
complying with and has at all times complied with all such Environmental
Permits, except to the extent the failure to so comply would not have a Material
Adverse Effect.
(iii) No notice, notification, demand, request for information,
citations, summons, complaint or order has been issued or filed to or with
respect to such Lessee, no penalty has been assessed on such Lessee and no
investigation or review is
18
<PAGE>
pending or, to its best knowledge, threatened by any Governmental Authority or
other Person in each case relating to the Leased Property with respect to any
alleged violation or liability of such Lessee under any Environmental Law. No
material notice, notification, demand, request for information, citations,
summons, complaint or order has been issued or filed to or with respect to any
other Person, no material penalty has been assessed on any other Person and no
investigation or review is pending or, to its best knowledge, threatened by any
Governmental Authority or other Person relating to such Leased Property with
respect to any alleged material violation or liability under any Environmental
Law by any other Person.
(iv) To such Lessee's best knowledge, such Leased Property and
each portion thereof are presently in compliance in all material respects with
all Environmental Laws, and there are no present or past facts, circumstances,
activities, events, conditions or occurrences regarding such Leased Property
(including without limitation the release or presence of Hazardous Materials)
that could reasonably be anticipated to (A) form the basis of a material Claim
against such Leased Property, any Participant or such Lessee, (B) cause such
Leased Property to be subject to any restrictions on ownership, occupancy, use
or transferability under any Environmental Law, (C) require the filing or
recording of any notice or restriction relating to the presence of Hazardous
Materials in the real estate records in the county or other appropriate
municipality in which such Leased Property is located, or (D) prevent or
interfere with the continued operation and maintenance of such Leased Property
as contemplated by the Operative Documents.
(j) Leased Property. The present condition and use of such Leased
---------------
Property conforms in all material respects with all conditions or requirements
of all existing permits and approvals issued with respect to such Leased
Property, and the present use of such Leased Property and such Lessee's future
intended use of such Leased Property under such Lease does not, in any material
respect, violate any Applicable Law. No material notices, complaints of orders
or violation or non-compliance have been issued or, to such Lessee's best
knowledge, threatened or contemplated by any Governmental Authority with respect
to such Leased Property or any present or intended future use thereof. All
agreements, easements and other rights, public or private, which are necessary
to permit the lawful use and operation of such Leased Property as such Lessee
intends to use such Leased Property under the related Lease and which are
necessary to permit the lawful intended use and operation of all presently
intended utilities, driveways, roads and other means of egress and ingress to
and from the same have been, or to such Lessee's best knowledge will be,
obtained and are in full force and
19
<PAGE>
effect, and such Lessee has no knowledge of any pending modification or
cancellation of any of the same.
4.2 Representations of the Lessor. Effective as of the date of execution
-----------------------------
hereof, as of each Closing Date and as of each Funding Date, the Lessor and the
General Partner represent and warrant to the Agent and the Lenders and, as to
paragraph (f) below, also to the Lessees as follows:
- - -------------
(a) Due Organization, etc. The General Partner is a corporation and
---------------------
the Lessor is a limited partnership, each duly organized and validly existing in
good standing under the laws of Pennsylvania and has full corporate power,
authority and legal right to execute, deliver and perform its obligations under
each Lease, this Participation Agreement and each other Operative Document to
which it is or will be a party.
(b) Due Authorization; Enforceability, etc. This Participation
--------------------------------------
Agreement and each other Operative Document to which the Lessor or the General
Partner is or will be a party have been or will be duly authorized, executed and
delivered by or on behalf of the Lessor or the General partner, as the case may
be, and are, or upon execution and delivery will be, legal, valid and binding
obligations of the Lessor or the General Partner, as the case may be,
enforceable against it in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally and by general equitable principles.
(c) No Conflict. The execution and delivery by the Lessor and the
-----------
General Partner of each Lease, this Participation Agreement and each other
Operative Document to which the Lessor or the General Partner is or will be a
party, are not or will not be, and the performance by the Lessor of its
obligations under each will not be, inconsistent with their constituent
documents, do not and will not contravene any Applicable Law and do not and will
not contravene any provision of, or constitute a default under, any Contractual
Obligation of Lessor or the General Partner, and the Lessor and the General
Partner possesses all requisite regulatory authority to undertake and perform
their obligations under the Operative Documents.
(d) Litigation. There are no pending or, to the knowledge of the
----------
Lessor or the General Partner, threatened actions or proceedings against the
Lessor or the General Partner before any court, arbitrator or administrative
agency that would have a material adverse effect upon the ability of the Lessor
or the General Partner to perform its obligations under this
20
<PAGE>
Participation Agreement or any other Operative Documents to which it is or will
be a party.
(e) Lessor Liens. No Lessor Liens (other than those created by the
------------
Operative Documents) exist on any Closing Date on any Leased Property, or any
portion thereof, and the execution, delivery and performance by the Lessor of
this Participation Agreement or any other Operative Document to which it is or
will be a party will not subject such Leased Property, or any portion thereof,
to any Lessor Liens (other than those created by the Operative Documents).
(f) Securities Act. The interest being acquired or to be acquired by
--------------
the Lessor in the Lessor's Invested Amount and such Leased Property is being
acquired for its own account, without any view to the distribution thereof or
any interest therein, provided that the Lessor shall be entitled to assign,
--------
convey or transfer its interest in accordance with Section 6.1.
-----------
(g) Employee Benefit Plans. The Lessor is not and will not be making
----------------------
its investment hereunder, and is performing its obligations under the Operative
Documents, with the assets of an "employee benefit plan" (as defined in Section
3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in
Section 4975(e)(1)) of the Code.
4.3 Representations of each Lender. Effective as of the date of execution
------------------------------
hereof and as of each Closing Date, each Lender represents and warrants to the
Lessor and to the Lessees as follows:
(a) Securities Act. The interest being acquired or to be acquired by
--------------
such Lender in the Funded Amounts is being acquired for its own account, without
any view to the distribution thereof or any interest therein, provided that such
--------
Lender shall be entitled to assign, convey or transfer its interest in
accordance with Section 6.2. Such Lender is an accredited investor as that term
-----------
is defined in Rule 501(a) under the Securities Act.
(b) Employee Benefit Plans. Such Lender is not and will not be
----------------------
making its investment hereunder, and is not performing its obligations under the
Operative Documents, with the assets of an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as
defined in Section 4975(e)(1)) of the Code.
21
<PAGE>
5
COVENANTS OF THE LESSEES, THE GUARANTOR AND THE LESSOR
5.1 Qualification to do Business. Each Lessee shall remain qualified
----------------------------
to do business in the state where its Leased Property is located.
5.2 Further Assurances. Upon the written request of the Lessor or the
------------------
Agent, each Lessee, at its own cost and expense, will cause all financing
statements (including precautionary financing statements), fixture filings and
other similar documents, to be recorded or filed at such places and times in
such manner, as may be necessary to preserve, protect and perfect the interest
of the Lessor, the Agent and the Lenders in the related Leased Property as
contemplated by the Operative Documents.
5.3 Financial Statements and Information. The Guarantor will furnish
------------------------------------
to each Lender:
(a) as soon as available and in any event within 60 days after the
end of the first, second and third quarterly accounting periods in each
fiscal year of the Guarantor, copies of a consolidated balance sheet of the
Guarantor and its Consolidated Subsidiaries as of the end of such
accounting period and of the related consolidated income and retained
earnings statements of the Guarantor and its Consolidated Subsidiaries for
the elapsed portion of the fiscal year ended with the last day of such
accounting period, all in reasonable detail and stating in comparative form
the amounts for the corresponding date and period in the previous fiscal
year, and all prepared and certified by an authorized financial officer of
the Guarantor, subject to year end audit adjustments;
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Guarantor, copies of consolidated balance
sheets of the Guarantor and its Consolidated Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings of the Guarantor and its Consolidated Subsidiaries for such fiscal
year, in reasonable detail and stating in comparative form the figures as
of the end of and for the previous fiscal year and certified by independent
public accountants of recognized standing as may be selected by the
Guarantor and satisfactory to the Agent;
(c) concurrently with each of the financial statements furnished
pursuant to the foregoing subsections (a) and (b),
22
<PAGE>
a certificate of the Chairman of the Board, President, a Vice President of
the Guarantor, or the Treasurer of the Guarantor, stating that in the
opinion of the signer, based upon a review made under their supervision,
the Guarantor has performed and observed all of, and the Guarantor is not
in default in the performance or observance of any of, the terms and of the
Operative Documents or, if the Guarantor shall be in default, specifying
all such defaults, and the nature thereof, of which the signer of such
certificate may have knowledge;
(d) concurrently with their being filed, mailed or delivered, as
applicable, copies of all proxy statements, financial statements and
reports which the Guarantor shall send or make available generally to its
shareholders, and copies of all reports which the Guarantor or any
Subsidiary may be required to file with the Securities and Exchange
Commission or any similar or corresponding governmental commission,
department or an agency substituted therefor or with any securities
exchange located in the United States of America; and
(e) such other information relating to the business, affairs and
financial condition of the Guarantor and its Subsidiaries as the Agent
(when requested so to do by any Lender) may from time to time reasonably
request.
5.4 Additional Required Appraisals. If, as a result of any change in
------------------------------
Applicable Law after the date hereof, an appraisal of all or any of any Leased
Property is required during the Lease Term under Applicable Law with respect to
any Participant's interest therein, in such Participant's Funded Amount or in
the Operative Documents, then the related Lessee shall pay the cost of such
appraisal.
5.5 Lessor's and General Partner's Covenants. The Lessor and the General
----------------------------------------
Partner covenant and agree that without the prior written consent of the Agent,
the Lenders and the Guarantor, (i) they shall not amend their constituent
documents and (ii) they shall not incur any indebtedness or other obligation or
liability, or engage in any business or activity, other than the Transactions.
23
<PAGE>
6
TRANSFERS BY LESSOR AND LENDERS
6.1 Lessor Transfers. The Lessor shall not assign, convey or otherwise
----------------
transfer all or any portion of its right, title or interest in, to or under any
Leased Property (except pursuant to Article VI of the related Lease) or any of
----------
the Operative Documents without the prior written consent of the Lenders and the
related Lessee. Any proposed transferee of the Lessor shall make the
representation set forth in Section 4.2(g) to the other parties hereto.
--------------
6.2 Lender Transfers. Any Lender may grant participations in its
----------------
Commitment and sell Loans or participations in their Loan and Commitments,
provided that the participation buyer shall not receive voting or waiver rights
- - --------
except with respect to postponing maturities, decreasing interest rates, or
increasing principal amounts. Assignments will be permitted only with the prior
written consent of the Guarantor obtained 14 days prior to any proposed
assignment.
7
INDEMNIFICATION
7.1 General Indemnification. The Lessees jointly and severally agree,
-----------------------
whether or not any of the transactions contemplated hereby shall be consummated,
to assume liability for, and to indemnify, protect, defend, save and keep
harmless each Indemnitee, on an After-Tax Basis, from and against, any and all
Claims that may be imposed on, incurred by or asserted against such Indemnitee
(whether because of action or omission by such Indemnitee or otherwise), whether
or not such Indemnitee shall also be indemnified as to any such Claim by any
other Person and whether or not such Claim arises or accrues prior to any
Closing Date or after the Lease Termination Date, in any way relating to or
arising out of:
(a) any of the Operative Documents or any of the transactions
contemplated thereby, and any amendment, modification or waiver in respect
thereof; or
(b) any Land, any Building or any part thereof or interest therein;
(c) the purchase, design, construction, preparation, installation,
inspection, delivery, non-delivery, acceptance, rejection, ownership,
management, possession, operation, rental, lease, sublease, repossession,
24
<PAGE>
maintenance, repair, alteration, modification, addition, substitution,
storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any
sale pursuant to any Lease), return or other disposition of all or any part
of any interest in any Leased Property or the imposition of any Lien (or
incurring of any liability to refund or pay over any amount as a result of
any Lien) thereon, including, without limitation: (1) Claims or penalties
arising from any violation of law or in tort (strict liability or
otherwise), (2) latent or other defects, whether or not discoverable, (3)
any Claim based upon a violation or alleged violation of the terms of any
restriction, easement, condition or covenant or other matter affecting
title to any Leased Property or any part thereof, (4) the making of any
Alterations in violation of any standards imposed by any insurance policies
required to be maintained by any Lessee pursuant to the Lease which are in
effect at any time with respect to any Leased Property or any part thereof,
(5) any Claim for patent, trademark or copyright infringement, and (6)
Claims arising from any public improvements with respect to any Leased
Property resulting in any change or special assessments being levied
against any Leased Property or any Claim for utility "tap-in" fees;
(d) the offer, issuance, sale or delivery of the Notes;
(e) the breach or alleged breach by any Lessee of any representation
or warranty made by it or deemed made by it in any Operative Document or
any certificate required to be delivered by any Operative Document;
(f) the retaining or employment of any broker, finder or financial
advisor by any Lessee to act on its behalf in connection with this
Participation Agreement, or the authorization of any broker or financial
adviser retained or employed by any other Person so to act, or the
incurring of any fees or commissions to which the Lessor, the Agent or any
Lender might be subjected by virtue of their entering into the transactions
contemplated by this Participation Agreement;
(g) the existence of any Lien on or with respect to any Leased
Property, the Construction, any Basic Rent or Supplemental Rent, title
thereto, or any interest therein, including any Liens which arise out of
the possession, use, occupancy, construction, repair or rebuilding of any
Leased Property or by reason of labor or materials furnished or claimed to
have been furnished to any Lessee, or any of its contractors or agents or
by reason of the financing of any personalty or equipment purchased or
leased by any Lessee or
25
<PAGE>
Alterations constructed by any Lessee, except in all cases the liens listed
as items (a) and (b) in the definition of Permitted Liens;
(h) the transactions contemplated by any Lessee hereby or by any
other Operative Document, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA and any prohibited transaction described in
Section 4975(c) of the Code; or
(i) any act or omission by any Lessee under any Purchase Agreement,
and any breach of any requirement, condition, restriction or limitation in
any Deed;
provided, however, no Lessee shall be required to indemnify any Indemnitee under
- - -------- -------
this Section 7.1 for any of the following: (1) any Claim to the extent that
-----------
such claim results from the willful misconduct or gross negligence of such
Indemnitee, (2) any Claim resulting from Lessor Liens which the Lessor
Indemnitee Group is responsible for discharging under the Operative Documents,
and (3) any Claim related to any Leased Property to the extent attributable to
acts or events occurring after the expiration of the Lease Term so long as the
Lessor, the Agent and the Participants are not exercising remedies against the
Lessee in respect of the Operative Documents. It is expressly understood and
agreed that the indemnity provided for herein shall survive the expiration or
termination of and shall be separate and independent from any remedy under any
Lease or any other Operative Document.
7.2 Environmental Indemnity. Without limitation of Section 7.1, the
----------------------- -----------
Lessees jointly and severally agree to indemnify, hold harmless and defend each
Indemnitee from and against any and all claims (including without limitation
third party claims for personal injury or real or personal property damage),
losses (including but not limited to any loss of value of any Leased Property),
damages, liabilities, fines, penalties, charges, administrative and judicial
proceedings (including informal proceedings) and orders, judgments, remedial
action, requirements, enforcement actions of any kind, and all reasonable costs
and expenses incurred in connection therewith (including, but not limited to,
reasonable attorneys' and/or paralegals' fees and expenses), including, but not
limited to, all costs incurred in connection with any investigation or
monitoring of site conditions or any clean-up, remedial, removal or restoration
work by any federal, state or local government agency, arising directly or
indirectly, in whole or in part, out of
26
<PAGE>
(i) the presence on or under any Land of any Hazardous Materials, or
any releases or discharges of any Hazardous Materials on, under, from or
onto any Land,
(ii) any activity, including, without limitation, construction,
carried on or undertaken on or off any Land, and whether by any Lessee, or
any predecessor in title or any employees, agents, contractors or
subcontractors of any Lessee, or any predecessor in title, or any other
Persons (including such Indemnitee), in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials that at any time are located or present
on or under or that at any time migrate, flow, percolate, diffuse or in any
way move onto or under any Land,
(iii) loss of or damage to any property or the environment (including,
without limitation, clean-up costs, response costs, remediation and removal
costs, cost of corrective action, costs of financial assurance, fines and
penalties and natural resource damages), or death or injury to any Person,
and all expenses associated with the protection of wildlife, aquatic
species, vegetation, flora and fauna, and any mitigative action required by
or under Environmental Laws,
(iv) any claim concerning lack of compliance with Environmental Laws,
or any act or omission causing an environmental condition that requires
remediation or would allow any governmental agency to record a lien or
encumbrance on the land records, or
(v) any residual contamination on or under any Land, or affecting any
natural resources, and to any contamination of any property or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Materials, and
irrespective of whether any of such activities were or will be undertaken
in accordance with applicable laws, regulations, codes and ordinances;
in any case with respect to the matters described in the foregoing clauses (i)
-----------
through (v) that arise or occur
---
(w) prior to or during the Lease Term,
(x) at any time during which any Lessee or any Affiliate thereof
owns any interest in or otherwise occupies or possesses any Leased Property
or any portion thereof,
27
<PAGE>
(y) during any period after and during the continuance of any Event
of Default or
(z) during any period of three years following the date an
Indemnitee takes possession of any Leased Property,
provided, however, no Lessee shall be required to indemnify any Indemnitee under
- - -------- -------
this Section 7.2 for any Claim to the extent a court of competent jurisdiction
-----------
shall have determined that such Claim results from the willful misconduct or
gross negligence of such Indemnitee. It is expressly understood and agreed that
the indemnity provided for herein shall survive the expiration or termination of
and shall be separate and independent from any remedy under any Lease or any
other Operative Document.
7.3 Proceedings in Respect of Claims. With respect to any amount that any
--------------------------------
Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2,
----------- ---
such Indemnitee shall, if so requested by such Lessee and prior to any payment,
submit such additional information to such Lessee as such Lessee may reasonably
request and which is in the possession of such Indemnitee to substantiate
properly the requested payment. In case any action, suit or proceeding shall be
brought against any Indemnitee, such Indemnitee shall notify such Lessee of the
commencement thereof, and such Lessee shall be entitled, at its expense, to
participate in, and, to the extent that such Lessee desires to, assume and
control the defense thereof; provided, however, that such Lessee shall have
-------- -------
acknowledged in writing its obligation to fully indemnify such Indemnitee in
respect of such action, suit or proceeding, and, such Lessee shall keep such
Indemnitee fully apprised of the status of such action suit or proceeding and
shall provide such Indemnitee with all information with respect to such action
suit or proceeding as such Indemnitee shall reasonably request, and, provided
--------
further, that such Lessee shall not be entitled to assume and control the
- - -------
defense of any such action, suit or proceeding if and to the extent that, (A) in
the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding
involves any possibility of imposition of criminal liability or any material
risk of material civil liability on such Indemnitee or will involve a material
risk of the sale, forfeiture or loss of, or the creation of any Lien (other than
a Permitted Lien) on any Leased Property or any part thereof unless such Lessee
shall have posted a bond or other security satisfactory to the relevant
Indemnitees in respect to such risk or (y) the control of such action, suit or
proceeding would involve an actual or potential conflict of interest, (B) such
proceeding involves Claims not fully indemnified by such Lessee which such
Lessee and the Indemnitee have been unable to sever from the indemnified
claim(s), or (C) an Event of Default has occurred and is continuing. The
Indemnitee may participate
28
<PAGE>
in a reasonable manner at its own expense and with its own counsel in any
proceeding conducted by such Lessee in accordance with the foregoing. Such
Lessee shall not enter into any settlement or other compromise with respect to
any Claim which is entitled to be indemnified under Section 7.1 or 7.2 without
---------- -----------
the prior written consent of the related Indemnitee, which consent shall not be
unreasonably withheld.
Unless an Event of Default shall have occurred and be continuing, no
Indemnitee shall enter into any settlement or other compromise with respect to
any Claim which is entitled to be indemnified under Section 7.1 or 7.2 without
----------- ---
the prior written consent of the Lessees, which consent shall not be
unreasonably withheld, unless such Indemnitee waives its right to be indemnified
under Section 7.1 or 7.2 with respect to such Claim.
----------- ---
Upon payment in full of any Claim by the Lessees pursuant to Section 7.1 or
-----------
7.2 to or on behalf of an Indemnitee, the Lessees, without any further action,
- - ---
shall be subrogated to any and all claims that such Indemnitee may have relating
thereto (other than claims in respect of insurance policies maintained by such
Indemnitee at its own expense), and such Indemnitee shall execute such
instruments of assignment and conveyance, evidence of claims and payment and
such other documents, instruments and agreements as may be reasonably necessary
to preserve any such claims and otherwise cooperate with the Lessees and give
such further assurances as are reasonably necessary or advisable to enable the
Lessees vigorously to pursue such claims.
Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2 shall be
----------- ---
paid to such Indemnitee promptly upon receipt of a written demand therefor from
such Indemnitee, accompanied by a written statement describing in reasonable
detail the basis for such indemnity and the computation of the amount so
payable.
7.4 General Tax Indemnity. (a) Tax Indemnity. Except as otherwise
--------------------- -------------
provided in this Section 7.4, each Lessee shall pay on an After-Tax Basis,
-----------
and on written demand shall indemnify and hold each Tax Indemnitee harmless from
and against, any and all fees (including, without limitation, documentation,
recording, license and registration fees), taxes (including, without limitation,
income, gross receipts, sales, rental, use, turnover, value-added, property,
excise and stamp taxes), levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever, together with any penalties, fines or
interest thereon or additions thereto (any of the foregoing being referred to
herein as "Taxes" and individually as a "Tax" (for the purposes of this Section
----- --- -------
7.4, the definition of "Taxes" includes amounts imposed on, incurred by, or
- - ---
asserted against each Tax Indemnitee as the result of any prohibited
transaction, within
29
<PAGE>
the meaning of Section 406 or 407 of ERISA or Section 4975(c) of the Code,
arising out of the transactions contemplated hereby or by any other Operative
Document)) imposed on or with respect to any Tax Indemnitee, any Lessee, any
Leased Property or any portion thereof or any Land, or any sublessee or user
thereof, by the United States or by any state or local government or other
taxing authority in the United States in connection with or in any way relating
to (i) the acquisition, financing, mortgaging, construction, preparation,
installation, inspection, delivery, non-delivery, acceptance, rejection,
purchase, ownership, possession, rental, lease, sublease, maintenance, repair,
storage, transfer of title, redelivery, use, operation, condition, sale, return
or other application or disposition of all or any part of any Leased Property or
the imposition of any Lien (or incurrence of any liability to refund or pay over
any amount as a result of any Lien) thereon, (ii) Basic Rent or Supplemental
Rent or the receipts or earnings arising from or received with respect to any
Leased Property or any part thereof, or any interest therein or any applications
or dispositions thereof, (iii) any other amount paid or payable pursuant to the
Notes or any other Operative Documents, (iv) any Leased Property, any Land or
any part thereof or any interest therein (including, without limitation, all
assessments payable in respect thereof, including, without limitation, all
assessments noted on the related Title Policy), (v) all or any of the Operative
Documents, any other documents contemplated thereby, any amendments and
supplements thereto, and (vi) otherwise with respect to or in connection with
the transactions contemplated by the Operative Documents.
(a) Exclusions from General Tax Indemnity. Section 7.4(a) shall not
------------------------------------- --------------
apply to:
(i) Taxes on, based on, or measured by or with respect to net
income of the Lessor and the Lenders (including, without limitation,
minimum Taxes, capital gains Taxes, Taxes on or measured by items of tax
preference or alternative minimum Taxes) other than (A) any such Taxes that
are, or are in the nature of, sales, use, license, rental or property
Taxes, and (B) withholding Taxes imposed by the United States or any state
in which Leased Property is located (i) on payments with respect to the
Notes, to the extent imposed by reason of a change in Applicable Law
occurring after the date on which the holder of such Note became the holder
of such Note or (ii) on Rent, to the extent the net payment of Rent after
deduction of such withholding Taxes would be less than amounts currently
payable with respect to the Notes;
30
<PAGE>
(ii) Taxes on, based on, or in the nature of or measured by
Taxes on doing business, business privilege, capital, capital stock, net
worth, or mercantile license or similar taxes other than (A) any increase
in such Taxes imposed on such Tax Indemnitee by any state in which Leased
Property is located, net of any decrease in such taxes realized by such Tax
Indemnitee, to the extent that such tax increase would not have occurred if
on each Funding Date the Lessor and the Lenders had advanced funds to such
Lessee in the form of loans secured by the Leased Property in an amount
equal to the Funded Amounts funded on such Funding Date, with debt service
for such loans equal to the Basic Rent payable on each Payment Date and a
principal balance at the maturity of such loans in a total amount equal to
the Funded Amounts at the end of the Lease Term, or (B) any Taxes that are
or are in the nature of sales, use, rental, license or property Taxes;
(iii) Taxes that are based on, or measured by, the fees or other
compensation received by a Person acting as Agent (in its individual
capacities) or any Affiliate of any thereof for acting as trustee under the
Loan Agreement;
(iv) Taxes that result from any act, event or omission, or are
attributable to any period of time, that occurs after the earliest of (A)
the expiration of the Lease Term with respect to any Leased Property and,
if such Leased Property is required to be returned to the Lessor in
accordance with related Lease, such return and (B) the discharge in full of
such Lessee's obligations to pay the Lease Balance, or any amount
determined by reference thereto, with respect to any Leased Property and
all other amounts due under the related Lease, unless such Taxes relate to
acts, events or matters occurring prior to the earliest of such times or
are imposed on or with respect to any payments due under the Operative
Documents after such expiration or discharge;
(v) Taxes imposed on a Tax Indemnitee that result from any
voluntary sale, assignment, transfer or other disposition by such Tax
Indemnitee or any related Tax Indemnitee of any interest in any Leased
Property or any part thereof, or any interest therein or any interest or
obligation arising under the Operative Documents or any Note, or from any
sale, assignment, transfer or other disposition of any interest in such Tax
Indemnitee or any related Tax Indemnitee, it being understood that each of
the following shall not be considered a voluntary sale: (A) any
substitution, replacement or removal of any of the property by any Lessee,
(B) any sale or transfer resulting from the
31
<PAGE>
exercise by any Lessee of any termination option, any purchase option or
sale option, (C) any sale or transfer while an Event of Default shall have
occurred and be continuing under any Lease, and (D) any sale or transfer
resulting from the Lessor's exercise of remedies under any Lease;
(vi) any Tax which is being contested in accordance with the
provisions of Section 7.4(c), during the pendency of such contest;
--------------
(vii) any Tax that is imposed on a Tax Indemnitee as a result of
such Tax Indemnitee's gross negligence or willful misconduct (other than
gross negligence or willful misconduct imputed to such Tax Indemnitee
solely by reason of its interest in any Leased Property);
(viii) any Tax that results from a Tax Indemnitee engaging, with
respect to any Leased Property, in transactions other than those permitted
by the Operative Documents; and
(ix) to the extent any interest, penalties or additions to tax
result in whole or in part from the failure of a Tax Indemnitee to file a
return that it is required to file in a proper and timely manner, unless
such failure (A) results from the transactions contemplated by the
Operative Documents in circumstances where any Lessee did not give timely
notice to such Tax Indemnitee (and such Tax Indemnitee otherwise had no
actual knowledge) of such filing requirement that would have permitted a
proper and timely filing of such return, or (B) results from the failure of
any Lessee to supply information necessary for the proper and timely filing
of such return that was not in the possession of such Tax Indemnitee.
(b) Contests. If any claim shall be made against any Tax Indemnitee
--------
or if any proceeding shall be commenced against any Tax Indemnitee (including a
written notice of such proceeding) for any Taxes as to which any Lessee may have
an indemnity obligation pursuant to Section 7.4, or if any Tax Indemnitee shall
-----------
determine that any Taxes as to which any Lessee may have an indemnity obligation
pursuant to Section 7.4 may be payable, such Tax Indemnitee shall promptly
-----------
notify such Lessee. Such Lessee shall be entitled, at its expense, to
participate in, and, to the extent that such Lessee desires to, assume and
control the defense thereof; provided, however, that such Lessee shall have
-------- -------
acknowledged in writing its obligation to fully indemnify such Tax Indemnitee in
respect of such action, suit or proceeding if the contest is unsuccessful; and,
provided further,
- - -------- -------
32
<PAGE>
that such Lessee shall not be entitled to assume and control the defense of any
such action, suit or proceeding (but the Tax Indemnitee shall then contest, at
the sole cost and expense of such Lessee, on behalf of such Lessee) if and to
the extent that, (A) in the reasonable opinion of such Tax Indemnitee, such
action, suit or proceeding involves any meaningful risk of imposition of
criminal liability or any material risk of material civil liability on such Tax
Indemnitee or will involve a material risk of the sale, forfeiture or loss of,
or the creation of any Lien (other than a Permitted Lien) on any Leased Property
or any part thereof unless such Lessee shall have posted a bond or other
security satisfactory to the relevant Tax Indemnitees in respect to such risk,
(B) such proceeding involves Claims not fully indemnified by such Lessee which
such Lessee and the Tax Indemnitee have been unable to sever from the
indemnified claim(s), (C) an Event of Default has occurred and is continuing,
(D) such action, suit or proceeding involves matters which extend beyond or are
unrelated to the Transaction and if determined adversely could be materially
detrimental to the interests of such Tax Indemnitee notwithstanding
indemnification by such Lessee or (E) such action, suit or proceeding involves
the federal or any state income tax liability of the Tax Indemnitee. With
respect to any contests controlled by a Tax Indemnitee, (i) if such contest
relates to the federal or any state income tax liability of such Tax Indemnitee,
such Tax Indemnitee shall be required to conduct such contest only if such
Lessee shall have provided to such Tax Indemnitee an opinion of independent tax
counsel selected by the Tax Indemnitee and reasonably satisfactory to such
Lessee stating that a reasonable basis exists to contest such claim or (ii) in
the case of an appeal of an adverse determination of any contest relating to any
Taxes, an opinion of such counsel to the effect that such appeal is more likely
than not to be successful, provided, however, such Tax Indemnitee shall in no
-------- -------
event be required to appeal an adverse determination to the United States
Supreme Court. The Tax Indemnitee may participate in a reasonable manner at its
own expense and with its own counsel in any proceeding conducted by such Lessee
in accordance with the foregoing.
Each Tax Indemnitee shall at such Lessee's expense supply such Lessee with
such information and documents reasonably requested by such Lessee as are
necessary or advisable for such Lessee to participate in any action, suit or
proceeding to the extent permitted by this Section 7.4. Unless an Event of
-----------
Default shall have occurred and be continuing, no Tax Indemnitee shall enter
into any settlement or other compromise with respect to any Claim which is
entitled to be indemnified under this Section 7.4 without the prior written
-----------
consent of such Lessee, which consent shall not be unreasonably withheld, unless
such Tax Indemnitee
33
<PAGE>
waives its right to be indemnified under this Section 7.4 with respect to such
-----------
Claim.
Notwithstanding anything contained herein to the contrary, (a) a Tax
Indemnitee will not be required to contest (and such Lessee shall not be
permitted to contest) a claim with respect to the imposition of any Tax if such
Tax Indemnitee shall waive its right to indemnification under this Section 7.4
-----------
with respect to such claim (and any related claim with respect to other taxable
years the contest of which is precluded as a result of such waiver) and (b) no
Tax Indemnitee shall be required to contest any claim if the subject matter
thereof shall be of a continuing nature and shall have previously been decided
adversely, unless there has been a change in law which in the opinion of Tax
Indemnitee's counsel creates substantial authority for the success of such
contest. Each Tax Indemnitee and each Lessee shall consult in good faith with
each other regarding the conduct of such contest controlled by either.
(c) Reimbursement for Tax Savings. If (x) a Tax Indemnitee shall
-----------------------------
obtain a credit or refund of any Taxes paid by a Lessee pursuant to this Section
-------
7.4 or (y) by reason of the incurrence or imposition of any Tax for which a Tax
- - ---
Indemnitee is indemnified hereunder or any payment made to or for the account of
such Tax Indemnitee by such Lessee pursuant to this Section 7.4, such Tax
-----------
Indemnitee at any time realizes a reduction in any Taxes for which Lessee is not
required to indemnify such Tax Indemnitee pursuant to this Section 7.4, which
-----------
reduction in Taxes was not taken into account in computing such payment by such
Lessee to or for the account of such Tax Indemnitee, then such Tax Indemnitee
shall promptly pay to such Lessee (xx) the amount of such credit or refund,
together with the amount of any interest received by such Tax Indemnitee on
account of such credit or refund or (yy) an amount equal to such reduction in
Taxes, as the case may be; provided that no such payment shall be made so long
--------
as an Event of Default shall have occurred and be continuing and, provided,
--------
further, that the amount payable to such Lessee by any Tax Indemnitee pursuant
- - -------
to this Section 7.4(c) shall not at any time exceed the aggregate amount of all
--------------
indemnity payments made by such Lessee under this Section 7.4 to such Tax
-----------
Indemnitee with respect to the Taxes which gave rise to the credit or refund or
with respect to the Tax which gave rise to the reduction in Taxes less the
amount of all prior payments made to such Lessee by such Tax Indemnitee under
this Section 7.4(d). Each Tax Indemnitee agrees to act in good faith to claim
--------------
such refunds and other available Tax benefits, and take such other actions as
may be reasonable to minimize any payment due from such Lessee pursuant to this
Section 7.4. The disallowance or reduction of any credit, refund or other tax
- - -----------
savings with respect to which a Tax Indemnitee has made a payment to such
34
<PAGE>
Lessee under this Section 7.4(d) shall be treated as a Tax for which such Lessee
--------------
is obligated to indemnify such Tax Indemnitee hereunder without regard to
Section 7.4(b) hereof.
- - --------------
(d) Payments. Any Tax indemnifiable under this Section 7.4 shall be
-------- -----------
paid directly when due to the applicable taxing authority if direct payment is
practicable and permitted. If direct payment to the applicable taxing authority
is not permitted or is otherwise not made, any amount payable to a Tax
Indemnitee pursuant to Section 7.4 shall be paid within thirty (30) days after
-----------
receipt of a written demand therefor from such Tax Indemnitee accompanied by a
written statement describing in reasonable detail the amount so payable, but not
before the date that the relevant Taxes are due. Any payments made pursuant to
Section 7.4 shall be made to the Tax Indemnitee entitled thereto or such Lessee,
- - -----------
as the case may be, in immediately available funds at such bank or to such
account as specified by the payee in written directions to the payor, or, if no
such direction shall have been given, by check of the payor payable to the order
of the payee by certified mail, postage prepaid at its address as set forth in
this Participation Agreement. Upon the request of any Tax Indemnitee with
respect to a Tax that any Lessee is required to pay, such Lessee shall furnish
to such Tax Indemnitee the original or a certified copy of a receipt for such
Lessee's payment of such Tax or such other evidence of payment as is reasonably
acceptable to such Tax Indemnitee.
(e) Reports. If any Lessee knows of any report, return or statement
-------
required to be filed with respect to any Taxes that are subject to
indemnification under this Section 7.4, such Lessee shall, if such Lessee is
-----------
permitted by Applicable Law, timely file such report, return or statement (and,
to the extent permitted by law, show ownership of the applicable Leased Property
in such Lessee); provided, however, that if such Lessee is not permitted by
-------- -------
Applicable Law or does not have access to the information required to file any
such report, return or statement, such Lessee will promptly so notify the
appropriate Tax Indemnitee, in which case Tax Indemnitee will file such report.
In any case in which the Tax Indemnitee will file any such report, return or
statement, such Lessee shall, upon written request of such Tax Indemnitee,
prepare such report, return or statement for filing by such Tax Indemnitee or,
if such Tax Indemnitee so requests, provide such Tax Indemnitee with such
information as is reasonably available to such Lessee.
(f) Verification. At the applicable Lessee's request, the amount of
------------
any indemnity payment by such Lessee or any payment by a Tax Indemnitee to such
Lessee pursuant to this Section 7.4 shall be verified and certified by an
-----------
independent public accounting firm selected by such Lessee and reasonably
acceptable
35
<PAGE>
to the Tax Indemnitee. Unless such verification shall disclose an error in
Lessee's favor of 10% or more, the costs of such verification shall be borne by
such Lessee. In no event shall such Lessee have the right to review the Tax
Indemnitee's tax returns or receive any other confidential information from the
Tax Indemnitee in connection with such verification. The Tax Indemnitee agrees
to cooperate with the independent public accounting firm performing the
verification and to supply such firm with all information reasonably necessary
to permit it to accomplish such verification, provided that the information
--------
provided to such firm by such Tax Indemnitee shall be for its confidential use.
The parties agree that the sole responsibility of the independent public
accounting firm shall be to verify the amount of a payment pursuant to this
Participation Agreement and that matters of interpretation of this Participation
Agreement are not within the scope of the independent accounting firm's
responsibilities.
36
<PAGE>
7.5 Increased Costs, etc.
---------------------
(a) Notwithstanding any other provisions herein, if any requirement
of law, regulation, order or decree or any change therein or in the
interpretation or application thereof shall make it unlawful for the Lenders to
make or maintain Loans at a rate based on the LIBOR Rate as contemplated by the
Operative Documents, the Commitments of the Lenders hereunder to make Loans at a
rate based on the LIBOR Rate shall forthwith be canceled and Loans of the
Lenders then outstanding, if any, shall, if and when required by such law, be
converted automatically to bear interest at the Alternative Rate. If any such
conversion of the interest rate applicable to Loans is made on a day which is
not the end of a Rent Period, the related Lessee shall pay to the Agent for the
account of the Lenders on such conversion date interest at the related LIBOR
Rate plus 0.75% per annum on the affected Loans to the date of such automatic
conversion and, upon the request of any Lender, shall pay to the Agent for the
account of such Lender such other amount or amounts as may be necessary to
compensate the Lender for any loss or expense which the Lender deems to be
material as determined by the Lender and which has been sustained or incurred by
such Lender in respect of such Loans as a result of such conversion. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by a Lender to the related Lessee shall be conclusive absent
manifest error. As soon as practicable, the Agent or any Lender shall notify
the related Lessee of any event of which it has knowledge occurring after the
date of this Participation Agreement, which will cause or is likely to cause a
conversion of the interest rate applicable to Loans pursuant to this Section
-------
7.5, and the Agent or such Lender shall designate a different funding office or
- - ---
take such other action to avoid the need for, or to reduce the amount of
compensation related to, such conversion of the interest rate applicable to
Loans which would not, in the reasonable opinion of the Agent or such Lender, be
otherwise disadvantageous to the Agent or the Lenders.
(b) If Regulation D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time, or in the
event that at any time or from time to time any change occurring after the date
hereof in any requirement of law, regulation, order or decree or in the
interpretation or application thereof or compliance by a Lender with any request
or directive (whether or not having the force of law) occurring after the date
hereof from any central bank or monetary authority or other governmental
authority:
(1) does or shall subject such Lender to any tax of any kind
whatsoever with respect to the
37
<PAGE>
Operative Documents or any Loan Amount, or change the basis of
taxation of payments to such Lender of principal, fees, interest,
yield or other amount payable hereunder (except for changes in the
rate of tax on general income and similar taxes on the overall net
income of such Operative Documents in any jurisdiction); or
(2) does or shall impose, modify or hold applicable or change
any reserve, special deposit, Federal Deposit Insurance Corporation
premium, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender which are not
otherwise included in the determination of the LIBOR Rate under the
Operative Documents;
(3) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing, converting or maintaining advances or extensions of credit as
Loans bearing interest at a rate based on the LIBOR Rate or to reduce any amount
receivable in respect of such Loans, then, in any such case, the related Lessee
shall promptly pay to such Lender, such additional amount which will compensate
the Lender for such additional cost or reduced amount receivable which the
Lender deems to be material as determined by the Lender with respect to the
Operative Documents or its Loans.
(c) If any Lender shall have determined that compliance by such
Lender with any applicable law, governmental rule, regulation or order regarding
capital adequacy of banks or bank holding companies, or any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any request or directive regarding capital adequacy (whether
or not having the force of law and whether or not failure to comply therewith
would be unlawful) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Lender's capital
as a consequence of such Lender's obligations hereunder to a level below that
which such Lender could have achieved but for such compliance (taking into
consideration such Lender's policies with respect to capital adequacy
immediately before such compliance and assuming that such Lender's capital was
fully utilized prior to such
38
<PAGE>
compliance) by an amount deemed by such Lender to be material, then, upon
demand, the related Lessee shall immediately pay to such Lender as are so
affected such additional amounts as shall be sufficient to compensate such
Lenders for such reduced return, together with interest on each such amount from
four Business Days after the date demanded until payment in full thereof at the
rate of interest of 3% per annum over the Alternative Rate. A certificate of an
officer of any such Lender setting forth the amount to be paid to it and the
basis for computation thereof hereunder shall, in the absence of manifest error,
be conclusive. In determining such amount, such Lender may use any reasonable
averaging and attribution methods. The related Lessee may at its option elect to
seek a substitute Lender (which may be one or more of the Lenders and which
shall be reasonably satisfactory to the related Lessee and the Agent) to
purchase the portion of the Loans then held by, and to assume the Commitment
hereunder of, such Lender. Until such substitution shall be consummated, the
related Lessee shall continue to pay to such Lender being replaced any amounts
required by this Agreement, including this Section 7.5(c). Upon any such
--------------
substitution, the related Lessee (or such substitute Lender, as applicable)
shall pay to such Lender being replaced all principal, interest and other
amounts accrued or owing to such Lender hereunder through the date of
substitution. No liability or cost pursuant to this Section 7.5(c) shall be
--------------
incurred by the related Lessee prior to, or relating to any period before, the
date that the related Lessee receives a demand from a Lender under this Section
-------
7.5(c).
- - ------
(d) If a Lender becomes entitled to claim any additional amounts
pursuant to this Section 7.5, it shall promptly notify the related Lessee
-----------
thereof. A certificate as to any additional amounts payable pursuant to the
foregoing submitted by a Lender to the related Lessee shall be conclusive absent
manifest error. For purposes of the application of this Section 7.5, and in
-----------
calculating the amount necessary to compensate such Lender for any imposition of
or increase in capital requirements or taxes hereunder, such Lender shall
determine the applicability of this provision and calculate the amount payable
to it hereunder in a manner consistent with the manner in which it shall apply
and calculate similar compensation payable to it by other borrowers having
provisions in their credit agreements comparable to this Section.
(e) If any Lender shall, at any time, incur costs associated with
reserve requirements pursuant to Regulation D in connection with the making or
maintenance of any Loan, then the related Lessee shall immediately pay such
costs to such Lender in accordance with Section 7.5(d).
--------------
39
<PAGE>
(f) The related Lessee shall indemnify each Lender against any loss,
funding cost, expense or loss of earnings, which such Lender, may, as a
consequence of the related Lessee's failure to accept Loans requested at any
time, failure to make a payment on the due date thereof or the payment,
prepayment or conversion of any Loans subject to LIBOR Rate options hereunder on
a day other than a Payment Date, sustain or incur in liquidating or employing
deposits from third parties acquired to effect, fund or maintain such or any
part thereof. If a Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Agent, which shall
promptly notify the related Lessee thereof.
(g) If any Lender has demanded compensation under this Section, the
related Lessee shall have the right, after consultation with the Agent, to seek
a substitute bank or banks (which may be one or more of the Lenders) to purchase
the Loans for cash without recourse to such Lender and assume the Commitment of
such Lender, which shall thereupon be released from all of its obligations
hereunder.
7.6 End of Term Indemnity. In the event that at the end of the Lease Term
---------------------
for a Leased Property: (i) The related Lessee elects the option set forth in
Section 15.6 of the related Lease, and (ii) after the Lessor receives the sales
proceeds from such Leased Property under Section 15.6 or 15.7 of such Lease,
together with such Lessee's payment of the Recourse Deficiency Amount, the
Lessor shall not have received the entire Lease Balance, then the Lessor or the
Agent may obtain, at such Lessee's sole cost and expense, a report from the
Appraiser (or, if the Appraiser is not available, another appraiser reasonably
satisfactory to the Lessor or the Agent, as the case may be) in form and
substance satisfactory to Lessor and the Agent (the "Report") to establish the
------
reason for any decline in value of such Leased Property from that anticipated
for such date in the Appraisal delivered on the Closing Date. Such Lessee shall
promptly reimburse the Lessor for the amount equal to such decline in value to
the extent that the Report indicates that such decline was due to
(w) extraordinary use, failure to maintain, to repair, to restore, to
rebuild or to replace, failure to comply with all Applicable Laws, failure
to use, workmanship, method of installation or removal or maintenance,
repair, rebuilding or replacement, or any other cause or condition within
the power of such Lessee to control or effect resulting in the Building
failing to be a distribution center of the type and quality contemplated by
the Appraisal (excepting in each case ordinary wear and tear), or
40
<PAGE>
(x) any Alteration made to, or any rebuilding of, such Leased
Property or any part thereof by such Lessee, or
(y) any restoration or rebuilding carried out by such Lessee or any
condemnation of any portion of such Leased Property pursuant to Article XI
of such Lease, or
(z) any use of such Leased Property or any part thereof by such
Lessee other than as permitted by such Lease, or any act or omission
constituting a breach of any requirement, condition, restriction or
limitation set forth in the related Deed or the related Purchase Agreement.
8
MISCELLANEOUS
8.1 Survival of Agreements. The representations, warranties, covenants,
----------------------
indemnities and agreements of the parties provided for in the Operative
Documents, and the parties' obligations under any and all thereof, shall survive
the execution and delivery and the termination or expiration of this
Participation Agreement and any of the Operative Documents, the transfer of any
Land to the Lessor as provided herein (and shall not be merged into any Deed),
any disposition of any interest of the Lessor in any Leased Property, the
purchase and sale of the Notes, payment therefor and any disposition thereof and
shall be and continue in effect notwithstanding any investigation made by any
party hereto or to any of the other Operative Documents and the fact that any
such party may waive compliance with any of the other terms, provisions or
conditions of any of the Operative Documents.
8.2 Notices. Unless otherwise specified herein, all notices, requests,
-------
demands or other communications to or upon the respective parties hereto shall
be addressed to such parties at the addresses therefor as set forth in Schedule
--------
8.2, as such other address as any such party shall specify to the other parties
- - ---
hereto, and shall be deemed to have been given when received.
8.3 Counterparts. This Participation Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
8.3
8.4 Amendments. No Operative Document nor any of the terms thereof may be
----------
terminated, amended, supplemented, waived or modified with respect to any Lessee
or any Participant, except
41
<PAGE>
(a) in the case of a termination, amendment, supplement, waiver or modification
to be binding on any Lessee, with the written agreement or consent of such
Lessee, and (b) in the case of a termination, amendment, supplement, waiver or
modification to be binding on the Participants, with the written agreement or
consent of the Required Participants; provided, however, that
-------- -------
(x) notwithstanding the foregoing provisions of this Section 8.4, the
-----------
consent of each Participant affected thereby shall be required for any
amendment, modification or waiver directly:
(i) modifying any of the provisions of this Section 8.4, changing the
-----------
definition of "Required Participants", or increasing the Commitment of such
---------------------
Participant;
(ii) amending, modifying, waiving or supplementing any of the
provisions of Section 3 of the Loan Agreement or the representations of
such Participant in Section 4.2 or 4.3 or the covenants of such Participant
----------- ---
in Section 6 of this Participation Agreement;
---------
(iii) reducing any amount payable to such Participant under the
Operative Documents or extending the time for payment of any such amount,
including, without limitation, any Rent, any Funded Amount, any fees, any
indemnity, the Lease Balance, any Participant Balance, Recourse Deficiency
Amount, interest or Yield; or
(iv) consenting to any assignment of any Lease, releasing any of the
collateral assigned to the Agent and the Lenders pursuant to any Mortgage
and any Assignment of Lease and Rents (but excluding a release of any
rights that the Lenders may have in any Leased Property, or the proceeds
thereof as contemplated in the definition of "Release Date"), releasing any
Lessee from its obligations in respect of the payments of Rent and the
Lease Balance, releasing any Guarantor from its obligations under the
Guaranty or the other Operative Documents or changing the absolute and
unconditional character of any such obligation; and
(y) no such termination, amendment, supplement, waiver or
modification shall, without the written agreement or consent of the Lessor and
the Lender, be made to any Lease;
(z) subject to the foregoing clauses (x) and (y), the Lessor, the
----------- ---
Agent and the Lenders may amend, supplement, waive or modify any terms of the
Loan Agreement, the Notes, the Mortgages and the Assignments of Lease and Rents
without the consent of the
42
<PAGE>
Lessees so long as such amendment, supplement, waiver or modification does not
reduce the Commitments or increase any Rent or the Lease Balance or accelerate
the scheduled date of any payment of Rent or the Lease Balance, provided that,
--------
so long as no Event of Default has occurred and is continuing, the Loan
Agreement shall not be modified in a manner adversely affecting any Lessee
without the consent of such Lessee (such consent not to be unreasonably withheld
or delayed); the Lessor and the Lessees may not amend, supplement, waive or
modify any terms of any Lease or any Security Agreement and Assignment without
the Agent and the consent of the Lenders.
8.5 Headings, etc. The Table of Contents and headings of the various
--------------
Articles and Sections of this Participation Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
8.6 Parties in Interest. Except as expressly provided herein, none of the
-------------------
provisions of this Participation Agreement is intended for the benefit of any
Person except the parties hereto, their successors and permitted assigns.
8.7 GOVERNING LAW. THIS PARTICIPATION AGREEMENT HAS BEEN DELIVERED IN,
-------------
AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
8.8 Expenses. Whether or not the transactions herein contemplated are
--------
consummated, the Lessees jointly and severally agree to pay, as Supplemental
Rent, all reasonable and documented out-of-pocket costs and expenses of the
Lessor, the General Partner, the Agent and the Lenders in connection with the
preparation, execution and delivery of the Operative Documents and the documents
and instruments referred to therein and any amendment, waiver or consent
relating thereto (including, without limitation, the fees and disbursements of
Mayer, Brown & Platt) and of the Lessor, the Agent and the Lenders in connection
with the enforcement of the Operative Documents and the documents and
instruments referred to therein (including, without limitation, the fees and
disbursements of counsel for the Lessor, the Agent and the Lenders) and all
reasonable organizational and operational expenses of the Lessor and the General
Partner incurred during the term of the transactions hereunder, including,
without limitation, capital stock taxes, franchise fees, and corporate and
partnership qualification and filing fees.
43
<PAGE>
8.9 Severability. Any provision of this Participation Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10 Liabilities of the Participants. No Participant shall have any
-------------------------------
obligation to any other Participant or to any Lessee with respect to the
transactions contemplated by the Operative Documents except those obligations of
such Participant expressly set forth in the Operative Documents or except as set
forth in the instruments delivered in connection therewith, and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations under the Operative Documents except as otherwise so set forth.
Lender shall not have any obligation or duty to any Lessee, any other
Participants or any other Person with respect to the transactions contemplated
hereby except to the extent expressly set forth in this Participation Agreement
or the Loan Agreement.
8.11 Submission to Jurisdiction; Waivers. Each party hereto hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Participation Agreement or any other Operative
Document, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the
State of Georgia, the courts of the United States of America for the
Northern District of Georgia, and appellate courts from any thereof;
(ii) consents that any such action or proceedings may be brought to
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any court or that such action
or proceeding was brought in an inconvenient court and agrees not to plead
or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Schedule 8.2 or at such
------------
other address of which the other parties hereto shall have been notified
pursuant to Section 8.2; and
-----------
44
<PAGE>
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law.
8.12 Liabilities of the Agent. The Agent shall have no duty, liability or
------------------------
obligation to any party to this Participation Agreement with respect to the
transactions contemplated hereby except those duties, liabilities or obligations
expressly set forth in this Participation Agreement or the Loan Agreement, and
any such duty, liability or obligations of the Agent shall be as expressly
limited by this Participation Agreement or the Loan Agreement, as the case may
be.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
UNISOURCE WORLDWIDE, INC., as
Lessee
By: /s/ Signature
----------------------------
Title: [Title]
-------------------------
PARTICIPATION AGREEMENT
S-1
<PAGE>
AOP INC., as Lessee
By: /s/ Signature
----------------------------
Title: [Title]
-------------------------
PARTICIPATION AGREEMENT
S-2
<PAGE>
ALCO STANDARD CORPORATION, as
Guarantor
By:____________________________
Title:_________________________
PARTICIPATION AGREEMENT
S-3
<PAGE>
PPI SPV, L.P., as Lessor
By: Pitcairn SPV, Inc.,
as General Partner
By:____________________________
Title:_________________________
PARTICIPATION AGREEMENT
S-4
<PAGE>
PITCAIRN SPV, INC., as General
Partner
By:____________________________
Title:_________________________
PARTICIPATION AGREEMENT
S-5
<PAGE>
TRUST COMPANY BANK, as Lender
and Agent
By:____________________________
Title:_________________________
By:____________________________
Title:_________________________
PARTICIPATION AGREEMENT
S-6
<PAGE>
SCHEDULE 1
INITIAL LAND INTERESTS
<PAGE>
SCHEDULE 2.2
PAYMENT INSTRUCTIONS AND
AMOUNT OF EACH PARTICIPANT'S COMMITMENT
<TABLE>
<S> <C>
Lessor Commitment Percentage: 3%
Trust Company Bank Commitment
Percentage: 97%
</TABLE>
2
<PAGE>
SCHEDULE 8.2
ADDRESSES FOR NOTICES
Guarantor and Lessees: 825 Duportail Road
Wayne, Pennsylvania 19087
Attn: Real Estate Department
copy to: Legal Department
General Partner and Lessor: 3220 Tillman Drive
Bensalem, Pennsylvania 19020
Lender and Agent: Trust Company Bank
25 Park Place
Atlanta, Georgia 30303
Attn: Center 118/Southeastern Corporate
<PAGE>
APPENDIX A
to
Participation Agreement,
Lease and Loan Agreement
------------------------
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear contrary
--------------
intention appears:
(i) the singular number includes the plural number and vice versa;
---- -----
(ii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative Document),
document or instrument means such agreement, document or instrument as
amended, supplemented or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms of the
other Operative Documents and reference to any promissory note includes any
promissory note which is an extension or renewal thereof or a substitute or
replacement therefor;
(v) reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that provision of such Applicable Law from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other
provision;
(vi) reference in any Operative Document to any Article, Section,
------- -------
Appendix, Schedule or Exhibit means such Article or Section thereof or
-------- -------- ------- ------- -------
Appendix, Schedule or Exhibit thereto;
-------- -------- -------
(vii) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to an Operative
<PAGE>
Document as a whole and not to any particular Article, Section or other
------- -------
provision hereof;
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(ix) "or" is not exclusive; and
(x) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding".
B. Accounting Terms. In each Operative Document, unless expressly
----------------
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between any
-------------------------------
Operative Documents, such Operative Document shall be interpreted and construed,
if possible, so as to avoid or minimize such conflict but, to the extent (and
only to the extent) of such conflict, the Participation Agreement shall prevail
and control.
D. Legal Representation of the Parties. The Operative Documents were
-----------------------------------
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
-------------
defined herein have the respective indicated meanings when used in each
Operative Document.
"A Loan" means the A Percentage of Loans made by Lender pursuant to the
------
Loan Agreement and the Participation Agreement.
"A Note" is defined in Section 2.2 of the Loan Agreement.
------
"A Percentage" means 85%.
------------
"Address" means with respect to any Person, its address set forth in
-------
Schedule 8.2 to the Participation Agreement or such other address as it shall
have identified to the parties to the Participation Agreement in writing.
"Affected Participant" is defined in Section 7.5 of the Participation
--------------------
Agreement.
-2-
<PAGE>
"Affiliate" of any Person shall mean any other Person directly or
---------
indirectly controlling, controlled by or under common control with, such Person.
For purposes of this definition, the term "control" (including the correlative
-------
meanings of the terms "controlling," "controlled by" and "under common control
----------- ------------- --------------------
with"), as used with respect to any Person, shall mean the possession, directly
- - ----
or indirectly, of the power to direct or cause the direction of the management
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise, provided (but without limiting the foregoing) that no
pledge of voting securities of any Person without the current right to exercise
voting rights with respect thereto shall by itself be deemed to constitute
control over such Person.
"After-Tax Basis" means (a) with respect to any payment to be received by
---------------
an Indemnitee (which, for purposes of this definition, shall include any Tax
Indemnitee), the amount of such payment supplemented by a further payment or
payments so that, after deducting from such payments the amount of all Taxes
(net of any current credits, deductions or other Tax benefits arising from the
payment by the Indemnitee of any amount, including Taxes, for which the payment
to be received is made) imposed currently on the Indemnitee by any Governmental
Authority or taxing authority with respect to such payments, the balance of such
payments shall be equal to the original payment to be received and (b) with
respect to any payment to be made by any Indemnitee, the amount of such payment
supplemented by a further payment or payments so that, after increasing such
payment by the amount of any current credits or other Tax benefits realized by
the Indemnitee under the laws of any Governmental Authority or taxing authority
resulting from the making of such payments, the sum of such payments (net of
such credits or benefits) shall be equal to the original payment to be made;
provided, however, for the purposes of this definition, and for purposes of any
- - -------- -------
payment to be made to either a Lessee or Tax Indemnitee on an after-tax basis,
it shall be assumed that (i) federal, state and local taxes are payable at the
highest combined marginal federal and state statutory income tax rate (taking
into account the deductibility of state income taxes for federal income tax
purposes) applicable to corporations from time to time and (ii) such Indemnitee
or Lessee has sufficient income to utilize any deductions, credits (other than
foreign tax credits, the use of which shall be determined on an actual basis)
and other Tax benefits arising from any payments described in clause (b) of this
definition.
"Agent" means Trust Company Bank, a Georgia banking corporation, in its
-----
capacity as agent under the Loan Agreement.
-3-
<PAGE>
"Alco" means Alco Standard Corporation, an Ohio corporation.
----
"Alterations" means, with respect to any Leased Property, fixtures,
-----------
alterations, improvements, modifications and additions to such Leased Property.
"Alternative Rate" means, for any period, an interest rate per annum equal
----------------
to the rate of interest most recently announced by the Agent in Atlanta, Georgia
from time to time as its "reference rate" for calculating interest on certain
loans, which need not be the lowest interest rate charged by such bank. If such
reference rate or equivalent of such bank changes from time to time after the
date hereof, the Alternative Rate shall be automatically increased or decreased,
as the case may be, without notice to the Lessees as of the effective time of
each change in such reference rate or equivalent.
"AOP" means AOP Inc., a Delaware corporation.
---
"Applicable Law" means all existing and future applicable laws (including
--------------
Environmental Laws), rules, regulations (including proposed, temporary and final
income tax regulations), statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by, any Governmental
Authority, and applicable judgments, decrees, injunctions, writs, orders or like
action of any court, arbitrator or other administrative, judicial or quasi-
judicial tribunal or agency of competent jurisdiction (including those
pertaining to health, safety or the environment (including, without limitation,
wetlands) and those pertaining to the construction, use or occupancy of any
Leased Property) and any restrictive covenant or deed restriction or easement of
record affecting any Leased Property.
"Appraisal" is defined in Section 3.1 of the Participation Agreement.
---------
"Appraiser" means a MAI appraiser satisfactory to the Agent and the Lessor.
---------
"Architect" means with respect to any Leased Property the architect engaged
---------
in connection with the construction of the related Building.
"Architect's Agreement" means, with respect to any Leased Property, the
---------------------
architectural services agreement, if any, between the related Lessee and the
related Architect.
"Assignment of Lease and Rents" means, with respect to any Leased Property,
-----------------------------
the Assignment of Lease and Rents, dated as of
-4-
<PAGE>
the related Closing Date, from the Lessor to the Agent substantially in the form
of Exhibit B to the Loan Agreement.
"Awards" means any award or payment received by or payable to Lessor or a
------
Lessee on account of any Condemnation or Event of Taking (less the actual costs,
fees and expenses incurred in the collection thereof, for which the Person
incurring the same shall be reimbursed from such award or payment).
"B Loan" means the B Percentage of Loans made by Lender pursuant to the
------
Loan Agreement and the Participation Agreement.
"B Note" is defined in Section 2.2 of the Loan Agreement.
------
"B Percentage" means 12%.
------------
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended.
---------------
"Base Note(s)" is defined in Section 2.2 of the Loan Agreement.
------------
"Base Term" means, with respect to any Leased Property, (a) the period
---------
commencing on the initial Closing Date and ending on the fifth (5th) anniversary
of such Closing Date or (b) such shorter period as may result from earlier
termination of the related Lease as provided therein.
"Basic Rent" means, for any Lease Term, the rent payable pursuant to
----------
Section 4.1 of the related Lease, determined in accordance with the following:
each installment of Basic Rent payable on any Payment Date shall be in an amount
equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on
such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable on
----
such Payment Date.
"Board of Directors", with respect to a corporation, means either the Board
------------------
of Directors or any duly authorized committee of that Board which pursuant to
the by-laws of such corporation has the same authority as that Board as to the
matter at issue.
"Building" means, with respect to any Leased Property, the buildings,
--------
structures and improvements described on Appendix B of the related Lease
Supplement located or to be located on the related Land, along with all fixtures
used or useful in connection with the operation of such Leased Property,
including, without limitation, all furnaces, boilers, compressors, elevators,
fittings, pipings, connectives, conduits, ducts, partitions, equipment and
apparatus of every kind and description now or hereafter affixed or attached or
used or useful in
-5-
<PAGE>
connection with the Building, all equipment financed by Lessor and/or the
Lenders and all Alterations (including all restorations, repairs, replacements
and rebuilding of such buildings, improvements and structures) thereto (but in
each case excluding trade fixtures financed other than by Lessor or the
Lenders).
"Business Day" means any day other than a Saturday, Sunday or other day on
------------
which banks are required or authorized to be closed for business in Atlanta,
Georgia.
"Casualty" means an event of damage or casualty relating to all or part of
--------
any Leased Property which does not constitute an Event of Loss.
"Change in Control" means (1) any person or group within the meaning of
-----------------
(S)13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act")
--------
and the rules and regulations promulgated thereunder shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act),
directly or indirectly, of securities of Alco (or other securities convertible
into such securities) representing twenty percent (20%) of the combined voting
power of all securities of Alco entitled to vote in the election of directors,
other than securities having such power only by reason of the happening of a
contingency (hereinafter called a "Controlling Person"); or (2) a majority of
------------------
the Board of Directors of Alco shall cease for any reason to consist of (A)
individuals who on December 18, 1991 were serving as directors of Alco and (B)
individuals who subsequently become members of the Board if such individuals'
nomination for election or election to the Board is recommended or approved by a
majority of the Board of Directors of Alco. For purposes of clause (1) above, a
----------
person or group shall not be a Controlling Person if such person or group holds
voting power in good faith and not for the purpose of circumventing this
definition as an agent, bank, broker, nominee, trustee, or holder of revocable
proxies given in response to a solicitation pursuant to the 1934 Act, for one or
more beneficial owners who do not individually, or, if they are a group acting
in concert, as a group have the voting power specified in clause (1).
----------
"Claims" means liabilities, obligations, damages, losses, demands,
------
penalties, fines, claims, actions, suits, judgments, settlements, utility
charges, costs, expenses and disbursements (including, without limitation,
reasonable legal fees and expenses) of any kind and nature whatsoever.
"Closing Date" means, with respect to each Land Interest, the date on which
------------
such Land Interest is acquired and the initial
-6-
<PAGE>
Funding occurs with respect to such Land Interest under the Participation
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commitment" means as to each Participant, its obligation to make Fundings
----------
as investments in each Leased Property, or Loans to the Lessor, as the case may
be, in an aggregate amount not to exceed at any one time outstanding the amount
set forth for such Participant on Schedule 2.2 to the Participation Agreement
(as it may be adjusted from time to time pursuant to Section 6 of the
Participation Agreement).
"Commitment Percentage" means as to any Participant, at a particular time,
---------------------
the percentage of the aggregate Commitments in effect at such time constituted
by such Participant's Commitment, as such percentage is shown for such
Participant on Schedule 2.2 to the Participation Agreement (as it may be
adjusted from time to time pursuant to Section 6 of the Participation
Agreement).
"Completion Date" means the Business Day on which the conditions specified
---------------
in Section 3.5 of the Participation Agreement have been satisfied.
"Completion Date Appraisal" means that appraisal, dated as of the
-------------------------
Completion Date, delivered by the Appraiser pursuant to Section 3.5 of the
Participation Agreement.
"Condemnation" means any condemnation, requisition, confiscation, seizure
------------
or other taking or sale of the use, occupancy or title to any Leased Property or
any part thereof in, by or on account of any actual eminent domain proceeding or
other action by any Governmental Authority or other Person under the power of
eminent domain or otherwise or any transfer in lieu of or in anticipation
thereof, which in any case does not constitute an Event of Taking. A
Condemnation shall be deemed to have "occurred" on the earliest of the dates
that use, occupancy or title is taken.
"Consolidated Net Worth" shall be determined in accordance with GAAP and
----------------------
shall mean the sum (as reflected in the consolidated balance sheet of Alco and
its Consolidated Subsidiaries) of (i) the stated dollar amount of outstanding
capital stock, (ii) the stated dollar amount of additional paid in capital, if
any, plus (iii) the amount of surplus and retained earnings minus (iv) the cost
of treasury shares and the excess of redemption value over the stated value of
preferred stock of Alco and its Consolidated Subsidiaries.
-7-
<PAGE>
"Consolidated Subsidiaries" shall mean all Subsidiaries except the Finance
-------------------------
Leasing Subsidiaries.
"Construction" means, with respect to any Leased Property, the construction
------------
of the related Building pursuant to the related Plans and Specifications.
"Construction Conditions" means the conditions set forth in Section 3.5 of
-----------------------
the Participation Agreement.
"Construction Contract" means, with respect to any Leased Property, that
---------------------
certain construction contract, if any, between the applicable Lessee and a
General Contractor for the construction of the related Building, provided that
such contract shall be assigned by such Lessee to Lessor, and such assignment
shall be consented to by such General Contractor, pursuant to an assignment of
such construction contract substantially in the form of the Security Agreement
and Assignment set forth as Exhibit D to the Participation Agreement.
"Construction Force Majeure Event" means, with respect to any Leased
--------------------------------
Property:
(a) an act of God arising after the related Closing Date, or
(b) any change in any state or local law, regulation or other legal
requirement arising after such Closing Date and relating to the use of
the Land or the construction of a building on the Land,
which prevents the related Lessee from completing the Construction prior to the
Scheduled Construction Termination Date and which could not have been avoided or
which cannot be remedied by such Lessee or any Guarantor through the exercise of
all commercially reasonable efforts or the expenditure of funds and, in the case
of (b) above, the existence or potentiality of which was not known to and could
not have been discovered prior to such Closing Date through the exercise of due
diligence by such Lessee or any Guarantor.
"Construction Funding Limit" means with respect to each Land Interest, the
--------------------------
amount agreed upon in writing by the Lessee and the Participants.
"Construction Land Interest" is defined in Section 2.1(b) of the
--------------------------
Participation Agreement.
"Construction Term" means, with respect to any Leased Property, the period
-----------------
commencing on the related Closing Date and
-8-
<PAGE>
ending on the related Construction Term Expiration Date, or such shorter period
as may result from earlier termination of the related Lease as provided therein.
"Construction Term Expiration Date" means, with respect to any Leased
---------------------------------
Property, the earliest of the following:
(a) the related Completion Date,
(b) the date on which the aggregate Funded Amounts with respect to such
Leased Property equal (or exceed) the related Construction Funding
Limit, and
(c) the related Scheduled Construction Termination Date.
"Contractual Obligation", as applied to any Person, means any provision of
----------------------
any Securities issued by that Person or any indenture, mortgage, deed of trust,
contract, undertaking, agreement, instrument or other document to which that
Person is a party or by which it or any of its properties is bound or to which
it or any of its properties is subject (including, without limitation, any
restrictive covenant affecting any of the properties of such Person).
"Credit Agreement" means the Credit Agreement dated as of December 18,
----------------
1991, as it has been heretofore amended from time to time and as the same may be
amended, restated, supplemented, renewed, extended or otherwise modified from
time to time, among Alco, various financial institutions as Banks and CoreStates
Bank, N.A., as agent.
"Deed" means, with respect to any Land Interest, a General Warranty Deed,
----
dated the applicable Closing Date, from the applicable Seller to the Lessor,
conveying such Land Interest, substantially in the form of Exhibit B to the
Participation Agreement.
"Early Termination Fee" means an amount equal to the applicable percentage
---------------------
of the aggregate outstanding principal amount of the Loans as set forth below:
<TABLE>
<CAPTION>
Year of Prepayment Percentage
------------------ ----------
<S> <C>
1 1.5%
2 1.0%
3 0.5%
4 0.25%
</TABLE>
-9-
<PAGE>
"Environmental Audit" means, with respect to each Land Interest, a Phase I
-------------------
Environmental Assessment, dated no more than 60 days prior to the related
Closing Date, by an environmental services firm satisfactory to the Agent and
the Lessor.
"Environmental Laws" means and include the Resource Conservation and
------------------
Recovery Act of 1976, (RCRA) 42 U.S.C. (S)(S) 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. (S)(S) 9601-9657, (CERCLA), the
Hazardous Materials Transportation Act of 1975, 49 U.S.C. (S)(S) 1801-1812, the
Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601-2671, the Clean Air Act, 42
U.S.C. (S)(S) 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. (S)(S) 136 et seq., and all similar federal, state and local
environmental laws, ordinances, rules, orders, statutes, decrees, judgments,
injunctions, codes and regulations, and any other federal, state or local laws,
ordinances, rules, codes and regulations, and any other federal, state or local
laws, ordinances, rules, codes and regulations relating to the environment,
human health or natural resources or the regulation or control of or imposing
liability or standards of conduct concerning human health, the environment,
Hazardous Materials or the clean-up or other remediation of any Leased Property,
or any part thereof, as any of the foregoing may have been from time to time
amended, supplemented or supplanted.
"Environmental Permits" means all permits, licenses, authorizations,
---------------------
certificates and approvals of Governmental Authorities required by Environmental
Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time or any successor federal statute.
"Event of Default" means any event or condition designated as an "Event of
----------------
Default" in Article XIII of any Lease.
"Event of Loss" is defined in Section 11.1 of each Lease.
-------------
"Event of Taking" is defined in Section 11.2 of each Lease.
---------------
"Excused Early Termination" is defined in Section 2.5 of the Loan
-------------------------
Agreement.
"Fair Market Rental Value" means, with respect to any Leased Property, the
------------------------
fair market rental value as determined by an independent appraiser chosen by
Lessor that would be obtained in an arm's-length lease between an informed and
willing lessee and
-10-
<PAGE>
an informed and willing lessor, in either case under no compulsion to lease, and
neither of which is related to Lessor or Lessees for the lease of such Leased
Property on the terms set forth, or referred to, in the related Lease. Such fair
market rental value shall be calculated as the value for the use of such Leased
Property to be leased in place at the Land, assuming, in the determination of
such fair market rental value, that such Leased Property is in the condition and
repair required to be maintained by the terms of such Lease (unless such fair
market rental value is being determined for the purposes of Section 14.1 of such
Lease and except as otherwise specifically provided in such Lease, in which case
this assumption shall not be made).
"Fair Market Sales Value" means, with respect to any Leased Property or any
-----------------------
portion thereof, the fair market sales value as determined by an independent
appraiser chosen by Lessor or, so long as the Notes are outstanding, the Agent
that would be obtained in an arm's-length transaction between an informed and
willing buyer (other than a lessee currently in possession) and an informed and
willing seller, under no compulsion, respectively, to buy or sell and neither of
which is related to Lessor or Lessees, for the purchase of such Leased Property.
Such fair market sales value shall be calculated as the value for the use of
such Leased Property, assuming, in the determination of such fair market sales
value, that such Leased Property is in the condition and repair required to be
maintained by the terms of the related Lease (unless such fair market sales
value is being determined for purposes of Section 14.1 of such Lease and except
as otherwise specifically provided in such Lease or the Participation Agreement,
in which case this assumption shall not be made).
"Final Rent Payment Date" is defined in Section 14.1(e) of each Lease.
-----------------------
"Finance Leasing Subsidiaries" means Alco Capital Resource, Inc., a
----------------------------
Delaware corporation, Alco Capital Resource Canada Limited, a Canadian
corporation, and TNL Financial, Inc., a Texas corporation, and their respective
successor corporations.
"Fiscal Year" means the fiscal year of the Guarantor and its Subsidiaries,
-----------
which shall be the twelve (12) months ending on the September 30.
"Funded Amount" means, as to the Lessor, the Lessor's Invested Amount, and,
-------------
as to each Lender, the outstanding principal of such Lender's Loans.
"Funded Debt" means any obligation payable more than one year from the date
-----------
of the creation thereof which under GAAP is
-11-
<PAGE>
shown on the consolidated balance sheet as a liability (excluding reserves for
deferred income taxes and other reserves to the extent that such reserves do not
constitute obligations for borrowed money and excluding the portion of any such
obligation property classified as a current liability) and including, without
limitation, capitalized leases.
"Funding" means any funding by the Participants pursuant to Section 2.2 of
-------
the Participation Agreement.
"Funding Date" means collectively, each Closing Date and each other date
------------
during the Construction Term on which a Funding occurs under Section 2 of the
Participation Agreement.
"Funding Request" is defined in Section 2.2 of the Participation Agreement.
---------------
"GAAP" means generally accepted accounting principles in the United States
----
of America as in effect from time to time.
"General Contractor" means with respect to any Leased Property the general
------------------
contractor under the related Construction Contract as may be selected by the
related Lessee.
"General Partner" is defined in the Participation Agreement.
---------------
"Governmental Action" means all permits, authorizations, registrations,
-------------------
consents, approvals, waivers, exceptions, variances, orders, judgments, decrees,
licenses, exemptions, publications, filings, notices to and declarations of or
with, or required by, any Governmental Authority, or required by any Applicable
Law and shall include, without limitation, all citings, environmental and
operating permits and licenses that are required for the use, occupancy, zoning
and operation of the Leased Property.
"Governmental Authority" means any foreign or domestic federal, state,
----------------------
county, municipal or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or any political subdivision thereof.
"Guarantor" means Alco Standard Corporation, an Ohio corporation.
---------
"Guaranty" means the Guaranty, dated as of November 8, 1994, by the
--------
Guarantor in favor of the Participants.
"Hazardous Material" means any substance, waste or material which is toxic,
------------------
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous,
-12-
<PAGE>
including petroleum, crude oil or any fraction thereof, petroleum derivatives,
by products and other hydrocarbons, or which is or becomes regulated by any
Governmental Authority, including any agency, department, commission, board or
instrumentality of the United States, the State of California, Missouri, Texas
or any jurisdiction in which a Leased Property is located or any political
subdivision thereof and also including, without limitation, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls ("PCBs") and radon gas.
"Houston Land Interest" is defined in Schedule 1 to the Participation
---------------------
Agreement.
"Indemnitee" means the Agent (in its individual capacity), each Lender, and
----------
the Lessor, and their respective Affiliates, successors, permitted assigns,
permitted transferees, employees, officers, directors and agents; provided,
--------
however, that in no event shall any Lessee or Guarantor be an Indemnitee.
- - -------
"Indemnitee Group" means the respective Affiliates, employees, officers,
----------------
directors and agents of the Agent (in its individual capacity), each Lender or
the Lessor, as applicable; provided, however, that in no event shall any Lessee
-------- -------
or Guarantor be a member of the Indemnitee Group.
"Inspecting Parties" is defined in Section 3.4 of each Lease.
------------------
"Land" means, with respect to any Lease, the land described in Appendix B
----
to the related Lease Supplement.
"Land Interest" means one of the three interests in Land described in
-------------
Schedule 1 to the Participation Agreement, as well as any substitute or
additional interest in Land that the Participants may accept from time to time
in their discretion at the request of a Lessee under the Participation
Agreement.
"Laws" means all ordinances, statutes, rules, regulations, orders,
----
injunctions, writs, treaties or decrees of any governmental or political
subdivision or agency thereof, or of any court or similar entity established by
any thereof.
"Lease" means, with respect to any Leased Property, a Lease and Development
-----
Agreement, entered into between the Lessor and a Lessee on the Closing Date
pursuant to Section 3.1 of the Participation Agreement, together with each Lease
Supplement thereto, with such modifications as are satisfactory to the Lessor
and the Agent in conformity with Applicable Law to assure customary remedies in
favor of the Participants in the jurisdiction where the Leased Property is
located.
-13-
<PAGE>
"Lease Balance" means, with respect to any Leased Property, as of any date
-------------
of determination, an amount equal to the aggregate sum of the outstanding
related Funded Amounts of all Participants, all accrued and unpaid interest on
the related Loans, all accrued and unpaid Yield on the related Lessor's Invested
Amount, all related unpaid fees owing to the Participants under the Operative
Documents, including the Early Termination Fee and all other amounts owing to
the Participants by the Lessee or any Guarantor under the Operative Documents.
"Lease Supplement" is defined in Section 2.1 of each Lease.
----------------
"Lease Term" means, with respect to any Lease, (a) the Base Term, as it may
----------
be renewed pursuant to Section 15.9 of such Lease or (b) such shorter period as
may result from earlier termination of such Lease as provided therein.
"Lease Termination Date" means, with respect to any Lease, the last day of
----------------------
the related Lease Term, as the same may be accelerated pursuant to such Lease.
"Leased Property" means a Land Interest and the related Building.
---------------
"Lenders" means Trust Company Bank and such other financial institutions,
-------
if any, who may become parties to the Loan Agreement as Lenders to the Lessor.
"Lender Basic Rent" means, for any Rent Period, the aggregate amount of
-----------------
interest accrued on the Loans pursuant to Section 2.4 of the Loan Agreement
during such Rent Period, plus the amount of principal then due pursuant to
Section 2.3 of the Loan Agreement, plus the amount of any Early Termination Fees
due under Section 2.5 of the Loan Agreement.
"Lessee" means, with respect to any Leased Property, Unisource Worldwide,
------
Inc. or AOP Inc., in each case in its capacity as lessee under the applicable
Lease.
"Lessor" means PPI SPV, L.P., a Pennsylvania limited partnership, in its
------
capacity as lessor under the Lease.
"Lessor Basic Rent" means, for any Rent Period, the aggregate amount of
-----------------
Yield accrued on the Lessor's Invested Amount under Section 2.3(a) of the
Participation Agreement during such Rent Period, in each case computed for the
actual number of days elapsed during such Rent Period on a 365-day (or 366-day,
if appropriate) year basis.
-14-
<PAGE>
"Lessor Liens" means Liens on or against any Leased Property, any Lease or
------------
any payment of Rent (a) which result from any act or omission of, or any Claim
against, the Lessor unrelated to the transactions contemplated by the Operative
Documents or (b) which result from any Tax owed by the Lessor, except any Tax
for which any Lessee is obligated to indemnify (including, without limitation,
in the foregoing exception, any assessments with respect to any Leased Property
noted on the related Title Policy or assessed in connection with any
construction or development by any Lessee).
"Lessor's Invested Amount" means, with respect to any Lease, the amounts
------------------------
funded by the Lessor pursuant to Section 2 of the Participation Agreement that
are not proceeds of Loans by the Lender, as increased during the related
Construction Term pursuant to Section 2.3(c) of the Participation Agreement.
"LIBOR Rate" means, with respect to any Rent Period, the rate per annum
----------
equal to the quotient of (i) the offered rate for deposits in U.S. Dollars of
amounts equal or comparable to the principal amount of the Loans offered for a
term comparable to such Rent Period (or, in the case of the first Rent Period
for any Loan made on a Closing Date, the one, two or three month period
beginning on such Closing Date that ends closest to the first Payment Date
thereafter), which rates appear on the Reuters Screen LIBO Page as of 11:00 a.m.
London time, two (2) Business Days prior to the first day of such Rent Period,
provided that (x) if more than one such offered rate appears on the Reuters
- - --------
Screen LIBO Page, the rate used to determine the LIBOR Rate will be the
arithmetic average (rounded upward, if necessary, to the next higher 1/16th of
1%) of such offered rates, or (y) if no such offered rates appear on such page,
the rate used for such Rent Period will be the arithmetic average (rounded
upward, if necessary, to the next higher 1/16th of 1% of rates quoted by not
less than two major banks in New York, New York, selected by the Agent, at
approximately 10:00 a.m., New York time, two (2) Business Days prior to the
first day of such Rent Period, for deposits in U.S. Dollars offered to leading
European banks for a period comparable to such Interest Period in an amount
comparable to the principal amount of the Loans, divided by (ii) a number equal
to 1.00 minus the LIBOR Reserve Percentage, the rate so determined to be rounded
upwards to the nearest multiple of 1/100th of 1%. All determinations of Yield,
interest, Lender Basic Rent, LIBOR Rate, Alternative Rate, and Overdue Rate by
the Agent shall, in the absence of demonstrable error, be binding and conclusive
upon the Lessees.
"LIBOR Reserve Percentage" means, for any Rent Period, the aggregate
------------------------
reserve requirement (including any basic, emergency, supplemental, marginal or
other reserve requirement) which is
-15-
<PAGE>
actually imposed on the Agent during such Rent Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages) under
Regulation D of the Board of Governors of the Federal Reserve System with
respect to liabilities or assets consisting of or including "Eurocurrency
liabilities" having a term equal to the applicable Rent Period. The LIBOR Rate
shall be adjusted automatically on and as of the effective date of any change in
the LIBOR Reserve Percentage.
"Loan" shall have the meaning specified in Section 2.1 of the Loan
----
Agreement.
"Loan Agreement" means the Loan Agreement, dated as of November 8, 1994,
--------------
between the Lessor, the Agent and the Lenders.
"Loan Documents" means the Loan Agreement, the Notes, the Assignments of
--------------
Lease and Rents, the Mortgages and all documents and instruments executed and
delivered in connection with each of the foregoing.
"Loan Event of Default" means any of the events specified in Section 5.1 of
---------------------
the Loan Agreement, provided that any requirement for the giving of notice, the
--------
lapse of time, or both, or any other condition, event or act has been satisfied.
"Loan Potential Event of Default" means any event, condition or failure
-------------------------------
which, with notice or lapse of time or both, would become a Loan Event of
Default.
"Loss Proceeds" is defined in Section 11.6 of each Lease.
-------------
"Material Adverse Effect" means a material adverse effect upon the
-----------------------
financial condition, operations, performance or properties of the Lessees and
the Guarantor, taken as a whole, or the ability of the Guarantor or any Lessee
to perform in any material respect under the Operative Documents or the value,
utility or useful life of any Leased Property, or the validity, enforceability
or legality of any of the Operative Documents, or the priority, perfection or
status of any Participant's interest in any Leased Property.
"Mortgage" means, with respect to any Leased Property, that certain
--------
mortgage or deed of trust, dated as of the related Closing Date, by Lessor to
the Agent, in the form of Exhibit D attached to the Participation Agreement,
with such modifications as are satisfactory to the Lessor and the Agent in
conformity with Applicable Law to assure customary remedies in favor of the
Agent in the jurisdiction where the Leased Property is located.
-16-
<PAGE>
"New Taxes" is defined in Section 7 of the Participation Agreement.
---------
"Notes" means the A Note and the B Note issued by the Lessor under the Loan
-----
Agreement, and any and all notes issued in replacement or exchange therefor in
accordance with the provisions thereof.
"Officer's Certificate" of a Person means a certificate signed by the
---------------------
Chairman of the Board or the President or any Executive Vice President or any
Senior Vice President or any other Vice President of such Person signing with
the Treasurer or any Assistant Treasurer or the Controller or any Assistant
Controller or the Secretary or any Assistant Secretary of the such Person, or by
any Vice President who is also Controller or Treasurer signing alone.
"Operative Documents" means the Participation Agreement, the Guaranty, the
-------------------
Deeds, the Leases, the Security Agreement and Assignment, the Notes, the Loan
Agreement, the Assignments of Lease and Rents, the Mortgages and the other
documents delivered in connection with the transactions contemplated by the
Participation Agreement.
"Overdue Rate" means the lesser of (a) the highest interest rate permitted
------------
by Applicable Law and (b) an interest rate per annum (calculated on the basis of
a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Alternative
Rate in effect from time to time.
"Participant Balance" means, with respect to any Leased Property for any
-------------------
Participant as of any date of determination, an amount equal to the sum of the
outstanding related Funded Amount of such Participant, all accrued and unpaid
interest or Yield thereon, all unpaid related fees owing to such Participant
under the Operative Documents, including any Early Termination Fee, and all
other related amounts owing to such Participant by either Lessee or any
Guarantor under the Operative Documents.
"Participants" means the Lessor, the Agent and the Lenders, collectively.
------------
"Participation Agreement" means the Participation Agreement, dated as of
-----------------------
November 8, 1994, among the Lessees, the Guarantor, the Lessor, the Agent and
the Lenders.
"Payment Date" means the first day of each January, April, July and
------------
October, or, if such day is not a Business Day, the next Business Day.
-17-
<PAGE>
"Permitted Liens" means the following with respect to any Leased Property:
---------------
(a) the respective rights and interests of the Lessee, the Lessor and the
Lender, as provided in the Operative Documents, (b) Liens for Taxes either not
yet due or being contested in good faith and by appropriate proceedings, so long
as enforcement thereof is stayed pending such proceedings, (c) materialmen's,
mechanics', workers', repairmen's, employees' or other like Liens arising after
the related Closing Date in the ordinary course of business for amounts either
not yet due or being contested in good faith and by appropriate proceedings, so
long as enforcement thereof is stayed pending such proceedings, (d) Liens
arising after such Closing Date out of judgments or awards with respect to which
at the time an appeal or proceeding for review is being prosecuted in good
faith, so long as the enforcement thereof has been stayed pending such appeal or
review, (e) easements, rights of way, reservations, servitudes and rights of
others against the Land which are listed on Schedule B to the Title Policy, and
(f) assignments, leases and subleases expressly permitted by the Operative
Documents.
"Person" means an individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, nonincorporated organization or
government or any agency or political subdivision thereof.
"Plans and Specifications" means with respect to any Building the final
------------------------
plans and specifications for such Building prepared by the Architect, and
referred to by the Appraiser in the Appraisal, as such Plans and Specifications
may be hereafter amended, supplemented or otherwise modified from time to time.
"Pleasanton Building" means the distribution center to be built on the
-------------------
Pleasanton Land Interest in accordance with the Plans and Specifications.
"Pleasanton Land Interest" is defined in Schedule 1 to the Participation
------------------------
Agreement.
"Pleasanton Lease" means the Lease in respect of the Pleasanton Land
----------------
Interest.
"Potential Event of Default" means any event, condition or failure which,
--------------------------
with notice or lapse of time or both, would become an Event of Default.
"Purchase Agreement" means with respect to any Land, the purchase agreement
------------------
with the Seller for the conveyance of such Land to the Lessor.
"Purchase Option" is defined in Section 15.1 of each Lease.
---------------
-18-
<PAGE>
"Recourse Deficiency Amount" means the sum of (i) the aggregate principal
--------------------------
amount of the A Loans, plus (ii) all accrued and unpaid interest on the A Loans.
----
"Regulations" means the income tax regulations promulgated from time to
-----------
time under and pursuant to the Code.
"Release" means the release, deposit, disposal or leak of any Hazardous
-------
Material into or upon or under any land or water or air, or otherwise into the
environment, including, without limitation, by means of burial, disposal,
discharge, emission, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
"Release Date" means, with respect to any Leased Property, the earlier of
------------
(i) the date that the Participant Balances of the Lenders have been paid in
full, and (ii) the date on which the Agent gives notice to the Lessor that the
Lenders release any and all interest they may have in such Leased Property, and
all proceeds thereof, and any rights to direct, consent or deny consent to any
action by the Lessor with respect to such Leased Property.
"Remarketing Option" is defined in Section 15.6 of each Lease.
------------------
"Rent" means Basic Rent and Supplemental Rent, collectively.
----
"Rent Period" means, with respect to any Leased Property, initially the
-----------
period commencing on the related Closing Date and ending on the first Payment
Date, and thereafter each period from one Payment Date to the next following
Payment Date.
"Report" is defined in Section 7.5 of the Participation Agreement.
------
"Required Lenders" means, at any time, Lenders holding an aggregate
----------------
outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate
outstanding principal amount of all Loans.
"Required Participants" means, at any time, Participants holding an
---------------------
aggregate outstanding principal amount of Funded Amounts equal to at least 66-
2/3% of the aggregate outstanding principal amount of all Funded Amounts.
"Requirements of Law" means, as to any Person, the charter and by-laws or
-------------------
other organizational or governing documents of such Person, and any law, rule or
regulation, permit, approval,
-19-
<PAGE>
authorization, license or variance, order or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject, including, without limitation, the Securities Act, the
Securities Exchange Act, Regulations G, T, U and X, and any building,
environmental or land use requirement or permit or occupational safety or health
law, rule or regulation.
"Responsible Officer" means the Chairman or Vice Chairman of the Board of
-------------------
Directors, the Chairman or Vice Chairman of the Executive Committee of the Board
of Directors, the President, any Senior Vice President or Executive Vice
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer.
"Scheduled Construction Termination Date" means with respect to any
---------------------------------------
Building the twelve-month anniversary of the related Closing Date.
"SEC" means the United States Securities and Exchange Commission.
---
"Securities" means any stock, shares, voting trust certificates, bonds,
----------
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Security Agreement and Assignment" means, with respect to any Leased
---------------------------------
Property, the Security Agreement and Assignment (Construction Contract,
Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans,
Specifications and Drawings) from the Lessee to the Lessor, substantially in the
form of Exhibit C to the Participation Agreement.
"Seller" means as to any Leased Property, the seller thereof to the Lessor
------
on the related Closing Date.
"Senior Funded Debt" means all Funded Debt other than Subordinated Funded
------------------
Debt.
-20-
<PAGE>
"St. Louis Land Interest" is defined in Schedule 1 to the Participation
-----------------------
Agreement.
"Subordinated Funded Debt" means Funded Debt which has been subordinated to
------------------------
all other Senior Funded Debt pursuant to subordination provisions acceptable to
the Lenders.
"Subsidiary" means for any Person any corporation or other entity of which
----------
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are at the time directly or indirectly owned by such Person.
"Supplemental Rent" means any and all amounts, liabilities and obligations
-----------------
other than Basic Rent which the related Lessee assumes or agrees or is otherwise
obligated to pay under the Lease or any other Operative Document (whether or not
designated as Supplemental Rent) to Lessor, the Agent, any Lender or any other
party, including, without limitation, amounts under Article XVII of each Lease,
and indemnities and damages for breach of any covenants, representations,
warranties or agreements, and all overdue or late payment charges in respect of
any Loan or other Funded Amount.
"Surrender Option" is defined in Section 15.6 of each Lease.
----------------
"Tax" or "Taxes" is defined in Section 7.4 of the Participation Agreement.
--- -----
"Tax Indemnitee" means the Lessor, Lender and their respective Affiliates,
--------------
successors, permitted assigns, permitted transferees, employees, officers,
directors and agents thereof, provided, however, that in no event shall any
-------- -------
Lessee or any Guarantor be a Tax Indemnitee.
"Title Policy" is defined in Section 3.1 of the Participation Agreement.
------------
"Transaction" means all the transactions and activities referred to in or
-----------
contemplated by the Operative Documents.
"UCC" means the Uniform Commercial Code of Georgia, as in effect from time
---
to time.
"Unfunded Benefit Liabilities" means with respect to any Employee Benefit
----------------------------
Plan at any time, the amount of unfunded benefit liabilities of such Employee
Benefit Plan at such time as determined under ERISA Section 4001(a)(18) which
shall not be less than the accumulated benefit obligation, as disclosed in
-21-
<PAGE>
accordance with FAS 87, over the fair market value of Employee Benefit Plan
assets.
"Unisource" means Unisource Worldwide, Inc., a Delaware corporation.
---------
"Yield" is defined in Section 2.3 of the Participation Agreement.
-----
-22-
<PAGE>
EXHIBIT G-1
to Participation Agreement
FORM OF OPINION OF COUNSEL TO LESSEES AND GUARANTOR
---------------------------------------------------
November 8, 1994
To Lessor, the Agent and the Lender
as defined in the Participation
Agreement hereinafter referred to
Re: Alco Lease Transaction
----------------------
Ladies and Gentlemen:
I have acted as counsel to Unisource Worldwide, Inc., a Delaware
corporation ("Unisource"), AOP Inc., a Delaware corporation ("AOP" and together
--------- ---
with Unisource, collectively the "Lessees" and individually a "Lessee"), and
------- ------
Alco Standard Corporation, an Ohio corporation (the "Guarantor"), in connection
---------
with the transactions contemplated by the Participation Agreement (as
hereinafter defined). I have examined and am familiar with originals of or
copies identified to my satisfaction of the Participation Agreement, dated as of
November 8, 1994 (as heretofore amended, the "Participation Agreement"), among
-----------------------
the Lessees, the Guarantor, PPI SPV, L.P., as Lessor, Pitcairn SPV, Inc., as
General Partner of Lessor, and Trust Company Bank, as Lender and Agent, the
other Operative Documents, and such other documents and proceedings as I have
considered necessary for the purpose of rendering this opinion. In addition, I
have examined and am familiar with such other legal and factual matters as I
have deemed necessary for the purpose of rendering this opinion. Capitalized
terms used in this opinion and not otherwise defined herein shall have the
respective meanings specified in Appendix A to the Participation Agreement.
This opinion is being furnished to you at the request of the Lessees and the
Guarantor pursuant to Section 3.2(vii)(1) of the Participation Agreement.
In rendering this opinion I have assumed: (a) the genuineness of the
signatures on all documents and instruments, other than those on behalf of the
Lessees and the Guarantor, and the authenticity of all documents submitted as
originals, and the conformity to originals of all documents submitted as
photostatic or certified copies; (b) that each of the parties to the Operative
Documents, other than the Lessees and the Guarantor as to which I opine herein,
has all the legal capacity, power and authority required for it to enter into
the Operative Documents to which it is a party, and to perform its respective
obligations thereunder; (c) that all such parties, other than the Lessees and
the Guarantor as to which I opine herein, have received any
<PAGE>
corporate, governmental or other authorization required by any applicable
charter, by-law, law or regulation; (d) the due execution and delivery of the
Operative Documents by each of the parties thereto, other than Lessees and the
Guarantor; (e) that there are no agreements between any parties which would
alter the agreements set forth in the Operative Documents; and (f) that the
Operative Documents constitute the legal, valid and binding obligations of the
respective parties thereto, if any, other than the Lessees and the Guarantor as
to which I opine herein.
Based upon the foregoing, I am of the opinion that:
1. Each Lessee and the Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of its
incorporation and has full corporate power and authority to conduct its business
as presently conducted, to own or hold under lease its properties, to enter into
and perform its obligations under the Operative Documents to which it is a
party, and is duly qualified as a foreign corporation authorized to do business
and is in good standing in every jurisdiction in which its failure to be so
qualified would have a material adverse effect on its ability to perform its
obligations under the Operative Documents to which it is a party or upon its
financial condition or its business as presently conducted. Unisource is duly
qualified as a foreign corporation authorized to do business and is in good
standing in the States of California, Missouri and Texas.
2. The execution and delivery by each of each Lessee and the
Guarantor of, the consummation by it of the transactions provided for in, and
the compliance by it with all of the provisions of, each Operative Document to
which it is a party have been duly authorized by all necessary corporate action
on its part; and neither the execution and delivery thereof, nor the
consummation of the transactions contemplated thereby (including, without
limitation, in the case of each Lessee, the operation of the Leased Property
under its Lease), nor compliance by it with any of the terms and provisions
thereof (i) requires any approval of its stockholders, or approval or consent of
any trustee or holders of any of its indebtedness or other obligations, (ii)
contravenes or will contravene any Applicable Laws currently in effect
applicable to or binding upon it or any of its property, or, in the case of each
Lessee, its Leased Property, (ii) results in any breach of or constitutes any
default under, or results in the creation of any Lien (other than the respective
rights and interests of the Lessees, the Lessor, the Agent and the Lenders as
provided in the Operative Documents) upon any of its property under, (A) any
indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales
contract, loan or credit arrangement or other material agreement or instrument
to which its or any of its properties may be bound or by which
-2-
<PAGE>
the Leased Property may be materially adversely affected, (B) its certificate of
incorporation or (C) its Code of Regulations or (iv) does or will require any
Governmental Action by any Governmental Authority except, in the case of the
Lessees, for the filings and recordings described in Section 3.1(a) of the
Participation Agreement to perfect the rights of Lessor, the Agent and the
Lenders intended to be created by the Operative Documents.
3. Each Operative Document to which either Lessee or the Guarantor
is a party constitutes its legal, valid and binding obligation enforceable
against it in accordance with the terms thereof, except as such enforceability
may be limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and by general equitable principles.
4. To my knowledge, there is no action, proceeding or investigation
pending or threatened which questions the validity of the Operative Documents to
which either Lessee or the Guarantor is a party or any action taken or to be
taken pursuant thereto; and there is no action, proceeding or investigation
pending or threatened (i) which is likely to result, either in any case or in
the aggregate, in any material adverse change in the ability of either Lessee or
the Guarantor to perform its obligations under the Operative Documents to which
it is a party or, in the case of either Lessee, its rights in its Leased
Property, or (ii) that, if adversely determined, would materially adversely
affect either Lessee's or the Guarantor's financial condition, business or
operations.
5. Neither of the Lessees nor the Guarantor is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
6. Neither of the Lessees nor the Guarantor is a "holding company",
or a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
7. Neither the Lender nor the Agent will become (i) solely by
reason of entering into the Operative Documents or the consummation of the
transactions contemplated thereby subject to ongoing regulation of its
operations by a Governmental Authority; or (ii) except for regulation the
applicability of which depends upon the existence of facts in addition to the
ownership of, or the holding of any interest in, the Leased Property or any
interest therein upon the exercise of remedies under either Lease or any
Mortgage, subject to ongoing regulation of its operations by any Governmental
Authority.
-3-
<PAGE>
8. It is not necessary in connection with the offer, issuance, sale
or delivery of the Leases or the Notes to register such securities under the
Securities Act of 1933, as amended.
9. The provisions of the Operative Documents concerning interest,
Yield, prepayment premiums, default interest, late charges and other charges,
including the methods of calculation and payment thereof, are not usurious
under, or otherwise violative of, the laws of the Commonwealth of Pennsylvania.
I am a member of the Bar of the Commonwealth of Pennsylvania. The
opinions expressed herein are limited exclusively to the laws of the
Commonwealth of Pennsylvania and the Federal laws of the United States of
America and the rules and regulations, if any, under each of said laws.
Very truly yours,
-4-
<PAGE>
EXHIBIT G-2
to Participation Agreement
FORM OF OPINION OF LOCAL COUNSEL FOR LESSEE
-------------------------------------------
__________, 199_
To the Lessor, the Agent and the
Lenders as defined in the Participation
Agreement hereinafter
referred to
Re: Alco Lease Transaction
----------------------
Ladies and Gentlemen:
We have acted as special _____________ counsel to ___________, a
__________ corporation (the "Lessee"), in connection with the transactions
------
contemplated by the Participation Agreement. We have examined and are familiar
with originals of or copies identified to our satisfaction of (i) the
Participation Agreement, dated as of November 8, 1994 (as heretofore amended,
the "Participation Agreement"), among the Lessee, [INSERT OTHER LESSEE'S NAME],
-----------------------
PPI SPV, L.P., as Lessor, Pitcairn SPV, Inc., as General Partner of Lessor, the
Lenders party thereto and Trust Company Bank, as Agent; and (ii) the other
Operative Documents listed on Schedule A hereto (together with the Participation
Agreement, the "Subject Documents"). In addition, we have examined and are
-----------------
familiar with such legal matters as we have deemed necessary for the purpose of
rendering this opinion. Capitalized terms used in this opinion and not
otherwise defined herein shall have the respective meanings specified in
Appendix A to the Participation Agreement. This opinion is being furnished to
you at the request of the Lessee pursuant to Section 3.1(a)(xii) of the
Participation Agreement in connection with the Closing Date related to the
Leased Property covered by the Subject Documents.
In rendering this opinion we have assumed: (a) the genuineness of the
signatures on all documents and instruments and the authenticity of all
documents submitted as originals, and the conformity to originals of all
documents submitted as photostatic or certified copies; (b) that each of the
parties to the Subject Documents has all the legal capacity, power and
<PAGE>
authority required for it to enter into the Subject Documents to which it is a
party, and to perform its respective obligations thereunder; (c) that all such
matters have received any corporate or other authorization required by any
applicable charter, by-law, law or regulation; (d) the due execution and
delivery of the Subject Documents by each of the parties thereto; and (e) that
there are no agreements between any parties that would alter the agreements set
forth in the Subject Documents. To the extent that the assumptions in clauses
(b) and (c) relate to any laws or regulations, such assumptions relate only to
those laws and regulations as to which we are not opining herein.
Based upon the foregoing, we are of the opinion that:
1. The Lessee is duly qualified as a foreign corporation authorized
to do business in, and is in good standing in, the State of _____________ (the
"State").
-----
2. None of the Agent and the Lenders are required under the laws of
the State to qualify as a foreign corporation, foreign trust company or
otherwise in the State, or to file any designation for service of process in the
State, solely as a result of its execution, delivery and performance of the
Subject Documents to which it is a party.
3. Each of the Mortgage, the Lease (as supplemented by the Lease
Supplement) and the Assignment of Lease and Rents constitutes the legal, valid
and binding obligation of the parties thereto enforceable against each such
party in accordance with the terms thereof, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and by general equitable principles.
4. The Deed delivered on the Closing Date for the Leased Property
is in form sufficient under the laws of the State to convey valid title to the
property described therein, and such instruments, when filed or recorded with
________________________ (the "Recording Office") will have been filed or
----------------
recorded in the appropriate public offices in the State in which such filing or
recording is necessary to convey valid title to the property described therein
to the Lessor.
5. The Lease and the Lease Supplement are in forms sufficient under
the laws of the State to demise to the Lessee a valid leasehold interest in the
Leased Property. The [Lease and the] Lease Supplement, when recorded with the
Recording Office, will have been filed or recorded in all public offices in the
State in which such filing or recording is necessary to provide constructive
notice of the Lease on the Leased Property to third
-2-
<PAGE>
Persons and to establish of record the interest of the Lessor thereunder.
6. If the transactions as provided for in the Lease are
characterized as a loan:
[(a) The provisions of the Lease are effective to create a
power of sale in favor of the Lessor.]
(b) The [Lease and the] Lease Supplement [are][is] in form
sufficient under the laws of the State to create a valid lien
or security interest in favor of the Lessor in the Leased
Property described therein, and when recorded with the
Recording Office, will have been filed or recorded in all
public offices in the State in which such filing or recording
is necessary to perfect the interest of the Lessor thereunder
to the extent that such Leased Property constitutes real
estate. The Lease provides the Lessor with all remedies
customarily obtained by lenders in the State in connection with
the type of loan and security provided thereby. The foreclosure
of the Lease would not restrict, affect or impair the Lessee's
liability with respect to the obligations secured thereby or
the Lessor's rights or remedies with respect to the foreclosure
or enforcement of any other security interests or liens
securing such obligations to the extent any deficiency remains
unpaid after application of the proceeds of the foreclosure.
(c) Execution and delivery by the Lessee of, and enforcement by
the Lessor of any of its remedies under, the Lease will not
affect the validity or priority of the liens and security
interests in favor of the Agent and the Lenders created by the
Mortgage.
7. The Mortgage, the Assignment of Lease and Rents and the Security
Agreement and Assignment are in form sufficient under the laws of the State to
create valid liens or security interests in favor of the Lender in the
collateral described therein, and when recorded with the Recording Office, will
have been filed or recorded in all public offices in the State in which such
filing or recording is necessary to perfect the interest of the Lender
thereunder to the extent that such collateral constitutes real estate. The
Mortgage, the Assignment of Lease and Rents and the Security Agreement and
Assignment provide the Lender with all remedies customarily obtained by lenders
in the State in connection with the type of loan and security provided for by
the Loan Agreement. The foreclosure of the Mortgage would not restrict, affect
or impair the Lessor's liability with respect to the obligations secured thereby
or the Lender's rights or remedies with respect to the foreclosure or
enforcement of any
-3-
<PAGE>
other security interests or liens securing such obligations to the extent any
deficiency remains unpaid after application of the proceeds of the foreclosure.
8. The law (statutory or otherwise) of the State does not require a
lienholder to make an election of remedies where such lienholder holds security
interests and liens on both the real and the personal property of a debtor or to
take recourse first or solely against or otherwise exhaust its remedies against
its collateral before otherwise proceeding to enforce against such debtor the
obligations of such debtor. Nothing in the laws of this State will hinder or
prevent enforcement in the State of the obligations of the Lessee or the
Guarantor under any of the Subject Documents to which it is, respectively, a
party.
9. Under the laws of the State the priority of the Mortgage, the
Lease (if the transactions provided for in the Lease are characterized as a
loan) and the Assignment of Lease and Rents, to the extent that such documents
secure future advances and are a conveyance of or create a lien against a real
property interest, is determined by the respective dates on which such documents
are recorded.
10. The UCC Financing Statements which are to be recorded or filed
within the State, the forms of which are attached hereto, are in form sufficient
under the laws of the State for filing or recording, and when recorded with the
Recorder's Office and the _______________ Secretary of State will have been
filed or recorded in all public offices in the State in which such filing or
recording is necessary to perfect the interests of the Lessor and the Agent in
the collateral described therein to the extent the same can be perfected by
filing or recording in the State.
11. Neither the execution and delivery of the Subject Documents, nor
the fulfillment of or the compliance with the provisions thereof, by the Lessor,
the Agent and the Lenders, results in a violation of, or contravenes any State
statute, law, rule, code, ordinance or regulation to which the Lessor, the Agent
or the Lenders are subject.
12. No approval, consent, or withholding of objection on the part
of, or filing or registration with, any governmental authority or regulatory
body in the State is required for the due execution and delivery of the Subject
Documents by the Lessor, the Agent or the Lenders, or the performance of the
transactions by the Lessor, the Agent or the Lenders as contemplated thereby.
13. Except for federal, state and local franchise, withholding and
income taxes, no taxes, fees or other charges imposed by the State, ___________
County or any other local
-4-
<PAGE>
governmental entity are payable by Lessor, the Agent or the Lenders solely as a
result of (i) the issuance of the Notes on the date hereof, (ii) the acquisition
by the Lessor of the Leased Property, or (iii) (except for nominal filing or
recording fees payable at the time of filing or recording) the execution,
delivery, recordation or filing (where applicable) of the Subject Documents and
all other instruments delivered in connection with the transactions contemplated
thereby.
14. The provisions in the Subject Documents concerning interest,
Yield, loan fees, late fees, prepayment premiums, default rate of interest and
other charges, including the methods of calculation and payment thereof, are not
usurious under, or otherwise violative of, the laws of the State.
15. Under the laws of the State and local jurisdictions therein,
there is no statutory or regulatory lien in favor of any Governmental Authority
for (a) liability under the State environmental laws or regulations, or (b)
damages (including natural resource damages) arising from, or costs incurred by,
such Governmental Authority in response to the release of Hazardous Material
into the environment.
16. Under the laws of the State and local jurisdictions therein,
there are no statutory or regulatory requirements relating to the transfer of
ownership or operation, sale or foreclosure of the Leased Property which require
notification of the State or the local jurisdiction of such transfer, sale or
foreclosure, certification that there has been no discharge of Hazardous
Material or other substances, or, in the event of a discharge, responsibility of
the Lessor, the Agent or the Lenders, as appropriate, for the undertaking of
remedial measures to alleviate environmental contamination resulting from such
discharge.
We are members of the Bar of the State. The opinions expressed herein
are limited exclusively to the laws of the State and the rules and regulations,
if any, under each of said laws. Certain of the Subject Documents purport to be
governed by laws of states other than the State. With your permission, we have
assumed for the purposes of this opinion (contrary to the express provisions
thereof) that such agreements would be governed by and construed and interpreted
in accordance with the laws of the State.
Very truly yours,
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<PAGE>
EXHIBIT G-3
TO PARTICIPATION AGREEMENT
FORM OF OPINION OF LESSOR'S COUNSEL
-----------------------------------
November 8, 1994
To Lessee, the Agent and the
Lenders as defined in the
Participation Agreement hereinafter
referred to
Re: Alco Lease Transaction
----------------------
Ladies and Gentlemen:
We have acted as counsel to PPI SPV, L.P., a Pennsylvania limited
partnership (the "Lessor"), and Pitcairn SPV, Inc., a Pennsylvania corporation
------
and general partner of the Lessor (the "General Partner") in connection with the
---------------
transactions contemplated by the Participation Agreement (as hereinafter
defined). We have examined and are familiar with originals of or copies
identified to our satisfaction of the Participation Agreement, dated as of
November 8, 1994 (as heretofore amended, the "Participation Agreement"), among
-----------------------
the Lessor, the General Partner, Unisource Worldwide, Inc. and AOP Inc., as
Lessees, Alco Standard Corporation, as Guarantor, and Trust Company Bank, as
Lender and Agent, the other Operative Documents, and such other documents and
proceedings as we have considered necessary for the purpose of rendering this
opinion. In addition, we have examined and am familiar with such other legal
and factual matters as we have deemed necessary for the purpose of rendering
this opinion. Capitalized terms used in this opinion and not otherwise defined
herein shall have the respective meanings specified in Appendix A to the
Participation Agreement. This opinion is being furnished to you at the request
of the Lessor pursuant to Section 3.2(vii) of the Participation Agreement.
In rendering this opinion we have assumed: (a) the genuineness of
the signatures on all documents and instruments, other than those on behalf of
the Lessor and the General Partner, and the authenticity of all documents
submitted as originals, and the conformity to originals of all documents
submitted as photostatic or certified copies; (b) that each of the parties to
the Operative Documents, other than the Lessor and the General Partner as to
which we opine herein, has all the legal capacity, power and authority required
for it to enter into the Operative Documents to which it is a party, and to
perform its respective obligations thereunder; (c) that all such parties, other
than the Lessor and the General Partner as to which we opine herein, have
<PAGE>
received any corporate, governmental or other authorization required by any
applicable charter, by-law, law or regulation; (d) the due execution and
delivery of the Operative Documents by each of the parties thereto, other than
Lessor and the General Partner; (e) that there are no agreements between any
parties which would alter the agreements set forth in the Operative Documents;
and (f) that the Operative Documents constitute the legal, valid and binding
obligations of the respective parties thereto, if any, other than the Lessor and
the General Partner as to which we opine herein.
Based upon the foregoing, I am of the opinion that:
1. The Lessor is a limited partnership duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has full power and authority to conduct its business as presently conducted,
to own or hold under lease its properties, to enter into and perform its
obligations under the Operative Documents to which it is a party, and is duly
qualified as a foreign limited partnership authorized to do business and is in
good standing in every jurisdiction in which its failure to be so qualified
would have a material adverse effect on its ability to perform its obligations
under the Operative Documents to which it is a party or upon its financial
condition or its business as presently conducted. The General Partner is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has full power and authority to enter
into and perform its obligations under the Participation Agreement.
2. The execution and delivery by the Lessor and the General Partner
of, the consummation by each of the transactions provided for in, and the
compliance by each with all of the provisions of, each Operative Document to
which it is a party have been duly authorized by all necessary partnership
action on its part; and neither the execution and delivery thereof, nor the
consummation of the transactions contemplated thereby (including, without
limitation, the acquisition of the Leased Property), nor compliance by it with
any of the terms and provisions thereof (i) requires any approval of its
partners or stockholders, as the case may be, or approval or consent of any
trustee or holders of any of its indebtedness or other obligations, (ii)
contravenes or will contravene any Applicable Law currently in effect applicable
to or binding upon it or any of its property, (iii) results in any breach of or
constitutes any default under, or results in the creation of any Lien (other
than the respective rights and interests of the Lessees, the Lessor, the Agent
and the Lenders as provided in the Operative Documents) upon any of its property
under, (A) any indenture, mortgage, chattel mortgage, deed of trust, lease,
conditional sales contract, loan or credit arrangement or other material
agreement or instrument to which
-2-
<PAGE>
its or any of its properties may be bound or by which the Leased Property may be
materially adversely affected, or (B) its constituent documents or (iv) does or
will require any Governmental Action by any Governmental Authority other than
the filings contemplated by Section 3.1(a)(xi) of the Participation Agreement to
perfect the rights of the Agent intended to be created by the Operative
Documents.
3. Each Operative Document to which the Lessor and the General
Partner is a party constitutes its legal, valid and binding obligation
enforceable against it in accordance with the terms thereof, except as such
enforceability may be limited by applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and by general equitable principles.
4. To our knowledge, there is no action, proceeding or
investigation pending or threatened against the Lessor or the General Partner.
5. Neither the Lessor nor the General Partner is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
6. Neither the Lessor nor the General Partner is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
We are members of the Bar of the Commonwealth of Pennsylvania. The
opinions expressed herein are limited exclusively to the laws of the
Commonwealth of Pennsylvania and the Federal laws of the United States of
America and the rules and regulations, if any, under each of said laws.
Very truly yours,
-3-
<PAGE>
EXHIBIT A
TO PARTICIPATION AGREEMENT
FORM OF FUNDING REQUEST
TO: The Lessor, the Agent and each Lender as defined in
the Participation Agreement
referred to below
Reference is hereby made to the Participation Agreement dated as of
November 8, 1994 (as heretofore amended, the "Participation Agreement") among
-----------------------
Unisource Worldwide, Inc. and AOP Inc., as Lessees, PPI SPV, L.P., as Lessor,
Pitcairn SPV, Inc., as General Partner of Lessor, Alco Standard Corporation, as
Guarantor, the Lenders from time to time party thereto, and Trust Company Bank,
as Agent. Capitalized terms not otherwise defined herein are used herein as
defined in the Participation Agreement.
[INSERT UNISOURCE WORLDWIDE, INC. OR AOP INC.] as Lessee (the "Lessee")
------
hereby notifies you that Lessee requests a Funding in the amount of
$____________ on [INSERT REQUESTED FUNDING DATE] in respect of [DESCRIBE LAND
INTEREST].
In connection with such requested Funding, the Lessee hereby represents and
warrants to you as follows:
(a) on the requested Funding Date the representations and warranties
of the Lessee contained in each of the Operative Documents shall be true
and correct in all material respects as though made on and as of such
Funding Date, except to the extent such representations or warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects on and
as of such earlier date;
(b) there shall not have occurred and be continuing any Event of
Default or Potential Event of Default;
(c) the amount of the requested Funding represents amounts in respect
of the purchase price for the related Land Interest and/or amounts that the
Lessee reasonably believes will be due in the 60 days following such
Funding
<PAGE>
from the Lessee to third parties in respect of the Construction, or amounts
paid by the Lessee to third parties in respect of the Construction for
which the Lessee has not previously been reimbursed by a Funding; and
(d) all of the conditions precedent to such Funding set forth in
Section 3 of the Participation Agreement have been satisfied.
Please wire transfer the proceeds of the Funding to
_________________________________________.
The Lessee has caused this Funding Request to be executed and delivered by
its duly authorized officer this _______________ [TO BE DELIVERED NOT LATER THAN
12:00 NOON, THREE BUSINESS DAYS PRIOR TO THE REQUESTED FUNDING DATE].
[INSERT NAME OF RELATED LESSEE]
By:__________________________
Title:_______________________
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<PAGE>
EXHIBIT C
TO PARTICIPATION AGREEMENT
SECURITY AGREEMENT AND ASSIGNMENT
(Construction Contract, Architect's Agreement,
Permits, Licenses and Governmental Approvals, and
Plans, Specifications and Drawings)
FOR VALUE RECEIVED, and to secure the performance by
_________________________________, a Delaware corporation ("Lessee"), of all of
------
its obligations under (i) that certain Lease and Development Agreement, by and
between Lessee and PPI, SPV, L.P., a Pennsylvania limited partnership having an
office at 3220 Tillman Drive, Bensalem, Pennsylvania 19020 (herein, together
with its successors and assigns, called the "Secured Party"), dated as of
-------------
November 8, 1994 (as the same may be amended, modified or restated from time to
time, and together with all substitutions therefor and replacements thereof, the
"Lease"), as the same may be amended, modified or restated from time to time,
-----
and any substitutions thereunder and replacements thereof, and (ii) the other
Operative Documents (as defined in the Lease), Lessee and Alco Standard
Corporation, an Ohio corporation ("Guarantor"; Lessee and Guarantor are referred
---------
to herein individually, collectively, jointly and severally as the "Assignor")
--------
individually, jointly and severally do hereby quitclaim, sell, assign, transfer
and set over unto the Secured Party, its successors and assigns, all of their
rights, title and interests in and to the following (referred to collectively
herein as the "Collateral"):
----------
(1) that certain [General Contracting Services Agreement] dated
________ __, 1994 between Lessee and _________________ (the "Contractor"),
----------
a _____________, having an address at ______________________________, as it
may hereafter be supplemented, modified or amended (the "Construction
------------
Contract");
--------
(2) that certain [Architectural Services Agreement] dated _______ __,
1994 between Lessee and _______________, having an address at
____________________________________ (the "Architect") pertaining to the
---------
Construction, as such Agreement may hereafter be supplemented, modified or
amended (the "Architect's Agreement");
---------------------
(3) all plans, specifications and drawings of any and every kind
heretofore or hereafter prepared for use in connection with the
Construction, and any supplements, amendments or modifications thereto
(collectively, the "Plans"); and
-----
(4) all building and other permits, licenses and governmental
approvals which are necessary or useful to the commencement and completion
of the Construction, or
<PAGE>
otherwise relate to the Construction, heretofore or hereafter obtained or
applied for by or on behalf of the Assignor or the Contractor or the
Architect or any of the architects, engineers or contractors working on any
aspect of the Construction, and any deposits made in connection therewith
(referred to collectively herein as the "Permits").
-------
provided, however, that the Secured Party shall have no obligation or liability
- - -------- -------
of any kind under or with respect to the Construction Contract, the Architect's
Agreement, the Permits or the Plans, either before or after its exercise of any
rights hereby granted to it, and the Assignor agrees to save and hold the
Secured Party harmless of and from, and to indemnify it against, any and all
such obligations and liabilities, contingent or otherwise.
This assignment shall inure to the benefit of the Secured Party and its
successors and assigns, and shall be binding upon the Assignor and its
successors and assigns, and shall continue in full force and effect until all
obligations, liabilities and indebtedness of any kind now or hereafter due the
Secured Party from the Assignor under or with respect to the Lease or any of the
other Operative Documents, or which are otherwise secured hereby, whether now
existing or hereafter arising or incurred (collectively, the "Liabilities"),
-----------
have been fully paid, performed and satisfied, at which time this assignment
will terminate. The Secured Party will not exercise any of its rights hereunder
until there occurs an Event of Default (which term is defined for purposes
hereof as it is defined in the Lease). The Assignor hereby acknowledges that
the Secured Party will assign all of its rights hereunder to Trust Company Bank,
as Agent ("Agent") to secure the Loans, and agrees that the Agent may exercise
-----
all of the rights of the Secured Party hereunder.
For purposes of completing the Construction, the Secured Party may, at its
option, further assign its right, title and interest in the Collateral without
the consent of Assignor, the Contractor, the Architect or any other contractor,
but shall promptly thereupon notify the Contractor and the Architect, and upon
exercise by such assignee of its rights to complete the Construction pursuant
hereto, only such assignee and not the Secured Party shall become liable to pay
or perform the Secured Party's obligations under the Construction Contract and
the Architect's Agreement.
This Assignment is a present, perfected and absolute assignment, provided
that the Secured Party shall not have the right to undertake completion of the
Construction or directly to enforce the provisions of the Construction Contract
or the
-2-
<PAGE>
Architect's Agreement until an Event of Default shall have occurred under the
Lease. During the continuance of any such Event of Default, the Secured Party
may, without affecting any other right or remedy available to it, exercise its
rights under this Assignment as provided herein in any manner permitted by law.
If any notice to Assignor is required by law, such notice shall be deemed
commercially reasonable if given at least ten (10) days prior to the date of
intended action.
This Assignment may be effectively waived, modified, amended or terminated
only by a written instrument executed by the Secured Party. Any waiver by the
Secured Party shall be effective only with respect to the specific instance
described therein. Delay or course of conduct shall not constitute a waiver of
any right or remedy of the Secured Party.
THIS ASSIGNMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
All terms capitalized herein and not specifically defined herein which are
capitalized and defined in the Lease shall have the same respective meanings for
purposes hereof as for purposes of the Lease.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
assignment as of ____________, 1994 at ____________________________, pursuant to
proper authority duly granted.
_________________________, a
Delaware corporation
By:_________________________
Name:_____________________
Title:____________________
ALCO STANDARD CORPORATION, an
Ohio corporation
By:_________________________
Name:_____________________
Title:____________________
Security Agreement
And Assignment
S-1
<PAGE>
ACCEPTANCE
----------
PPI SPV, L.P., being the Secured Party as described in the foregoing
Security Agreement and Assignment, hereby acknowledges receipt of the foregoing
instrument as of this ___ day of _____, 1994, and hereby assigns all of its
rights under such agreement to Trust Company Bank, as Agent.
PPI SPV, L.P., a
Pennsylvania limited partnership
By: Pitcairn SPV, Inc., its
general partner
By:_____________________________
Name:________________________
Title:_______________________
Security Agreement
And Assignment
S-2
<PAGE>
SECURITY AGREEMENT
AND ASSIGNMENT
S-3
<PAGE>
CONSENT AND ACKNOWLEDGMENT BY THE CONTRACTOR
--------------------------------------------
The undersigned hereby acknowledges receipt of a counterpart original of,
and consents to, the foregoing Security Agreement and Assignment.
1. The undersigned certifies that the Construction Contract is in full
force and effect and constitutes the entire agreement between the Assignor and
the undersigned, and that there have been no modifications, supplements,
amendments or addenda thereto from the form thereof dated _______________, 1994,
a true, correct and complete copy of which is attached hereto, and that the
Assignor is not in default under the Construction Contract.
2. The undersigned agrees to look solely to the Assignor for the
performance of all of the obligations of the Assignor under the Construction
Contract, and not to look to Secured Party for such performance. However, if the
Secured Party exercises, with respect to the Construction Contract, the rights
and privileges conferred upon it by the Security Agreement and Assignment and
asserts (by written election as specified in the immediately succeeding two
sentences) the present right to have the benefits of the Construction Contract
and to enforce the same against the undersigned in the place and stead of the
Assignor, the undersigned agrees to perform for, and for the benefit of, the
Secured Party all of the undersigned's obligations under and pursuant to the
Construction Contract if the balance due under the Construction Contract (being
the portion of the total price which is then or thereafter due and payable as
provided therein, less the total of all portions thereof theretofore paid to or
for the benefit of the Contractor) has been paid or is then paid (or for
portions thereof not then due under the Construction Contract, such amounts are
paid as and when due under the Construction Contract). Prior to the Secured
Party's express written election (if any) to succeed to the Assignor's rights
and to assume the Assignor's obligations (to the extent provided in the
immediately succeeding sentence) under the Construction Contract, the Contractor
agrees that the Secured Party shall have no personal obligations or liabilities
of any kind under the Construction Contract, the Security Agreement and
Assignment, or otherwise. In the event that the Secured Party shall so expressly
elect in writing to succeed to the Assignor's rights and to assume the
Assignor's obligations under the Construction Contract, the sole obligations
which the Secured Party shall assume and be liable for are (i) obligations to
pay the Contractor the amounts due under the Construction Contract as provided
in the second sentence of this paragraph (whether due
-i-
<PAGE>
before or after such election), and (ii) other obligations of the Assignor under
the Construction Contract first accruing after such election by the Secured
Party, and the Secured Party shall not be liable or obligated for any other
obligations.
3. The Contractor hereby agrees to send to the Secured Party copies of all
notices to the Assignor under the Construction Contract by courier or certified
mail, return receipt requested, to the following address (or at such other
address as the Secured Party shall, from time to time, notify the undersigned in
writing):
Trust Company Bank
25 Park Place
Atlanta, Georgia 30303
Attention: Center 118/Southeastern Corporate
Such notices shall be sent at the same time as any notices to the Assignor.
4. The Contractor agrees that it shall not voluntarily terminate the
Construction Contract except in accordance with the following provisions of this
paragraph. The Contractor agrees that if the Contractor is entitled to
terminate the Construction Contract by reason of defaults of the Assignor, the
Contractor shall not terminate the Construction Contract until it has provided
the Secured Party with a written notice of its election to so terminate the
Construction Contract by virtue of any such default thereunder by the Assignor
and the Secured Party has not assumed the Assignor's obligations under the
Construction Contract and cured the defaults as (but only to the extent)
required in Section 3 of this Consent and Acknowledgment within thirty days
---------
after Secured Party's receipt of said written notice.
5. Notices to the Contractor hereunder shall be sent by courier or
certified mail, return receipt requested, to the following:
Attention: __________________
6. In the event the Construction Contract is terminated, the Secured
Party shall be entitled to use, as required for the Construction (as defined in
the Lease), without any additional cost or fee, any and all Permits and all
Plans and Specifications and final plans and specifications developed in
connection therewith for the Construction.
-ii-
<PAGE>
The foregoing is furnished for good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged by the undersigned, and the
undersigned understands and intends that the Secured Party will rely on the
foregoing and that the undersigned will be legally bound by the foregoing. This
Consent and Acknowledgment shall inure to the benefit of the Secured Party and
its successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent
and Acknowledgment as of __________, 1994, pursuant to proper authority duly
granted.
[NAME OF CONTRACTOR]
By:______________________________
Name:____________________________
Title:___________________________
-iii-
<PAGE>
Attach copy of Construction Contract
-iv-
<PAGE>
CONSENT AND ACKNOWLEDGMENT BY ARCHITECT
---------------------------------------
The undersigned hereby acknowledges receipt of a counterpart original of,
and consents to, the foregoing Security Agreement and Assignment.
1. The undersigned certifies that the Architect's Agreement is in full
force and effect and constitutes the entire agreement between the Assignor and
the Architect, that there have been no modifications, supplements, amendments or
addenda to the Architect's Agreement from the form thereof dated ____________,
1994, a true and correct copy of which is attached hereto, and that the Assignor
is not in default under the Architect's Agreement.
2. The undersigned agrees to look solely to the Assignor for the
performance of all of the obligations of the Assignor under the Architect's
Agreement, and not to look to Secured Party for such performance. However, if
the Secured Party exercises, with respect to the Architect's Agreement, the
rights and privileges conferred upon it by the Security Agreement and Assignment
and asserts (by written election as specified in the immediately succeeding two
sentences) the present right to have the benefits of the Architect's Agreement
and to enforce the same against the undersigned in the place and stead of the
Assignor, the undersigned agrees to perform for, and for the benefit of, the
Secured Party all of the undersigned's obligations under and pursuant to the
Architect's Agreement if the balance due under the Architect's Agreement (being
the portion of the total price which is then or thereafter due and payable as
provided therein, less the total of all portions thereof theretofore paid to or
for the benefit of the Architect) has been paid or is then paid (or for portions
thereof not then due under the Architect's Agreement, such amounts are paid as
and when due under the Architect's Agreement). Prior to the Secured Party's
express written election (if any) to succeed to the Assignor's rights and to
assume the Assignor's obligations (to the extent provided in the immediately
succeeding sentence) under the Architect's Agreement, the Architect agrees that
the Secured Party shall have no personal obligations or liabilities of any kind
under the Architect's Agreement, the Security Agreement and Assignment, or
otherwise. In the event that the Secured Party shall so expressly elect in
writing to succeed to the Assignor's rights and to assume the Assignor's
obligations under the Architect's Agreement, the sole obligations which the
Secured Party shall assume and be liable for are (i) obligations to pay the
Architect the amounts due under the Architect's Agreement as provided in the
second sentence of this paragraph (whether due before or after such election),
and (ii) other obligations of the Assignor
-i-
<PAGE>
under the Architect's Agreement first accruing after such election by the
Secured Party, and the Secured Party shall not be liable or obligated for any
other obligations.
3. The Architect hereby agrees to send to the Secured Party copies of all
notices to the Assignor under the Architect's Agreement by courier or certified
mail, return receipt requested, to the following address (or at such other
address as the Secured Party shall, from time to time, notify the undersigned in
writing):
Trust Company Bank
25 Park Place
Atlanta, Georgia 30303
Attention: Center 118/Southeastern Corporate
Such notices shall be sent at the same time as any notices to the Assignor.
4. The Architect agrees that it shall not voluntarily terminate the
Architect's Agreement except in accordance with the following provisions of this
paragraph. The Architect agrees that if the Architect is entitled to terminate
the Architect's Agreement by reason of defaults of the Assignor, the Architect
shall not terminate the Architect's Agreement until it has provided the Secured
Party with a written notice of its election to so terminate the Architect's
Agreement by virtue of any such default thereunder by the Assignor and the
Secured Party has not assumed the Assignor's obligations under the Architect's
Agreement and cured the defaults as (but only to the extent) required in Section
-------
4 of this Consent and Acknowledgment within thirty days after Secured Party's
- - -
receipt of said written notice.
5. Notices to the Architect hereunder shall be sent by courier or
certified mail, return receipt requested, to the following:
___________________________
___________________________
___________________________
Attn: _____________________
6. In the event the Architect's Agreement is terminated, the Secured
Party shall be entitled to use, as required for the Construction (as defined in
the Lease), without any additional cost or fee, any and all Permits and all
Plans and Specifications and final plans and specifications developed in
connection therewith for the Construction.
-ii-
<PAGE>
The foregoing is furnished for good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged by the undersigned, and the
undersigned understands and intends that Secured Party will rely on the
foregoing and that the undersigned will be legally bound by the foregoing. This
Consent and Acknowledgment shall inure to the benefit of the Secured Party and
its successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent
and Acknowledgment as of ____________, 1994 pursuant to proper authority duly
granted.
________________________________
By:______________________________
Name:_________________________
Title:________________________
-iii-
<PAGE>
Attach copy of Architect's Agreement
-iv-
<PAGE>
EXHIBIT D TO THE
PARTICIPATION AGREEMENT
================================================================================
DEED OF TRUST AND SECURITY AGREEMENT
dated as of November 8, 1994
from
PPI SPV, L.P., as Lessor, Grantor
to
__________________, Trustee
for the use and
benefit of
TRUST COMPANY BANK
as Agent, Beneficiary
When recorded return to:
_____________________________
_____________________________
_____________________________
_____________________________
================================================================================
<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
DEED OF TRUST AND SECURITY AGREEMENT, dated as of _________, 199__
(this "Deed of Trust"), made by PPI SPV, L.P. (the "Grantor"), with an address
------------- -------
at 3220 Tillman Drive, Bensalem, Pennsylvania 19020 to _______________________,
a ________ ("Trustee"), with an address at
-------
_______________________________________ in favor of TRUST COMPANY BANK, with an
address at 25 Park Place, Atlanta, Georgia 30303, in its capacity as Agent (in
such capacity, the "Agent"), under the Loan Agreement, dated as of November 8,
-----
1994 (as amended, supplemented or otherwise modified from time to time, the
"Loan Agreement"), between the Grantor, the Agent and the Lenders party thereto
- - ---------------
(the "Lenders").
-------
Preliminary Statement
---------------------
Pursuant to the Loan Agreement, the Lenders have agreed to make Loans
to the Grantor in an aggregate amount not to exceed $25,000,000 upon the terms
and subject to the conditions set forth therein, to be evidenced by the notes
("Notes") issued by the Grantor under the Loan Agreement. The Notes bear
interest as set forth in the Notes and mature (if not sooner accelerated) on a
date no later than November 8, 1999. The Grantor is the legal and beneficial
owner of the Mortgaged Property (as defined below).
It is a condition, among others, to the obligation of the Lenders to
make the Loans to the Grantor under the Loan Agreement that the Grantor shall
have executed and delivered this Deed of Trust to the Trustee for the benefit of
the Agent.
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to make the Loans under the Loan Agreement, the Grantor hereby agrees
with the Trustee and the Agent, as follows:
TO SECURE PAYMENT OF ALL THE AMOUNTS ADVANCED UNDER THE LOAN AGREEMENT
AND THE NOTES AND THE OTHER SECURITY DOCUMENTS, THE GRANTOR HEREBY CONVEYS TO
THE TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS, WARRANTS AND SETS OVER TO THE
TRUSTEE, IN TRUST FOR THE USE AND BENEFIT OF THE AGENT, AND GRANTS THE AGENT AND
THE TRUSTEE A SECURITY INTEREST IN:
(A) the parcel(s) of real property described on Exhibit A
---------
(the "Land"); and the fee interest in the land described in Exhibit A
---- ---------
(if and when acquired by Grantor, and which
<PAGE>
shall then be deemed included in the "Land"); all buildings, structures,
Fixtures, Equipment, and other improvements of every kind existing at any time
and from time to time on or under the Land, together with any and all
appurtenances to such buildings, structures or improvements, including
sidewalks, utility pipes, conduits and lines, parking areas and roadways, and
including all modifications, alterations, renovations, improvements and other
additions to or changes in the Improvements at any time ("Improvements"); all
------------
agreements, easements, rights of way or use, rights of ingress or egress,
privileges, appurtenances, tenements, hereditaments and other rights and
benefits at any time belonging or pertaining to the Land or the Improvements,
including, without limitation, the use of any streets, ways, alleys, vaults or
strips of land adjoining, abutting, adjacent or contiguous to the Land and all
permits, licenses and rights, whether or not of record, appurtenant to the Land
("Appurtenant Rights"; Land, Improvements, Appurtenant Rights, Fixtures and
------------------
Equipment relating thereto being collectively referred to as the "Property");
--------
(B) all the estate, right, title, claim or demand whatsoever of the
Grantor, in possession or expectancy, in and to the Property or any part
thereof;
(C) all right, title and interest of the Grantor in and to all of the
fixtures, furnishings and fittings of every kind and nature whatsoever, and all
appurtenances and additions thereto and substitutions or replacements thereof
(together with, in each case, attachments, components, parts and accessories)
currently owned or subsequently acquired by the Grantor and now or subsequently
attached to, or contained in or used or usable in any way in connection with any
operation or letting of the Property (all of the foregoing in this paragraph (C)
being referred to as the "Fixtures");
---------
(D) all right, title and interest of the Grantor in and to all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings and articles of personal property of every kind and nature
whatsoever, and all appurtenances and additions thereto and substitutions or
replacements thereof (together with, in each case, attachments, components,
parts and accessories) currently owned or subsequently acquired by the Grantor
and now or subsequently attached to, or contained in or used or usable in any
way in connection with any operation or letting of the Property, including but
without limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and windows,
furniture and furnishings, heating, electrical, and mechanical equipment,
lighting, switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators, refrigerators,
display cases, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention
and extinguishing apparatus and materials, security systems, motors, engines,
-2-
<PAGE>
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of
every kind and description (all of the foregoing in this paragraph (D) being
-------------
referred to as the "Equipment");
----------
(E) all right, title and interest of the Grantor in and to all
substitutes and replacements of, and all additions and improvements to, the
Improvements and the Fixtures and Equipment, subsequently acquired by the
Grantor or constructed, assembled or placed by the Grantor on the Land,
immediately upon such acquisition, release, construction, assembling or
placement, including, without limitation, any and all building materials whether
stored at the Property or offsite, and, in each such case, without any further
conveyance, mortgage, assignment or other act by the Grantor;
(F) all right, title and interest of the Grantor in, to and under all
trade names, trade marks, logos, copyrights, good will and books and records
relating to or used in connection with the operation of the Property or the
Fixtures or any part thereof; and all general intangibles related to the
operation of the Improvements now existing or hereafter arising;
(G) all right, title and interest of the Grantor in and to all
unearned premiums under insurance policies now or subsequently obtained by the
Lessee relating to the Property or the Fixtures and the Grantor's interest in
and to all proceeds of any such insurance policies (including title insurance
policies) including the right to collect and receive such proceeds: and all
awards and other compensation, including the interest payable thereon and the
right to collect and receive the same, made to the present or any subsequent
owner of the Property for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Property or any easement or other right
therein;
(H) all right, title and interest of the Grantor in and to (i) all
consents, licenses, building permits, certificates of occupancy and other
governmental approvals relating to construction, completion, occupancy, use or
operation of the Property or any part thereof and (ii) all Plans and
Specifications relating to the Property;
(I) all Rent and all other rents, payments, purchase prices,
receipts, revenues, issues and profits payable under the Lease or pursuant to
any other lease with respect to the Property; and
(J) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by the Grantor and described in the foregoing
clauses (A) through (J) are collectively referred to as the "Trust Property").
--------------
-3-
<PAGE>
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto the Trustee, its successors and assigns for the uses and
purposes set forth, until all amounts due under the Notes, the Loan Agreement
and the other Security Documents (collectively, the "Obligations") are paid.
-----------
1. Definitions. Capitalized terms used but not otherwise defined in
-----------
this Deed of Trust shall have the respective meanings specified in Appendix A to
this Deed of Trust.
2. Payment of Obligations. The Grantor shall pay the Obligations in
----------------------
accordance with the terms of the Loan Agreement and the Notes and perform each
term to be performed by it under the Loan Agreement and the Notes and the other
Operative Documents.
3. Other Covenants. At any time and from time to time, upon the
---------------
written request of the Agent or the Trustee, and at the sole expense of the
Grantor (but only to the extent the Grantor has been reimbursed by Lessee), the
Grantor will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Agent or the Trustee reasonably
may request for the purposes of obtaining or preserving the full benefits of
this Deed of Trust and of the rights and powers granted by this Deed of Trust.
4. Default: Remedies./1/ (a) If Loan Agreement Event of Default has
----------------- -
occurred and is continuing and the Loans have been accelerated pursuant to
Section 5 of the Loan Agreement:
(i) the Trustee, in addition to all other remedies available at law
or in equity, shall have the right forthwith to enter upon and take possession
of the Trust Property, and to let the Trust Property and receive the rents,
issues and profits thereof, to make repairs and to apply said rentals and
profits, after payment of all necessary or proper charges and expenses, on
account of the amounts hereby secured; and
(ii) the Trustee, shall, as a matter of right, at the option of the
Agent, be entitled to the appointment of a receiver for the Trust Property, and
the Grantor hereby consents to such appointment and waives notice of any
application therefor.
___________________________
/1/ Remedies are a matter of state law and vary from jurisdiction to
jurisdiction. Local counsel will be consulted to be sure that the deed of trust
covers all remedies available under local law, and that any waivers or other
provisions required by state statutes to ensure enforceability of particular
remedies are included in the deed of trust.
-4-
<PAGE>
(f) The Grantor hereby waives the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale of the Trust
Property or any interest therein.
5. Remedies Not Exclusive. The Trustee shall be entitled to enforce
----------------------
payment of the indebtedness and performance of the Obligations and to exercise
all rights and powers under this Deed of Trust or under any of the other
Operative Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Obligations may now or hereafter be otherwise
secured, whether by deed of trust, mortgage, security agreement, pledge, lien,
assignment or otherwise. Neither the acceptance of this Deed of Trust nor its
enforcement, shall prejudice or in any manner affect the Trustee's right to
realize upon or enforce any other security now or hereafter held by the Trustee,
it being agreed that the Trustee shall be entitled to enforce this Deed of Trust
and any other security now or hereafter held by the Trustee in such order and
manner as the Trustee or the Agent may determine in its absolute discretion. No
remedy herein conferred upon or reserved to the Trustee or the Agent is intended
to be exclusive of any other remedy herein or by law provided or permitted, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Operative Documents to the Trustee or the
Agent or to which they may otherwise be entitled, may be exercised, concurrently
or independently, from time to time and as often as may be deemed expedient by
the Agent. In no event shall the Trustee, in the exercise of the remedies
provided in this Deed of Trust (including, without limitation, in connection
with the assignment of Rents to the Agent, or the appointment of a receiver and
the entry of such receiver on to all or any part of the Trust Property), be
deemed a "mortgagee in possession," and the Trustee shall not in any way be made
liable for any act, either of commission or omission, in connection with the
exercise of such remedies.
6. Performance by the Trustee or the Agent of the Grantor's
--------------------------------------------------------
Obligations. If the Grantor fails to perform or comply with any of its
- - -----------
agreements contained herein the Trustee or the Agent, at their option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement. The expenses of the Trustee and
the Agent incurred in connection with actions undertaken as provided in this
Section, together with interest thereon at a rate per annum equal to the Overdue
Rate, from the date of payment by the Trustee or the Agent, as applicable, to
the date reimbursed by the Grantor, shall be payable by the Grantor to the
Trustee or the Agent on demand (but only to the extent the Grantor has been
reimbursed by Lessee).
7. Duty of the Trustee. The Trustee's sole duty with respect to the
-------------------
custody, safekeeping and physical preservation of any Trust Property in its
possession, under Section 9-207 of the Uniform Commercial Code or otherwise,
shall be to deal with it in the same manner as the Trustee deals with similar
property for its own account. Neither the Trustee, the Agent nor any of their
respective directors, officers, employees or agents shall be liable for failure
to
-5-
<PAGE>
demand, collect or realize upon any of the Trust Property or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Trust Property upon the request of the Grantor or any other Person or to take
any other action whatsoever with regard to the Trust Property or any part
thereof.
8. Powers Coupled with an Interest. All powers, authorizations and
-------------------------------
agencies contained in this Deed of Trust are coupled with an interest and are
irrevocable until this Deed of Trust is terminated and the lien created hereby
is released.
9. Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Uniform Commercial Code, the Grantor authorizes the Trustee or the Agent to
file financing statements with respect to the Trust Property without the
signature of the Grantor in such form and in such filing offices as the Trustee
or the Agent reasonably determines appropriate to perfect the security interests
of the Trustee and the Agent under this Deed of Trust. A carbon, photographic
or other reproduction of this Deed of Trust shall be sufficient as a financing
statement for filing in any jurisdiction.
10. Security Agreement under Uniform Commercial Code. (a) It is the
------------------------------------------------
intention of the parties hereto that this Deed of Trust shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code of the
State in which the Trust Property is located. If a Loan Event of Default shall
occur, then in addition to having any other right or remedy available at law or
in equity, the Trustee, at the direction of the Agent, shall have the option of
either (i) proceeding under the Uniform Commercial Code and exercising such
rights and remedies as may be provided to a secured party by the Code with
respect to all or any portion of the Trust Property which is personal property
(including, without limitation, taking possession of and selling such property)
or (ii) treating such property as real property and proceeding with respect to
both the real and personal property constituting the Trust Property in
accordance with the Trustee's rights, powers and remedies with respect to the
real property (in which event the default provisions of the Uniform Commercial
Code shall not apply). If the Trustee, at the direction of the Agent, shall
elect to proceed under the Uniform Commercial Code, then five days' notice of
sale of the personal property shall be deemed reasonable notice and the
reasonable expenses of retaking, holding, preparing for sale, selling and the
like incurred by the Trustee or the Agent shall include, but not be limited to,
attorneys' fees and legal expenses. At the Trustee's request, the Grantor shall
assemble the personal property and make it available to the Trustee and the
Agent at a place designated by the Trustee or the Agent which is reasonably
convenient to both parties.
(b) The Grantor, the Trustee and the Agent agree, to the extent
permitted by law, that this Deed of Trust upon recording or registration in the
real estate records of the proper office shall constitute a financing statement
filed as a "fixture filing" within the meaning of Sections 9-313 and 9-402 of
the Uniform Commercial Code.
-6-
<PAGE>
(c) The Grantor, upon request by the Trustee or the Agent from time to
time, shall execute, acknowledge and deliver to the Trustee or the Agent one or
more separate security agreements, in form satisfactory to the Trustee and the
Agent, covering all or any part of the Trust Property and will further execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or certificate or
other document as the Trustee or the Agent may request in order to perfect,
preserve, maintain, continue or extend the security interest under and the
priority of this Deed of Trust and such security instrument. The Grantor
further agrees to pay to the Trustee and the Agent on demand all costs and
expenses incurred by the Trustee or the Agent in connection with the
preparation, execution, recording, filing and re-filing of any such document and
all reasonable costs and expenses of any record searches for financing
statements the Trustee or the Agent shall reasonably require; provided, however,
-------- --------
that the Grantor shall not be liable for payment of any amount under this
Section to the extent Lessee is responsible for payment of such amount under the
Lease or the Participation Agreement. If the Grantor shall fail to furnish any
financing or continuation statement within 10 days after request by the Trustee
or the Agent, then pursuant to the provisions of the Uniform Commercial Code,
the Grantor hereby authorizes the Trustee and the Agent, without the signature
of the Grantor, to execute and file any such financing and continuation
statements. The filing of any financing or continuation statements in the
records relating to personal property or chattels shall not be construed as in
any way impairing the right of the Trustee to proceed against any personal
property encumbered by this Deed of Trust as real property, as set forth above.
11. Authority of Trustee. The Grantor acknowledges that the rights
--------------------
and responsibilities of the Trustee under this Deed of Trust with respect to any
action taken by the Trustee or the exercise or non-exercise by the Trustee of
any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Deed of Trust shall, as between
the Grantor and the Agent, the Trustee shall be conclusively presumed to be
acting as agent for the Agent with full and valid authority so to act or refrain
from acting, and the Grantor shall be under no obligation, or entitlement, to
make any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the
-------
Trustee, the Agent or the Grantor shall be given in accordance with Section 8.2
of the Participation Agreement.
13. Severability. Any provision of this Deed of Trust which is
------------
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
14. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
-----------------------------------------------------
of the terms or provisions of this Deed of Trust may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Grantor, the Trustee and the Agent in accordance with the terms of the Loan
Agreement.
-7-
<PAGE>
(b) No failure to exercise, nor any delay in exercising, on the part
of the Trustee or the Agent, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Agent of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Trustee or the Agent would otherwise have
on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
15. Section Headings. The section headings used in this Deed of
----------------
Trust are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. Successors and Assigns. This Deed of Trust shall run with the
----------------------
land and be binding upon the successors and assigns of the Grantor and shall
inure to the benefit of the Trustee, the Agent and their respective successors
and assigns.
17. Grantor's Waiver of Rights. Except as otherwise set forth
--------------------------
herein, to the fullest extent permitted by law, the Grantor waives the benefit
of all laws now existing or that may subsequently be enacted providing for (i)
any appraisement before sale of any portion of the Trust Property, (ii) any
extension of the time for the enforcement of the collection of the indebtedness
or the creation or extension of a period of redemption from any sale made in
collecting such debt and (iii) exemption of the Trust Property from attachment,
levy or sale under execution or exemption from civil process. Except as
otherwise set forth herein, to the full extent the Grantor may do so, the
Grantor agrees that the Grantor will not at any time insist upon, plead, claim
or take the benefit or advantage of any law now or hereafter in force providing
for any appraisement, valuation, stay, exemption, extension, reinstatement or
redemption, or requiring foreclosure of this Deed of Trust before exercising any
other remedy granted hereunder and the Grantor, for the Grantor and its
successors and assigns, and for any and all Persons ever claiming any interest
in the Trust Property, to the extent permitted by law, hereby waives and
releases all rights of reinstatement, redemption, valuation, appraisement stay
of execution, notice of election to mature or declare due the whole of the
secured indebtedness and marshalling in the event of foreclosure of the liens
hereby created.
18. Multiple Security. If (a) the Trust Property shall consist of
-----------------
one or more parcels, whether or not contiguous and whether or not located in the
same county, or (b) in addition to this Deed of Trust, the Trustee and the Agent
shall now or hereafter hold one or more additional mortgages, liens, deeds of
trust or other security (directly or indirectly) for the Obligations upon other
property in the State in which the Trust Property is located (whether or not
such property is owned by the Grantor or by others) or (c) both the
circumstances described
<PAGE>
in clauses (a) and (b) shall be true, then to the fullest extent permitted by
law, the Trustee and the Agent may, in their discretion, commence or consolidate
in a single foreclosure action all foreclosure proceedings against all such
collateral securing the Obligations (including the Trust Property), which action
may be brought or consolidated in the courts of any county in which any of such
collateral is located. The Grantor acknowledges that the right to maintain a
consolidated foreclosure action is a specific inducement to the Lenders to
extend the Obligations, and the Grantor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. The Grantor
----- --- ----------
further agrees that if the Trustee or the Agent shall be prosecuting one or more
foreclosure or other proceedings against a portion of the Trust Property or
against any collateral other than the Trust Property, which collateral directly
or indirectly secures the Obligations, or if the Trustee or the Agent shall have
obtained a judgment of foreclosure and sale or similar judgment against such
collateral, then, whether or not such proceedings are being maintained or
judgments were obtained in or outside the State in which the Trust Property is
located, the Trustee and the Agent may commence or continue foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and the Grantor waives any
objections to the commencement or continuation of a foreclosure of this Deed of
Trust or exercise of any other remedies hereunder based on such other
proceedings or judgments, and waives any right to seek to dismiss, stay, remove,
transfer or consolidate either any action under this Deed of Trust or such other
proceedings on such basis. Neither the commencement nor continuation of
proceedings to foreclose this Deed of Trust nor the exercise of any other rights
hereunder nor the recovery of any judgment by the Trustee and the Agent in any
such proceedings shall prejudice, limit or preclude the Trustee's and the
Agent's rights to commence or continue one or more foreclosure or other
proceedings or obtain a judgment against any other collateral (either in or
outside the State in which the Trust Property is located) which directly or
indirectly secures the Obligations, and the Grantor expressly waives any
objections to the commencement of, continuation of, or entry of a judgment in
such other proceedings or exercise of any remedies in such proceedings based
upon any action or judgment connected to this Deed of Trust, and the Grantor
also waives any right to seek to dismiss, stay, remove, transfer or consolidate
either such other proceedings or any action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, the Trustee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Obligations (directly or
indirectly) in the most economical and least time-consuming manner.
19. GOVERNING LAW. THIS DEED OF TRUST SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
_________________.
-9-
<PAGE>
20. Partial Release; Full Release. The Trustee, at the direction of
-----------------------------
the Agent, may release, for such consideration or none, as it may require, any
portion of the Trust Property without, as to the remainder of the Trust
Property, in any way impairing or affecting the lien, security interest and
priority herein provided for the Trustee compared to any other lien holder or
secured party.
21. Miscellaneous. (a) This Deed of Trust is one of several deeds of
-------------
trust, mortgages and other documents that create liens and security interests
that secure payment and performance of the Obligations. The Trustee, at the
direction of the Agent, at its election, may commence or consolidate in a single
action all proceedings to realize upon all such liens and security interests.
The Grantor hereby waives (i) any objections to the commencement or continuation
of an action to foreclose this Deed of Trust or exercise of any other remedies
hereunder based on any action being prosecuted or any judgment entered with
respect to the Obligations or any liens or security interests that secure
payment and performance of the Obligations and (ii) any objections to the
commencement of, continuation of, or entry of a judgment in any such other
action based on any action or judgment connected to this Deed of Trust. In case
of a foreclosure sale, the Trust Property may be sold, at the Trustee's
election, in one parcel or in more than one parcel and the Trustee is
specifically empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the Trust Property
to be held.
(b) Except as provided in the Operative Documents, the Trustee, with
the express written consent of the Grantor, may at any time or from time to time
renew or extend this Deed of Trust, or alter or modify the same in any way, or
the Trustee may waive any of the terms, covenants or conditions hereof in whole
or in part and may release any portion of the Trust Property or any other
security, and grant such extensions and indulgences in relation to the
Obligations secured hereby as the Agent may determine without the consent of any
other person and without any obligation to give notice of any kind thereto and
without in any manner affecting the priority of the lien hereof on any part of
the Trust Property.
22. Future Advances; Revolving Credit. This Deed of Trust is given
---------------------------------
to secure not only existing indebtedness, but also future advances made pursuant
to or as provided in the Loan Agreement and the other Loan Documents, whether
such advances are obligatory or to be made at the option of the Lenders, or
otherwise, to the same extent as if such future advances were made on the date
of execution of this Deed of Trust, although there may be no advance made at the
time of execution hereof, and although there may be no indebtedness outstanding
at the time any advance is made. [The portion of the indebtedness evidenced by
the Notes constitutes "revolving credit" as that term is used in 205 ILCS 5/5d
and 735 ILCS 5/15-140, as amended and as the same may hereafter be amended from
time to time.] To the fullest extent permitted by law, the lien of this Deed of
Trust shall be valid as to all such indebtedness, including all revolving credit
and future advances, from the time this Deed of Trust is recorded.
Notwithstanding anything in this Deed of Trust to the contrary, although the
amount of
-10-
<PAGE>
indebtedness secured by this Deed of Trust may increase or decrease from time to
time, the maximum principal amount of indebtedness secured by this Deed of Trust
at any one time shall not exceed Twenty-Five Million and No/100 Dollars
($25,000,000.00), plus all costs of enforcement and collection of this Deed of
Trust, the Notes, the Loan Agreement and the other Loan Documents, plus the
total amount of any advances made pursuant to the Loan Documents to protect the
collateral and the security interest and lien created hereby; together with
interest on all of the foregoing as provided in the Loan Documents.
IN WITNESS WHEREOF, the undersigned has caused this Deed of Trust to
be duly executed and delivered as of the date first above written.
PPI SPV, L.P., as Lessor, Grantor
By: Pitcairn SPV, Inc., as its
general partner
By:_________________________
Name:_______________
Title:______________
-11-
<PAGE>
STATE OF __________________ )
) SS.:
COUNTY OF _________________ )
On the ___ day of__________, 199__, before me personally came
________________ ___________ to me known, who, being by me duly sworn, did
depose and say that he/she resides at_________________________________________;
that he/she is the _____________________ of Pitcairn SPV, Inc., the corporation
described in and which executed the above instrument; and that he/she signed
his/her name thereto by order of the board of directors of said corporation, as
general partner of PPI SPV, L.P.
____________________________
Notary Public
<PAGE>
Exhibit A
---------
Legal Description of the Land
-----------------------------
-13-
<PAGE>
EXHIBIT E
TO PARTICIPATION AGREEMENT
CERTIFICATE AS TO FINANCIAL STATEMENTS
I, _______________________, the [Chairman of the Board] [President]
[Vice President] [Treasurer] of Alco Standard Corporation, an Ohio corporation
(the "Company"), hereby certify, pursuant to Section 5.3 of the Participation
Agreement dated as of November 8, 1994 among the Company, as Guarantor,
Unisource Worldwide, Inc. and AOP Inc., as Lessee, PPI SPV, L.P., as Lessor,
Pitcairn SPV, Inc., as General Partner of Lessor, the Lenders from time to time
party thereto, and Trust Company Bank, as Agent (the "Participation Agreement";
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Participation Agreement), that:
1. To the best of my knowledge,
(a) the accompanying unaudited consolidated financial
statements of the Company and its Consolidated Subsidiaries as at
___________________ and for the ________ fiscal quarter ending
__________________, 19___, are complete and correct and present
fairly, in accordance with generally accepted accounting principles
(except for changes therein or therefrom described below that have
been approved in writing by Messrs. __________________, the Company's
current independent certified public accountants), the consolidated
financial position of the Company and its Consolidated Subsidiaries
as of the end of such fiscal quarter, and the consolidated results
of operations and cash flows for such fiscal quarter, and for the
elapsed portion of the fiscal year ended with the last day of such
fiscal quarterly period, in each case on the basis presented and
subject only to usual and customary year-end auditing adjustments
and footnote disclosures; and
(b) to the best of my knowledge, except as previously disclosed
in writing to the Lenders, the Agent and the Lessor, neither the
Company nor any of its Subsidiaries had any significant liabilities,
contingent or otherwise, including liabilities for Taxes or any
unusual forward or long-term commitments, nor any material unrealized
or unanticipated losses from any unfavorable commitments of the
Company or any of its Subsidiaries.
<PAGE>
2. There follow the calculations required to establish whether or not the
Company was in compliance with the following Section 7 of the Guaranty:
3. Based on an examination sufficient to enable me to make an informed
statement, no Event of Default or Potential Event of Default exists, including,
in particular, any such arising under the provisions of Section 7 of the
Guaranty, except the following:
[If none such exist, insert "None"; if any do exist, specify the same
by Section, give the date the same occurred, whether it is continuing, and
the steps being taken by the Company or a Subsidiary with respect thereto.]
Dated:
_________________________________
Title:
<PAGE>
EXHIBIT F
TO PARTICIPATION AGREEMENT
[letterhead of firm that performed environmental audit]
____________, 199_
PPI SPV, L.P., as Lessor under
the Participation Agreement dated as of
November 3, 1994 among Unisource Worldwide, Inc.,
and AOP Inc. as Lessees, Alco Standard Corporation,
as Guarantor, such Lessor, Pitcairn SPV, Inc., the Lenders party
thereto and Trust Company Bank, as Agent
320 Tillman Drive
Bensalem, Pennsylvania 19020
The Lenders and the Agent under
such Participation Agreement
c/o Trust Company Bank, as Agent
25 Park Place
Atlanta, Georgia 30303
Attn: Center 118/Southeastern Corporate
Ladies/Gentlemen:
We refer to the Phase One environmental assessment dated _________,
prepared by us for ______________, with respect to [DESCRIBE PROPERTY]. Please
be advised that you may rely upon such report as if it were addressed directly
to you.
Very truly yours,
<PAGE>
EXHIBIT H
TO PARTICIPATION AGREEMENT
FORM OF COMPLETION DATE CERTIFICATE
TO: Lessor, Agent and each Lender as defined in the Participation Agreement
referred to below
Reference is hereby made to the Participation Agreement dated as of
November 8, 1994 (as heretofore amended, the "Participation Agreement") among
-----------------------
Unisource Worldwide, Inc. and AOP Inc., as Lessees, PPI SPV, L.P., as Lessor,
Pitcairn SPV, Inc., as General Partner of Lessor, Alco Standard Corporation, as
Guarantor, the Lenders from time to time party thereto, and Trust Company Bank,
as Agent. Capitalized terms not otherwise defined herein are used herein as
defined in the Participation Agreement. This Certificate is being delivered
pursuant to Section 3.5(c) of the Participation Agreement.
The undersigned Lessee hereby certifies to you that as of ____________,
199___ (the "Completion Date") with respect to [DESCRIBE THE LEASED PROPERTY]:
---------------
(i) all amounts owing to third parties for the Construction have been
paid in full (other than contingent obligations for which the Lessee has
made adequate reserves), and no litigation or proceedings are pending, or
to the best of Lessee's knowledge, are threatened, against the Leased
Property or the Lessee which could reasonably be expected to materially
adversely affect (A) the enforceability or priority of the Participation
Agreement or the other Operative Documents or (B) the ability of the Lessee
to fully perform its obligations pursuant to and as contemplated by the
terms and provisions of the Participation Agreement and the other Operative
Documents;
(ii) all consents, licenses and permits and other governmental
authorizations or approvals required for the Construction and operation of
the Leased Property have been obtained and are in full force and effect;
(iii) the Leased Property has available all services of public
facilities and other utilities necessary for use and operation of the
Leased Property for its intended
<PAGE>
purposes, including, without limitation, adequate water, gas and electrical
supply, storm and sanitary sewerage facilities, telephone, other required
public utilities and means of access between the Building and public
highways for pedestrians and motor vehicles;
(iv) all material agreements, easements and other rights, public or
private, which are necessary to permit the lawful use and operation of the
Leased Property as the Lessee intends to use the Leased Property under the
Lease and which are necessary to permit the lawful intended use and
operation of all then intended utilities, driveways, roads and other means
of egress and ingress to and from the same have been obtained and are in
full force and effect and the Lessee has no knowledge of any pending
modification or cancellation of any of the same; and the use of the Leased
Property does not depend on any variance, special exception or other
municipal approval, permit or consent that has not been obtained and is in
full force and effect for its continuing legal use;
(v) all of the requirements and conditions set forth in Section
-------
3.5(b) of the Participation Agreement have been completed and fulfilled;
------
(vi) the Leased Property is in compliance with all applicable zoning
laws and regulations; and
(vii) the representations set forth in Section 4.1 of the
-----------
Participation Agreement are true and correct on the Completion Date.
-2-
<PAGE>
The Lessee has caused this Completion Date Certificate to be executed and
delivered by its duly authorized officer this _______________, 199___.
[INSERT NAME OF RELATED LESSEE]
By:______________________
Title:___________________
-3-
<PAGE>
EXHIBIT 4.8
AMENDMENT AGREEMENT No. 1
-------------------------
This AMENDMENT AGREEMENT, dated as of September 30, 1995, is entered into
between Alco Standard Corporation (the "Company") and The Prudential Insurance
Company of America ("Prudential").
WHEREAS, the Company and Prudential have entered into that certain
Assumption Agreement and Amended and Restated Note Agreement, dated as of May
13, 1994 (the "Note Agreement"); and
WHEREAS, the Company wishes to amend certain provisions of the Note
Agreement and Prudential has agreed to the amendments set forth below;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Paragraph 6A. Paragraph 6A is amended and restated in its entirety to
------------
read as follows:
"6A(1) Funded Debt to Net Worth Ratios. Senior Funded Debt of the
Company and its Consolidated Subsidiaries (x) to exceed 45% of the sum of
Senior Funded Debt and Subordinated Funded Debt of the Company and its
Consolidated Subsidiaries plus the consolidated minority interest
obligations shown on the most recently delivered consolidated balance sheet
of the Company and its Consolidated Subsidiaries and the Consolidated Net
Worth of the Company and its Consolidated Subsidiaries, or (y) plus
Subordinated Funded Debt of the Company and its Consolidated Subsidiaries,
taken together, to exceed 55% of the sum of Senior Funded Debt and
Subordinated Funded Debt of the Company and its Consolidated Subsidiaries
plus the consolidated minority interest obligations shown on the most
recently delivered consolidated balance sheet of the Company and its
Consolidated Subsidiaries and the Consolidated Net Worth of the Company and
its Consolidated Subsidiaries; and
6A(2) Interest Coverage Ratios. The consolidated earnings (before
reduction for taxes and after interest expense has been added back) of the
Company and its Consolidated Subsidiaries for the most recent four quarters
to be less than 3.5 times the consolidated interest expense of the Company
and its Consolidated Subsidiaries for such four quarters. For purposes of
calculating such ratio, (a) the Finance Leasing Subsidiaries shall be
treated as if they were accounted for under the equity accounting method
(i.e., the net or deficit of their income over their
<PAGE>
expenses shall be taken into account in determining consolidated earnings
of the Company and its Consolidated Subsidiaries but their aggregate
interest expense shall not be added to the consolidated interest expense of
the Company and its Consolidated Subsidiaries) and (b) the amount of either
unusual or special non-operating gains or unusual or special non-operating
losses during such four quarters that, in either the case of losses or
gains, exceed, individually or in the aggregate, U.S. $25,000,000 shall be
excluded. The total of either such gains or such losses up to and including
U.S. $25,000,000 of either or both is to be included in the consolidated
earnings for purposes of calculating compliance with this clause (iii); and
6A(3) Contingent Liabilities. Contingent Liabilities to exceed the
sum of U.S. $20,000,000 plus 10% of Consolidated Net Worth."
2. Paragraph 6B. Paragraph 6B of the Note Agreement is hereby amended and
------------
restated in its entirety as follows:
"6B. [Intentionally left blank]"
3. Paragraph 6C(6). Paragraph 6C(6) of the Note Agreement is hereby
---------------
amended and restated in its entirety as follows:
"6C(6). [Intentionally left blank]"
4. Paragraph 7A(xii). Paragraph 7A(xii) of the Note Agreement is amended
-----------------
by deleting the phrase "6A(3)" and inserting in place thereto the phrase
"6A(2)."
5. Miscellaneous.
-------------
(a) Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Note Agreement.
(b) The Note Agreement, as amended by this Amendment Agreement, is
and shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed.
(c) This Amendment Agreement may be executed in any number of
counterparts and by any combination of the parties hereto in separate
counterparts, each of which constitute one and the same Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to set their hands below as of the day and year first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ (Signature Appears Here)
---------------------------------
Vice President
ALCO STANDARD CORPORATION
By: /s/ (Signature Appears Here)
---------------------------------
Title: Vice President and
Treasurer
3
<PAGE>
EXHIBIT 4.9
================================================================================
ALCO STANDARD CORPORATION
$55,000,000
7.15% SERIES A SENIOR NOTES DUE NOVEMBER 15, 2005
______________
NOTE PURCHASE AGREEMENT
______________
DATED SEPTEMBER 14, 1995
PPN: 013788 D@ 0
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- - --------- ----
<S> <C> <C>
1. AUTHORIZATION OF NOTES.................................................................1
2. SALE AND PURCHASE OF NOTES.............................................................1
3. CLOSING................................................................................1
4. CONDITIONS TO CLOSING..................................................................2
4.1. Representations and Warranties...................................................2
4.2. Performance; No Default..........................................................2
4.3. Compliance Certificates..........................................................2
4.4. Opinions of Counsel..............................................................3
4.5. Purchase Permitted By Applicable Law, etc........................................3
4.6. Sale of Other Notes..............................................................3
4.7. Payment of Special Counsel Fees..................................................3
4.8. Private Placement Number.........................................................3
4.9. Changes in Corporate Structure...................................................4
4.10. Proceedings and Documents........................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................4
5.1. Organization; Power and Authority................................................4
5.2. Authorization, etc...............................................................4
5.3. Disclosure.......................................................................5
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.................5
5.5. Financial Statements.............................................................6
5.6. Compliance with Laws, Other Instruments, etc.....................................6
5.7. Governmental Authorizations, etc.......................................................6
5.8. Litigation; Observance of Agreements, Statutes and Orders........................6
5.9. Taxes............................................................................7
5.10. Title to Property; Leases........................................................7
5.11. Licenses, Permits, etc...........................................................7
5.12. Compliance with ERISA............................................................8
5.13. Private Offering by the Company..................................................9
5.14. Use of Proceeds; Margin Regulations..............................................9
5.15. Existing Indebtedness; Future Liens..............................................9
5.16. Foreign Assets Control Regulations, etc.........................................10
5.17. Status under Certain Statutes...................................................10
5.18. Environmental Matters...........................................................10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
6. REPRESENTATIONS OF THE PURCHASER.......................................................11
6.1. Purchase for Investment..........................................................11
6.2. Source of Funds..................................................................11
7. INFORMATION AS TO COMPANY..............................................................12
7.1. Financial and Business Information...............................................12
7.2. Officer's Certificate............................................................15
7.3. Inspection.......................................................................15
8. PREPAYMENT OF THE NOTES................................................................16
8.1. Required Prepayments.............................................................16
8.2. Optional Prepayments and Rating Decline Prepayment...............................16
8.3. Allocation of Partial Prepayments................................................17
8.4. Maturity; Surrender, etc.........................................................17
8.5. Purchase of Notes................................................................18
8.6. Make-Whole Amount................................................................18
9. AFFIRMATIVE COVENANTS..................................................................19
9.1. Compliance with Law..............................................................19
9.2. Insurance........................................................................20
9.3. Maintenance of Properties........................................................20
9.4. Payment of Taxes and Claims......................................................20
9.5. Corporate Existence, etc.........................................................20
10. NEGATIVE COVENANTS.....................................................................21
10.1. Transactions with Affiliates.....................................................21
10.2. Merger, Consolidation, etc.......................................................21
10.3. Liens............................................................................22
10.4. Limitation on Sale and Lease-Back................................................24
10.5. Exemption from Limitation on Liens and Sale and Lease-Back.......................24
11. EVENTS OF DEFAULT......................................................................25
12. REMEDIES ON DEFAULT, ETC...............................................................27
12.1. Acceleration.....................................................................27
12.2. Other Remedies...................................................................28
12.3. Rescission.......................................................................28
12.4. No Waivers or Election of Remedies, Expenses, etc................................28
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................................28
13.1. Registration of Notes............................................................28
13.2. Transfer and Exchange of Notes...................................................29
13.3. Replacement of Notes.............................................................29
14. PAYMENTS ON NOTES......................................................................30
14.1. Place of Payment.................................................................30
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
14.2. Home Office Payment.............................................................30
15. EXPENSES, ETC..........................................................................30
15.1. Transaction Expenses............................................................30
15.2. Survival........................................................................31
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT..............................................................................31
17. AMENDMENT AND WAIVER...................................................................31
17.1. Requirements....................................................................31
17.2. Solicitation of Holders of Notes................................................32
17.3. Binding Effect, etc.............................................................32
17.4. Notes held by Company, etc......................................................32
18. NOTICES................................................................................32
19. REPRODUCTION OF DOCUMENTS..............................................................33
20. CONFIDENTIAL INFORMATION...............................................................33
21. SUBSTITUTION OF PURCHASER..............................................................34
22. MISCELLANEOUS..........................................................................35
22.1. Successors and Assigns..........................................................35
22.2. Payments Due on Non-Business Days...............................................35
22.3. Severability....................................................................35
22.4. Construction....................................................................35
22.5. Counterparts....................................................................35
22.6. Governing Law...................................................................35
</TABLE>
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary
Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
iii
<PAGE>
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 10.3 -- Existing Liens
EXHIBIT 1 -- Form of 7.15% Series A Senior Note due November 15, 2005
EXHIBIT 4.4(a) -- Form of Legal Opinions
iv
<PAGE>
ALCO STANDARD CORPORATION
Box 834
Valley Forge, Pennsylvania 19482
7.15% Series A Senior Notes due November 15, 2005
September 14, 1995
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
ALCO STANDARD CORPORATION, an Ohio corporation (the "COMPANY"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $55,000,000 aggregate
principal amount of its 7.15% Series A Senior Notes due November 15, 2005 (the
"NOTES", such term to include any such notes issued in substitution therefor
pursuant to Section 13 of this Agreement). The Notes shall be substantially in
the form set out in Exhibit 1, with such changes therefrom, if any, as may be
approved by you and the Company. Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. You and the other Purchasers are referred to herein
individually as a "Purchaser" and collectively as the "Purchasers." The funding
and the obligations of the Purchasers under this Agreement are several and not
joint obligations and you shall have no obligation and no liability to any
Person for the performance or non-performance by any other Purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by the Purchasers
shall occur at the offices of Gardner, Carton & Douglas, 321 North Clark Street,
Suite 3400, Chicago, Illinois 60610, at 9:00 a.m., Central Standard Time, at a
closing (the "CLOSING") on November 28, 1995 or on such other Business Day
thereafter on or prior to November 28, 1995 as may be agreed upon by the Company
and the Purchasers. At the Closing the Company will deliver to you the Notes to
be purchased by you in the form of a single Note (or such greater
<PAGE>
number of Notes in denominations of at least $100,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to account number
0117-7190 at Corestates Bank, N.A., Philadelphia, Pennsylvania, ABA# 0310-0001-
1. If at the Closing the Company shall fail to tender such Notes to you as
provided above in this Section 3, or any of the conditions specified in Section
4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14), no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Sections 10.1 or 10.2 hereof had such Sections applied since such date.
4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you
---------------------
Officer's Certificates, dated the date of execution of this Agreement and the
date of the Closing, respectively, certifying that the conditions specified in
Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you
-----------------------
certificates dated the date of execution of this Agreement and the date of
Closing, respectively, certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Notes and the Agreements.
2
<PAGE>
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of execution of this Agreement and the date of the Closing,
respectively, (a) from Thompson, Hine and Flory, special counsel for the
-
Company, and from Karin M. Kinney, Esq., Corporate Counsel for the Company,
covering the matters set forth in Exhibit 4.4(a) and covering such other matters
incident to the transactions contemplated hereby as you or your counsel may
reasonably request (and the Company hereby instructs its counsel to deliver such
opinion to you) and (b) from Gardner, Carton & Douglas, your special counsel in
-
connection with such transactions, substantially in the form set forth in
Exhibit 4.4(a) and covering such other matters incident to such transactions as
you may reasonably request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
-
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
--
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
---
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
The Company shall have consummated the sale of the entire $55,000,000
principal amount of Notes to be sold on the Closing Date pursuant to this
Agreement.
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
3
<PAGE>
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you as of the date of execution
of this Agreement and as of the date of Closing that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
-
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
--
considered in a proceeding in equity or at law).
4
<PAGE>
5.3. DISCLOSURE.
The Company, through its agents, First Fidelity Bank, N.A. and SPP
Hambro & Co., has delivered to you and each other Purchaser a copy of a private
placement memorandum (the "MEMORANDUM"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by or
on behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Memorandum
or as expressly described in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the financial
statements listed in Schedule 5.5, since September 30, 1994, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any Subsidiary except changes that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists (i) of the Company's Subsidiaries, showing, as to each
-
Subsidiary, the correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
--
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
---
directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
5
<PAGE>
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the consolidated
financial statements of the Company and its Subsidiaries listed on Schedule 5.5.
All of said consolidated financial statements (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
-
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
--
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
---
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
6
<PAGE>
(d) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
-
individually or in the aggregate Material or (ii) the amount, applicability or
--
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended September 30, 1987.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of
others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
7
<PAGE>
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any
of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by more than $5,000,000 in the case of any
single Plan and by more than $25,000,000 in the aggregate for all Plans. The
term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA
and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax could
be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to (i) the accuracy of your representation in Section 6.2 as to
-
the sources of the funds used to pay the purchase price of the Notes to be
purchased by you and (ii) the assumption, made solely for the purpose of making
--
such
8
<PAGE>
representation, that Department of Labor Interpretive Bulletin 75-2 with respect
to prohibited transactions remains valid in the circumstances of the
transactions contemplated herein.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than the Purchasers, and not more than 15 other Institutional
Investors, each of which has been offered the Notes at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to
the registration requirements of Section 5 of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes to the
repayment of short-term borrowings. No part of the proceeds from the sale of
the Notes hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR 207), or for the
purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 1% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 1% of the value of such assets. As used in this
Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have
the meanings assigned to them in said Regulation G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of August 15 1995 and November 15, 1995, respectively, since
which date there has been no Material change in the amounts, interest rates,
sinking funds, installment payments or maturities of the Indebtedness of the
Company or its Subsidiaries. Neither the Company nor any Subsidiary is in
default and no waiver of default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company or such Subsidiary and
no event or condition exists with respect to any Indebtedness of the Company or
any Subsidiary that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly scheduled dates
of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.3.
9
<PAGE>
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets
or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust
<PAGE>
funds and not with a view to the distribution thereof, provided that the
--------
disposition of your or their property shall at all times be within your or their
control. You understand that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Company is not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than
a separate account that is maintained solely in connection with your
fixed contractual obligations under which the amounts payable, or
credited, to such plan and to any participant or beneficiary of such plan
(including any annuitant) are not affected in any manner by the
investment performance of the separate account; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE")
90-1 (issued January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Company in writing pursuant to this
paragraph (b), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or collective
investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
-
of such QPAM and (ii) the names of all employee benefit plans whose
--
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (c); or
11
<PAGE>
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
--------------------
quarterly fiscal period in each fiscal year of the Company (other than
the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
--------
above of copies of the Company's Quarterly Report on Form 10-Q prepared
in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each fiscal
-----------------
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
12
<PAGE>
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries, for such
year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit),
provided that the delivery within the time period specified above of the
--------
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
clause (B) above, shall be deemed to satisfy the requirements of this
Section (b);
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
one copy of (i) each financial statement, report, notice or proxy
-
statement sent by the Company or any Subsidiary to public securities
holders generally, and (ii) each regular or periodic report, each
--
registration statement (without exhibits except as expressly requested by
such holder and excepting Form S-8), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to
the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five days after a Responsible Officer becoming aware of the
existence of any Default or
13
<PAGE>
Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has
given any notice or taken any action with respect to a claimed default of
the type referred to in Section 11(f), a written notice specifying the
nature and period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five Business
-------------
Days after a Senior Financial Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
-----------------------------------
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating
to any order, ruling, statute or other law or regulation that could
reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
14
<PAGE>
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
-------------------
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.5
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has reviewed
----------------
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date
of the certificate and that such review shall not have disclosed the
existence during such period of any condition or event that constitutes a
Default or an Event of Default or, if any such condition or event existed
or exists (including, without limitation, any such event or condition
resulting from the failure of the Company or any Subsidiary to comply
with any Environmental Law), specifying the nature and period of
existence thereof and what action the Company shall have taken or
proposes to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs,
15
<PAGE>
finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested.
8. PREPAYMENT OF THE NOTES
8.1. REQUIRED PREPAYMENTS.
Except as set forth in Section 8.2(b), no prepayments of the Notes are
required.
8.2. OPTIONAL PREPAYMENTS AND RATING DECLINE PREPAYMENT.
(a) The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than 5% of the aggregate principal amount of the Notes then
outstanding in the case of a partial prepayment, at 100% of the principal amount
so prepaid, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2 not less than
30 days and not more than 60 days prior to the date fixed for such prepayment.
Each such notice shall specify such date, the aggregate principal amount of the
Notes to be prepaid on such date, the principal amount of each Note held by such
holder to be prepaid (determined in accordance with Section 8.3), and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid, and shall be accompanied by a certificate of a Senior Financial
Officer as to the estimated Make-Whole Amount due in connection with such
prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
(b) Upon the occurrence of a Ratings Decline, the Company shall offer
to prepay the entire principal amount of the Notes at a price of 100% of the
principal amount thereof, plus the Make-Whole Amount determined for the
prepayment date. The Company shall give notice of any offer to prepay the Notes
pursuant to this Section 8.2(b) to each holder of the Notes promptly after a
Responsible Officer becomes aware of the occurrence of a Ratings Decline and in
any event no later than five Business Days following the occurrence of a Ratings
Decline. Such notice shall specify (i) in reasonable detail, the facts and
circumstances surrounding such Ratings Decline, including reports from Moody's
and S&P concerning the Ratings Decline, (ii) the date fixed for prepayment which
shall be not less than 60 or more than 90 calendar days after the date of such
notice, (iii) the accrued interest applicable to the prepayment and (iv) the
date by which any holder of a Note that wishes to accept such offer must deliver
notice thereof to the Company which shall not be earlier than five calendar days
after the date of such notice and shall be accompanied by a certificate of a
Senior Financial Officer as to the estimated Make-Whole amount due in connection
with such prepayment (calculated as if the date of such notice were the date of
the prepayment), setting forth the details of such computation. Two Business
Days prior to such prepayment, the Company shall deliver to each holder of Notes
a certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole amount as of the specified prepayment date. Such calculation shall
use the Reinvestment Yield on the date two Business
16
<PAGE>
Days prior to the date fixed for prepayment, but shall use the actual date fixed
for prepayment as the prepayment date.
A "Ratings Decline" shall be deemed to exist if (1) Moody's and S&P (the
"Rating Agencies") shall: (i) have lowered their ratings of the Company's
senior notes pari passu in ranking to the Notes (collectively defined herein as
the "Company's Senior Notes") to a rating below Investment Grade or (ii) have
previously rated the Company's Senior Notes below Investment Grade, and both
ratings are further lowered by one rating category (including gradations of
rating category by numerical modifier "+" or "-" or otherwise) or (2) the
Company's Senior Notes cease to be rated by either Moody's or S&P (except for
reasons through no fault of the Company where both Rating Agencies become unable
to provide a rating for the Company's Senior Notes due to business failure or
business interruption of such Rating Agencies) and the Company is unable to
replace the rating with a rating by a Comparable Rating Agency within 90 days.
"Comparable Rating Agency" shall mean any nationally recognized rating agency
which, in the ordinary course of its business, rates Indebtedness obligations.
8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
The Company will not and will not permit any Subsidiary or Affiliate
to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Subsidiary or Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
17
<PAGE>
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
--------
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1,
as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the
Notes is payable) equal to the Reinvestment Yield with respect to such
Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, the yield to maturity implied by (i) the yields reported, as of
-
10:00 A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as "Page 678" on the Telerate Access Service (or such other
display as may replace Page 678 on Telerate Access Service) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, plus
.50 of 1%, or (ii) if such yields are not reported as of such time or the
--
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, plus .50 of 1%. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
-
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
- -
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
-
Treasury security with the duration closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
- --
obtained by multiplying (a) the principal component of each Remaining
-
Scheduled Payment with respect to such Called Principal by (b) the number
-
of years (calculated to the nearest one-twelfth year) that will elapse
18
<PAGE>
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior
to its scheduled due date, provided that if such Settlement Date is not a
--------
date on which interest payments are due to be made under the terms of the
Notes, then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement Date
and required to be paid on such Settlement Date pursuant to Section 8.2
or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant
to Section 8.2 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles, co-
insurance and self-insurance, if adequate reserves are maintained with respect
thereto) as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will, and will cause each of its Subsidiaries to, maintain
and keep, or cause to be maintained and kept, their respective properties in
good repair, working order and
19
<PAGE>
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
--------
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
--------
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
-
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
--
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
Subject to Section 10.2, the Company will at all times preserve and
keep in full force and effect its corporate existence. Subject to Section 10.2,
the Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries (unless merged into the Company
or a Subsidiary) and all rights and franchises of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any Material transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or exchange
of properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's
20
<PAGE>
business and upon fair and reasonable terms no less favorable to the Company or
such Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
10.2. MERGER, CONSOLIDATION, ETC.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of the Company as an entirety, as the
case may be, shall be a solvent corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Company is not such corporation, (i)
-
such corporation shall have executed and delivered to each holder of any
Notes its assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement and the Notes and (ii)
--
shall have caused to be delivered to each holder of any Notes an opinion
of nationally recognized independent counsel, or other independent
counsel reasonably satisfactory to the Required Holders, to the effect
that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof;
(b) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under this Agreement or the Notes.
10.3. LIENS.
Except to the extent provided in Section 10.5, the Company will not
create or assume, and will not permit any Subsidiary to create or assume, any
Lien of or upon any Principal Property or shares of capital stock or
Indebtedness of any Subsidiary, whether owned at the date of this Agreement or
thereafter acquired, without making effective provision whereby the Notes shall
be secured by such Lien equally and ratably with any and all other Indebtedness
or obligations thereby secured so long as such other Indebtedness or obligations
shall be secured; provided that the foregoing shall not apply to any of the
following:
(a) Liens on any Principal Property existing at the time that it is
acquired by the Company or any Subsidiary; or Liens on any Principal
Property acquired, constructed or improved by the Company or any
Subsidiary after the date of this Agreement which are created or assumed
contemporaneously with, or within 180 days after (or, in the case of any
such Principal Property which is being financed on the basis of long-term
contracts or similar financing arrangements for which a firm commitment
is made by one or more
21
<PAGE>
banks, insurance companies or other lenders or investors (not including
the Company or any Subsidiary), within 360 days after) the completion of
such acquisition, construction or improvement to secure or provide for
the payment of any part of the purchase price of such property or the
cost of such construction or improvement.
(b) 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 the Company or a 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 the Company or a Subsidiary:
(c) Liens on property or shares of capital stock or Indebtedness of a
corporation existing at the time such corporation becomes a Subsidiary;
(d) Liens to secure Indebtedness of a Subsidiary to the Company or to
another Subsidiary, but only so long as such Indebtedness is held by the
Company or a Subsidiary;
(e) 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 any 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;
(f) 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;
(g) Liens existing at the date of this Agreement, as set forth in
Schedule 10.3;
(h) mechanics', workers', repairmen's, materialmen's, warehousemen's,
carriers' or other similar Liens arising in the ordinary course of
business;
(i) 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 the Company or any 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 the Company or any Subsidiary is a party, or
deposits in litigation or other proceedings such as, but not limited to,
interpleader proceedings;
22
<PAGE>
(j) 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 the Company or any Subsidiary with respect to which the
Company or such Subsidiary is in good faith prosecuting an appeal or
proceedings for review; or Liens incurred by the Company or any
Subsidiary for the purpose of obtaining a stay or discharge in the course
of any legal proceeding to which the Company or such Subsidiary is a
party;
(k) Liens for taxes or assessments or governmental charges 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;
(l) other Liens incidental to the conduct of the business or the
ownership of the property and assets of the Company or a 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 the
Company, materially detract from the value of the property or assets or
materially impair the use thereof in the operation of the business of the
Company and its Subsidiaries taken as a whole;
(m) Liens for the sole purpose of extending, renewing or replacing in
whole or in part any Lien referred to in the foregoing clauses (a) to
(l), inclusive, or in this clause (m), provided that the principal amount
of Indebtedness secured thereby shall not exceed the principal amount of
any Indebtedness so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to all or a part of the property subject to the Lien so extended,
renewed or replaced (plus improvements on such property).
In the event that the Company or any Subsidiary creates, assumes,
incurs or permits to exist any Lien not otherwise permitted by this Section
10.3, the Company will make or cause to be made provision whereby the Notes will
be secured equally and ratably with all other obligations secured by such Liens
(subject (i) to any holder of Notes having the right to decline to have its
Notes secured by such Liens and (ii) to the receipt by the Noteholders of an
opinion of counsel in form and substance satisfactory to such Noteholders to the
effect that the Notes will be secured equally and ratably with all other
obligations secured by such Liens), and in any case the Notes shall have the
benefit, to the full extent that, and with such priority as, the holders may be
entitled thereto under applicable law, of an equitable Lien on such Property
securing the Notes.
10.4. LIMITATION ON SALE AND LEASE-BACK.
Except to the extent provided in Section 10.5, the Company will not,
nor will it permit any Subsidiary to, enter into any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of any Principal
Property (except for leases of not more than three years and except for leases
between the Company and a Subsidiary or between Subsidiaries), which property
has been owned and operated by the Company or any Subsidiary for more than
23
<PAGE>
180 days and has been or is to be sold or transferred by the Company or such
Subsidiary to such Person (in Section 10.4 and in Section 10.5 referred to as a
"Sale and Lease-Back Transaction") unless either (i) the Company or such
Subsidiary would be entitled to incur Indebtedness secured by a Lien on such
property without equally and ratably securing the Notes pursuant to the
provisions of Section 10.3 or (ii) the Company shall apply an amount equal to
the Attributable Debt in respect of such Sale and Lease-Back Transaction to (1)
the acquisition of one or more Principal Properties of equal or greater
aggregate fair market value, (2) the optional prepayment of Indebtedness,
including, at the option of each holder of a Note, the Notes (which shall be
prepaid pursuant to the terms and conditions of Section 8.2(a)), incurred or
assumed by the Company or any Subsidiary (other than Indebtedness for borrowed
money owed to the Company or any Subsidiary) prepaid within 180 days after such
sale or (3) any combination of the foregoing. Notwithstanding the foregoing, no
prepayment referred to in clause (2) of the preceding sentence may be effected
by payment at maturity or pursuant to any mandatory sinking fund payment or any
mandatory prepayment provision.
10.5. EXEMPTION FROM LIMITATION ON LIENS AND SALE AND LEASE-BACK.
Notwithstanding the provisions of Section 10.3 and Section 10.4, the
Company and its Subsidiaries may create or assume Liens and enter into Sale and
Lease-Back Transactions which would otherwise require the securing of the Notes,
the acquisition of one or more Principal Properties or the prepayment of
Indebtedness under said provisions, provided that the aggregate amount of all
such Liens and Sale and Lease-Back Transactions permitted by Section 10.5
outstanding at the time such Lien is assumed or created or such Sale and Lease-
Back Transaction is entered into (as measured by (i) 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 (ii) the Attributable Debt in respect of all
such Sale and Lease-Back Transactions then outstanding or to be so entered into)
shall not exceed 10% of Consolidated Net Assets, as determined in accordance
with the most recent consolidated balance sheet of the Company and after giving
effect to the receipt and application of any proceeds of all Indebtedness
secured by all such Liens so to be created or assumed and of any Sale and Lease-
Back Transactions so to be entered into.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-
Whole Amount, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration
or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with any
term contained in Sections 10.2, 10.4 and 10.5; or
24
<PAGE>
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) and such default is not remedied within
30 days after the earlier of (i) a Responsible Officer obtaining actual
-
knowledge of such default and (ii) the Company receiving written notice
--
of such default from any holder of a Note (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any
writing furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any material respect on the
date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
-
as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $15,000,000
beyond any period of grace provided with respect thereto, or (ii) the
--
Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Indebtedness in an
aggregate outstanding principal amount of at least $15,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its
stated maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any event or
---
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests), (x) the
-
Company or any Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly
scheduled dates of payment in an aggregate outstanding principal amount
of at least $15,000,000, or (y) one or more Persons have the right to
-
require the Company or any Subsidiary so to purchase or repay such
Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
-
admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it
--
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
of any jurisdiction, (iii) makes an assignment for the benefit of its
---
creditors, (iv) consents to the appointment of a custodian, receiver,
--
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
-
insolvent or to be liquidated, or (vi) takes corporate action for the
--
purpose of any of the foregoing; or
25
<PAGE>
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Subsidiaries, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such
petition shall be filed against the Company or any of its Subsidiaries
and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company and its Subsidiaries and which judgments are not, within 45
days after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 45 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
-
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of intent
--
to terminate any Plan shall have been or is reasonably expected to be
filed with the PBGC or the PBGC shall have instituted proceedings under
ERISA section 4042 to terminate or appoint a trustee to administer any
Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (iii) the
---
aggregate "amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $25,000,000, (iv) the Company or any
--
ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, (v) the
-
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or amends any employee
--
welfare benefit plan that provides post-employment welfare benefits in a
manner that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause
26
<PAGE>
encompasses clause (i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 25% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
-
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
-
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 75%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
-
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
-
that have become due solely by reason of such declaration, have been cured or
have been waived
27
<PAGE>
pursuant to Section 17, and (c) no judgment or decree has been entered for the
-
payment of any monies due pursuant hereto or to the Notes. No rescission and
annulment under this Section 12.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
28
<PAGE>
transferred in denominations of less than $100,000, provided that if necessary
--------
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that an Institutional Investor's
--------
own unsecured agreement of indemnity shall be deemed to be satisfactory),
or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made at the
address of the Purchasers set forth in Schedule A hereto. The Company may at
any time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal office of
the Company in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the
29
<PAGE>
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by you
under this Agreement and that has made the same agreement relating to such Note
as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you or holder of a Note in connection with such transactions and in
connection with any amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses incurred
-
in enforcing or defending (or determining whether or how to enforce or defend)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Notes, or by reason of being a holder of any Note, and (b)
-
the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary or
in connection with any work-out or restructuring of the transactions
contemplated hereby and by the Notes. The Company will pay, and will save you
and each other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders (other than those
retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding
30
<PAGE>
sentence, this Agreement and the Notes embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
-
provisions of Section 1, 2, 3, 4, 5, 6 or 20 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
-
the holder of each Note at the time outstanding affected thereby, (i) subject to
-
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
--
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
---
20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
-------
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation,
31
<PAGE>
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "THIS AGREEMENT" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
-
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
-
requested (postage prepaid), or (c) by a recognized overnight delivery service
-
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
-
executed, (b) documents received by you at the Closing (except the Notes
-
themselves), and (c) financial statements, certificates and other information
-
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates
32
<PAGE>
that, to the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
--------
include information that (a) was publicly known or otherwise known to you prior
-
to the time of such disclosure, (b) subsequently becomes publicly known through
-
no act or omission by you or any person acting on your behalf, (c) otherwise
-
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
-
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
--------
Information to (i) your directors, officers, employees, agents, attorneys and
-
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes), (ii) your financial
--
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
--- --
to which you sell or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which you offer to purchase any security of the Company
-
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any federal
--
or state regulatory authority having jurisdiction over you, (vii) the National
---
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
----
disclosure may be necessary or appropriate (w) to effect compliance with any
-
law, rule, regulation or order applicable to you, (x) in response to any
-
subpoena or other legal process, (y) in connection with any litigation to which
-
you are a party or (z) if an Event of Default has occurred and is continuing, to
-
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or
33
<PAGE>
its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with
34
<PAGE>
any one covenant shall not (absent such an express contrary provision) be deemed
to excuse compliance with any other covenant. Where any provision herein refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Pennsylvania excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
35
<PAGE>
* * * * *
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
ALCO STANDARD CORPORATION
By /s/ Signature
-------------------------------
Title: [Title]
36
<PAGE>
The foregoing is hereby agreed to
as of the date thereof.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Signature
------------------------------------
By: /s/ Signature
------------------------------------
Authorized Signatories
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Signature
------------------------------------
Title: [Title]
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT OH
By: /s/ Signature
------------------------------------
Title: [Title]
EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU
By: /s/ Signature
------------------------------------
Title: [Title]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc.
By: /s/ Signature
------------------------------------
Name: [Name]
Title: [Title]
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA Investments, Inc.
By: /s/ Signature
------------------------------------
Name: [Name]
Title: [Title]
37
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
GREAT-WEST LIFE & ANNUITY INSURANCE $20,000,000
COMPANY
8515 East Orchard Road
Third Floor, Tower 2
Englewood, Colorado 80111
Attn: Private Placements
</TABLE>
All notices of scheduled payments and written confirmations of such wire
transfer should be sent to the address above. All payments by Fedwire
transfer of immediately available funds, identifying the name of the Issuer
(and the Credit, if any), the Private Placement Number preceded by "DPP"
and the payment as principal, interest or premium, in the format as
follows:
[BBK =Norwest Bank Minnesota, N.A.
ABA #091-000-019 NW MPLS/TRUST CLEARING
BNF = Great-West Life & Annuity Insurance Company
Collection Account #08-40-245 ATTN: Acct. #12468800
ORG = Alco Standard Corporation
OBI = DPP (PPN: 013788 D@ 0)
Payment Due Date (MM/DD/YY) -
P__________ (Enter "P" and amount of
principal being remitted, for example,
P5000000.00) -
I__________ (Enter "I" and amount of
interest being remitted, for example,
I225000.00)
Schedule A
<PAGE>
Securities to be delivered to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
5th Floor
Minneapolis, Minnesota 55479-0047
Attention: Security Clearance
All financial reports, compliance certificates and all other written
communications, including notice of prepayments, to be sent to:
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
3rd Floor, Tower 2
Englewood, Colorado 80111
Attention: U.S. Private Placements
Tax ID #84-0467907
Schedule A
2
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY $16,000,000
One Nationwide Plaza
Columbus, Ohio 43215-2220
</TABLE>
(1) All payments by wire transfer of immediately
available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O Nationwide Life Insurance Company
Custody A/C #71615
Attn: Custody Service Dept.
PPN: 013788 D@ 0
Security Description:___________________
With notice of each such payment to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(2) All notices and communications to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention; Corporate Fixed-Income Securities
Schedule A
3
<PAGE>
(3) The original note should be registered in the name of
NATIONWIDE LIFE INSURANCE COMPANY and delivered to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, New York 10260-0023
F/A/O Nationwide Life Insurance Company
Custody Account #71615
Tax ID #31-4156830
Schedule A
4
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY $1,000,000
Separate Account OH
One Nationwide Plaza
Columbus, Ohio 43215-2220
</TABLE>
(1) All payments by wire transfer of immediately
available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O Nationwide Life Insurance Company
Separate Acct. OH Custody A/C #74605
Attn: Custody Service Dept.
PPN: 013788 D@ 0
Security Description:___________________
With notice of each such payment to:
Nationwide Life Insurance Company
Separate Account OH
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(2) All notices and communications to:
Nationwide Life Insurance Company
Separate Account OH
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention; Corporate Fixed-Income Securities
Schedule A
5
<PAGE>
(3) The original note should be registered in the name of
NATIONWIDE LIFE INSURANCE COMPANY SEPARATE ACCOUNT OH
and delivered to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, New York 10260-0023
F/A/O Nationwide Life Insurance Company Separate Account OH
Custody Account #74605
Tax ID #31-4156830
Schedule A
6
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
EMPLOYERS LIFE INSURANCE COMPANY $3,000,000
OF WAUSAU
2000 Westwood Drive
Wausau, Wisconsin 54401
</TABLE>
(1) All payments by wire transfer of immediately
available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O Employers Life Custody A/C #50135
Attn: Custody Service Dept.
PPN: 013788 D@ 0
Security Description:___________________
With notice of each such payment to:
Employers Life Insurance Company of Wausau
2000 Westwood Drive
Wausau, Wisconsin 54401
(2) All notices and communications to:
Employers Life Insurance Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention; Corporate Fixed-Income Securities
Schedule A
7
<PAGE>
(3) The original note should be registered in the name of
EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU and delivered to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, New York 10260-0023
F/A/O Employers Life Insurance Company of Wausau
Custody Account #50135
A copy of the note should be mailed directly to:
Ms. Lorraine Moran
Employers Life Insurance Company of Wausau
2000 Westwood Drive
Wausau, Wisconsin 54401
Tax ID #39-1049873
Schedule A
8
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
CONNECTICUT GENERAL LIFE INSURANCE $9,000,000
COMPANY
</TABLE>
(1) In the case of all payments on account of the Notes:
---------------------------------------------------
By crediting in the form of bank wire transfer of Federal or other
immediately available funds, to:
FED ABA #021000021 Chase NYC/CTR
BNF=CIGNA Private Placements/AC=9009001802
OBI=[Issue Name, Private Placement Number, description of security
with rate and maturity, the amount of interest and/or principal, the
amount of any prepayment, the payable date, contact name and telephone
number]
(2) In the case of all notices with respect to payments only:
--------------------------------------------------------
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Accounting Department (S-206)
with a copy to each of:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508, Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
and
Schedule A
9
<PAGE>
CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Department (S-307)
(3) In the case of all other communications:
---------------------------------------
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Department (S-307)
SECURITIES SHOULD BE REGISTERED IN THE NAME OF CIG & CO.
CIG & Co.'s Tax ID #13-3574027
Schedule A
10
<PAGE>
SCHEDULE A
----------
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- - ----------------------------- ---------------------
<S> <C>
LIFE INSURANCE COMPANY OF $6,000,000
NORTH AMERICA
</TABLE>
(1) In the case of all payments on account of the Notes:
---------------------------------------------------
By crediting in the form of bank wire transfer of Federal or other
immediately available funds, to:
FED ABA #021000021 Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
OBI=[Issue Name, Private Placement Number, description
of security with rate and maturity, the amount of interest and/or
principal, the amount of any prepayment, the payable date,
contact name and telephone number]
(2) In the case of all notices with respect to payments only:
--------------------------------------------------------
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Accounting Department (S-206)
with a copy to each of:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508, Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
and
CIGNA Investments, Inc.
Schedule A
11
<PAGE>
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Department (S-307)
(3) In the case of all other communications:
---------------------------------------
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Department (S-307)
SECURITIES SHOULD BE REGISTERED IN THE NAME OF CIG & CO.
CIG & Co.'s Tax ID #13-3574027
Schedule A
12
<PAGE>
SCHEDULE B
----------
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"ATTRIBUTABLE DEBT" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent required to be paid by such Person
under such lease during the remaining term thereof, excluding renewals at the
option of lessee, discounted at a rate per annum equal to the prevailing market
interest rate, at the time such lease was entered into, on United States
Treasury obligations having a maturity substantially the same as the average
term of such lease, plus 3%. The net amount of rent required to be paid under
any such lease for any such period shall be the amount of the rent payable by
the lessee with respect to such period, after excluding amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges and contingent rents such as those based on sales. In
the case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
-
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
-
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Denver, Colorado; Columbus, Ohio; or Hartford,
Connecticut, Philadelphia, Pennsylvania are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
Schedule B
<PAGE>
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Alco Standard Corporation, an Ohio corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED NET ASSETS" means the total of all assets after
deducting all current liabilities appearing on a consolidated balance sheet of
the Company and its consolidated Subsidiaries, prepared in accordance with
generally accepted accounting principles, the assets to be determined at their
net book values (after deducting related depreciation, depletion, amortization
and all other valuation reserves which, in accordance with such principles,
should be set aside in connection with the business conducted).
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of (i)
-
two percent (2%) per annum above the rate of interest stated in clause (a) of
the first paragraph of the Notes or (ii) two percent (2%) over the rate of
--
interest publicly announced by The Chase Manhattan Bank, N.A., in New York, New
York as its "base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2
Schedule B
<PAGE>
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement
with respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance with
GAAP in respect of Capital Leases;
3
Schedule B
<PAGE>
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
-
(b) any holder of a Note holding more than 5% of the aggregate principal amount
-
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
-
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"INVESTMENT GRADE" means ratings by Moody's and S&P of BBB-1/Baa3,
respectively, or above.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
-
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the Company
-
to perform its obligations under this Agreement and the Notes, or (c) the
-
validity or enforceability of this Agreement or the Notes.
4
Schedule B
<PAGE>
"MEMORANDUM" is defined in Section 5.3.
"MOODY'S" means Moody's Investors Service, Inc. or any successor
thereof.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"PRINCIPAL PROPERTY" means any manufacturing plant, research facility
or warehouse owned or leased by the Company or any Subsidiary which is located
within the United States of America and has a net book value exceeding 2-1/2% of
Consolidated Net Assets.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"RATINGS DECLINE" is defined in Section 8.2(b).
5
Schedule B
<PAGE>
"REQUIRED HOLDERS" means, at any time, the holders of at least 66-2/3%
in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"SALE AND LEASEBACK TRANSACTION" is defined in Section 10.4
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"S&P" means Standard & Poor's Corporation or any successor thereto.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a reference to a Subsidiary of the Company.
"SWAPS" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting
6
Schedule B
<PAGE>
interests of which are owned by any one or more of the Company and the Company's
other Wholly-Owned Subsidiaries at such time.
7
Schedule B
<PAGE>
EXHIBIT 1
---------
[FORM OF NOTE]
ALCO STANDARD CORPORATION
7.15% SERIES A SENIOR NOTE DUE NOVEMBER 15, 2005
No. [_____] [Date]
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, ALCO STANDARD CORPORATION (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Ohio, hereby promises to pay to [________________], or registered
assigns, the principal sum of [_______________] DOLLARS on November 15, 2005,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of 7.15% per annum from the date
-
hereof, payable semiannually, on the fifteenth day of November and May in each
year, commencing with May 15, 1996, until the principal hereof shall have become
due and payable, and (b) to the extent permitted by law on any overdue payment
-
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any Make-Whole Amount (as defined in the Note
Purchase Agreements referred to below), payable semiannually as aforesaid (or,
at the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to the greater of (i) 9.15% or (ii) 2% over the rate of
- --
interest publicly announced by The Chase Manhattan Bank, N.A., from time to time
in New, York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the address set forth in Schedule A to the Note Purchase Agreement
(as defined below).
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of
September 14, 1995 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
-
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
--
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
Exhibit 1
<PAGE>
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase Agreements,
but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
No replacement or substitution of this Note shall constitute a
novation of this Note.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of
Pennsylvania excluding choice-of-law principles of the law of such state that
would require the application of the laws of a jurisdiction other than such
state without prejudice to or limitation of any other rights or remedies
available under the laws of any jurisdiction where property or assets of the
Company subject to the Note Purchase Agreements may be found.
ALCO STANDARD CORPORATION
By_________________________
[Title]
2
Exhibit 1
<PAGE>
EXHIBIT 4.4(a)
FORM OF LEGAL OPINIONS
A. The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Ohio, with all requisite corporate power
and authority referred to in the Agreement, to enter into and perform the
Agreement and to issue and sell the Notes.
2. The Agreement has been duly authorized by proper corporate action on
the part of the Company, has been duly executed and delivered by an authorized
officer of the Company and constitutes the legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except to the extent that
enforcement of the Agreement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
3. The Notes have been duly authorized by proper corporate action on the
part of the Company, have been duly executed and delivered by an authorized
officer of the Company and constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their terms, except to the extent
that enforcement of the Notes may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles, regardless of whether enforcement is sought in a
proceeding in equity or at law.
4. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
5. The issuance and sale of the Notes and compliance with the terms and
provisions of the Notes and the Agreement will not conflict with or result in
any breach of any of the provisions of the Certificate of Incorporation or By-
Laws of the Company.
The opinion of Gardner, Carton & Douglas also shall state that the opinion of
Karin M. Kinney, Esq., Corporate Counsel for the Company and the opinion of
Thompson, Hine and Flory, special counsel for the Company, each delivered to you
pursuant to the Agreement, are each satisfactory in form and scope to Gardner,
Carton & Douglas, and, in their opinion, the Purchasers and it are justified in
relying thereon and shall cover such other matters relating to the sale of the
Notes as the Purchasers may reasonably request.
Exhibit 4.4(a)
<PAGE>
B. The opinion of Karin M. Kinney, Esq., Corporate Counsel for the
Company and the opinion of Thompson, Hine and Flory, special counsel for the
Company, shall together cover all matters specified in clauses 1 through 4 set
forth in A. above and also shall together be to the effect that:
1. The Company has full corporate power and authority to conduct the
activities in which it is now engaged and own its property.
2. Each Subsidiary of the Company is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
incorporation, and each has all requisite corporate power and authority to carry
on its business as now conducted and own its property.
3. Each of the Company and its Subsidiaries is duly qualified or licensed
and in good standing as a foreign corporation authorized to do business in each
jurisdiction where the nature of the business transacted by it or the character
of its properties owned or leased makes such qualification or licensing
necessary except where failure to so qualify would not, individually or in the
aggregate, have a material adverse affect on its business, properties, or
condition, financial or otherwise.
4. No authorization, approval or consent of any governmental or
regulatory body is necessary or required in connection with the lawful execution
and delivery by the Company of the Agreement or the lawful offering, issuance
and sale of the Notes, and no designation, filing, declaration, registration
and/or qualification with any governmental authority is required by the Company
in connection with such offer, issuance and sale.
5. The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Agreement will not conflict with, or result in
any breach or violation of any of the provisions of, or constitute a default
under, or result in the creation of any Lien on the property of the Company or
any Subsidiary pursuant to, (i) the provisions of the Certificate of
Incorporation or other charter document of the Company or any Subsidiary or By-
laws of the Company or any Subsidiary or any loan agreement under which the
Company or any Subsidiary is bound, or other agreement or instrument to which
the Company or any Subsidiary is a party or by which any of them or their
property is bound or (ii) any law (including usury laws) or regulation, order,
writ, injunction or decree of any court or governmental authority applicable to
the Company.
6. There are no actions, suits or proceedings pending or, to the best of
such counsel's knowledge after due inquiry, threatened against, or affecting the
Company or its Subsidiaries, at law or in equity or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which are likely to result,
either individually or in the aggregate, in any material adverse change in the
business,
2
Exhibit 4.4(a)
<PAGE>
properties, operations or condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole.
7. All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly and validly issued, are fully paid and nonassessable
and, to the knowledge of such counsel, are owned by the Company free and clear
of any Lien.
8. The issuance of the Notes and the use of the proceeds of the sale of
the Notes do not violate or conflict with Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System (12 C.F.R., Chapter II).
9. Neither the Company nor any Subsidiary is: (i) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
or (ii) a "public utility" as defined in the Federal Power Act, as amended, or
(iii) an "investment company" or an "affiliated person" thereof or an
"affiliated person" of any such "affiliated person," as such terms are defined
in the Investment Company Act of 1940, as amended.
The opinion of Karin M. Kinney, Esq., Corporate Counsel for the Company and the
opinion of Thompson, Hine and Flory, special counsel for the Company, shall
cover such other matters relating to the sale of the Notes as the Purchasers may
reasonably request. With respect to matters of fact on which such opinions are
based, such counsel shall be entitled to rely on appropriate certificates of
public officials and officers of the Company and with respect to matters
governed by the laws of any jurisdiction other than the United States of America
and the State of Pennsylvania, such counsel may rely upon the opinions of
counsel deemed (and stated in their opinion to be deemed) by them to be
competent and reliable. The opinion of Karin M. Kinney, Esq., Corporate Counsel
for the Company and the opinion of Thompson, Hine and Flory, special counsel for
the Company, shall provide that such opinions may be relied upon by the
Purchasers and its counsel and (i) in connection with enforcement of obligations
of the Company under the Notes and the Note Agreement, (ii) in response to a
subpoena or other legal process, (iii) as otherwise required by applicable law
or regulation or (iv) in connection with the sale or transfer of any of the
Notes to a subsequent purchaser or transferee.
3
Exhibit 4.4(a)
<PAGE>
ALCO STANDARD CORPORATION
LONG TERM INCENTIVE COMPENSATION PLAN
1. Purpose. The Alco Standard Corporation Long-Term Incentive Plan is
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adopted effective October 1, 1994 for the purpose of motivating, recognizing and
rewarding performance at the corporate, group and business unit levels which
enhances long term shareholder value. The Plan has been designed and is
intended to operate in a manner consistent with Alco Standard Corporation's
decentralized operating philosophy and multitiered organizational structure.
2. Eligibility. Participation in the Plan shall be limited to full-
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time key employees of Alco Standard Corporation ("Alco") and its subsidiaries
(collectively, the "Company").
3. Shares. No more than 2,500,000 shares of common stock, no par
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value, of Alco ("Shares") may be issued under the Plan. Shares subject to
awards which have been forfeited pursuant to the terms of the Plan may again be
awarded pursuant to the Plan.
4. Adjustments. If the outstanding Shares are increased, decreased or
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exchanged for a different number or kind of shares or other securities, or if
additional Shares or other property (other than ordinary cash dividends) are
distributed with respect to such Shares or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, dividend, stock split,
reverse stock split, spin off, split off, or other distribution with respect to
such Shares or other securities, an appropriate and proportionate adjustment may
be made in (i) the maximum number and kind of shares that may be issued under
the Plan and (ii) the number and kind of shares or other securities subject to
then outstanding awards. No fractional shares will be issued under the Plan on
account of any such adjustments.
5. Administration and Interpretation. The Plan as it applies to
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participants who are executive officers of Alco shall be administered by a
committee of the Board of Directors of Alco (the "Committee"), which shall
consist of two or more directors, each of whom is a "disinterested person"
within the meaning of Rule 16b-3(c) under the Securities Exchange Act of 1934
and an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code and applicable regulations thereunder. The Committee may make such
rules and establish such procedures as it deems appropriate for the
administration of the Plan as it applies to executive officers. In the event of
any disagreement as to the interpretation of the Plan or any rule or procedure
thereunder, the decision of the Committee shall be final and binding upon all
persons in interest.
The Plan as it applies to participants who are not executive officers of
Alco shall be administered by the Chief Executive Officer of Alco. The Chief
Executive Officer may make such rules and establish such procedures as it deems
appropriate for the administration of the Plan as it applies to non-executive
officers. In the event of any disagreement as to the interpretation of the Plan
or any rule or procedure thereunder, the decision of the Chief Executive Officer
shall be final and binding upon all persons in interest.
6. Awards. The Committee shall have the authority to make awards
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("Awards") under the Plan to any executive officer. Awards may be made in the
form of Shares, cash, stock options, or any other form which the Committee deems
appropriate. At the time an Award is made, the Committee shall specify (i) the
amount and form of the Award, (ii) the objective performance goals that must be
met in order for the executive officer to receive all or any part of the Award
and (iii) the time period within which the performance goals must be met
("Performance Period"). The performance goals specified by the Committee may
relate to the performance of an executive officer's business unit or the
performance of the Company as a whole, or to any combination of the foregoing.
Measurements of performance may include stock price, sales, earnings per share,
return on equity, return on assets, growth in assets, total shareholder return
or such other objective performance goals as may be established by the
Committee. The number of Awards, if any, made each year, the executive officers
to whom and the time or times at which Awards are made, the amount or form of
any Award, the performance goals applicable to each Award and the other terms
and provisions of such Award shall be wholly within the discretion of the
Committee, subject to the limit on the number of Shares described in Section 3.
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The Chief Executive Officer shall have the authority to make awards
("Awards") under the Plan to any eligible non-executive officer. At the time an
Award is made, the Chief Executive Officer shall specify (i) the amount and form
of the Award, (ii) the objective performance goals that must be met in order for
the employee to receive all or any part of the Award and (iii) the time period
within which the performance goals must be met ("Performance Period"). The
performance goals specified by the Chief Executive Officer may relate to the
performance of an employee's business unit or the performance of the Company as
a whole, or to any combination of the foregoing. Measurements of performance
may include stock price, sales, earnings per share, return on equity, return on
assets, growth in assets, total shareholder return or such other objective
performance goals as may be established by the Chief Executive Officer. The
number of Awards, if any, made each year, the employees to whom and the time or
times at which Awards are made, the amount or form of any Award, the performance
goals applicable to each Award and the other terms and provisions of such Award
shall be wholly within the discretion of the Chief Executive Officer, subject to
the limit on the number of Shares described in Section 3.
7. Certification; Forfeiture. If the Committee or Chief Executive
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Officer (as applicable) shall certify, after the end of the Performance Period,
that the applicable performance goals have been met, Alco shall cause such
amount as is earned pursuant to the Award to be delivered to the employee,
subject to valid income tax deferral under any of Alco's deferred compensation
programs and/or reduction in the amount of the Award for tax withholding
purposes. If the Committee or Chief Executive Officer (as applicable) does not
so certify, the Award shall be forfeited. Unless otherwise determined by the
Committee or Chief Executive Officer, an Award will be forfeited if the
participant is not an employee of the Company on the last day of the Performance
Period, subject to the provisions of Section 9 hereof.
8. Certificate. Each Award shall be evidenced by an Award Certificate,
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which shall specify the amount and form of the Award, the Performance Period,
and the applicable performance goals. In addition, the Committee or Chief
Executive Officer, as applicable, may specify additional terms, not inconsistent
with this Plan, by rules of general application or by specific direction in
connection with a particular Award or group of Awards.
9. Termination of Employment -- Unless otherwise determined by the
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Committee or Chief Executive Officer, as applicable, an Award will be forfeited
if the participant ceases to be a full-time active employee of Alco and its
subsidiaries before the end of the Performance Period for any reason other than
death or total disability. If the participant becomes totally disabled (as
defined in Alco's Long-Term Disability Plan) or dies before the end of the
Performance Period, the participant (or estate or legal heir) shall generally be
entitled to receive a prorated Award (payable, if earned, after the end of the
Performance Period). If the participant's full-time active employment
terminates prior to the end of the Performance Period due to early retirement,
voluntary or involuntary termination, demotion, transfer to part-time status, or
for any reason other than disability or death, the Award will be forfeited.
In the event the participant transfers to a position as a full-time active
employee of another business unit within Alco prior to the end of the
Performance Period, the Committee or Chief Executive Officer, as applicable, may
make an adjustment in the amount of the Award, the Performance Period and/or
performance goals associated with the Award, and/or may determine that the Award
should be forfeited in part or its entirety. Any such adjustment is in the sole
discretion of the Committee or Chief Executive Officer, as applicable. Before
making any such adjustment for an executive officer, however, the Committee
shall take into consideration the requirements of Section 162(m) of the Internal
Revenue Code and the applicable regulations thereunder.
10. Common Stock Subject to Award. Any Shares issued pursuant to an
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Award may be unissued shares or treasury shares, including shares bought on the
open market.
11. Rights of Participant in Shares. A participant shall not be deemed
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to be the holder of, or to have the rights of a holder with respect to, any
Shares subject to an Award unless and until a stock certificate representing
such Shares is issued to such participant.
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12. Tax Withholding. At the election of the employee, the Company
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shall reduce and withhold the amount which becomes deliverable pursuant to the
Award by up to fifty percent of such amount and shall apply the amount withheld
to applicable federal, state, city, non-U.S. and other taxes required to be
withheld by the Company pursuant to any statutes or other governmental
regulation or ruling.
13. Nonassignment. Any Award and the rights and privileges conferred
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hereby shall not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process.
14. Plan and Award Not to Affect Employment, Neither this Plan nor any
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Award shall confer upon any employee any right to continue in the employ of the
Company.
15. Amendment of Plan. The Board of Directors of Alco may terminate
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the Plan or make such amendments to the Plan as it deems necessary or advisable,
provided, however, that unless otherwise required by law, no such amendment may
impair the rights of any participant under any Award previously granted without
such participant's consent.
16. Successors. The Plan shall be binding upon and inure to the
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benefit of any successor, successors or assigns of Alco.
17. Severability. If any part of the Plan shall be determined to be
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invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
18. Governing Law. The Plan and actions taken in connection herewith
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shall be governed and construed in accordance with the laws of the Commonwealth
of Pennsylvania.
19. Construction. Wherever any words are used in the Plan in the
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masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
20. Liability of Plan Administrators, No administrator of the Plan
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shall be liable, in the absence of bad faith or willful misconduct, for any act
or omission with respect to administration of the Plan. Service as a Plan
Administrator, whether on the Committee or as Chief Executive Officer, shall
constitute service as a director of the Company so that the plan administrators
named herein shall be entitled to indemnification and reimbursement as directors
of the Company pursuant to its Code of Regulations.
21. Other Benefits. Neither the receipt of an Award nor the delivery
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of cash, stock options, Shares, or any other amounts pursuant to an Award shall
be deemed compensation for purposes of computing benefits under any retirement
plan nor affect any benefits under any other benefit plan now or hereafter in
effect under which the availability or amount of benefits is related to the
level of compensation.
22. Costs. Unless otherwise determined by the Board of Directors, the
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Company shall bear all expenses incurred in administering the Plan, including
expenses of issuing Shares or granting stock options pursuant to an Award.
23. Effective Date. The Plan shall be effective October 1, 1992.
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24. Termination of the Plan. No Award shall be made after
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September 30, 2004. However, Awards made prior to such date shall continue to be
governed in accordance with the terms of the Plan and participants shall be
entitled to receive payment for such Awards under the terms of the Plan.
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Exhibit 10.6
ALCO STANDARD CORPORATION
1986 STOCK OPTION PLAN
1. Purpose. The purpose of this 1986 Stock Option Plan (the "Plan")
of Alco Standard Corporation, an Ohio corporation ("Alco"), is to secure for
Alco and its shareholders the benefits of the incentive inherent in the
ownership of common stock of Alco by employees and other persons who will be
responsible for the future growth and continued success of Alco and its
subsidiaries.
2. Effectiveness. This Plan became effective on February 21, 1986.
As of the effective date of this Plan, there were no further grants under the
prior Alco Standard Corporation 1981 Stock Option Plan.
3. Stock. There are authorized for issuance or delivery upon the
exercise of options to be granted from time to time under the Plan an aggregate
of 4,000,000 shares of Alco's common stock, no par value, subject to adjustment
as provided hereinafter in paragraph 14. Such shares may be, as a whole or in
part, authorized but unissued shares, whether now or hereafter authorized, or
issued shares which have been reacquired by Alco. If any option under this Plan
shall expire, terminate or be cancelled for any reason without having been
exercised in full, the shares which have not been purchased thereunder shall
again become available for the purpose of this Plan.
4. Administration. The Plan shall be administered by a committee
(the "Committee") of not less than three members of the board of directors of
Alco (each of whom is a "disinterested person" within the meaning of the
Securities Exchange Act of 1934, as amended from time to time) who have been
appointed by the board of directors to administer the Plan. No member or former
member of the Committee shall be liable, in the absence of bad faith or
misconduct, for any act or omission with respect to service on the Committee.
Service on the Committee shall constitute service as a director of Alco so that
members of the Committee shall be entitled to indemnification and reimbursement
as directors of Alco pursuant to its Code of Regulations. Subject to the
express provisions of paragraph 6 of the Plan with respect to eligibility, the
Committee shall determine the persons to whom, and the time or times at which,
options shall be granted and the number of shares to be subject to each option.
The Committee shall have authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and
provisions of particular options (which terms and provisions need not be the
same in each case) and to make all other determinations deemed necessary or
advisable in administering the Plan. The determinations of the Committee on the
matters referred to in this paragraph shall be conclusive.
5. Time of Granting. The action of the Committee with respect to the
granting of an option shall take place on such date as a majority of the members
of the Committee, at a meeting, shall make a determination with respect to the
granting of an option, or, in the absence of a meeting, on such date as a
unanimous written consent covering such option shall have been executed by all
members of the Committee. The effective date of the grant of an option
(hereinafter called the "Granting Date") shall be the date specified by the
Committee in its determination or consent relating to the grant of such option.
6. Participants. Options may be granted to key persons who on the
Granting Date are (a) employees of Alco or any of its present or future domestic
subsidiary corporations, as defined in Section 424 of the Internal Revenue Code
of 1986, as amended (the "Code"), (b) employees of any other subsidiary of Alco
as determined by the Board, or (c) persons who directly or through a corporation
in which they own a majority of the outstanding shares of voting stock provide
services to Alco or any of its subsidiaries as independent contractors. Options
may be granted only to those
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persons described in the foregoing sentence who, in the opinion of the
Committee, exercise such functions or discharge such responsibilities that they
merit consideration as key persons. The Committee shall have the authority to
determine whether to grant to any employee of Alco or any of its present or
future subsidiary corporations, as defined in Section 424 of the Code, options
which may qualify for special tax treatment under the Code, as the same may be
amended from time to time.
7. Terms and Conditions; Stock Option Awards. In granting options,
the Committee shall determine the exercise prices (which may be less than the
current fair market value), the duration (which may be up to ten years), any
conditions precedent to the vesting of the right to exercise options (which, at
a minimum, shall include continued employment for a six-month period after the
Granting Date) and other terms and conditions of the options (including any
business performance criteria, any restrictions to be placed on the
transferability of shares upon exercise of options, and any provisions
considered appropriate from the standpoint of possible tax consequences). Each
grant of an option shall be reflected in an option award document.
8. Limitations.
(a) All options granted pursuant to this Plan shall be granted by
November 14, 1995.
(b) No option granted pursuant to this Plan shall be transferable
by the optionee otherwise than by will or the laws of descent and distribution,
and an option shall be exercisable during the optionee's lifetime only by the
optionee.
(c) The aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which "incentive stock options"
(within the meaning of the Code) are exercisable for the first time by such
individual during any calendar year (under all plans of the individual's
employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000.
9. Relationship at Time of Exercise. Except as provided in
paragraphs 10 and 11 below, no option may be exercised at any time unless the
holder thereof is then an employee of, or rendering service as an independent
contractor to, Alco or a subsidiary.
10. Termination of Relationship. In the event of termination of the
employment of any employee with Alco and all of its subsidiaries, or the
services of any other person to whom an option has been granted, such option
may, unless not permitted under the particular option agreement, be exercised by
the optionee (to the extent that the optionee was entitled to do so at the
termination of employment or services) within three months after such
termination, but in no event after the expiration of the term of the option. If
a company ceases to be a subsidiary of Alco, such shall be deemed a termination
of the employment or services of persons employed by or serving such company for
purposes of this paragraph, and the three-month post-termination exercise period
shall apply. Notwithstanding the foregoing, the Committee may determine that
Alco's divestiture of a company shall not be considered a termination of
employment for purposes of the Plan, so that an optionee who continues to be
employed by such divested company will be entitled to exercise his or her
outstanding options (and will be entitled to continued vesting) in accordance
with the terms of the stock option award as though the optionee remained an
employee of Alco.
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11. Death of Optionee. If an optionee to whom an option has been
granted under the Plan shall die while employed by, or performing services for,
Alco or any of its subsidiaries or within three months after the termination of
the optionee's employment or services (including a deemed termination as
described in paragraph 10 above), such option may be exercised within one year
after the optionee's death (even if the optionee was not entitled to do so at
the date of death) by the person or persons to whom the optionee's rights
hereunder shall pass by will or by the laws of descent and distribution, but in
no event after the expiration of the term of the option.
12. Payment. The purchase price of shares purchased upon the
exercise of any option shall be paid in full in cash or check payable to the
order of Alco prior to the delivery of the shares, or options may be exercised
through broker-assisted exercises in which the broker pays the exercise price
out of the proceeds of a same-day sale of the shares acquired upon exercise.
13. Rights as a Shareholder. An optionee shall have no rights as a
shareholder with respect to any shares covered by an option until the date of
issuance of a share certificate to the optionee for such shares. No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such share certificate is issued.
14. Adjustments. If the outstanding shares of Alco common stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional shares or other property (other than ordinary
cash dividends) are distributed with respect to such shares of Alco common stock
or other securities, through merger, consolidation, sale of all or substantially
all of the assets of Alco, reorganization, recapitalization, reclassification,
dividend stock split, reverse stock split, spin off, split off, or other
distribution with respect to such shares of common stock, or other securities,
an appropriate and proportionate adjustment may be made in (i) the maximum
number and kind of shares reserved for issuance under the Plan, (ii) the number
and kind of shares or other securities subject to then outstanding options under
the Plan, and (iii) the price for each share subject to any then outstanding
options under the Plan. No fractional shares will be issued under the Plan on
account of any such adjustments.
15. Amendment and Termination. The board of directors of Alco shall
have complete power and authority to amend the Plan, provided, however, that it
shall not without the affirmative vote of the holders of a majority of the
shares of voting stock of Alco (a) increase the maximum number of shares for
which options may be granted under the Plan, (b) reduce any minimum option price
for stock options which become entitled to special tax treatment under future
amendments to the Code, (c) extend the period during which options may be
granted or exercised, or (d) alter the class of persons eligible to receive
options. No amendment or termination of the Plan may, without the consent of
the holders of their outstanding options, adversely affect the rights of such
holders under such options.
16. Government and Other Regulations. The obligation of Alco to
sell, issue and deliver shares upon exercise of options granted under the Plan
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies as may be required, including (but not
limited to) satisfaction of the income tax withholding requirements of the Code.
17. Other Actions. Nothing contained in the Plan shall be construed
to limit the authority of Alco to exercise its corporate rights and powers
including, but not limited to, the right of Alco (a) to grant options for proper
corporate purposes otherwise than under the Plan to any employee or other
person, firm or corporation or association, or (b) to grant options to, or
assume the options of, any person in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business and assets
(in whole or in part) of any person, firm, corporation or association.
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November 1, 1995
ALCO STANDARD CORPORATION
1994 DEFERRED COMPENSATION PLAN
THE PLAN
Alco Standard Corporation ("Alco") is offering to certain employees of its
divisions and subsidiaries ("Employer(s)") the opportunity to participate in the
Alco Standard Corporation 1994 Deferred Compensation Plan (the "Plan"), pursuant
to which participants may defer a portion of their compensation and receive
certain benefits upon retirement or other termination of employment. The Plan
initially became effective for certain employees on May 1, 1994. It was amended
and restated as of January 1, 1995 and was further amended and restated as of
July 1, 1995 for all current and new participants.
The full text of the amended and restated Plan is set forth beginning on
page 8 of this document. This document sets forth information about the Plan,
but should be read in conjunction with the text of the Plan itself.
Alco's principal office is located at Wayne, Pennsylvania 19087. Its
telephone number is (610) 296-8000. Alco's federal tax identification number is
23-0334400.
ELIGIBILITY
You are eligible to participate in the Plan if you are:
--A full-time employee of Alco or an Employer;
--A "highly compensated" employee (employees who have had compensation
from Alco or an Employer in excess of $100,000 in calendar year 1992
or 1993 will be considered "highly compensated" for purposes of the
Plan) or a "Partner" or have been selected for participation by the
President of Alco; and
--A U.S. taxpayer.
ELECTION TO PARTICIPATE
If you were a "Partner" on July 1, 1995 and did not already participate in
the Plan, you were permitted to begin participation as of July 1, 1995 by
signing an agreement ("Participation Agreement") which expressed your commitment
to participate in the Plan through December 31, 1999 (or until your employment
terminates, if earlier) and set forth your deferral
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election for the period from July 1, 1995 through December 31, 1995. You may
also be required to sign any other forms required by the Plan Administrator.
If you were a "Partner" on July 1, 1995 and were already participating in
the Plan, you were permitted to increase your previous deferral election by up
to $5,000 for the period July 1, 1995 through December 31, 1995 by signing the
form provided for such purpose by the Plan Administrator.
DEFERRALS
You may elect to defer from your compensation an amount between $3,000 and
$30,000 for each of five plan years. (If you began participation as of July 1,
1995, you were permitted to elect to defer an amount between $1,500 and $5,000
for the period from July 1, 1995 through December 31, 1995 and an amount between
$3,000 and $30,000 for each of the next four plan years.) The amounts you defer
may vary from year to year, subject to these minimum and maximum limits. A
participant who does not elect a specific amount for any year will be deemed to
have elected to defer $3,000 for such year. If you terminate employment during
the deferral period, your deferral of income will immediately cease.
Generally, your Employer will deduct from your compensation, through
payroll deduction in substantially equal installments, the amounts you elect to
defer.
INVESTMENT ACCOUNTS
Amounts that you defer under the Plan will be credited to an account
established by Alco in your name. Your account will be "indexed", or credited
with earnings based on the performance of various investment alternatives
selected by you. In other words, Alco will measure the performance of these
funds, and will credit your account accordingly.
You may allocate your account balance among one or more of the following
alternatives (or such other alternatives as Alco may designate from time to
time), in any combination of whole percentages adding up to 100%:
. Growth Alternative - pursues capital growth through investment in
common stocks of financially sound companies believed to have above
average earnings or otherwise provide above average potential for
capital appreciation.
. Value Equity Alternative - pursues capital growth through a
conservative investment approach designed to
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increase capital with reasonable risk through investment in common
stocks of established companies.
. Balanced Alternative - pursues long-term capital growth and reasonable
current income without undue risk to principal through investment in
both common stocks and bonds.
. Limited Maturity Bond Alternative - seeks to achieve the highest
current income consistent with low risk to principal and liquidity
through investment in a diversified group of short to intermediate term
debt securities. Average maturity will not exceed 5 years.
. Government Income Alternative - seeks a high level of current income
and total return consistent with safety of principal through investment
in debt securities issued or guaranteed by the U.S. Government,
including Government Mortgage-backed securities.
. Short-Term Investment Alternative - pursues maximum current income
consistent with liquidity and preservation of capital through
investment in money market securities.
. Quality Equity Alternative - seeks to attain the highest total
investment return consistent with prudent risk through a fully managed
investment policy utilizing equity securities, primarily common stocks
of large-capitalization companies, as well as investment grade debt and
convertible securities.
. Equity Growth Alternative - seeks to attain long-term growth of capital
by investing primarily in common stocks of relatively small companies
believed to have special investment value and emerging growth companies
regardless of size.
. International Equity Focus Alternative - seeks to obtain capital
appreciation through investments in securities, principally equities,
of issuers in countries other than the United States.
Nueberger & Berman Management, Inc. serves as the investment adviser to the
Growth, Value Equity, Balanced, Limited Maturity Bond, Government Income and
Short-Term Investment Alternatives. Merrill Lynch Asset Management L.P. manages
the Quality Equity, Equity Growth and International Equity Focus Alternatives.
You will receive additional information for each of the above Alternatives from
the Plan Administrator. The above descriptions are qualified in their entirety
by reference to such information.
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<PAGE>
You may change your allocation among the various alternatives once during
any calendar quarter. Any change you request will become effective as of the
first day of the next calendar quarter.
THE VALUE OF THE BENEFIT YOU ULTIMATELY RECEIVE UNDER THE PLAN DEPENDS ON
THE RETURNS CREDITED TO YOUR ACCOUNT, BASED ON YOUR SELECTION OF ALTERNATIVES.
THERE IS NO GUARANTEED RATE OF RETURN ON YOUR ACCOUNT UNDER THE PLAN.
VESTING
You will become vested in your account if you remain a full-time employee
of Alco or an Employer for a period of five years after you begin participating
in the Plan (or, in the case of employees who began participating in the Plan as
of July 1, 1995, until December 31, 1999) or until you reach age 65, whichever
occurs first. If you leave employment (for any reason other than death or total
disability) before you are vested in your account, you will not receive any
retirement benefits, but you will receive a lump sum payment equal to the lesser
of the balance in your account or the total amount of your deferrals.
DISABILITY BENEFITS
If your employment with Alco or an Employer terminates because of total
disability before your benefits have vested, you will automatically become
vested as of such date. Your retirement benefits will not begin until the
January after you reach age 60, except that you may, in the case of financial
hardship, apply to the Committee for an earlier commencement of benefits.
DEATH BENEFITS
If you die before you begin to receive your retirement benefits, your
beneficiary will be entitled to receive, in a lump sum, the balance in your
account as of the last day of the month following your date of death.
RETIREMENT BENEFITS
Your retirement benefits will be paid to you in ten annual payments,
beginning in January of the year after you reach age 60 or retire from the
employ of Alco or an Employer, whichever is later. Your retirement benefits will
be paid to you as follows:
. 1/10 of your account balance in year 1,
. 1/9 of your account balance in year 2,
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. 1/8 of your account balance in year 3,
. 1/7 of your account balance in year 4,
. 1/6 of your account balance in year 5,
. 1/5 of your account balance in year 6,
. 1/4 of your account balance in year 7,
. 1/3 of your account balance in year 8,
. 1/2 of your account balance in year 9, and
. the balance in year 10.
You may elect to defer receipt of your benefits to a later date by providing
written notice to the Administrator at least 12 months prior to the date on
which your benefits would otherwise commence.
If you die after your retirement benefit payments have commenced, your
beneficiary will be entitled to receive, for the duration of the ten-year
period, the retirement benefits to which you would have been entitled if you had
lived.
USE OF PARTICIPANT PAYMENTS
Alco currently intends (but is not obligated) to use participant deferrals
to purchase life insurance on the lives of participating employees. The
obligations of Alco and/or the Employers under the Plan will not be secured in
any manner, however, nor will specific assets or funds be set aside for the
payment of benefits. A Participant's interest in the Plan or a Participation
Agreement may not be assigned, transferred, pledged, encumbered, alienated or
charged.
OTHER EMPLOYEE BENEFIT PLANS
Participation in this Plan does not in any way affect your right to
participate in any pension, profit-sharing, incentive, thrift, group health
insurance, stock option, termination pay, or similar plan of Alco or an
Employer, except that the deferrals shall not be included in determining your
benefits under any retirement plans qualified under section 401(a) of the
Internal Revenue Code. Deferrals under this Plan will be included as
compensation for purposes of calculating the level of contributions under Alco's
Partners' Stock Purchase Plan.
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EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Plan is a "pension plan" as defined in the Employee Retirement Income
Security Act of 1974 ("ERISA") and is subject to certain provisions of ERISA,
including certain requirements relating to reporting, disclosure, enforcement
and claims. The Plan is unfunded for purposes of ERISA. The Plan is not subject
to eligibility, participation, vesting, benefit accrual, or plan termination
insurance provisions of ERISA.
ADMINISTRATION
The Plan provides that authority for the administration and interpretation
of the Plan will be vested in a Committee selected by the Board of Directors of
Alco (the "Committee"). The Board of Directors may at any time change the
membership of the Committee.
The Committee will from time to time appoint a Plan Administrator who will
be responsible for the general administration of the Plan under the policy
guidance of the Committee. William M. Bauer, Director of Risk Management of
Alco, P.O. Box 834, Valley Forge, PA 19482 has been selected as the Plan
Administrator, and the agent for service of process under the Plan. A new
Administrator may be appointed by the Committee at any time.
The Plan's fiscal year is January 1 - December 31. Its Plan number is 301.
All expenses incurred in administering the Plan will be paid by Alco and
none will be paid by the Plan participants.
CLAIMS PROCEDURE
If at any time the Plan Administrator denies your written claim for any
benefit to which your believe you are entitled under the Plan, the Plan
Administrator will send you written notice within 90 days (or 180 days under
special circumstances) of the date on which you filed your claim. This notice
will (a) explain the specific reason or reasons for the denial of your claim,
(b) refer to the specific Plan provision on which the denial is based, (c)
describe any additional information required in order to obtain a favorable
determination of your claim and explain why this information is necessary, and
(d) explain the steps to be taken in you wish to submit your claim for review.
If you wish to appeal a denied claim, you must, within 60 days of receiving
your notice of denial, petition the Committee for a review. All petitions for
review must be made in writing on forms supplied by Alco. The Committee will
render a written
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<PAGE>
decision with 60 days (or 120 days under special circumstances) after receiving
your petition.
You must follow the claims procedure described above before you can
consider legal action against Alco. Naturally, both you and Alco will want to
avoid legal action. Should you feel legal action is necessary, however, any
summons or other legal process should be served on the agent named on page 6.
TAX CONSEQUENCES
The following discussion is intended to provide general information under
current federal law concerning the tax consequences of the Plan to the Plan
participants and to Alco and its Employers. It does not provide information
about the tax consequences under any state or local law which may be applicable
to the transactions described herein. Because the consequences under federal,
state and local law may vary with each employee and may materially affect an
employee's decisions with respect to the Plan, you should seek competent advice
from legal or other counsel. There may also be changes in the law subsequent to
the date hereof which affect the tax consequences of the Plan or which cause
Alco to terminate the Plan in accordance with its terms.
The Plan is not a qualified Plan under section 401(a) of the Internal
Revenue Code of 1986, as amended.
1. YEARS OF DEFERRAL
An effective election to defer compensation otherwise payable in a taxable
year will remove the amount so deferred from the taxable income of the
participant for such year for federal income tax purposes. Neither Alco nor an
Employer will be permitted a current federal income tax deduction for any
amounts deferred under the Plan.
Amounts deferred will generally be subject to taxes imposed under the
Federal Insurance Contributions Act ("FICA") or the Federal Unemployment Tax Act
("FUTA") in the year of deferral.
2. YEARS OF PAYMENT
Retirement benefits (or lump sum payments) will be taxable income to the
participants or a beneficiary in the year in which such benefits (or lump sum
payments) are received. Such benefits will generally not be subject to taxes
imposed under FICA or FUTA, but are subject to federal income tax withholding
requirements. Alco or an Employer will generally be permitted a federal income
tax deduction for the year in which such benefits are paid.
7
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ALCO STANDARD CORPORATION
1994 DEFERRED COMPENSATION PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1995)
1. PURPOSE. The purpose of the Alco Standard Corporation 1994 Deferred
Compensation Plan is to permit certain eligible employees of Alco Standard
Corporation and its affiliated companies to defer a portion of their
compensation and to participate in a program under which they are provided
supplemental income after their retirement. The program is intended to
constitute an unfunded deferred compensation arrangement for a select group of
management or highly compensated employees.
2. DEFINITION. Unless the context otherwise requires, the following words
as used herein shall have the following meanings:
(a) "Administrator" shall mean the person or persons so designated and
acting under Paragraph 16 hereof.
(b) "Affiliated Employer" shall mean any domestic corporation of which Alco
(directly or through any subsidiary) owns 80% or more of the outstanding voting
stock.
(c) "Alco" shall mean Alco Standard Corporation, an Ohio corporation.
(d) "Compensation" shall mean all salaries, commissions and incentive
compensation from an Employer, but shall not include company contributions under
Alco's Partners' Stock Purchase Plan or the Alco Retirement Savings Plan or any
fringe benefits.
(e) "Effective Date" shall mean July 1, 1995, the effective date of this
amended and restated Plan. The rights of a Participant whose participation in
the Plan commenced prior to the Effective Date and who remains a Participant on
the Effective Date shall be governed by the terms of the amended and restated
Plan as set forth herein.
(f) "Employer" shall mean Alco or an Affiliated Employer.
(g) "Participant" shall mean any person employed by an Employer on the
Effective Date who is eligible, and who has elected, to participate in the Plan.
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(h) "Participation Agreement" shall mean the agreement executed by each
Participant and the Employer setting forth certain information relating to the
Participant's participation in the Plan.
(i) "Plan" shall mean the Alco Standard Corporation 1994 Deferred
Compensation Plan, as amended from time to time.
(j) "Plan Year" shall mean the period beginning on January 1 and ending on
December 31 of each year.
(k) "Total Disability" shall mean a total disability as defined in the long
term disability plan adopted by the Participant's Employer (or, if the
Participant's Employer does not have such a plan, the long term disability plan
of Alco).
3. PARTICIPATION. Any person who (a) is employed by an Employer on a
full-time basis as of the Effective Date, (b) is "highly compensated" (employees
who received Compensation from an Employer in the 1992 or 1993 calendar year in
excess of $100,000 are considered "highly compensated" for purposes of the Plan)
or has been designated by Alco as a "Partner" and (c) is a United States
taxpayer as of the Effective Date, shall be eligible to participate herein. In
addition, other persons who satisfy conditions (a) and (c) of the foregoing
sentence shall be eligible to participate in the Plan if selected by the
President of Alco prior to the Effective Date. A person eligible under this
Paragraph 3 shall become a Participant by executing a Participation Agreement
and such other forms as may be required by the Administrator.
4. DEFERRAL OF COMPENSATION. Prior to the Effective Date, a "Partner" who
is not already a Participant may irrevocably elect to defer or forgo a portion
of his Compensation for the period from July 1, 1995 through December 31, 1995
and for each of the next four Plan Years (or, if less, for each of the Plan
Years while he is an active employee of an Employer). The amount to be deferred
for the period from July 1, 1995 through December 31, 1995 shall be designated
on the Participant's Participation Agreement, which amount shall be no less than
$1,500 and no more than $5,000.
Prior to the Effective Date, a "Partner" who is already a Participant may
elect to defer or forgo up to an additional $5,000 of Compensation for the
period from July 1, 1995 through December 31, 1995.
The amount of the deferral for each subsequent Plan Year may vary, but may
be no less than $3,000 and no more than $30,000. For each of the next four Plan
Years after a Participant's initial deferral election (or, if less, for each
Plan Year while
9
<PAGE>
he is an active employee of an Employer), the Participant will be given the
opportunity, prior to the beginning of each Plan Year, to elect the amount to be
deferred (subject to the minimum and maximum limitations set forth above). In
the event that a Participant fails to specify the amount to be deferred in any
Plan Year, he shall be deemed to have elected to defer $3,000 for such Plan
Year. The Administrator shall have the right to waive the future deferral
obligation for a Participant who has suffered an unforseeable emergency.
The amount to be deferred for a Plan Year will be deducted from the
Participant's Compensation otherwise payable by an Employer, in substantially
equal installments.
5. INVESTMENT ACCOUNTS. Amounts deferred by a Participant pursuant to
Paragraph 4 will be credited to an account established by Alco in the name of
the Participant. A Participant's account will be credited with earnings based
on the performance of various investment alternatives selected by the
Participant from among those made available by Alco from time to time.
A Participant may request a change in his allocation among the various
investment alternatives once during any calendar quarter. Any such changes will
become effective as of the first day of the next calendar quarter.
6. VESTING. A Participant shall vest in the benefits to be provided
hereunder on the fifth anniversary of the date of his initial participation in
the Plan (or, in the case of Participants whose participation in the Plan began
as of July 1, 1995, on December 31, 1999) or when he attains age 65, whichever
shall first occur, provided the Participant has been a full-time employee of an
Employer for the entire period.
A Participant who incurs a Total Disability while still employed by an
Employer shall become immediately vested in the benefits to be provided
hereunder (as described in Paragraph 8, below).
Each other Participant whose employment terminates prior to vesting (other
than on account of death, as described in Paragraph 7, below) shall be entitled
to receive, in a lump sum payment, an amount equal to the lesser of (i) the
Participant's deferrals to the date of termination, without interest or (ii) the
value of the Participant's account as of the last day of the calendar month
coincident with or next following the date of termination. No other benefits
shall be payable under the Plan to such Participant.
10
<PAGE>
7. DEATH BENEFITS. If a Participant dies while employed by an Employer
(whether or not vested) or if a vested Participant dies while no longer employed
by an Employer but before benefit payments commence, his beneficiary shall be
entitled to receive, in a lump sum payment, the value of the Participant's
account as of the last day of the calendar month coincident with or next
following the Participant's date of death.
8. DISABILITY BENEFITS. If a Participant incurs a Total Disability while
still employed by an Employer, he shall be entitled to receive the benefits
described in Paragraph 9, which shall commence in the January following the year
in which he attains age 60. A Participant who has incurred a Total Disability
may begin to receive benefits before reaching age 60 if the Committee (as
defined in Paragraph 16) determines, upon application by the Participant, that
the Participant has a financial hardship that cannot reasonably be relieved by
use of other resources available to him.
9. AMOUNT AND TIMING OF BENEFIT PAYMENTS. Except as otherwise provided in
Paragraphs 6, 7 and 8, payment of benefits under the Plan shall commence in the
January following the later of the Participant's attaining age 60 or the
Participant's retirement from the employ of an Employer, unless the Participant
has notified the Administrator, in writing, at least 12 months prior to such
date, of his election to defer receipt of such benefits until a later date. The
Participant's benefits shall be paid to him in ten annual payments, as follows:
(a) 1/10 of the value of his account as of the preceding December 31 in the
first year.
(b) 1/9 of the value of his account as of the preceding December 31 in the
second year.
(c) 1/8 of the value of his account as of the preceding December 31 in the
third year.
(d) 1/7 of the value of his account as of the preceding December 31 in the
fourth year.
(e) 1/6 of the value of his account as of the preceding December 31 in the
fifth year.
(f) 1/5 of the value of his account as of the preceding December 31 in the
sixth year.
(g) 1/4 of the value of his account as of the preceding December 31 in the
seventh year.
(h) 1/3 of the value of his account as of the preceding December 31 in the
eighth year.
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(i) 1/2 of the value of his account as of the preceding December 31 in the
ninth year.
(j) All amounts remaining in his account in the tenth year.
10. BENEFICIARY DESIGNATION - CONTINUATION OF BENEFITS. Upon the death of
a Participant who is receiving benefits under the Plan, any benefits to which he
would otherwise have been entitled shall continue to be paid after his death to
the beneficiary or beneficiaries designated by the Participant in his
Participation Agreement. This designation may be amended in writing and filed
with the Administrator from time to time by the Participant. In the event that
there is no effective beneficiary designation when benefits are payable, such
benefits shall be paid to the members of the first surviving class of the
Participant in the following priority:
(a) spouse;
(b) the living children (including adopted children) in equal amounts;
(c) estate.
11. INCAPACITY OF RECIPIENT. Any payment required to be made under the
Plan to a person who is under a legal disability may be made to or for the
benefit of such person in such of the following ways as the Administrator shall
determine:
(a) to such person;
(b) to the legal representatives of such person;
(c) to a near relative of such person to be used for his benefit; or
(d) to pay the expenses of support, maintenance or education of such
person.
The Administrator shall not be required to see to the application by any
third party of payments made pursuant to this Paragraph 11.
12. RESPONSIBILITY FOR PAYMENT. All benefits under the Plan shall be paid
by Alco. Alco may, in its sole discretion, determine the manner in which it
shall finance its obligation to pay such benefits.
13. NON-ASSIGNMENT. Except as hereinafter provided with respect to
marital or family support disputes, no amount payable under the Plan shall be
subject to assignment, transfer, sale,
12
<PAGE>
pledge, encumbrance, alienation or charge by the Participant or any beneficiary.
Any attempt to assign, transfer, sell, pledge, encumber, alienate or charge any
amount hereunder shall be without effect. In cases of marital or family support
disputes, the Administrator will observe the terms of the Plan unless and until
ordered to do otherwise by a state or federal court. As a condition of
participation in the Plan, the Participant shall agree to hold the Employer
harmless from any claim that arises out of obeying an order of any state or
federal court with respect to marital or family support disputes, whether such
order effects a judgment of such court or is issued to enforce a judgment or
order of another court.
14. NO FUNDING. Alco shall not segregate or physically set aside any
funds or assets as a result of this Plan. Neither a Participant, nor his
beneficiary, nor any other person shall be deemed to have, pursuant to this
Plan, any property interest, legal or equitable, in any specific asset of Alco
or an Employer. To the extent that any person acquires any right to receive
benefits under this Plan or a Participation Agreement, such right shall be no
greater than, nor shall it have any preference or priority over, the rights of
any unsecured general creditor of Alco or an Employer.
15. OWNERSHIP OF LIFE INSURANCE POLICIES. Alco may, but is not obligated
to, purchase life insurance policies to assist it in meeting its obligation to
pay benefits under the Plan. Alco will retain all incidents of ownership in
such policies.
As a condition of participation in the Plan, the Participant shall agree
that Alco or an Employer may, at their expense, purchase life insurance on the
life of the Participant.
16. ADMINISTRATION. The Plan shall be administered by a Committee
selected from time to time by the Board of Directors of Alco (the "Committee").
The Committee shall select an Administrator from time to time to administer the
Plan under the general policy guidance of the Committee. The Administrator
shall be one or more persons who shall be responsible for:
(a) maintaining any records necessary in connection with the Plan;
(b) making calculations under the Plan;
(c) interpreting the provisions of the Plan; and
(d) otherwise administering the Plan in accordance with its terms.
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<PAGE>
17. CLAIMS PROCEDURES. At any time the Administrator makes a
determination adverse to a Participant or beneficiary with respect to a claim
for benefits or participation under the Plan, the Administrator shall notify the
claimant in writing of such determination, setting forth:
(a) the specific reason for such determination;
(b) a reference to the specific provision or provisions of the Plan on
which such determination is based;
(c) a description of any additional material or information necessary to
perfect the claim, and an explanation of the reason that such material is
required; and
(d) an explanation of the rights and procedures set forth in this
Paragraph 17.
A person who receives notice of an adverse determination by the
Administrator with respect to a claim may request, within 60 days of receipt of
such notice, that the Committee review the Administrator's determination. This
request may be made on behalf of a claimant by a duly authorized representative.
The claimant or representative may review pertinent documents and submit issues
and comments with respect to the controversy to the Committee. The Committee
shall render a decision within 60 days of a request for review (or within 120
days under special circumstances), which decision shall be in writing and shall
set forth the specific reasons for the decision reached and the specific
provisions of the Plan on which the decision is based. A copy of the ruling
shall be forwarded to the claimant.
18. EMPLOYEE BENEFIT PLANS. This Plan shall not in any way affect a
Participant's right to participate in any pension, profit-sharing, incentive,
thrift, group health insurance, stock option, termination pay or similar plan of
an Employer, which is now in effect or may hereafter be adopted, to the extent
that the Participant is entitled to participate under the applicable terms and
provisions of such plan, except that the amounts deferred herein shall not be
included in determining a Participant's benefits under any retirement plans
qualified under section 401(a) of the Internal Revenue Code. Deferrals under
this Plan will be included as compensation for purposes of calculating the level
of contributions under Alco's Partners' Stock Purchase Plan.
19. AMENDMENT. This Plan shall remain in effect until termination by the
Board of Directors of Alco. The Board of Directors shall have the power to
amend this Plan at any time; provided, however, that, except as set forth in
Paragraph 20 and/or Paragraph 21, no amendment or termination of the Plan
14
<PAGE>
shall have a material adverse effect upon a Participant unless he consents to
such amendment or termination in writing.
20. TERMINATION. The Board of Directors of Alco shall have the right to
terminate the Plan in its entirety, and not in part, at any time it determines
that proposed or pending tax law changes or other events cause, or are likely in
the future to cause, the Plan to have an adverse financial impact upon Alco. In
such event, Alco shall have no liability or obligation under the Plan or the
Participant's Participation Agreement (or any other document), provided that
Alco distributes to each Participant, in a lump sum payment, the value of his
account, valued as of the end of the month in which such termination occurs.
21. ACCELERATION. Alco shall have the right at any time to (a) accelerate
the vesting of benefits to be provided under the Plan or (b) cause the payment
of all amounts thereafter due to a Participant to be paid in a single lump sum
or in such other accelerated manner as Alco shall deem appropriate. The amount
of any lump sum payment shall be the value of a Participant's account, valued as
of the end of the month following Alco's determination to accelerate benefits.
If Alco accelerates the payment of benefits to more than 70% of all Participants
pursuant to this provision, it must accelerate the payment of benefits to all
Participants under the Plan in a comparable manner.
22. CHANGE IN CONTROL. In the event that a Flip-in Transaction or Event
or a Flip-over Transaction or Event occurs (as defined in the Alco Standard
Corporation Preferred Share Purchase Rights Plan, as amended from time to time),
the Plan shall terminate, and the Participant shall receive, in a lump sum
payment, the value of his account, valued as of the end of the month in which
such transaction or event occurs.
23. MISCELLANEOUS.
(a) The existence of this Plan and the Participation Agreements hereunder,
and any actions undertaken pursuant hereto, shall not confer upon the
Participant any right to continued employment by any Employer.
(b) This Plan shall be administered under and in accordance with the laws
of the Commonwealth of Pennsylvania, in which Alco's principal place of business
is located.
(c) The terms of this Plan and the Participation Agreements and other
documents executed in accordance herewith shall be binding upon Alco, its
successors and assigns, and each Participant, his heirs and legal
representatives.
15
<PAGE>
(d) Any taxes imposed on a Participant shall be the sole responsibility of
the Participant. Employers shall have the right to deduct from any benefits
payable under the Plan any federal, state or local taxes required to be deducted
or withheld from such benefits.
(e) No expenses of administering the Plan shall be charged against the
Participants or their benefits hereunder.
(f) As used herein, the singular shall include the plural, the masculine
shall include the feminine, and vice versa.
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<PAGE>
EXHIBIT 10.21
U.S. $1,028,000,000
ALCO CAPITAL RESOURCE, INC.
MEDIUM-TERM NOTES, SERIES B
DISTRIBUTION AGREEMENT
June 30, 1995
Lehman Brothers
Lehman Brothers Inc.
3 World Financial Center, 12th Floor
New York, New York 10285-1200
Chase Securities, Inc.
One Chase Manhattan Plaza
New York, New York 10081
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281
Dear Sirs:
Alco Capital Resource, Inc., a Delaware corporation (the "Company"),
confirms its agree ment with each of you (individually, an "Agent" and
collectively, the "Agents") (which terms shall, for all purposes of this
Agreement, include Lehman Government Securities Inc., an affiliate of Lehman
Brothers, Lehman Brothers Inc.) with respect to the issuance and sale by the
Company of up to an aggregate of $1,028,000,000 in gross proceeds of its Medium-
Term Notes, Series B (the "Notes"). The Notes are to be issued from time to time
pursuant to an indenture, dated as of June 30, 1995 (as it may be supplemented
or amended from time to time, the "Indenture"), between the Company and Chemical
Bank, as trustee (the "Trustee").
The Notes shall have the maturity ranges, applicable interest rates or
interest rate formulas, specified currency, issue price, redemption and
repayment provisions and other terms set forth in the Prospectus referred to in
Section 1(a) as it may be amended or supplemented from time to time, including
any supplement providing for the interest rate, maturity and other terms of any
<PAGE>
Note (a "Pricing Supplement"). The Notes will be issued, and the terms thereof
established, from time to time, by the Company in accordance with the Indenture
and the Procedures referred to below. This Agreement shall only apply to sales
of the Notes and not to sales of any other securities or evidences of
indebtedness of the Company and only on the specific terms set forth herein.
Subject to the terms and conditions stated herein and to the reservation by
the Company of the right to sell its Notes directly on its own behalf, the
Company hereby (i) appoints each of the Agents as the agent of the Company for
the purpose of soliciting and receiving offers to purchase Notes from the
Company and (ii) agrees that whenever the Company determines to sell Notes
directly to an Agent as principal it will enter into a separate agreement (each
a "Purchase Agreement"). Each such Purchase Agreement, whether oral (and
confirmed in writing, which may be by facsimile transmission) or in writing,
shall be with respect to such information (as appli cable) as specified in
Exhibit C hereto, relating to such sale in accordance with Section 2(e) hereof.
1. Representations and Warranties
The Company represents and warrants to each Agent as of the date hereof, as
of the Closing Date (defined herein) and as of the times referred to in Sections
6(a) and 6(b) hereof (the Closing Date and each such time being hereinafter
sometimes referred to as a "Representation Date"), as follows:
(a) General. Registration statements (No. 33-57377 and No. 33-53779) on
Form S-3 with respect to the Notes have been prepared and filed by the Company
in conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and have
become effective under the Act. The Indenture has been qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). As used in this
Agreement (i) "Registration Statement" means such registration statements when
they became effective under the Act, and as from time to time amended or
supplemented thereafter (if any post-effective amendment to such registration
statements have been filed with the Commission prior to the execution and
delivery of this Agreement, the time the most recent such amendment has been
declared effective by the Commission); (ii) "Basic Prospectus" means the
prospectus (including all documents incorporated therein by reference) included
in the Registration Statement; and (ii) "Prospectus" means the Basic Prospectus
(together with all documents incorporated therein by reference) and any
amendments or supplements thereto (including the applicable Pricing Supplement)
relating to the Notes, as filed with the Commission pursuant to paragraph (b) of
Rule 424 of the Rules and Regulations. The Commission has not issued any order
preventing or suspending the use of the Prospectus. Any reference in this
Agreement to amending or supplementing the Prospectus shall be deemed to include
the filing of materials incorporated by reference in the Prospectus after the
Closing Date (defined herein) and any reference in this Agreement to any
amendment or supplement to the Prospectus shall be deemed to include any such
materials incorporated by reference in the Prospectus after the Closing Date
(defined herein).
(b) Registration Statement, Prospectus and Indenture: Contents. The
Registration Statement and each Prospectus conformed, and the Registration
Statement and each Prospectus will conform as of the applicable Representation
Date and at all times during each period during
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<PAGE>
which, in the opinion of counsel for the Agents, a prospectus relating to the
Notes is required to be delivered under the Act (each a "Marketing Period"), in
all respects to the requirements of the Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Trust Indenture Act, and the rules
and regulations of the Commission under such Acts; the Indenture, including any
amendments and supplements thereto, conforms with the requirements of the Trust
Indenture Act and the rules and regulations of the Commission thereunder; and
the Registration Statement and each Prospectus do not, and will not as of the
applicable Representation Date and at all times during each Marketing Period,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company makes no representation or
warranty as to information contained in or omitted from the Registration
Statement or any Prospectus in reliance upon and in conformity with written
information furnished to the Company by the Agents specifically for inclusion
therein or to any statements in or omissions from the statement of eligibility
and qualification on Form T-1 (the "Form T-1") of the Trustee under the Trust
Indenture Act.
(c) No Defaults. The Company is not in violation of its corporate charter
or by-laws or in default under any agreement, indenture or instrument, the
effect of which violation or default would be material to the Company; the
execution, delivery and performance of this Agreement, the Indenture, the Notes,
the Support Agreement, dated June 1, 1994 (the "1994 Support Agreement") between
the Company and Alco Standard Corporation ("Alco Standard"), and each
applicable Purchase Agreement, if any, and compliance by the Company with the
provisions of the Notes and the Indenture have been duly authorized by all
necessary corporate action and will not conflict with, result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of the
Company pursuant to the terms of, or constitute a default under, any agreement,
indenture or instrument, or result in a violation of the corporate charter or
by-laws of the Company or any order, rule or regulation of any court or
governmental agency having jurisdiction over the Company or its properties; and
except as required by the Act, the Trust Indenture Act, the Exchange Act and
applicable state securities laws, no consent, authorization or order of, or
filing or registration with, any court or governmental agency is required for
the execution, delivery and performance of the transactions contemplated by this
Agreement, the Notes, the 1994 Support Agreement, each applicable Purchase
Agreement, if any, or the Indenture. The Company has no subsidiaries within the
meaning of Rule 405 of the Rules and Regulations.
(d) Material Changes or Material Transactions. Except as described in the
Registration Statement and each Prospectus, (i) there has not been any material
adverse change in, or any adverse development which materially affects, the
business, properties, condition (financial or other), results of operations or
prospects of the Company, and (ii) there has been no material transaction
entered into by the Company other than those in the ordinary course of business.
(e) Accountants. Ernst & Young LLP, whose report appears in the Company's
Annual Report on Form 10-K which is incorporated by reference in each
Prospectus, are independent public accountants with respect to the Company as
required by the Act and the Rules and Regulations.
(f) Validity of the Indenture and the Notes. (i) The Indenture has been
duly authorized, executed and delivered by the Company and constitutes the valid
and legally binding obligation of the Company, enforceable in accordance with
its terms; (ii) the Notes have been validly authorized
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<PAGE>
for issuance and sale pursuant to this Agreement and, when the terms of the
Notes and of their issue and sale have been duly established in accordance with
the Indenture and this Agreement so as not to violate any applicable law or
agreement or instrument binding on the Company, and the Notes have been duly
executed, authenticated, delivered and paid for as provided in this Agreement
and the Indenture, the Notes will be validly issued and outstanding, and will
constitute valid and legally binding obligations of the Company entitled to the
benefits of the Indenture and enforceable in accordance with their terms and the
terms of the Indenture; and (iii) the Notes and the Indenture conform to the
descriptions thereof contained in each Prospectus. The validity, enforceability
and legally binding nature of the Indenture and the Notes are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(g) Due Incorporation and Qualification. The Company has been duly
incorporated, is validly existing and in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which its ownership of
properties or the conduct of its businesses requires such qualification (except
where the failure to obtain such qualification would not have a material adverse
effect on the Company), and has the power and authority necessary to own or hold
its properties and to conduct the businesses in which it is engaged, as
described in each Prospectus.
(h) Validity of the Support Agreements. (i) Each of the 1994 Support
Agreement, and the Maintenance Agreement, dated August 15, 1991 (the
"Maintenance Agreement") and the Operating Agreement dated August 15, 1991 (the
"Operating Agreement") between the Company and Alco Standard has been duly
authorized, executed and delivered by each of the Company and Alco Standard and
constitutes the valid and legally binding obligation of the Company and Alco
Standard and, enforceable in accordance with its terms; and (ii) such agreements
conform to the descriptions thereof contained in each Prospectus. The validity,
enforceability and legally binding nature of such agreements are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
(i) Ownership of Property. The Company owns, or has valid rights to use,
all items of real and personal property which are material to the business of
the Company, free and clear of all liens, encumbrances and claims which may
materially interfere with the business, properties, financial condition or
results of operations of the Company.
(j) Legal Proceedings. Except as described in each Prospectus, there is
no material litigation or governmental proceeding pending or, to the knowledge
of the Company, threatened against the Company which might result in any
material adverse change in the condition (financial or other), results of
operations, business, property, or prospects of the Company or which is required
to be disclosed in the Registration Statement.
(k) Financial Statements. The audited financial statements included or
incorporated by reference in each Prospectus present and will present fairly, as
of the applicable Representation
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Date and at all times during each Marketing Period, the financial condition,
results of operations, changes in shareholder's equity and cash flows of the
entities purported to be shown thereby in conformity with generally accepted
accounting principles, at the dates and for the periods indicated, and have
been, and will be as of the applicable Representation Date and at all times
during each Marketing Period, prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the period or
periods involved; and the supporting schedules, if applicable, included or
incorporated by reference in each Prospectus present, and will present as of the
applicable Representation Date and at all times during each Marketing Period,
fairly the information required to be stated therein. The unaudited financial
statements of the Company, if any, and the related notes, included or
incorporated by reference in each Prospectus present fairly and will present
fairly at all times during each period specified in Section 3(c) hereof the
financial position of the Company at the dates and for the periods indicated in
conformity with generally accepted accounting principles (except for the absence
of notes) applied on a consistent basis throughout the periods shown, subject to
normally recurring changes, and prepared in accordance with the instructions to
Form 10-Q.
(l) Documents Incorporated by Reference. The documents incorporated by
reference into any Prospectus have been, and will be as of the applicable
Representation Date and at all times during each Marketing Period, prepared by
the Company in conformity with the applicable requirements of the Act and the
Rules and Regulations and the Exchange Act and the rules and regulations of the
Commission thereunder; and none of such documents contained, or will contain as
of the applicable Representation Date and at all times during each Marketing
Period, an untrue statement of a material fact or omitted, or will omit, to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and such documents have been, or will be, as
of the applicable Representation Date and at all times during each Marketing
Period, timely filed as required thereby.
(m) Exhibits to Registration Statement. There are no contracts or other
documents which are required to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations, or which were required to
be filed as exhibits to any document incorporated by reference in any Prospectus
by the Exchange Act or the rules and regulations of the Commission thereunder,
which have not been filed as exhibits to the Registration Statement or to such
document or incorporated therein by reference as permitted by the Rules and
Regulations or the rules and regulations of the Commission under the Exchange
Act, as the case may be.
(n) Licenses, Approvals and Consents. The Company has all licenses,
approvals and consents for the conduct of its business the failure of which to
have would have a material adverse effect on the business, properties, financial
condition or results of operations of the Company.
(o) Investment Company Act. The Company is not required to register under
the provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and no action need be taken with respect to or under
the Investment Company Act by reason of the issuance of the Notes by the
Company.
(p) Rating. The Notes have been rated by a "nationally recognized
statistical rating agency" (as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act), including one or both of Moody's
Investor Services, Inc. and Standard & Poor's Corporation.
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(q) Doing Business with Cuba. The Company confirms as of the date hereof,
and each acceptance by the Company of an offer to purchase Notes will be deemed
to be an affirmation, that the Company is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of
Doing Business with Cuba, and the Company further agrees that if it commences
engaging in business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking and
Finance (the "Department"), whichever date is later, or if the information
reported in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any material way, the
Company will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(r) True and Complete Documents. The certificates delivered pursuant to
paragraph (f) of Section 5 hereof and all other documents delivered by the
Company or its representatives in connection with the issuance and sale of the
Notes were on the dates on which they were delivered, or will be on the dates on
which they are to be delivered, true and complete in all material respects.
2. Solicitations as Agent; Purchases as Principal
(a) Appointment. Subject to the terms and conditions stated herein, the
Company hereby appoints each of the Agents as the agent of the Company for the
purpose of soliciting or receiving offers to purchase the Notes from the Company
by others. On the basis of the representations and warranties contained herein,
but subject to the terms and conditions herein set forth, each Agent agrees, as
the agent of the Company, to use its reasonable efforts to solicit offers to
purchase the Notes upon the terms and conditions set forth in the Prospectus.
The Company may offer the Notes for sale from time to time otherwise than
through an Agent. However, so long as this Agreement is in effect the Company
shall not solicit offers to purchase Notes through any agent without (i)
amending this Agreement to appoint such agent as an additional Agent hereunder
on the same terms and conditions as provided herein for the Agents (the consent
of the then current Agents shall not be necessary for such purpose) and (ii)
delivering 2 days prior written notice thereof to the Agents. The Company may,
however, accept offers to purchase Notes through an agent other than an Agent,
provided that (i) the Company shall not have solicited such offers, (ii) the
Company and such agent shall have executed an agreement with respect to such
purchases having the same terms and conditions (including, without limitation,
commission and discount rates) as those which would apply to such purchases
under this Agreement if such agent were an Agent (which may be accomplished by
incorporating by reference in such agreement the terms and conditions of this
Agreement) and (iii) the Company shall provide the Agents with a copy of such
agreement promptly following the execution thereof. Each Agent may also purchase
Notes from the Company as principal for purposes of resale, as more fully
described in paragraph (e) of this Section.
(b) Suspension of Solicitation. The Company reserves the right, in its
sole discretion, to suspend solicitation of offers to purchase the Notes
commencing at any time for any period of time or indefinitely. Upon receipt of
at least one business day's prior written notice from the Company, the Agents
will forthwith suspend solicitation of offers to purchase Notes from the Company
until such time as the Company has advised the Agents that such solicitation may
be resumed. For the purpose of the foregoing sentence, "business day" shall mean
any day which is not a Saturday or Sunday and which is not a day on which (i)
banking institutions are generally authorized or
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obligated by law to close in The City of New York and (ii) the New York Stock
Exchange, Inc. is closed for trading.
Upon receipt of notice from the Company as contemplated by Section 3(c)
hereof, each Agent shall suspend its solicitation of offers to purchase Notes
until such time as the Company shall have furnished it with an amendment or
supplement to the Registration Statement or the Prospectus, as the case may be,
contemplated by Section 3(c) and shall have advised such Agent that such
solicitation may be resumed.
(c) Agent's Commission. Promptly upon the closing of the sale of any
Notes sold by the Company as a result of a solicitation made by or offer to
purchase received by an Agent, the Company agrees to pay such Agent a
commission, in the form of a discount, in accordance with the schedule set forth
in Exhibit A hereto.
(d) Solicitation of Offers. The Agents are authorized to solicit offers
to purchase the Notes only in denominations as are specified in the Prospectus
at a purchase price as shall be specified by the Company. Each Agent shall
communicate to the Company, orally or in writing, each reasonable offer to
purchase Notes received by it as an Agent. The Company shall have the sole right
to accept offers to purchase the Notes and may reject any such offer in whole or
in part. Each Agent shall have the right, in its discretion reasonably exercised
without advising the Company, to reject any offer to purchase the Notes received
by it, in whole or in part, and any such rejection shall not be deemed a breach
of its agreement contained herein.
No Note which the Company has agreed to sell pursuant to this Agreement
shall be deemed to have been purchased and paid for, or sold by the Company,
until such Note shall have been delivered to the purchaser thereof against
payment by such purchaser.
(e) Purchases as Principal. Each sale of Notes to any Agent as principal,
for resale to one or more investors or to another broker-dealer (acting as
principal for purposes of resale), shall be made in accordance with the terms of
this Agreement and a Purchase Agreement whether oral (and confirmed in writing
by such Agent to the Company, which may be by facsimile transmission) or in
writing, which will provide for the sale of such Notes to, and the purchase
thereof by, such Agent. A Purchase Agreement may also specify certain provisions
relating to the reoffering of such Notes by such Agent. The commitment of any
Agent to purchase Notes from the Company as principal shall be deemed to have
been made on the basis of the representations and warranties of the Company
herein contained and shall be subject to the terms and conditions herein set
forth. Each Purchase Agreement shall specify the principal amount and terms of
the Notes to be purchased by an Agent, the time and date (each such time and
date being referred to herein as a "Time of Delivery") and place of delivery of
and payment for such Notes and such other information (as applicable) as is set
forth in Exhibit C hereto. The Company agrees that if any Agent purchases Notes
as principal for resale such Agent shall receive such compensation, in the form
of a discount or otherwise, as shall be indicated in the applicable Purchase
Agreement or, if no compensation is indicated therein a commission in accordance
with Exhibit A hereto. Any Agent may utilize a selling or dealer group in
connection with the resale of such Notes. In addition, any Agent may offer the
Notes it has purchased as principal to other dealers. Any Agent may sell Notes
to any dealer at a discount and, unless otherwise specified in the applicable
Pricing Supplement, such discount allowed to any dealer will not be in excess of
the discount to be received by such Agent from the Company. Such Purchase
Agreement shall also specify any requirements for
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<PAGE>
delivery of opinions of counsel, accountant's letters and officers' certificates
pursuant to Section 5 hereof.
(f) Administrative Procedures. Administrative procedures respecting the
sale of Notes (the "Procedures") are set forth in Exhibit B hereto and may be
amended in writing from time to time by the Agents and the Company. Each Agent
and the Company agree to perform the respective duties and obligations
specifically provided to be performed by each of them herein and in the
Procedures. The Procedures shall apply to all transactions contemplated
hereunder including sales of Notes to any Agent as principal pursuant to a
Purchase Agreement, unless otherwise set forth in such Purchase Agreement.
(g) Delivery of Documents. The documents required to be delivered by
Section 5 hereof shall be delivered at the offices of Sullivan & Cromwell, 125
Broad Street, New York, New York 10004, not later that 10:00 A.M., New York City
time, on the date of this Agreement or at such later time as may be mutually
agreed upon by the Company and the Agents, which in no event shall be later than
the time at which the Agents commence solicitation of offers to purchase Notes
hereunder (the "Closing Date").
3. Covenants of the Company
The Company covenants and agrees:
(a) Delivery of Signed Registration Statement. To furnish promptly to the
Agents and to their counsel a signed copy of the Registration Statement as
originally filed and each amendment or supplement thereto.
(b) Delivery of Other Documents. To deliver promptly to the Agents, and
in such number as they may request, each of the following documents: (i)
conformed copies of the Registration Statement (excluding exhibits other than
the computation of the ratio of earnings to fixed charges, the Indenture, this
Agreement and such other exhibits that the Agents may request), (ii) the Basic
Prospectus, (iii) each Prospectus and (iv) any documents incorporated by
reference in the Prospectus.
(c) Revisions to Prospectus - Material Changes. If, during any Marketing
Period, any event occurs as a result of which the Prospectus would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading, or if it is necessary at any time
to amend any Prospectus to comply with the Act, to notify the Agents promptly,
in writing, to suspend solicitation of purchases of the Notes; and if the
Company shall decide to amend or supplement the Registration Statement or any
Prospectus, to promptly advise the Agents by telephone (with confirmation in
writing) and to promptly, in writing, prepare and file with the Commission an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance; provided, however, that if during
the period referred to above any Agent shall own any Notes which it has
purchased from the Company as principal with the intention of reselling them,
the Company shall promptly prepare and timely file with the Commission any
amendment or supplement to the Registration Statement or any Prospectus that
may, in the judgment of the Company or the Agents, be required by the Act or
requested by the Commission.
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<PAGE>
(d) Commission Filings. To timely file with the Commission during any
Marketing Period, all documents (and any amendments to previously filed
documents) required to be filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act.
(e) Copies of Filings with Commission. Prior to filing with the
Commission during any Marketing Period, (i) any amendment or supplement to the
Registration Statement, (ii) any amendment or supplement to any Prospectus or
(iii) any document incorporated by reference in any of the foregoing or any
amendment of or supplement to any such incorporated document, to furnish a copy
thereof to the Agents.
(f) Notice to Agent of Certain Events. To advise the Agents immediately
(i) when any post-effective amendment to the Registration Statement relating to
or covering the Notes becomes effective, (ii) of any request or proposed request
by the Commission for an amendment or supplement to the Registration Statement,
to any Prospectus, to any document incorporated by reference in any of the
foregoing or for any additional information and the Company will afford the
Agents a reasonable opportunity to comment on any such proposed amendment or
supplement, (iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any part thereof or any order
directed to any Prospectus or any document incorporated therein by reference or
the initiation or threat of any stop order proceeding or of any challenge to the
accuracy or adequacy of any document incorporated by reference in any
Prospectus, (iv) of receipt by the Company of any notification with respect to
the suspension of the qualification of the Notes for sale in any jurisdiction or
the initiation or threat of any proceeding for that purpose, (v) of any
downgrading in the rating of the Notes or any other debt securities of the
Company, or any proposal to downgrade the rating of the Notes or any other debt
securities of the Company, by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a
possible downgrading of such rating) as soon as the Company learns of any such
downgrading, proposal to downgrade or public announcement and (vi) of the
happening of any event which makes untrue any statement of material fact made in
the Registration Statement or any Prospectus or which requires the making of a
change in the Registration Statement or any Prospectus in order to make any
material statement therein not misleading.
(g) Stop Orders. If, during any Marketing Period, the Commission shall
issue a stop order suspending the effectiveness of the Registration Statement,
to make every reasonable effort to obtain the lifting of that order at the
earliest possible time.
(h) Earnings Statements. As soon as practicable, but not later than 18
months, after the date of each acceptance by the Company of an offer to purchase
Notes hereunder, to make generally available to its security holders an earnings
statement covering a period of at least 12 months beginning after the later of
(i) the effective date of the Registration Statement, (ii) the effective date of
the most recent post-effective amendment to the Registration Statement to become
effective prior to the date of such acceptance and (iii) the date of the
Company's most recent Annual Report on Form 10-K filed with the Commission prior
to the date of such acceptance which will satisfy the provisions of Section
11(a) of the Act (including, at the option of the Company, Rule 158 of the Rules
and Regulations under the Act).
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<PAGE>
(i) Copies of Reports, Releases and Financial Statements. So long as any
of the Notes are outstanding, to furnish to the Agents, not later than the time
the Company makes the same available to others, copies of all public reports or
releases and all reports and financial statements furnished by the Company to
any securities exchange on which the Notes are listed pursuant to requirements
of or agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder.
(j) Blue Sky Qualifications. To endeavor, in cooperation with the Agents,
to qualify the Notes for offering and sale under the securities laws of such
jurisdictions as the Agents may designate, and to maintain such qualifications
in effect for as long as may be required for the distribution of the Notes; and
to file such statements and reports as may be required by the laws of each
jurisdiction in which the Notes have been qualified as above provided.
(k) Holdback. Between the date of a Purchase Agreement and the date of
delivery of the Notes with respect thereto, the Company will not offer or sell,
or enter into any agreement to sell, any of its debt securities, other than
borrowings under the Company's revolving credit agreements and lines of credit,
the private placement of securities and issuances of its commercial paper.
(l) Pricing Supplement. To prepare, with respect to any Notes to be sold
through or to the Agents pursuant to this Agreement, a Pricing Supplement with
respect to such Notes in a form previously approved by the Agents and to file
such Pricing Supplement timely pursuant to Rule 424 under the Act with the
Commission.
Section 4. Payment of Expenses
The Company will pay:
(i) the costs incident to the authorization, issuance, sale and
delivery of the Notes and any taxes payable in that connection,
(ii) the costs incident to the preparation, printing and filing
under the Act of the Registration Statement and any amendments and exhibits
thereto,
(iii) the costs incident to the preparation, printing and filing
of any document and any amendments and exhibits thereto required to be
filed by the Company under the Exchange Act,
(iv) the costs of distributing the Registration Statement as
originally filed, and each amendment and post-effective amendment thereof
(including exhibits), the Basic Prospectus, each Prospectus, any supplement
or amendment to any Prospectus and any documents incorporated by reference
in any of the foregoing documents,
(v) the fees and disbursements of the Trustee, any paying
agent, any calculation agent, any exchange agent and any other agents
appointed by the Company, and their respective counsel,
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(vi) the costs and fees in connection with the listing of the
Notes on any securities exchange,
(vii) the cost and fees in connection with any filings with the
National Association of Notes Dealers, Inc.,
(viii) the fees and disbursements of counsel to the Company and
counsel to the Agents,
(ix) the fees paid to rating agencies in connection with the
rating of the Notes,
(x) the fees and expenses of qualifying the Notes under the
securities laws of the several jurisdictions as provided in Section 3(j)
hereof and of preparing and printing a Blue Sky Memorandum and a memorandum
concerning the legality of the Notes as an investment (including fees and
expenses of counsel for the Agents in connection therewith),
(xi) all advertising expenses in connection with the offering of
the Notes incurred with the consent of the Company, and
(xii) all other costs and expenses arising out of the
transactions contemplated hereunder and incident to the performance of the
Company's obligations under this Agreement or otherwise in connection with
the activities of the Agents under this Agreement.
Section 5. Conditions of Obligations of Agent
The obligation of the Agents, as agents of the Company, under this
Agreement to solicit offers to purchase the Notes, the obligation of any person
who has agreed to purchase Notes to make payment for and take delivery of Notes,
and the obligation of any Agent to purchase Notes pursuant to any Purchase
Agreement, is subject to the accuracy, on each Representation Date, of the
representations and warranties of the Company contained herein, to the accuracy
of the statements of the Company's officers made in any certificate furnished
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to each of the following additional terms and
conditions:
(a) Registration Statement. The Prospectus as amended or supplemented
(including the Pricing Supplement) with respect to such Notes shall have been
filed with the Commission pursuant to Rule 424(b) under the Act within the
applicable time period prescribed for such filing by the Rules and Regulations
and in accordance with Section 3(1) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof nor any order
directed to any document incorporated by reference in any Prospectus have been
issued and no stop order proceeding shall have been initiated or threatened by
the Commission and no challenge shall have been made to the accuracy or adequacy
of any document incorporated by reference in any Prospectus; any request of the
Commission for inclusion of additional information in the Registration Statement
or any Prospectus or otherwise shall have been complied with; and the Company
shall not have filed with the Commission any amendment or supplement to the
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Registration Statement or any Prospectus (or any document incorporated by
reference therein) without the consent of the Agents.
(b) No Suspension of Sale of the Notes. No order suspending the sale of
the Notes in any jurisdiction designated by the Agents pursuant to Section 3(j)
hereof shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened.
(c) No Material Omissions or Untrue Statements. The Agents shall not have
discovered and disclosed to the Company that the Registration Statement or any
Prospectus contains an untrue statement of a fact which, in the opinion of
counsel for the Agents, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(d) Legal Matters Satisfactory to Counsel. All corporate proceedings and
other legal matters incident to the authorization, form and validity of this
Agreement, the Notes, the Indenture, the form of the Registration Statement,
each Prospectus (other than financial statements and other financial data) and
all other legal matters relating to this Agreement and the transactions
contemplated hereby shall be satisfactory in all respects to counsel for the
Agents and the Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.
(e) Opinion of Company Counsel. At the Closing Date, the Agents shall
have received the opinion, addressed to the Agents and dated the Closing Date,
of J. Kenneth Croney, General Counsel of Alco Standard Corporation, in form and
substance satisfactory to the Agents and counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which its ownership of
properties or the conduct of its businesses requires such qualification
(except where the failure to so qualify would not have a material adverse
effect on the Company), and has all power and authority necessary to own
its properties and conduct the businesses in which it is engaged, as
described in the Prospectus;
(ii) Such counsel has no reason to believe that the Registration
Statement, as of its effective date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made not misleading, it being understood that such counsel need express no
opinion as to the financial statements or other financial information
contained or incorporated therein or omitted therefrom, or the Form T-1
that is an exhibit to the Registration Statement;
(iii) Such counsel does not know, after reasonable
investigation, of any litigation or any governmental proceeding pending or
threatened against the Company which would affect the subject matter of
this Agreement or is required to be disclosed in the Prospectus which is
not disclosed and correctly summarized therein;
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(iv) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated herein except such as have been obtained under
the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the sale of the Notes as contemplated by
this Agreement and such other approvals (specified in such opinion) as have
been obtained;
(v) Such counsel does not know, after reasonable investigation,
of any contracts or other documents which are required to be filed as
exhibits to the Registration Statement by the Act or by the Rules and
Regulations, or which are required to be filed by the Exchange Act or the
rules and regulations of the Commission thereunder as exhibits to any
document incorporated by reference in the Prospectus, which have not been
filed as exhibits to the Registration Statement or to such document or
incorporated therein by reference as permitted by the Rules and Regulations
or the rules and regulations of the Commission under the Exchange Act;
(vi) To the best of such counsel's knowledge, the Company is not
in violation of its corporate charter or by-laws, or in default (except
where such default would not have a material adverse effect upon the
Company) under any agreement, indenture or instrument;
(vii) The execution, delivery and performance of this Agreement,
the 1994 Support Agreement and the Purchase Agreements, if any, and
compliance by the Company with the provisions of the Notes and the
Indenture will not conflict with, or result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of the Company
pursuant to the terms of, or constitute a default under, any agreement,
indenture or instrument known to such counsel, or result in a violation of
the corporate charter or by-laws of the Company (as in effect on the date
of such opinion) or any order, rule or regulation (also as in effect on the
date of such opinion) of any court or governmental agency having
jurisdiction over the Company or its properties; and no consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance
by the Company of this Agreement, the 1994 Support Agreement and the
Purchase Agreements, if any, except such as may be required by the Act, the
Trust Indenture Act, the Exchange Act or state securities laws;
(viii) The Indenture has been duly authorized by the Company,
duly executed and delivered by the Company and the Trustee and duly
qualified under the Trust Indenture Act and is a valid and legally binding
obligation of the Company enforceable in accordance with its terms;
(ix) The Notes are in a form contemplated by the Indenture and
have been duly authorized by all necessary corporate action and, when the
terms of the Notes and of their issue and sale have been duly established
in accordance with the Indenture and this Agreement so as not to violate
any applicable law or agreement or instrument then binding on the Company,
and when the Notes have been duly executed and authenticated as specified
in the Indenture and delivered against payment therefor in accordance with
this
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Agreement, the Notes will be legal, valid and binding obligations of the
Company enforceable in accordance with their terms, and entitled to the
benefits of the Indenture;
(x) The Notes and the Indenture conform to the statements
concerning each of them in the Registration Statement and the Prospectus;
(xi) Each of the 1994 Support Agreement, the Operating Agreement
and the Maintenance Agreement has been duly authorized, executed and
delivered by each of the Company and Alco Standard and constitutes the
valid and legally binding obligation of the Company and Alco Standard in
accordance with its terms; and (ii) such agreements conform to the
descriptions thereof contained in each Prospectus;
(xii) The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or threatened by the Commission;
(xiii) To the knowledge of such counsel, after reasonable
investigation, no order directed to any document incorporated by reference
in the Prospectus has been issued and no challenge has been made to the
accuracy or adequacy of any such document; and they have no reason to
believe that any of such documents, when they became effective or were so
filed, as the case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and, in
the case of other documents which were filed under the Act or the Exchange
Act with the Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made when such
documents were so filed, not misleading;
(xiv) The Registration Statement and the Prospectus (except that
no opinion need be expressed as to the financial statements and other
financial data contained therein or the Form T-1 that is an exhibit
thereto) comply as to form in all material respects with the requirements
of the Act and the Trust Indenture Act and the rules and regulations of the
Commission under said Acts and the documents incorporated by reference in
the Prospectus (except that no opinion need be expressed as to the
financial statements and other financial data contained therein) comply as
to form in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission thereunder;
(xv) The statements made in the Prospectus under the captions
"Description of Debt Securities" and "Description of Notes," insofar as
they purport to summarize the provisions of documents or agreements
specifically referred to therein, fairly present the information called for
with respect thereto by Form S-3;
(xvi) The Company has the corporate power and authority
necessary to execute and deliver this Agreement and the 1994 Support
Agreement, and to perform its
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obligations (including the sale and delivery of the Notes under this
Agreement) thereunder; and this Agreement has been duly authorized,
executed and delivered by the Company;
(xvii) The Company is not required to register under the
provisions of the Investment Company Act, and no action need be taken with
respect to or under the Investment Company Act by reason of the issuance of
the Notes by the Company; and
(xviii) The description contained in the Prospectus under the
heading "Certain United States Federal Income Tax Consequences" while not
purporting to discuss all possible income tax ramifications of the proposed
issuance, is correct in all material respects.
The opinions set forth in paragraphs (viii), (ix) and (xi) above are
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(f) Officers' Certificate. The Company shall have furnished to the Agents
on the Closing Date a certificate, dated the Closing Date, of its President or a
Vice President and its Treasurer or an Assistant Treasurer stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 hereof are true and correct as of the Closing Date;
the Company has complied with all its agreements contained herein; and the
conditions set forth in Sections 5(a) and 5(b) hereof have been fulfilled;
and
(ii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion, (A) the Registration Statement, as of
its effective date, did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) the Prospectus
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and (C) since the effective date of the
Registration Statement there has not occurred any event required to be set
forth in an amended or supplemented prospectus which has not been so set
forth.
(g) Accountant's Letter. The Company shall have furnished to the Agents
on the Closing Date a letter of Ernst & Young LLP, addressed jointly to the
Company and the Agents and dated the Closing Date, of the type described in the
American Institute of Certified Public Accountants' Statement on Auditing
Standards No. 72, in form and substance reasonably satisfactory to the Agents
confirming that they are independent accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and stating in
effect that:
(i) In their opinion, the financial statements examined by them
and incorporated by reference in the prospectus contained in the
Registration Statement comply
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in form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and Regulations;
(ii) They have made a review of any unaudited financial
statements incorporated by reference in the Prospectus in accordance with
standards established by the American Institute of Certified Public
Accountants;
(iii) On the basis of the review referred to in (ii) above and a
reading of the latest available interim financial statements of the
Company, inquiries of officials of the Company who have responsibility for
financial and accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements, if any, incorporated by
reference in the Prospectus do not comply in form in all material
respects with the applicable accounting requirements of the Act and
the related published Rules and Regulations or are not in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
incorporated by reference in the Prospectus;
(B) the unaudited capsule information, if any, included in the
Prospectus does not agree with the amounts set forth in the unaudited
financial statements from which it was derived or was not determined
on a basis substantially consistent with that of the audited financial
statements incorporated by reference in the Prospectus;
(C) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than five
days prior to the Closing Date, there was any change in the capital
stock, any increase in short-term indebtedness or long-term debt of
the Company or, at the date of the latest available balance sheet read
by such accountants, there was any decrease in net assets as compared
with amounts shown on the latest balance sheet incorporated by
reference in the Prospectus; or
(D) for the period from the date of the latest income statement
included in the Prospectus to the closing date of the latest available
income statement read by such accountants there were any decreases, as
compared with the corresponding period of the previous year in
revenues, income before income taxes and cumulative effect of
accounting change, or net income, or in the ratio of earnings to fixed
charges;
except in all cases set forth in clauses (C) and (D) above for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(iv) They have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information contained
in the Prospectus (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the general
accounting records of the Company
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<PAGE>
subject to the internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such letter.
All financial statements included in material incorporated by reference
into the Prospectus shall be deemed included in the Prospectus for purposes of
this subsection.
(h) The Agents shall have received from Sullivan & Cromwell, counsel to
the Agents, such opinion or opinions, dated the Closing Date, with respect to
the issuance and sale of the Notes, the Indenture, the Registration Statement,
the Prospectus and other related matters as the Agents may reasonably require,
and the Company shall have furnished to such counsel such docu ments as they may
request for the purpose of enabling them to pass upon such matters.
(i) Additional Conditions. There shall not have occurred: (i) any change
in the capital stock or long-term debt of the Company or any of its Subsidiaries
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, shareholder's equity, business,
properties, condition (financial or other), results of operations or prospects
of the Company which in the opinion of the Agents materially impairs the
investment quality of the Notes; (ii) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the over-the-counter market or the establishment of minimum
prices on such exchanges or such market by the Commission, by such exchange or
by any other regulatory body or governmental authority having jurisdiction;
(iii) a general moratorium on commercial banking activities declared by Federal,
or New York State authorities; (iv) any downgrading in the rating accorded the
Company's debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national calamity or emergency; or (vi) any
material adverse change in the existing financial, political or economic
conditions in the United States, including any effect of international
conditions on the financial markets in the United States, that in the judgment
of the Agents makes it impracticable or inadvisable to proceed with the
solicitation of offers to purchase Notes or the purchase of Notes from the
Company as principal pursuant to the applicable Purchase Agreement, as the case
may be.
(j) Other Information and Documentation. Prior to the Closing Date, the
Company shall have furnished to the Agents such further information,
certificates and documents as the Agents or counsel to the Agents may reasonably
request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agree ment shall be deemed to be in compliance with the
provisions hereof only if they are in the form and substance satisfactory to
counsel for the Agents.
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Section 6. Additional Covenants of the Company
The Company covenants and agrees that:
(a) Acceptance of Offer Affirms Representations and Warranties. Each
acceptance by it of an offer for the purchase of Notes shall be deemed to be an
affirmation that the representations and warranties of the Company contained in
this Agreement and in any certificate theretofore given to the Agents pursuant
hereto are true and correct at the time of such acceptance, and an undertaking
that such representations and warranties will be true and correct at the time of
delivery to the purchaser or his agent of the Notes relating to such acceptance
as though made at and as of each such time (and such representations and
warranties shall relate to the Registration Statement and the Prospectus as
amended or supplemented to each such time).
(b) Subsequent Delivery of Officers' Certificates. The Company agrees
that during each Marketing Period, each time that the Registration Statement or
any Prospectus shall be amended or supplemented (other than by a Pricing
Supplement providing solely for the interest rates or maturities of the Notes or
the principal amount of Notes remaining to be sold or similar changes), each
time the Company sells Notes to an Agent as principal and the applicable
Purchase Agreement specifies the delivery of an officers' certificate under this
Section 6(b) as a condition to the purchase of Notes pursuant to such Purchase
Agreement or the Company files with the Commission any document incorporated by
reference into any Prospectus, the Company shall submit to the Agents a
certificate, (i) as of the date of such amendment, supplement, Time of Delivery
relating to such sale or filing or (ii) if such amendment, supplement or filing
was not filed during a Marketing Period, as of the first day of the next
succeeding Marketing Period, representing that the statements contained in the
certificate referred to in Section 5(f) hereof which was last furnished to the
Agents are true and correct at the time of such amendment, supplement or filing,
as the case may be, as though made at and as of such time (except that such
statements shall be deemed to relate to the Registration Statement and each
Prospectus as amended and supplemented to such time).
(c) Subsequent Delivery of Legal Opinions. The Company agrees that during
each Marketing Period, each time that the Registration Statement or any
Prospectus shall be amended or supplemented (other than by a Pricing Supplement
providing solely for the interest rates or maturities of the Notes or the
principal amount of Notes remaining to be sold or similar changes), each time
the Company sells Notes to an Agent as principal and the applicable Purchase
Agreement specifies the delivery of a legal opinion under this Section 6(c) as a
condition to the purchase of Notes pursuant to such Purchase Agreement or the
Company files with the Commission any document incorporated by reference into
any Prospectus, the Company shall, (i) concurrently with such amendment,
supplement, Time of Delivery relating to such sale or filing or (ii) if such
amendment, supplement or filing was not filed during a Marketing Period, on the
first day of the next succeeding Marketing Period, furnish the Agents and their
counsel with the written opinions of the General Counsel of the Company, each
addressed to the Agents and dated the date of delivery of such opinion, in form
satisfactory to the Agents, of the same effect as the opinions referred to in
Section 5(e) hereof, but modified, as necessary, to relate to the Registration
Statement and each Prospectus as amended or supplemented to the time of delivery
of such opinion; provided, however, that in lieu of such opinion, such counsel
may furnish the Agents with a letter to the effect that the Agents may rely on
such prior opinion to the same extent as though it
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was dated the date of such letter authorizing reliance (except that statements
in such prior opinion shall be deemed to relate to the Registration Statement
and each Prospectus as amended or supplemented to the time of delivery of such
letter authorizing reliance).
(d) Subsequent Delivery of Accountant's Letters. The Company agrees that
during each Marketing Period, each time that the Registration Statement or any
Prospectus shall be amended or supplemented to include additional financial
information, each time the Company sells Notes to an Agent as principal and the
applicable Purchase Agreement specifies the delivery of a letter under this
Section 6(d) as a condition to the purchase of Notes pursuant to such Purchase
Agreement or the Company files with the Commission any document incorporated by
reference into any Prospectus which contains additional financial information,
the Company shall cause Ernst & Young (or other independent accounts of the
Company acceptable to the Agents) to furnish the Agents, (i) concurrently with
such amendment, supplement, Time of Delivery relating to such sale or filing or
(ii) if such amendment, supplement, or filing was not filed during a Marketing
Period, on the first day of the next succeeding Marketing Period, a letter,
addressed jointly to the Company and the Agents and dated the date of delivery
of such letter, in form and substance reasonably satisfactory to the Agents, of
the same effect as the letter referred to in Section 5(g) hereof but modified to
relate to the Registration Statement and each Prospectus, as amended and
supplemented to the date of such letter, with such changes as may be necessary
to reflect changes in the financial statements and other information derived
from the accounting records of the Company; provided, however, that if the
Registration Statement or any Prospectus is amended or supplemented solely to
include financial information as of and for a fiscal quarter, such accountants
may limit the scope of such letter to the unaudited financial statements
included in such amendment or supplement unless there is contained therein any
other accounting, financial or statistical information that, in the reasonable
judgment of the Agents, should be covered by such letter, in which event such
letter shall also cover such other information.
(e) Opinion on Settlement Date. On any settlement date for the sale of
Notes, the Company shall, if requested by the Agent that solicited or received
the offer to purchase any Notes being delivered on such settlement date, furnish
such Agent with a written opinion of the General Counsel of the Company, dated
such settlement date, in form satisfactory to such Agent, to the effect set
forth in Section 5(e) hereof, but modified, as necessary, to relate to the
Prospectus relating to the Notes to be delivered on such settlement date;
provided, however, that in lieu of such opinion, such counsel may furnish the
Agents with a letter to the effect that the Agents may rely on such prior
opinion to the same extent as though it was dated such settlement date (except
that statements in such prior opinion shall be deemed to relate to the
Registration Statement and such Prospectus as amended or supplemented to the
time of delivery of such letter authorizing reliance).
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Section 7. Indemnification and Contribution
(a) Indemnification of Agents. The Company shall indemnify and hold
harmless each Agent and each person, if any, who controls any Agent within the
meaning of the Act from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which such Agent or
controlling person may become subject, under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or arises out of, or
is based upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Agent and controlling person for any legal
and other expenses reasonably incurred by such Agent or controlling person in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in the Form T-1 or
made in the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Company by the Agents
specifically for inclusion therein; provided further, that as to any prospectus
included in the Registration Statement before it became effective under the Act
(a "Preliminary Prospectus") this indemnity agreement shall not inure to the
benefit of any Agent on account of any loss, claim, damage, liability or action
arising from the sale of Notes to any person by that Agent if that Agent failed
to send or give a copy of the Prospectus, as the same may be amended or
supplemented, to that person within the time required by the Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus, unless such failure resulted from non-compliance by the
Company with Section 3(b). The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to any Agent or controlling
person.
(b) Indemnification of the Company. Each Agent shall indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and any person who controls the Company within the
meaning of the Act from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the Act, the
Exchange Act or federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or
arises out of, or is based upon, the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Agent specifically for inclusion therein, and shall
reimburse the Company or any such director, officer or controlling person for
any legal and other expenses reasonably incurred by such indemnified party in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action. The foregoing indemnity agreement is in addition to
any liability which any Agent may otherwise have to the Company or any of its
directors, officers or controlling persons.
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(c) Notice. Promptly after receipt by an indemnified party under this
Section of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify the indemnifying party in writing
of the claim or the commencement of action; provided, however, that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investiga tion; provided, however, that
the Agents shall have the right to employ counsel to represent the Agents who
may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the Agents against the Company under this Section if,
in the reasonable judgment of the Agents, it is advisable for the Agents to be
represented by separate counsel, and in that event the fees and expenses of such
counsel shall be paid by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 7
shall for any reason be unavailable to an indemnified party under Section 7(a)
or 7(b) hereof in respect of any loss, claim, damage or liability, or any action
in respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and any Agents on the other from the offering of the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and any Agents on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and any Agents on the
other with respect to such offering shall be deemed to be in the same proportion
as the total net proceeds from the offering of
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the Notes (before deducting expenses) received by the Company bears to the total
commissions received by the such Agent with respect to such offering. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or any Agent, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Agents agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation (even
if the Agents were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(d) shall be deemed to include, for
purposes of this Section 7(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no Agent
shall be required to contribute any amount in excess of the amount by which the
total price at which the Notes sold through such Agent and distributed to the
public were offered to the public exceeds the amount of any damages which such
Agent has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Section 8. Status of Each Agent
In soliciting offers to purchase the Notes from the Company pursuant to
this Agreement (other than in respect of any Purchase Agreement), each Agent is
acting individually and not jointly and is acting solely as agent for the
Company and not as principal. Each Agent will make reasonable efforts to assist
the Company in obtaining performance by each purchaser whose offer to purchase
Notes from the Company has been solicited by such Agent and accepted by the
Company but such Agent shall have no liability to the Company in the event any
such purchase is not consummated for any reason. If the Company shall default in
its obligations to deliver Notes to a purchaser whose offer it has accepted, the
Company shall (i) hold the Agents harmless against any loss, claim or damage
arising from or as a result of such default by the Company, and (ii) in
particular, pay to the Agents any commission to which they would be entitled in
connection with such sale.
Section 9. Representations, Warranties and Obligations to Survive Delivery
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the Agents contained in this Agreement, or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of any Agent or any person controlling such Agent or by or
on behalf of the Company, and shall survive each delivery of and payment for any
of the Notes.
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Section 10. Termination
This Agreement may be terminated for any reason with respect to any party
hereto, at any time, by any party hereto upon the giving of one day's written
notice of such termination to the other parties hereto; provided, however, if
such terminating party is an Agent, such termination shall be effective only
with respect to such terminating party. If, at the time of a termination, an
offer to purchase any of the Notes has been accepted by the Company but the time
of delivery to the purchaser has not occurred, the provisions of this Agreement
shall remain in effect until such Notes are delivered. The provisions of
Sections 2(c), 3(d), 3(h), 3(i), 4, 7, 8 and 9 hereof shall survive any
termination of this Agreement.
Section 11. Sales of Notes Denominated in a Foreign Currency and Indexed
Notes
If at any time the Company and any of the Agents shall determine to issue
and sell Notes denominated in a currency or currency unit other than U.S.
Dollars, which other currency may include a composite currency, or with respect
to which an index is used to determine the amounts of payments of principal and
any premium or interest, the Company and any such Agent shall execute and
deliver an Amendment (a "Foreign Currency Amendment" or "Indexed Note
Amendment," as the case may be) in the form attached hereto as Exhibit D. Such
amendment shall establish, as appropriate additions and modifications that shall
apply to the sales, whether offered on an agency or principal basis, of the
Notes covered thereby. The Agents are authorized to solicit offers to purchase
Notes with respect to which an index is used to determine the amounts of
payments of principal and any premium and interest, and the Company shall agree
to any sales of such Notes (whether offered on an agency or principal basis),
only in a minimum aggregate amount of $2,500,000.
Section 12. Notices
Except as otherwise provided herein, all notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Agents shall be directed to them as follows: Lehman Brothers Inc., 3 World
Financial Center, New York, New York 10285-1200, Attention: Medium Term Note
Department, 12th Floor, Telephone No.: (212) 526-2040, Telecopy No.: (212) 528-
1718; Chase Securities, Inc., 1 Chase Manhattan Plaza - 15th Floor, New York,
New York 10081, Attention: Medium-Term Note Desk, Telephone No.: (212) 552-2969,
Telecopy No.: (212) 552-1507; Goldman, Sachs & Co., MTN Desk, 85 Broad Street,
New York, New York 10004, Attention: Karen Robertson, Telephone No.: (212) 902-
1482, Telecopy No.: (212) 902-6658; Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, World Financial Center, North Tower, 10th Floor,
New York, New York 10281-1310, Attention: MTN Product Management, Telephone No.:
(212) 449-7476, Telecopy No.: (212) 449-2234; notices to the Company shall be
directed to it as follows: Alco Capital Resource, Inc., c/o Alco Standard
Corporation, 825 Duportail Road, Wayne, PA 19087, Attention: Kathleen Burns,
Telephone No.: (610) 296-8000, Telecopy No.: (610) 296-8419.
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Section 13. Binding Effect; Benefits
This Agreement shall be binding upon each Agent, the Company, and their
respective suc cessors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (a) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Agent within the meaning of Section 15 of the Act, and
(b) the indemnity agreement of the Agents contained in Section 7 hereof shall be
deemed to be for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company. Nothing in this Agreement is intended or shall be construed to give
any persons other than the person referred to in this Section, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
Section 14. Governing Law; Counterparts
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. This Agreement may be executed in counterparts
and the executed counterparts shall together constitute a single instrument.
Section 15. Paragraph Headings
The paragraph headings used in this Distribution Agreement are for
convenience of reference only, and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
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<PAGE>
If the foregoing correctly sets forth our agreement, please indicate your
acceptance hereof in the space provided for that purpose below.
Very truly yours,
ALCO CAPITAL RESOURCE, INC.
By: /s/ Signature
---------------------------------
Authorized Signatory
CONFIRMED AND ACCEPTED
as of the date first above written:
LEHMAN BROTHERS INC.
By: /s/ Signature
-------------------------------------
Authorized Signatory
CHASE SECURITIES, INC.
By: /s/ Signature
---------------------------
GOLDMAN, SACHS & CO.
By: /s/ Signature
---------------------------
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Signature
---------------------------
-25-
<PAGE>
Exhibit A
ALCO CAPITAL RESOURCE, INC.
Medium-Term Notes, Series B
SCHEDULE OF PAYMENTS
The Company agrees to pay each Agent a commission equal to the following
percentage of the aggregate U.S. dollar equivalent of the principal amount of
Notes sold by it:
<TABLE>
<CAPTION>
========================================================================
TERM COMMISSION RATE
------------------------------------------------------------------------
<S> <C>
9 months to less than 12 months .125%
------------------------------------------------------------------------
12 months to less than 18 months .150%
------------------------------------------------------------------------
18 months to less than 2 years .200%
------------------------------------------------------------------------
2 years to less than 3 years .250%
------------------------------------------------------------------------
3 years to less than 4 years .350%
------------------------------------------------------------------------
4 years to less than 5 years .450%
------------------------------------------------------------------------
5 years to less than 6 years .500%
------------------------------------------------------------------------
6 years to less than 7 years .550%
------------------------------------------------------------------------
7 years to less than 10 years .600%
------------------------------------------------------------------------
10 years to less than 15 years .625%
------------------------------------------------------------------------
15 years to less than 20 years .650%
------------------------------------------------------------------------
20 years to 30 years .750%
------------------------------------------------------------------------
More than 30 years Determined at time of issue
========================================================================
</TABLE>
<PAGE>
Exhibit B
ALCO CAPITAL RESOURCE, INC.
Medium-Term Notes, Series B
Administrative Procedures
Medium-Term Notes, Series B, with maturities of nine months or more from
date of issue (the "Notes") are to be offered on a continuing basis by Alco
Capital Resource, Inc. (the "Company"). Lehman Brothers, Lehman Brothers Inc.,
Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Chase Securities, Inc., as agents (each an "Agent" and
collectively, the "Agents", which shall include Lehman Special Securities Inc.,
an affiliate of Lehman Brothers Inc.), have each agreed to use their reasonable
best efforts to solicit offers to purchase the Notes. The Notes are being sold
pursuant to a Distribution Agreement between the Company and the Agents dated
June 30, 1995 (as it may be supplemented or amended from time to time, the
"Distribution Agreement") to which these administrative procedures are attached
as an exhibit. The Notes will be issued under the Company's Indenture, dated as
of June 30, 1995 between the Company and Chemical Bank, as trustee (the
"Trustee"), as heretofore supplemented. The Notes will rank equally with all
other unsecured and unsubordinated indebtedness of the Company and will have
been registered with the Securities and Exchange Commission (the "Commission").
Terms defined in the Prospectus relating to the Notes (the "Prospectus," which
term shall include any Prospectus Supplement relating to the Notes and any
Pricing Supplement relating to an applicable Note) and in the Distribution
Agreement shall have the same meaning when used in this exhibit.
The Notes will be issued either (a) in certificated form (each, a
"Certificated Note") delivered to the purchaser thereof or a person designated
by such purchaser or (b) in book-entry form (each, a "Book-Entry Note")
represented by one or more fully registered global Notes (each, a "Global
Security") delivered to the Trustee, as agent for The Depository Trust Company
("DTC"), and recorded in the book-entry system maintained by DTC. Owners of
beneficial interests in Book-Entry Notes will be entitled to physical delivery
of Certificated Notes equal in principal amount to their respective beneficial
interests only in certain limited circumstances described in the Prospectus.
General procedures relating to the issuance of all Notes are set forth in
Part I hereof. Certificated Notes will be issued in accordance with the
procedures set forth in Part II, as supplemented, in the case of Certificated
Notes denominated other than in U.S. dollars ("Multi-Currency Notes"), by Part
III. Book-Entry Notes will be issued in accordance with the procedures set forth
in Part IV.
Administrative responsibilities, document control and record-keeping
functions to be performed by the Company will be performed by its Treasurer.
Administrative procedures for the offering are explained below.
PART I: Procedures of General Applicability
Price to Public
Each Note will be issued at 100% of principal amount, unless otherwise
determined by the Company.
<PAGE>
Date of Issuance
Each Note will be dated and issued as of the date of its authentication by
the Trustee.
Maturities
Each Note will mature on a day at least nine months or more from the date
of issuance selected by the purchaser and agreed upon by the Company. Each
Floating Rate Note (as defined below) will mature on an Interest Payment Date
(as defined below).
Registration
Notes will be issued only in fully registered form as either a Book-Entry
Note or a Certificated Note.
Interest Payments
Each Note bearing interest at a fixed rate (a "Fixed Rate Note") will bear
interest from its issue date at the annual rate stated on the face thereof,
payable in the case of Fixed Rate Notes other than Amortizing Notes, unless
otherwise specified in an applicable Pricing Supplement, on June 15 and December
15 of each year (each an "Interest Payment Date" with respect to such Fixed Rate
Note) and at Stated Maturity or upon redemption, if applicable.
Special provisions are set forth in the Prospectus relating to Notes
bearing interest at a rate or rates determined by reference to an interest rate
formula ("Formula Rate Notes") at a rate determined pursuant to the formula
stated on the face thereof, payable in arrears on such dates as are specified
therein (each an "Interest Payment Date" with respect to such Floating Rate
Note).
Unless otherwise specified in an applicable Pricing Supplement, interest on
Fixed Rate Notes will be calculated and paid on the basis of a 360-day year of
twelve 30-day months. Unless otherwise specified in an applicable Pricing
Supplement, interest will be payable to the person in whose name such Note is
registered at the close of business on May 31 or November 30 (whether or not a
Business Day) with respect to Fixed Rate Notes other than Amortizing Notes (as
hereinafter defined) or the fifteenth day (whether or not a Business Day) next
preceding an Interest Payment Date with respect to Floating Rate Notes (the
"Record Dates"); provided, however, that interest payable at Stated Maturity
will be payable to the person to whom principal shall be payable. Payments of
principal and interest on Notes for which payments of principal and interest are
made in equal installments over the life of the security ("Amortizing Notes")
will be made either quarterly on each March 15, June 15, September 15 and
December 15 or semiannually on each June 15 and December 15 as set forth in the
applicable Pricing Supplement, and at maturity or upon earlier redemption or
repayment. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in respect
of each Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent Holders. Any payment of principal
B-2
<PAGE>
and interest on any such Note required to be paid on an Interest Payment Date or
at Stated Maturity or upon redemption, if applicable, which is not a Business
Day shall be postponed to the next day which is a Business Day. The first
payment of interest on any Note originally issued between a Record Date and an
Interest Payment Date will be made on the Interest Payment Date following the
next succeeding Record Date. All interest payments (and, in the case of
Amortizing Notes, principal payments) excluding interest payments and, in the
case of Amortizing Notes, principal payments made at Stated Maturity or upon
redemption, if applicable, will be made by check mailed to the person entitled
thereto as provided above, or, at the option of the Company, by wire transfer to
an account maintained by such person with a bank located in the United States.
Notwithstanding the foregoing, the holder of $10 million or more in aggregate
principal amount of Notes of like tenor and terms with the same Interest Payment
Date may request payment by wire transfers.
On the fifth Business Day immediately preceding each Interest Payment Date,
the Trustee will furnish the Company with the total amount of the interest
payments and, in the case of Amortizing Notes, principal payments, to be made on
such Interest Payment Date. The Trustee (or any duly selected paying agent) will
provide monthly to the Company's Treasury Department a list of the principal and
interest to be paid on Notes maturing in the next succeeding month. The Company
will provide to the Trustee not later than the payment date sufficient moneys to
pay in full all principal and interest payments due on such payment date. The
Trustee will assume responsibility for withholding taxes on interest paid as
required by law.
Acceptance and Rejection of Offers
The Company shall have the sole right to accept offers to purchase Notes
and may reject any such offer in whole or in part. Each Agent shall promptly
communicate to the Company, orally or in writing, each reasonable offer to
purchase Notes from the Company received by it other than those rejected by such
Agent. Each Agent shall have the right, in its discretion reasonably exercised
without advising the Company, to reject any offers in whole or in part.
Settlement
The receipt of immediately available funds in U.S. dollars by the Company
in payment for a Note (less the applicable commission) and the authentication
and issuance of such Note shall, with respect to such Note, constitute
"Settlement." All offers accepted by the Company will be settled on the third
Business Day next succeeding such date of acceptance, unless the Company accepts
an offer to purchase Notes after 4:30 p.m. on such date in which case Settlement
will occur on the fourth Business Day next succeeding such date of acceptance,
pursuant to the timetable for Settlement set forth below, unless otherwise
agreed to by the Company and the purchaser; provided, however, that the Company
will so notify the Trustee of any such other date on or before the Business Day
immediately prior to the Settlement date.
B-3
<PAGE>
Procedures for Establishing the Terms of the Notes
The Company and the Agents will discuss from time to time the rates to be
borne by the Notes that may be sold as a result of the solicitation of offers by
the Agents. Once any Agent has recorded any indication of interest in Notes upon
certain terms, and communicated with the Company, if the Company accepts an
offer to purchase Notes upon such terms, it will prepare a Pricing Supplement in
the form previously approved by the Agents, reflecting the terms of such Notes
and, after approval from the Presenting Agent, will arrange to have 10 copies of
such Pricing Supplement (together with the Prospectus, if amended or
supplemented) filed with the Commission and will supply an appropriate number of
copies of the Prospectus, as then amended or supplemented, together with such
Pricing Supplement, to the Presenting Agent. See "Delivery of Prospectus." No
settlements with respect to Notes upon such terms may occur prior to such filing
and the Presenting Agent will not, prior to such filing, mail confirmations to
customers who have offered to purchase Notes upon such terms. After such filing,
sales, mailing of confirmations and settlements may occur with respect to Notes
upon such terms, subject to the provisions of "Delivery of Prospectus" below.
If the Company decides to post rates and a decision has been reached to
change interest rates, the Company will promptly notify each Agent. Each Agent
will forthwith suspend solicitation of purchases. At that time, the Agents will
recommend and the Company will establish rates to be so "posted." Following
establishment of posted rates and prior to the filing described in the following
sentence, the Agents may only record indications of interest in purchasing Notes
at the posted rates. Once any Agent has recorded any indication of interest in
Notes at the posted rates and communicated with the Company, if the Company
accepts an offer at the posted rate, it will prepare a Pricing Supplement
reflecting such posted rates and, after approval from the Presenting Agent, will
arrange to have 10 copies of such Pricing Supplement (together with the
Prospectus if amended or supplemented) filed with the Commission and will supply
an appropriate number of copies of the Prospectus, as then amended or
supplemented, to the Presenting Agent. See "Delivery of Prospectus." No
settlements at the posted rates may occur prior to such filing and the
Presenting Agent will not, prior to such filing, mail confirmations to customers
who have offered to purchase Notes at the posted rates. After such filing,
sales, mailing of confirmations and settlements may resume, subject to the
provisions of "Delivery of Prospectus" below.
Suspension of Solicitation; Amendment or Supplement
In the event that at the time the Agents, at the direction of the Company,
suspend solicitation of offers to purchase from the Company there shall be any
orders outstanding which have not been settled, the Company will promptly advise
the Agents and the Trustee whether such orders may be settled and whether copies
of the Prospectus as theretofore amended and/or supplemented as in effect at the
time of the suspension may be delivered in connection with the settlement of
such orders. The Company will have the sole responsibility for such decision and
for any arrangements which may be made in the event that the Company determines
that such orders may not be settled or that copies of such Prospectus may not be
so delivered.
B-4
<PAGE>
Delivery of Prospectus
A copy of the Prospectus as most recently amended or supplemented on the
date of delivery thereof, together with the applicable Pricing Supplement, must
be delivered to a purchaser prior to or together with the earlier of the
delivery by the Agents of (i) the written confirmation of a sale sent to a
purchaser or his agent and (ii) any Note purchased by such purchaser. The
Company shall ensure that the Presenting Agent receives copies of the Prospectus
and each amendment or supplement thereto (including the applicable Pricing
Supplement) in such quantities and within such time limits as will enable the
Presenting Agent to deliver such confirmation or Note to a purchaser as
contemplated by these procedures and in compliance with the preceding sentence.
Copies of Pricing Supplements should be delivered by 11:00 A.M. on the Business
Day following the applicable trade date by telecopy to (i) Lehman Brothers Inc.,
c/o ADP, Prospectus Services, 536 Broad Hollow Road, Melville, New York 11747,
Attention: Eric Johnson, Telephone: (516) 254-7106, Telecopy: (516) 249-7942 and
by hand to Lehman Brothers Inc., 3 World Financial Center, 9th Floor, New York,
New York 10285-0900, Attention: Brunie Vazquez, Telephone: (212) 526-8400; (ii)
Chase Securities, Inc., One Chase Manhattan Plaza, 15th Floor, New York, New
York 10081, Attention: Medium-Term Note Desk, Telephone No.: (212) 552-2969,
Telecopy No.: (212) 552-1507; (iii) Goldman, Sachs & Co., MTN Desk, 85 Broad
Street, New York, New York 10004, Attention: Karen Robertson, Telephone No.:
(212) 902-1482, Telecopy No.: (212) 902-6658; or (iv) Merrill Lynch & co. -
Tritech Services, 4 Corporate Place, Corporate Park 287, Piscataway, New Jersey
08854; Attention: Final Prospectus Unit/Nachman Kimerling, Telephone No.: (908)
878-6525/26/27, Telecopy No.: (908) 878-6530; also, for record keeping purposes,
send a copy to: Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, Merrill Lynch World Headquarters, World Financial Center, North
Tower 10th Floor, 250 Vesey Street, New York, New York 10281-1310, Attention:
MTN Product Management. If, since the date of acceptance of a purchaser's offer,
the Prospectus shall have been supplemented solely to reflect any sale of Notes
on terms different from those agreed to between the Company and such purchaser
or a change in posted rates not applicable to such purchaser, such purchaser
shall not receive the Prospectus as supplemented by such new supplement, but
shall receive the Prospectus as supplemented to reflect the terms of the Notes
being purchased by such purchaser and otherwise as most recently amended or
supplemented on the date of delivery of the Prospectus. The Company will make
all such deliveries with respect to all Notes sold directly by the Company.
B-5
<PAGE>
Redemption and Repayment
Unless one or more Redemption Dates are specified in the applicable
Pricing Supplement, the Notes will not be redeemable prior to their Stated
Maturity. If one or more Redemption Dates are so specified with respect to any
Note, the applicable Pricing Supplement will also specify one or more redemption
prices (expressed as a percentage of the principal amount of such Note)
("Redemption Prices") and the redemption period or periods ("Redemption
Periods") during which such Redemption Prices shall apply. Unless otherwise
specified in the Pricing Supplement, any such Note shall be redeemable at the
option of the Company at the specified Redemption Price applicable to the
Redemption Period during which such Note is to be redeemed, together with
interest accrued to the Redemption Date. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be subject to any sinking
fund. The Company may redeem any of the Notes that are redeemable and remain
outstanding either in whole or from time to time in part, upon not less than 30
nor more than 60 days' notice. In the event of a redemption in part of any Note,
a new Note for the amount of the unredeemed portion shall be issued in the name
of the Holder upon cancellation of the redeemed Note.
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be repaid prior to Stated Maturity or that such Note will be
repayable at the option of the holder on a date or dates specified prior to
Stated Maturity at a price or prices set forth in the applicable Pricing
Supplement, together with accrued interest to the date of repayment.
In order for a Note that is subject to repayment at the option of the
Holder to be repaid, the Paying Agent must receive at least 30 days but not more
than 45 days prior to the repayment date (a) appropriate wire instructions and
(b) either (i) the Note with the form entitled "Option to Elect Repayment"
attached to the Note duly completed or (ii) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States setting forth the name of the Holder of the Note,
the principal amount of the Note, the portion of the principal amount of the
Notes to be repaid, the certificate number or a description of the tenor and
terms of the Note, a statement that the option to elect repayment is being
exercised thereby and a guarantee that the Note to be repaid with the form
entitled "Option to Elect Repayment" attached to the Note duly completed will be
received by the Paying Agent not later than five Business Days after the date of
such telegram, telex, facsimile transmission or letter and such Note and form
duly completed must be received by the Paying Agent by such fifth Business Day.
Exercise of the repayment option by the Holder of a Note shall be irrevocable,
except as otherwise described under "Interest Rate Reset" and "Extension of
Maturity" in the Prospectus Supplement. The repayment option may be exercised by
the Holder of a Note for less than the entire principal amount of the Note
provided that the principal amount of the Note remaining outstanding after
repayment is an authorized denomination. No registration of, transfer or
exchange of any Note (or, in the event that any Note is to be repaid in part,
the portion of the Note to be repaid) will be permitted after exercise of a
repayment option. All questions as to the validity, eligibility (including time
of receipt) and acceptance of any Note for repayment will be determined by the
Company, whose determination will be final, binding and non-appealable.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which
B-6
<PAGE>
it holds an interest in such Note to notify the Depositary of its desire to
exercise a right to repayment. Different firms have different cut-off times for
accepting instructions from their customers and, accordingly, each beneficial
owner should consult the broker or other direct or indirect participant through
which it holds an interest in a Note in order to ascertain the cut-off time by
which such an instruction must be given in order for timely notice to be
delivered to the Depositary.
Unless otherwise specified in the applicable Pricing Supplement, if a Note
is an Original Issue Discount Note, the amount payable on such Note in the event
of redemption or repayment prior to its Stated Maturity shall be the Amortized
Face Amount of such Note, as specified in the applicable Pricing Supplement, as
of the Redemption Date or the date of repayment, as the case may be.
Authenticity of Signatures
The Company will cause the Trustee to furnish the Agents from time to time
with the specimen signatures of each of the Trustee's officers, employees and
agents who have been authorized by the Trustee to authenticate Notes, but the
Agents will have no obligation or liability to the Company or the Trustee in
respect of the authenticity of the signature of any officer, employee or agent
of the Company or the Trustee on any Note.
Advertising Costs
The Company will determine with the Agents the amount and nature of
advertising that may be appropriate in offering the Notes. Advertising expenses
incurred with the consent of the Company will be paid by the Company.
Business Day
"Business Day" shall mean, with respect to any particular location, each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions and trust companies in such location are authorized or
required by law, regulation or executive order to close and, with respect to
Notes as to which LIBOR is an applicable Base Rate, is also a London Banking Day
(as defined in the Prospectus).
PART II: Procedures For Certificated Notes
Prior to any issuance of Certificated Notes, the Company will deliver to
the Trustee an adequate supply of 4-ply notes meeting the specifications set
forth herein.
Currency
B-7
<PAGE>
Certificated Notes will be denominated in U.S. dollars or in one or more
foreign currencies or foreign currency units, as specified in the applicable
Pricing Supplement. For special procedures relating to Multi-Currency Notes, see
Part III hereof.
Registration
Certificated Notes may be presented for registration of transfer or
exchange at the Trustee's drop facility in The City of New York.
Denominations
Except as provided in the applicable Pricing Supplement, Certificated Notes
will be issued and payable in U.S. dollars in the denomination of $1,000 and any
larger denomination which is an integral multiple of $1,000.
Maturity
Upon presentation of each Certificated Note at Maturity the Trustee (or any
duly appointed Paying Agent) will pay the principal amount thereof, together
with accrued interest due at maturity. Such payment shall be made in immediately
available funds in U.S. dollars, provided that the Certificated Note is
presented to the Trustee (or any such Paying Agent) in time for the Trustee (or
such Paying Agent) to make payments in such funds in accordance with its normal
procedures. The Company will provide the Trustee (and any such Paying Agent)
with funds available for immediate use for such purpose. Certificated Notes
presented at Maturity will be cancelled by the Trustee as provided in the
Indenture.
Settlement Procedures
In the event of a purchase of Certificated Notes by an Agent, as principal,
appropriate Settlement details will be as set forth below unless such details
are set forth in the applicable Purchase Agreement to be entered into between
such Agent and the Company pursuant to the Distribution Agreement.
In the event of the sale of a Certified Note that is a Multi-Currency Note
or an Indexed Note, whether the sale is through an Agent or to an Agent, as
principal, additional or different Settlement details may be set forth in an
amendment to these administrative procedures to be entered into between such
Agent and the Company.
Other than as contemplated above, settlement procedures with regard to each
Certificated Note sold through each Agent shall be as follows:
B-8
<PAGE>
A. Such Agent (the "Presenting Agent") will advise the Company by
telephone, telex or facsimile, of the following Settlement information:
1. Exact name in which the Note is to be registered ("Registered
Owner").
2. Exact address of the Registered Owner and address for payment
of principal and interest, if any.
3. Taxpayer identification number of the Registered Owner.
4. Principal amount of the Note (and, if multiple Notes are to be
issued, denominations thereof).
5. Settlement date.
6. Stated Maturity and, if the Company has the option to extend
the Stated Maturity, the Extension Periods and the Final
Maturity Date.
7. Issue Price and any OID information.
8. Trade Date/Original Issue Date.
9. If such Note is a Fixed Rate Note, whether such Note is an
Amortizing Note.
10. Interest rate (including, if appropriate, such interest rate
information applicable to any Extension Period):
(a) Fixed Rate Certificated Notes:
(i) interest rate
(ii) interest payment dates, if other than as specified above
(iii) date or dates, if any, on which the interest rate may be
reset and the basis or formula, if any, for such resetting
(iv) overdue rate, if any
(b) Floating Rate Certificated Notes:
(i) interest rate basis
(ii) initial interest rate
(iii) spread or spread multiplier, if any
(iv) date or dates, if any, on which the spread or spread
multiplier may be reset and the basis or formula, if any,
for such resetting
(v) interest rate reset periods
(vi) interest payment dates
(vii) index maturity
(viii) maximum and minimum interest rates, if any
B-9
<PAGE>
(ix) record dates
(x) interest determination dates
(xi) overdue rate, if any
11. The date on or after which the Certificated Notes are redeemable
at the option of the Company or are to be repaid at the option of
the Holder, and additional redemption or repurchase provisions, if
any.
12. Wire transfer information.
13. Presenting Agent's commission (to be paid in the form of a
discount from the proceeds remitted to the Company upon
Settlement).
14. That the Note will be a Certificated Note.
B. The Company will confirm the above Settlement information to the
Trustee by telephone, telex or facsimile, and the Trustee will assign a Note
number to the transaction. If the Company rejects an offer, the Company will
promptly notify the Presenting Agent and the Trustee by telephone.
C. The Trustee will complete the first page of the preprinted 4-ply
Certificated Note packet, the form of which was previously approved by the
Company, the Agents and the Trustee.
D. The Trustee will deliver the Certificated Note (with the attached
white confirmation) and the yellow and blue stubs to the Presenting Agent at one
of the following addresses: (i) Chemical Bank, Four New York Plaza, Ground
Floor, Physical Delivery Window, SAO Lehman Brothers; (ii) Chase Securities,
Inc., One Chase Manhattan Plaza, Level 4B, Window 11, New York, New York 10081,
Attention: Receive and Deliver; (iii) Goldman, Sachs & Co., 85 Broad Street, 6th
Floor, New York, New York 10004, Attention: Edward Bissoth; or Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Money Market Clearance - MTNs, 75 Barclay
Street, Window C, New York, New York 10080, Attention: Kevin Brennan. The
Presenting Agent will acknowledge receipt of the Certificated Note by completing
the yellow stub and returning it to the Trustee.
E. The Presenting Agent will cause to be wire transferred to a bank
account designated by the Company immediately available funds in U.S. dollars in
the amount of the principal amount of the Certificated Note, less the applicable
commission or discount, if any.
F. The Presenting Agent will deliver the Certificated Note (with the
white confirmation) to the purchaser against payment in immediately available
funds in the amount of the principal amount of the Certificated Note. The
Presenting Agent will deliver to the purchaser a copy of the most recent
Prospectus applicable to the Certificated Note with or prior to any written
offer of Certificated Notes, delivery of the Certificated Note and the
confirmation and payment by the purchaser for the Certificated Note.
G. The Presenting Agent will obtain the acknowledgment of receipt for the
Certificated Note and Prospectus by the purchaser through the purchaser's
completion of the blue stub.
H. The Trustee will mail the pink stub to the Company's Treasurer.
B-10
<PAGE>
Settlement Procedures Table
For offers to purchase Certificated Notes accepted by the Company,
Settlement procedures "A" through "H" set forth above shall be completed on or
before the respective times set forth below:
<TABLE>
<CAPTION>
===========================================================================
Settlement Procedure Time (New York)
===========================================================================
<S> <C>
A 5 PM on the Trade Date
---------------------------------------------------------------------------
B 3 PM on the Business Day prior to Settlement Date
---------------------------------------------------------------------------
C-D 12 Noon on the Settlement Date
---------------------------------------------------------------------------
E 2:15 PM on the Settlement Date
---------------------------------------------------------------------------
F-G 3 PM on the Settlement Date
---------------------------------------------------------------------------
H 5 PM on the Business Day after the Settlement Date
===========================================================================
</TABLE>
Fails
In the event that a purchaser of a Certificated Note shall either fail to
accept delivery of or make payment for such Certificated Note on the date fixed
by the Company for Settlement, the Presenting Agent will immediately notify the
Trustee and the Company's Treasurer by telephone, confirmed in writing, of such
failure and return the Certificated Note to the Trustee. Upon the Trustee's
receipt of the Certificated Note from the Presenting Agent, the Company will
promptly return to the Presenting Agent an amount of immediately available funds
in U.S. dollars equal to any amount previously transferred to the Company in
respect of the Certificated Note pursuant to advances made by the Agent. Such
returns will be made on the Settlement Date, if possible, and in any event not
later than 12 noon (New York City time) on the Business Day following the
Settlement Date. The Company will reimburse the Presenting Agent on an equitable
basis for its loss of the use of the funds during the period when the funds were
credited to the account of the Company. Upon receipt of the Certificated Note in
respect of which the default occurred, the Trustee will mark the Certificated
Note "cancelled," make appropriate entries in its records and deliver the
Certificated Note to the Company with an appropriate debit advice. The
Presenting Agent will not be entitled to any commission with respect to any
Certificated Note which the purchaser does not accept or make payment for.
PART III: Special Administrative Procedures For
Multi-Currency Notes
Unless otherwise set forth in an applicable Foreign Currency Amendment, the
following procedures and terms shall apply to Multi-Currency Notes in addition
to, and to the extent inconsistent therewith in replacement of, the procedures
and terms set forth above.
B-11
<PAGE>
Denominations
The authorized denominations of any Multi-Currency Note will be the amount
of the Specified Currency for such Multi-Currency Note equivalent, at the noon
buying rate in the City of New York for cable transfers for such Specified
Currency (the "Market Exchange Rate") on the first Business Day in the City of
New York and the country issuing such currency (or, in the case of ECUs,
Brussels) next preceding the date on which the Company accepts the offer to
purchase such Multi-Currency Note, to U.S. $1,000 (rounded down to an integral
multiple of 10,000 units of such Specified Currency) and any greater amount that
is an integral multiple of 10,000 units of such Specified Currency.
Currencies
Unless otherwise specified in the applicable Pricing Supplement, payments
of principal of (and premium, if any) and interest on all Multi-Currency Notes
will be made in the applicable Specified Currency, provided, however, that
payments of principal of (and premium, if any) and interest on Multi-Currency
Notes denominated in other than U.S. dollars will nevertheless be made in U.S.
dollars (i) at the option of the Holders thereof under the procedures described
below and (ii) at the option of the Company in the case of imposition of
exchange controls or other circumstances beyond the control of the Company as
described below.
Payment of Principal and Interest
If so specified in the applicable Pricing Supplement, except as provided in
the next paragraph, payments of interest and principal (and premium, if any)
with respect to any Multi-Currency Note will be made in U.S. dollars if the
Holder of such Note on the relevant Regular Record Date or at Maturity, as the
case may be, has transmitted a written request for such payment in U.S. dollars
to the Trustee at its Corporate Trust Office on or prior to such Regular Record
Date or the date 15 days prior to Maturity, as the case may be. Such request may
be in writing (mailed or hand delivered) or by cable, telex or other form of
facsimile transmission. Any such request made with respect to any Multi-Currency
Note by a Holder will remain in effect with respect to any further payments of
interest and principal (and premium, if any) with respect to such Multi-Currency
Note payable to such Holder, unless such request is revoked on or prior to the
relevant Regular Record Date or the date 15 days prior to Maturity, as the case
may be. Holders of Multi-Currency Notes denominated in other than U.S. dollars
whose Notes are registered in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in U.S. dollars may be made.
The U.S. dollar amount to be received by a Holder of a Multi-Currency Note
who elects to receive payments in U.S. dollars will be based on the highest bid
quotation in The City of New York received by the Currency Determination Agent
(as defined below) as of noon New York City time on the third Business Day next
preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Currency Determination Agent) for the purchase
by the quoting dealer of the Specified Currency for U.S. dollars for settlement
on such payment date in the aggregate amount of the Specified Currency payable
to all Holders of Multi-Currency Notes electing to receive U.S. dollar payments
and at which the applicable dealer commits to execute a contract. If three such
bid quotations are not available on
B-12
<PAGE>
the third Business Day preceding the date of payment of principal (and premium,
if any) or interest with respect to any such Multi-Currency Note, such payment
will be made in the Specified Currency. All currency exchange costs associated
with any payment in U.S. dollars on any such Multi-Currency Note will be borne
by the Holder thereof by deductions from such payment. Unless otherwise provided
in the applicable Pricing Supplement, Lehman Brothers Inc. will be the Currency
Determination Agent (the "Currency Determination Agent") with respect to the
Multi-Currency Notes.
Payment Currency
If the principal of (and premium, if any) or interest on any Multi-Currency
Note is payable in any currency other than U.S. dollars and such Specified
Currency is not available due to the imposition of exchange controls or other
circumstances beyond the control of the Company, the Company will be entitled to
satisfy its obligations to Holders of the Multi-Currency Notes by making such
payment in U.S. dollars on the basis of the Market Exchange Rate on the last
date such Specified Currency was available (the "Conversion Date"). Any payment
made under such circumstances in U.S. dollars where the required payment is in
other than U.S.dollars will not constitute an Event of Default under the
Indenture.
If payment in respect of a Note is required to be made in any currency unit
(e.g., ECU) and such currency unit is unavailable due to the imposition of
exchange controls or other circumstances beyond the Company's control, then all
payments in respect of such Multi-Currency Note shall be made in U.S. dollars
until such currency unit is again available. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the currency unit in
U.S. dollars, which shall be determined by the Company or its agent on the
following basis. The component currencies of the currency unit for this purpose
(the "Component Currencies") shall be the currency amounts that were components
of the currency unit as of the Conversion Date for such currency unit. The
equivalent of the currency unit in U.S. dollars shall be calculated by
aggregating the U.S. dollar equivalents of the Component Currencies. The U.S.
dollar equivalent of each of the Component Currencies shall be determined by the
Company or such agent on the basis of the Market Exchange Rate for each such
Component Currency that is available as of the third Business Day prior to the
date on which the relevant payment is due and for each such Component Currency
that is unavailable, if any, as of the Conversion Date for such Component
Currency.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
Currency shall be divided or multiplied in the same proportion, if two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
B-13
<PAGE>
Outstanding Multi-Currency Notes
For purposes of calculating the principal amount of any Multi-Currency Note
for any purpose under the Indenture, the principal amount of such Multi-Currency
Note at any time Outstanding shall be deemed to be the U.S. dollar equivalent at
the Market Exchange Rate, determined as of the date of the original issuance of
such Multi-Currency Note, of the principal amount of such Multi-Currency Note.
Details for Settlement of Multi-Currency Notes
In addition to the Settlement information specified in "Settlement
Procedures" above, the Presenting Agent shall communicate to the Company in the
manner set forth in "Settlement Procedures" the following information:
1. Specified Currency
2. Denominations
3. Wire transfer and overseas bank account information (if holder has
elected payment in a Specified Currency).
Whether the sale is through an Agent or to the Agent, as principal,
additional or different Settlement details may be set forth in an amendment to
these administrative procedures to be agreed to by the Agent and the Company.
PART IV: Special Administrative Procedures for Book-Entry Notes
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
or cause to be performed the custodial, document control and administrative
functions described below, in accordance with its respective obligations under a
Letter of Representations from the Company and the Trustee to DTC and a Medium-
Term Note Certificate Agreement previously entered into between the Trustee and
DTC, and its obligations as a participant in DTC, including DTC's Same-Day Funds
Settlement System ("SDFS"). Except as otherwise set forth in this Exhibit B,
Book-Entry Notes will be issued in accordance with the administrative procedures
set forth below.
B-14
<PAGE>
Issuance
On any date of settlement (as defined under "Settlement" below) for one or
more Fixed Rate Book-Entry Notes, the Company will issue a single Global
Security in fully registered form without coupons representing up to
$200,000,000 principal amount, or the equivalent thereof in any Specified
Currency, other than U.S. dollars, at the Market Exchange Rate used to determine
the denomination of such Book-Entry Note as described below (rounded down to an
integral multiple of 10,000 units of such Specified Currency), of all of such
Notes that have the same original issuance date, interest rate, redemption or
repayment provisions and Stated Maturity. Similarly, on any settlement date for
one or more Floating Rate Book-Entry Notes, the Company will issue a single
Global Security representing up to $200,000,000 principal amount, or the
equivalent thereof in any Specified Currency, other than U.S. dollars, at the
Market Exchange Rate used to determine the denomination of such Book-Entry Note
as described below (rounded down to an integral multiple of 10,000 units of such
Specified Currency), of all of such Notes that have the same interest rate
formula, original issuance date, Initial Interest Rate, Interest Payment Dates,
Index Maturity, Spread, Spread Multiplier, minimum interest rate (if any),
maximum interest rate (if any), redemption or repayment provisions and Stated
Maturity. Each Global Security will be dated and issued as of the date of its
authentication by the Trustee. Each Global Security will have an interest
accrual date (the "Interest Accrual Date"), which will be (i) with respect to an
original Global Security (or any portion thereof), its original issuance date
and (ii) with respect to any Global Security (or portion thereof) issued
subsequently upon exchange of a Global Security or in lieu of a destroyed, lost
or stolen Global Security, the most recent Interest Payment Date to which
interest has been paid or duly provided for on the predecessor Global Security
or Securities (or if no such payment or provision has been made, the original
issuance date of the predecessor Global Security), regardless of the date of
authentication of such subsequently issued Global Security. No Global Security
will represent (i) both Fixed Rate and Floating Rate Book-Entry Notes or (ii)
any Certificated Note.
Identification Numbers
The Company will arrange, on or prior to commencement of a program for the
offering of Book-Entry Notes,with the CUSIP Service Bureau of Standard & Poor's
Ratings Group (the "CUSIP Service Bureau") for the reservation of a series of
CUSIP numbers (including tranche numbers), consisting of approximately 900 CUSIP
numbers and relating to Global Securities representing the Book-Entry Notes. The
Company will obtain a written list of such series of reserved CUSIP numbers and
will deliver to the Trustee and DTC such written list of 900 CUSIP numbers of
such series. The Company will assign CUSIP numbers to Global Securities as
described below under Settlement Procedure "B." DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers that the Company has assigned
to Global Securities. When fewer than 100 of the reserved CUSIP numbers remain
unassigned to Global Securities, and if it deems necessary, the Company will
reserve additional CUSIP numbers for assignment to Global Securities
representing Book-Entry Notes. Upon obtaining such additional CUSIP numbers the
Company shall deliver such additional CUSIP numbers to the Trustee and DTC.
B-15
<PAGE>
Registration
Each Global Security will be registered in the name of Cede & Co., as
nominee for DTC, on the Securities Register maintained under the Indenture
governing such Global Security. The beneficial owner of a Book-Entry Note (or
one or more indirect participants in DTC designated by such owner) will
designate one or more participants in DTC with respect to such Book-Entry Note
(the "Participants") to act as agent or agents for such owner in connection with
the book-entry system maintained by DTC, and DTC will record in book-entry form,
in accordance with instructions provided by such Participants, a credit balance
with respect to such Book-Entry Note in the account of such Participants. The
ownership interest of such beneficial owner in such Book-Entry Note will be
recorded through the records of such Participants or through the separate
records of such Participants and one or more indirect participants in DTC.
Voting
In the event of any solicitation of consents from or voting by holders of
the Book-Entry Notes, the Company or the Trustee shall establish a record date
for such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date.
Transfers
Transfers of a Book-Entry Note will be accomplished by book entries made by
DTC and, in turn, by Participants (and in certain cases, one or more indirect
participants in DTC ) acting on behalf of beneficial transferors and transferees
of such Book-Entry Note.
B-16
<PAGE>
Consolidation and Exchange
The Trustee may deliver to DTC and the CUSIP Service Bureau at any time a
written notice of consolidation specifying (i) the CUSIP numbers of two or more
Outstanding Global Securities that represent (A) Fixed Rate Book-Entry Notes
having the same original issuance date, interest rate, redemption and repayment
provisions and Stated Maturity and with respect to which interest has been paid
to the same date or (B) Floating Rate Book-Entry Notes having the same interest
rate formula, original issuance date, Initial Interest Rate, Interest Payment
Dates, Index Maturity, Spread or Spread Multiplier, minimum interest rate (if
any), maximum interest rate (if any), redemption and repayment provisions and
with respect to which interest has been paid to the same date, (ii) a date,
occurring at least thirty days after such written notice is delivered and at
least thirty days before the next Interest Payment Date for such Book-Entry
Notes, on which such Global Securities shall be exchanged for a single
replacement Global Security and (iii) a new CUSIP number, obtained from the
Company, to be assigned to such replacement Global Security. Upon receipt of
such a notice, DTC will send to its Participants (including the Trustee) a
written reorganization notice to the effect that such exchange will occur on
such date. Prior to the specified exchange date, the Trustee will deliver to the
CUSIP Service Bureau a written notice setting forth such exchange date and the
new CUSIP number and stating that, as of such exchange date, the CUSIP numbers
of the Global Securities to be exchanged will no longer be valid. On the
specified exchange date, the Trustee will exchange such Global Securities for a
single Global Security bearing the new CUSIP number and a new Interest Accrual
Date, and the CUSIP numbers of the exchanged Global Securities will, in
accordance with CUSIP Service Bureau procedures, be cancelled and not
immediately reassigned. Notwithstanding the foregoing, if the Global Securities
to be exchanged exceed $200,000,000 (or the equivalent thereof in any Specified
Currency other than U.S. dollars at the Market Exchange Rate used to determine
the denomination of such Book-Entry Note as described below (rounded down to an
integral multiple of 10,000 units of such Specified Currency)) in aggregate
principal amount, one Global Security will be authenticated and issued to
represent each $200,000,000 (or the equivalent thereof in any Specified Currency
other than U.S. dollars at the Market Exchange Rate used to determine the
denomination of such Book-Entry Note as described below (rounded down to an
integral multiple of 10,000 units of such Specified Currency)) of principal
amount of the exchanged Global Securities and an additional Global Security will
be authenticated and issued to represent any remaining principal amount of such
global Securities (see "Denominations" below).
Notice of Redemption and Repayment Dates
The Trustee will give notice to DTC prior to each redemption date or
repayment date (as specified in the Book-Entry Note), if any, at the time and in
the manner set forth in the letter of representation.
B-17
<PAGE>
Denominations
Book-Entry Notes denominated in U.S. dollars will be issued in principal
amounts of $1,000 or any amount in excess thereof that is an integral multiple
of $1,000. The authorized denomination of any Book-Entry Notes denominated in
other than U.S. dollars will be the amount of the Specified Currency for such
Book-Entry Note equivalent, at the Market Exchange Rate on the first Business
Day in the City of New York and the country issuing such currency (or, in the
case of ECUs, Brussels) next preceding the date on which the Company accepts the
offer to purchase such Book-Entry Note, to U.S. $1,000 (rounded down to an
integral multiple of 10,000 units of such Specified Currency) and any greater
amount that is an integral multiple of 10,000 units of such Specified Currency.
Global Securities representing one or more Book-Entry Notes will be denominated
in principal amounts not in excess of $200,000,000, or the equivalent thereof in
any Specified Currency other than U.S. dollars at the Market Exchange Rate used
to determine the denomination of such Book-Entry Note (rounded down to an
integral multiple of 10,000 units of such Specified Currency). If one or more
Book-Entry Notes having an aggregate principal amount in excess of $200,000,000
(or the equivalent thereof in any Specified Currency other than U.S. dollars at
the Market Exchange Rate used to determine the denomination of such Book-Entry
Note down to an integral multiple of 10,000 units of such Specified Currency))
would, but for the preceding sentence, be represented by a single Global
Security, then one Global Security will be issued to represent each $200,000,000
principal amount, or the equivalent thereof in any Specified Currency other than
U.S. dollars at the Market Exchange Rate used to determine the denomination of
such Book-Entry Note (rounded down to an integral multiple of 10,000 units of
such Specified Currency), of such Book-Entry Note or Notes and an additional
Global Security will be issued to represent any remaining principal amount of
such Book-Entry Note or Notes. In such a case, each of the Global Securities
representing such Book-Entry Note or Notes shall be assigned the same CUSIP
number.
Interest
General. Interest on each Book-Entry Note will accrue from the date of
issue of the Global Security representing such Note or from and including the
last date in respect of which interest has been paid or duly provided for. Each
payment of interest on a Book-Entry Note will include interest accrued through
the day preceding, as the case may be, the Interest Payment Date or the date of
Maturity, redemption or repayment; provided, however, that if the Interest Reset
Dates with respect to any such Note are daily or weekly, interest payable on any
Interest Payment Date, other than interest payable on any date on which
principal for such Note is payable, will include interest accrued from the date
of issue of the Global Security, or from and including the last Interest Payment
Date as the case may be, to and including the regular record date immediately
preceding the applicable Interest Payment Date except that at the Stated
Maturity the interest payments will include accrued interest from and including
the date of issue, or from and including the last day in respect of which
interest has been paid or duly provided for, as the case may be, to, but
excluding, the Stated Maturity. Interest payable at the Maturity or upon earlier
redemption or repayment of a Book-Entry Note will be payable to the Person to
whom the principal of such Note is payable. Standard & Poor's Ratings Group will
use the information received in the pending deposit message described under
Settlement Procedure "C" below in order to include the amount of any interest
payable and certain other information regarding the related Global Security in
the appropriate weekly bond report published by Standard & Poor's Ratings Group.
B-18
<PAGE>
Floating Rate Note Notices. On the first Business Day of January, April,
July and October of each year, the Trustee will deliver to the Company and DTC a
written list of Regular Record Dates and Interest Payment Dates that will occur
with respect to Floating Rate Book-Entry Notes during the six-month period
beginning on such first Business Day. Promptly after each Interest Determination
Date (as defined in Appendix A hereto) for Floating Rate Notes, the Company will
notify the Trustee, and the Trustee in turn will notify Standard & Poor's
Ratings Group, of the interest rates determined on such Interest Determination
Date.
Payments of Principal and Interest
Payments of Interest Only. Promptly after each Regular Record Date, the
Trustee will deliver to the Company and DTC a written notice specifying by CUSIP
number the amount of interest to be paid on each Global Security on the
following Interest Payment Date (other than an Interest Payment Date coinciding
with Maturity or an earlier redemption or repayment date) and the total of such
amounts. DTC will confirm the amount payable on each Global Security on such
Interest Payment Date by reference to the daily bond reports published by
Standard & Poor's Ratings Group. The Company will pay to the Trustee, as paying
agent, the total amount of interest due on such Interest Payment Date (other
than at Maturity), and the Trustee will pay such amount to DTC at the times and
in the manner set forth below under "Manner of Payment." Promptly after each
Interest Determination Date for Floating Rate Book-Entry Notes, the Calculation
Agent will notify the Trustee and Standard & Poor's Ratings Group of the
interest rates determined on such Interest Determination Date.
Payments at Maturity or Upon Redemption or Repayment. On or about the first
Business Day of each month, the Trustee will deliver to the Company and DTC a
written list of principal and interest to be paid on each Global Security
maturing either at maturity or any redemption or repayment date in the following
month. The Company, the Trustee and DTC will confirm the amounts of such
principal and interest payments with respect to each such Global Security on or
about the fifth Business Day preceding the Maturity or redemption or repayment
date of such Global Security. The Company will pay to the Trustee, as the paying
agent, the principal amount of such Global Security, together with interest due
at such Maturity or redemption or repayment date, as the case may be. The
Trustee will pay such amount to DTC at the times and in the manner set forth
below under "Manner of Payment."
Promptly after payment to DTC of the principal and interest due at the
Maturity of such Global Security, the Trustee will cancel such Global Security
in accordance with the Indenture and deliver to the Company an appropriate debit
advice. On the first Business Day of each month, the Trustee will prepare a
written statement indicating the total principal amount of Outstanding Global
Securities for which it serves as paying agent as of the immediately preceding
Business Day.
Manner of Payment. The total amount of any principal and interest due on
global Securities on any Interest Payment Date or at Maturity or upon redemption
or repayment shall be paid by the Company to the Trustee in funds available for
use by the Trustee as of 9:30 A.M. (New York City time) on such date. The
Company will make such payment on such Global Securities by instructing the
Trustee to withdraw funds from an account maintained by the Company at the
Trustee. For maturity, redemption or any other principal payments: prior to 10
A.M. (New York City time) on such date or as soon as possible thereafter, the
Trustee will make such payments to DTC in same day funds in accordance with
DTC's Same Day Funds Settlement Paying Agent Operating Procedures. For interest
payments: the Trustee will make such
B-19
<PAGE>
payments to DTC in accordance with existing arrangements between DTC and the
Trustee. DTC will allocate such payments to its Participants in accordance with
its existing operating procedures. Neither the Company, the Trustee (as Trustee
or as Paying Agent nor any other Paying Agent) shall have any direct
responsibility or liability for the payment by DTC to such Participants of the
principal of and interest on the Book-Entry Notes.
Withholding Taxes. The amount of any taxes required under applicable law to
be withheld from any interest payment on a Book-Entry Note will be determined
and withheld by the Participant, indirect participant in DTC or other Person
responsible for forwarding payments and materials directly to the beneficial
owner of such Note.
Settlement Procedures
In the event of a purchase of Book-Entry Notes by an Agent, as principal,
Settlement details will be as set forth below unless such details are set forth
in the applicable Purchase Agreement to be entered into between such Agent and
the Company pursuant to the Distribution Agreement.
In the event of a sale of a Book-Entry Note that is a Multi-Currency Note
or an Indexed Note, whether the sale is through an Agent or to an Agent, as
principal, additional or different Settlement details may be set forth in an
amendment to the administrative procedures to be entered into between the such
Agent and the Company.
Other than as contemplated above, settlement procedures with regard to each
Book-Entry Note sold by the Company through an Agent, as agent, shall be as
follows:
A. The Presenting Agent will advise the Company by telephone, telex or
facsimile, of the following settlement information:
1. Principal amount of the Book-Entry Note (and, if multiple Notes
are to be issued, denominations thereof).
2. Settlement date.
3. Stated Maturity and, if the Company has the option to extend the
Stated Maturity, the Extension Periods and the Final Maturity
Date.
4. Issue Price and any OID information.
5. Trade date.
6. If such Book-Entry Note is a Fixed Rate Note, whether such Note
is an Amortizing Note.
7. The DTC Participant account number of such Agent.
B-20
<PAGE>
8. Interest rate (including, if appropriate, such interest rate
information applicable to any Extension Period):
(a) Fixed Rate Notes:
(i) interest rate
(ii) interest payment dates, if other than as specified
above
(iii) date or dates, if any, on which the interest rate may
be reset and the basis or formula, if any, for such
resetting
(iv) overdue rate, if any
(b) Floating Rate Notes:
(i) interest rate basis
(ii) initial interest rate
(iii) spread or spread multiplier, if any
(iv) date or dates, if any, on which the spread or spread
multiplier may be reset and the basis or formula, if
any, for such resetting
(v) interest rate reset periods
(vi) interest payment dates
(vii) index maturity
(viii) maximum and minimum interest rates, if any
(ix) record dates
(x) interest determination dates
(xi) overdue rate, if any
9. The date on or after which the Book-Entry Notes are redeemable at
the option of the Company or are to be repaid at the option of
the Holder, and additional redemption or repurchase provisions,
if any.
10. Wire transfer information.
11. Presenting Agent's commission (to be paid in the form of a
discount from the proceeds remitted to the Company upon
settlement).
12. That the Note will be a Book-Entry Note.
B. The Company will assign a CUSIP number to the Global Security
representing such Note and then advise the Trustee by telephone (confirmed in
writing at any time on the same date) or electronic transmission of the
information set forth in Settlement Procedure "A" above, such CUSIP number and
the name of such Agent.
C. The Trustee will enter a pending deposit message through DTC's
Participant Terminal System, providing the following settlement information to
DTC, the Presenting Agent, Standard & Poor's Ratings Group and, upon request,
the Trustee under the Indenture pursuant to which such Note is to be issued:
1. The information set forth in Settlement Procedure "A."
B-21
<PAGE>
2. Identification as a Fixed Rate Book-Entry Note or a Floating Rate
Book-Entry Note.
3. Initial Interest Payment Date for such Note, number of days by
which such date succeeds the related "DTC Record Date" (which
term means the Regular Record Date except in the case of floating
rate notes which reset daily or weekly in which case it means the
date five (5) calendar days immediately preceding the Interest
Payment Date) and amount of interest payable on such Interest
Payment Date.
4. Frequency of interest payments (monthly, semiannually, quarterly,
etc.).
5. CUSIP number of the Global Security representing such Book-Entry
Note.
6. Whether such Global Security will represent any other Book-Entry
Note (to the extent known at such time).
7. The number of Participant accounts to be maintained by DTC on
behalf of the Agents or the Trustee.
D. The Trustee, as Trustee will complete and authenticate the note
certificate evidencing the Global Security representing such Book-Entry Note.
E. DTC will credit such Book-Entry Note to the Trustee's participant
account at DTC.
F. The Trustee will enter an SDFS deliver order through DTC's Participant
Terminal System instructing DTC to (i) debit such Book-Entry Note to the
Trustee's participant account and credit such Note to the Presenting Agent's
participant account and (ii) debit the Presenting Agent's settlement account and
credit the Trustee's settlement account for an amount equal to the price of such
Book-Entry Note less the Presenting Agent's commission.
G. The Presenting Agent will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC (i) to debit such Book-Entry Note to
the Presenting Agent's participant account and credit such Note to the
participant accounts of the Participants with respect to such Book-Entry Note
and (ii) to debit the settlement accounts of such Participants and credit the
settlement account of the Presenting Agent for an amount equal to the price of
such Note.
H. Transfers of funds in accordance with SDFS deliver orders described in
Settlement Procedures "F" and "G" will be settled in accordance with SDFS
operating procedures in effect on the settlement date.
I. The Trustee will credit to an account of the Company maintained at the
Trustee funds available for immediate use in the amount transferred to the
Trustee in accordance with Settlement Procedure "F."
J. The Presenting Agent will deliver to the purchaser a copy of the most
recent Prospectus applicable to the Book-Entry Note with or prior to any written
offer of Book-Entry Notes and the confirmation and payment by the purchaser of
the Book-Entry Note.
B-22
<PAGE>
The Presenting Agent will confirm the purchase of such Book-Entry Note to
the purchaser either by transmitting to the Participants with respect to such
Book-Entry Note a confirmation order or orders through DTC's institutional
delivery system or by mailing a written confirmation to such purchaser.
Settlement Procedures Timetable
For offers to purchase Book-Entry Notes solicited by an Agent, as agent,
and accepted by the Company for settlement, Settlement Procedures "A" through
"J" set forth above shall be completed as soon as possible but not later than
the respective times (New York City time) set forth below:
<TABLE>
<CAPTION>
============================================================================
Settlement Time
Procedures
- - ----------------------------------------------------------------------------
<S> <C>
A-B 11:00 A.M. on the Sale date
- - ----------------------------------------------------------------------------
C 2:00 P.M. on the Sale date
- - ----------------------------------------------------------------------------
D 3:00 P.M. on date before Settlement date
- - ----------------------------------------------------------------------------
E 10:00 A.M. on Settlement date
- - ----------------------------------------------------------------------------
F-G 2:00 P.M. on Settlement date
- - ----------------------------------------------------------------------------
H 4:45 P.M. on Settlement date
- - ----------------------------------------------------------------------------
I-J 5:00 P.M. on Settlement date
============================================================================
</TABLE>
If a sale is to be settled more than one (1) Business Day after the sale
date, Settlement Procedures "A," "B" and "C" shall be completed as soon as
practicable but no later than 11:00 A.M., 11:00 A.M. and 2:00 P.M., as the case
may be, on the first Business Day after the sale date. If the initial interest
rate for a Floating Rate Book-Entry Note has not been determined at the time
that Settlement Procedure "A" is completed, Settlement Procedures "B" and "C"
shall be completed as soon as such rate has been determined but not later than
11:00 A.M. and 12:00 Noon, respectively, on the second Business Day before the
settlement date. Settlement Procedure "I" is subject to extension in accordance
with any extension of Fedwire closing deadlines and in the other events
specified in the SDFS operating procedures in effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or canceled, the Trustee
will deliver to DTC, through DTC's Participant Terminal System, a cancellation
message to such effect by no later than 2:00 P.M. on the Business Day
immediately preceding the scheduled settlement date.
B-23
<PAGE>
Failure To Settle
If the Trustee fails to enter an SDFS deliver order with respect to a Book-
Entry Note pursuant to Settlement Procedure "F," the Trustee may deliver to DTC,
through DTC's Participant Terminal System, as soon as practicable a withdrawal
message instructing DTC to debit such Book-Entry Note to the Trustee's
participant account. DTC will process the withdrawal message, provided that the
Trustee's participant account contains a principal amount to be debited. If a
withdrawal message is processed with respect to all the Book-Entry Notes
represented by a Global Security, the Trustee will mark such Global Security
"canceled," make appropriate entries in the Trustee's records and send such
canceled Global Security to the Company. The CUSIP number assigned to such
Global Security shall, in accordance with CUSIP Service Bureau procedures, be
canceled and not immediately reassigned. If a withdrawal message is processed
with respect to one or more, but not all, of the Book-Entry Notes represented by
a Global Security, the Trustee will exchange such Global Security for two Global
Securities, one of which shall represent such Book-Entry Note or Notes and shall
be canceled immediately after issuance and the other of which shall represent
the other Book-Entry Notes previously represented by the surrendered Global
Security and shall bear the CUSIP number of the surrendered Global Security.
If the purchase price for any Book-Entry Note is not timely paid to the
Participants with respect to such Book-Entry Note by the beneficial purchaser
thereof (or a Person, including an indirect participant in DTC, acting on behalf
of such purchaser), such Participants and, in turn, the Agent for such Book-
Entry Note may enter SDFS deliver orders through DTC's Participant Terminal
System reversing the orders entered pursuant to Settlement Procedures "F" and
"G," respectively. Thereafter, the Trustee will deliver the withdrawal message
and take the related actions described in the preceding paragraph.
Notwithstanding the foregoing, upon any failure to settle with respect to a
Book-Entry Note, DTC may take any actions in accordance with its SDFS operating
procedures then in effect. In the event of a failure to settle with respect to
one or more, but not all, of the Book-Entry Notes to have been represented by a
Global Security, the Trustee will provide, in accordance with Settlement
Procedure "D," for the authentication and issuance of a Global Security
representing the other Book-Entry Notes to have been represented by such Global
Security and will make appropriate entries in its records.
B-24
<PAGE>
Exhibit C
PURCHASE AGREEMENT
ALCO CAPITAL RESOURCE, INC. [Date]
1738 Bass Road
Macon, Georgia 31210
Attention: Treasurer
The undersigned agrees to purchase the following principal amount of the
Notes described in the Distribution Agreement dated June 30, 1995 (as it may be
supplemented or amended from time to time, the "Distribution Agreement"):
Principal Amount: $__________
Specified Currency:
Denominated and Indexed Currencies:
Interest Rate: ____%
Discount: ____% of Principal Amount
Aggregate Price to be Paid to $__________
Company (in immediately available
Funds):
Settlement Date:
Other Terms:
Terms defined in the Prospectus relating to the Notes and in the
Distribution Agreement shall have the same meaning when used herein.
[In the case of Notes issued in a Specified Currency other than U.S.
dollars, payments of principal of (and premium, if any) and interest on all
Notes will be made in the applicable Specified Currency, provided, however, that
payments of principal of (and premium, if any) and interest on Notes denominated
in other than U.S. dollars will nevertheless be made in U.S. dollars (i) at the
option of the Holders thereof; (ii) at the option of the Company in the case of
imposition of exchange controls or other circumstances beyond the control of the
Company as described below; or (iii) if so specified in the applicable Pricing
Supplement.
The U.S. dollar amount to be received by a Holder of a Note denominated in
other than U.S. dollars who elects to receive payments in U.S. dollars will be
based on the highest bid quotation in The City of New York received by the
Currency Determination Agent (as defined below) as of noon New York City time on
the third Business Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Currency
Determination Agent) for the purchase by the quoting dealer of the Specified
Currency for U.S. dollars for settlement on such payment date in the aggregate
amount of the Specified Currency payable to all Holders of Notes electing to
receive U.S. dollar payments and at which the applicable dealer commits to
execute a contract. If three such bid quotations are not available on the third
Business Day preceding the date of payment of principal (and premium, if any) or
interest with respect to any Note, such payment will be made in the Specified
Currency. All currency
<PAGE>
exchange costs associated with any payment in U.S. dollars on any such Note will
be borne by the Holder thereof by deductions from such payment.]
Our obligation to purchase Notes hereunder is subject to the continued
accuracy of your representations and warranties contained in the Distribution
Agreement and to your performance and observance of all applicable covenants and
agreements contained therein, including, without limitation, your obligations
pursuant to Section 7 thereof. Our obligation hereunder is subject to the
further condition that we shall receive (a) the opinions required to be
delivered pursuant to Sections 5(e) and 5(h) of the Distribution Agreement, (b)
the certificate required to be delivered pursuant to Section 5(f) of the
Distribution Agreement, (c) the letter referred to in Section 5(g) of the
Distribution Agreement in each case dated as of the above Settlement Date and
(d) [insert other conditions as appropriate].
In further consideration of our agreement hereunder, you agree that between
the date hereof and the above Settlement Date, you will not offer or sell, or
enter into any agreement to sell, any debt securities of the Company [, other
than borrowings under your revolving credit agreements and lines of credit, the
private placement of securities and issuances of your commercial paper].
We may terminate this Agreement, immediately upon notice to you, at any
time prior to the Settlement Date, if prior thereto there shall have occurred:
(i) any change, or any development involving a prospective change, in or
affecting the general affairs, management, shareholder's equity, business,
properties, condition (financial or other), results of operations or prospects
of the Company which in our opinion materially impairs the investment quality of
the Notes; (ii) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market, or the establishment of minimum prices on such
exchanges or such markets; (iii) a general moratorium on commercial banking
activities declared by Federal or New York State authorities; (iv) any
downgrading in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities of the Company (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national calamity or emergency; or (vi) any
material adverse change in the existing financial, political or economic
conditions in the United States, including the effect of international
conditions on the financial markets in the United States, or you are unable to
provide any of the opinions, certificates or letters referred to in the second
preceding paragraph. In the event of such termination, no party shall have any
liability to the other party hereto, except as provided in Sections 4, 7 and 13
of the Distribution Agreement.
C-2
<PAGE>
This Agreement shall be governed by and construed in accordance with the
laws of New York.
[Insert Name[s] of Agent[s]]
By:____________________________________
[Title]
Accepted: ,
ALCO CAPITAL RESOURCE, INC.
By:____________________________________
[Authorized Signatory]
C-3
<PAGE>
Exhibit D
[INDEXED NOTE]
AMENDMENT NO. ___
TO DISTRIBUTION AGREEMENT DATED June 30, 1995, AS AMENDED
[Insert Title of the Denominated
and Indexed Currencies]
The undersigned hereby agree that for the purposes of the issue and sale of
Notes denominated in [title of currency or currency unit] (the "Denominated
Currency") and indexed to [title of currency or currency unit] (the "Indexed
Currency") pursuant to the Distribution Agreement, dated June 30, 1995, as it
may be amended (the "Distribution Agreement"), the following additions and
modifications shall be made to the Distribution Agreement. The additions and
modifications adopted hereby shall be of the same effect for the sale under the
Distribution Agreement of all Notes denominated in the Denominated Currency and
indexed to the Indexed Currency, whether offered on an agency or principal
basis, but shall be of no effect with respect to Notes denominated in any
currency or currency unit other than the Applicable Foreign Currency.
Except as otherwise expressly provided herein, all terms used herein which
are defined in the Distribution Agreement shall have the same meanings as in the
Distribution Agreement. The terms Agent or Agents, as used in the Distribution
Agreement, shall be deemed to refer [only] to the undersigned Agents for
purposes of this Amendment.
[Insert appropriate additions and modifications to the Distribution
Agreement, for example, to opinions of counsel, conditions to obligation and
settlement procedures, etc.]
_________________, 19__
Alco Capital Resource, Inc.
By:_______________________________________
Name:
Title:
[Name(s) of Agent(s) Participating
In the Offering of the Indexed Notes]
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.23
================================================================================
ALCO CAPITAL RESOURCE, INC.
TO
CHEMICAL BANK,
Trustee
______________
INDENTURE
Dated as of June 30, 1995
______________
================================================================================
<PAGE>
TABLE OF CONTENTS
__________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties..................................................................... 1
Recitals of the Company..................................................... 1
</TABLE>
ARTICLE ONE
Definitions and Other Provisions of General Application
<TABLE>
<S> <C> <C>
Section 101. Definitions:
Act......................................................... 1
Affiliate; control.......................................... 2
Alco Standard............................................... 2
Authenticating Agent........................................ 2
Board of Directors.......................................... 2
Board Resolution............................................ 2
Business Day................................................ 2
Commission.................................................. 2
Company..................................................... 2
Company Request; Company Order.............................. 3
Consolidated Net Tangible Assets............................ 3
Corporate Trust Office...................................... 3
corporation................................................. 3
Covenant Defeasance......................................... 3
Defaulted Interest.......................................... 3
Defeasance.................................................. 3
Depositary.................................................. 3
Event of Default............................................ 3
Exchange Act................................................ 3
Expiration Date............................................. 3
Global Security............................................. 3
Holder...................................................... 4
Indenture................................................... 4
interest.................................................... 4
Interest Payment Date....................................... 4
Investment Company Act...................................... 4
Maturity.................................................... 4
Notice of Default........................................... 4
Officers' Certificate....................................... 4
Opinion of Counsel.......................................... 4
Original Issue Discount Security............................ 4
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Outstanding................................................. 5
Paying Agent................................................ 6
Person...................................................... 6
Place of Payment............................................ 6
Predecessor Security........................................ 6
Redemption Date............................................. 6
Redemption Price............................................ 6
Regular Record Date......................................... 6
Responsible Officer......................................... 6
Secured Debt................................................ 6
Securities.................................................. 6
Securities Act.............................................. 7
Security Register and Security Registrar.................... 7
Special Record Date......................................... 7
Stated Maturity............................................. 7
Subsidiary.................................................. 7
Support Agreement........................................... 7
Trust Indenture Act......................................... 7
Trustee..................................................... 7
U.S. Government Obligation.................................. 7
Vice President.............................................. 7
Wholly-owned Subsidiary..................................... 7
Section 102. Compliance Certificates and Opinions........................ 8
Section 103. Form of Documents Delivered to Trustee...................... 8
Section 104. Acts of Holders; Record Dates............................... 9
Section 105. Notices, Etc., to Trustee and Company....................... 11
Section 106. Notice to Holders; Waiver................................... 11
Section 107. Conflict with Trust Indenture Act........................... 12
Section 108. Effect of Headings and Table of Contents.................... 12
Section 109. Successors and Assigns...................................... 12
Section 110. Separability Clause......................................... 12
Section 111. Benefits of Indenture....................................... 12
Section 112. Governing Law............................................... 13
Section 113. Legal Holidays.............................................. 13
</TABLE>
-ii-
<PAGE>
Page
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<TABLE>
ARTICLE TWO
Security Forms
<S> <C> <C>
Section 201. Forms Generally............................................. 13
Section 202. Form of Face of Security.................................... 14
Section 203. Form of Reverse of Security................................. 15
Section 204. Form of Legend for Global Securities........................ 20
Section 205. Form of Trustee's Certificate of Authentication............. 20
Section 206. Form of Assignment.......................................... 20
</TABLE>
<TABLE>
ARTICLE THREE
The Securities
<S> <C> <C>
Section 301. Amount Unlimited; Issuable in Series........................ 21
Section 302. Denominations............................................... 24
Section 303. Execution, Authentication, Delivery and Dating.............. 24
Section 304. Temporary Securities........................................ 26
Section 305. Registration, Registration of Transfer and Exchange......... 27
Section 306. Mutilated, Destroyed, Lost and Stolen Securities............ 28
Section 307. Payment of Interest; Interest Rights Preserved.............. 29
Section 308. Persons Deemed Owners....................................... 30
Section 309. Cancellation................................................ 30
Section 310. Computation of Interest..................................... 31
</TABLE>
<TABLE>
ARTICLE FOUR
Satisfaction and Discharge
<S> <C> <C>
Section 401. Satisfaction and Discharge of Indenture..................... 31
Section 402. Application of Trust Money.................................. 32
</TABLE>
-iii-
<PAGE>
Page
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<TABLE>
ARTICLE FIVE
Remedies
<S> <C> <C>
Section 501. Events of Default........................................... 32
Section 502. Acceleration of Maturity; Rescission and Annulment.......... 34
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................... 35
Section 504. Trustee May File Proofs of Claim............................ 36
Section 505. Trustee May Enforce Claims Without Possession
of Securities............................................. 36
Section 506. Application of Money Collected.............................. 37
Section 507. Limitation on Suits......................................... 37
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest...................................... 38
Section 509. Restoration of Rights and Remedies.......................... 38
Section 510. Rights and Remedies Cumulative.............................. 38
Section 511. Delay or Omission Not Waiver................................ 38
Section 512. Control by Holders.......................................... 39
Section 513. Waiver of Past Defaults..................................... 39
Section 514. Undertaking for Costs....................................... 39
Section 515. Waiver of Usury, Stay or Extension Laws..................... 40
</TABLE>
<TABLE>
ARTICLE SIX
The Trustee
<S> <C> <C>
Section 601. Certain Duties and Responsibilities......................... 40
Section 602. Notice of Defaults.......................................... 40
Section 603. Certain Rights of Trustee................................... 41
Section 604. Not Responsible for Recitals or Issuance of Securities...... 42
Section 605. May Hold Securities......................................... 42
Section 606. Money Held in Trust......................................... 42
Section 607. Compensation and Reimbursement.............................. 42
Section 608. Conflicting Interests....................................... 43
Section 609. Corporate Trustee Required; Eligibility..................... 44
Section 610. Resignation and Removal; Appointment of Successor........... 44
Section 611. Acceptance of Appointment by Successor...................... 45
</TABLE>
-iv-
<PAGE>
Page
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<TABLE>
<S> <C> <C>
Section 612. Merger, Conversion, Consolidation or Succession
to Business............................................... 47
Section 613. Preferential Collection of Claims Against Company........... 47
Section 614. Appointment of Authenticating Agent......................... 47
</TABLE>
<TABLE>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
<S> <C> <C>
Section 701. Company to Furnish Trustee Names and Addresses
of Holders................................................ 49
Section 702. Preservation of Information; Communications
to Holders................................................ 49
Section 703. Reports by Trustee.......................................... 50
Section 704. Reports by Company.......................................... 50
</TABLE>
<TABLE>
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
<S> <C> <C>
Section 801. Company May Consolidate, Etc., Only on
Certain Terms............................................. 51
Section 802. Successor Substituted....................................... 52
</TABLE>
<TABLE>
ARTICLE NINE
Supplemental Indentures
<S> <C> <C>
Section 901. Supplemental Indentures Without Consent of Holders.......... 52
Section 902. Supplemental Indentures With Consent of Holders............. 53
Section 903. Execution of Supplemental Indentures........................ 54
Section 904. Effect of Supplemental Indentures........................... 54
Section 905. Conformity with Trust Indenture Act......................... 55
Section 906. Reference in Securities to Supplemental Indentures.......... 55
</TABLE>
-v-
<PAGE>
Page
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<TABLE>
ARTICLE TEN
Covenants
<S> <C> <C>
Section 1001. Payment of Principal, Premium and Interest................. 55
Section 1002. Maintenance of Office or Agency............................ 55
Section 1003. Money for Securities Payments to Be Held in Trust.......... 56
Section 1004. Maintenance of Support Agreement........................... 57
Section 1005. Restriction on Creation of Secured Debt.................... 57
Section 1006. Statement by Officers as to Default........................ 59
Section 1007. Existence.................................................. 59
Section 1008. Maintenance of Properties.................................. 59
Section 1009. Payment of Taxes and Other Claims.......................... 60
Section 1010. Waiver of Certain Covenants................................ 60
</TABLE>
<TABLE>
ARTICLE ELEVEN
Redemption of Securities
<S> <C> <C>
Section 1101. Applicability of Article................................... 60
Section 1102. Election to Redeem; Notice to Trustee...................... 60
Section 1103. Selection by Trustee of Securities to Be Redeemed.......... 61
Section 1104. Notice of Redemption....................................... 62
Section 1105. Deposit of Redemption Price................................ 62
Section 1106. Securities Payable on Redemption Date...................... 63
Section 1107. Securities Redeemed in Part................................ 63
</TABLE>
<TABLE>
ARTICLE TWELVE
Sinking Funds
<S> <C> <C>
Section 1201. Applicability of Article................................... 63
Section 1202. Satisfaction of Sinking Fund Payments with Securities...... 64
Section 1203. Redemption of Securities for Sinking Fund.................. 64
</TABLE>
-vi-
<PAGE>
Page
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<TABLE>
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
<S> <C> <C>
Section 1301. Company's Option to Effect Defeasance or
Covenant Defeasance...................................... 65
Section 1302. Defeasance and Discharge................................... 65
Section 1303. Covenant Defeasance........................................ 65
Section 1304. Conditions to Defeasance or Covenant Defeasance............ 66
Section 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions............ 68
Section 1306. Reinstatement.............................................. 68
Testimonium................................................................. 70
Signatures and Seals........................................................ 70
Acknowledgements............................................................ 71
</TABLE>
-vii-
<PAGE>
ALCO CAPITAL RESOURCE, INC.
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
(S) 310(a)(1).................................. 609
(a)(2) ...................................... 609
(a)(3) ...................................... Not Applicable
(a)(4) ...................................... Not Applicable
(b) ...................................... 608
610
(S) 311(a) ...................................... 613
(b) ...................................... 613
(S) 312(a) ...................................... 701
702
(b) ...................................... 702
(c) ...................................... 702
(S) 313(a) ...................................... 703
(b) ...................................... 703
(c) ...................................... 703
(d) ...................................... 703
(S) 314 ...................................... 704
(a)(4) ...................................... 101
1006
(b) ...................................... Not Applicable
(c)(1) ...................................... 102
(c)(2) ...................................... 102
(c)(3) ...................................... Not Applicable
(d) ...................................... Not Applicable
(e) ...................................... 102
(S) 315(a) ...................................... 601
(b) ...................................... 602
(c) ...................................... 601
(d) ...................................... 601
(e) ...................................... 514
(S) 316(a) ...................................... 101
(a)(1)(A) ...................................... 502
512
(a)(1)(B) ...................................... 513
(a)(2) ...................................... Not Applicable
(b) ...................................... 508
(c) ...................................... 104
(S) 317(a)(1) ...................................... 503
(a)(2) ...................................... 504
(b) ...................................... 1003
(S) 318(a) ...................................... 107
</TABLE>
___________________
<PAGE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE, dated as of June 30, 1995, between Alco Capital Resource, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 1738 Bass Road,
Macon, Georgia, and Chemical Bank, a banking corporation duly organized and
existing under the laws of the State of New York, as Trustee (herein called the
"Trustee").
Recitals of the Company
The Company has duly authorized the execution and delivery of this Indenture
to provide for the issuance from time to time of its unsecured debentures, notes
or other evidences of indebtedness (herein called the "Securities"), to be
issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Company,
in accordance with its terms, have been done.
Now, Therefore, This Indenture Witnesseth:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities or of series thereof, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and, except as otherwise herein expressly provided, the term "generally
accepted accounting prin ciples" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation;
<PAGE>
(4) unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Alco Standard" means Alco Standard Corporation, an Ohio corporation, and its
successors.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to
Section 614 to act on behalf of the Trustee to authenticate Securities of one or
more series.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is (i) not a day on which
banking institutions and trust companies in that Place of Payment are authorized
or obligated by law, regulation or executive order to close or (ii) such other
days as may be designated in respect of Securities of a particular Series
pursuant to Section 301.
"Commission" means the Securities and Exchange Commission, from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
-2-
<PAGE>
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order signed
in the name of the Company by its Chairman of the Board, its Vice Chairman of
the Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Net Tangible Assets" means as of any particular time the
aggregate amount of assets after deducting therefrom (a) all current liabilities
(excluding any such liability that by its terms is extendable or renewable at
the option of the obligor thereon to a time more than 12 months after the time
as of which the amount thereof is being computed) and (b) all goodwill, excess
of cost over assets acquired, patents, copyrights, trademarks, trade names,
unamortized debt discount and expense and other like intangibles, all as shown
in the most recent consolidated financial statements of the Company and its
Subsidiaries prepared in accordance with generally accepted accounting
principles.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office as of the date of this Indenture is the address of
the Trustee set forth in Section 105.
"corporation" means a corporation, association, company, joint-stock company
or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
-3-
<PAGE>
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an instalment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an instalment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of accele ration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in Section
501(5) or 501(6).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1006 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
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"Outstanding", when used with respect to Securities, means, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:
(1) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities; provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant to
Section 1302; and
(4) Securities which have been paid pursuant to Section 306 or in exchange
for or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which a Responsible
Officer of the Trustee knows to be so owned shall be so disregarded. Securities
so owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and
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that the pledgee is not the Company or any other obligor upon the Securities
or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and any premium and interest on
the Securities of that series are payable as specified as contemplated by
Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Department (or any successor department)
including without limitation any vice president, any assistant vice president,
any trust officer, any assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers, in each case with direct responsibility for the
administration of this Indenture, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Secured Debt" means indebtedness for money borrowed which is secured by a
mortgage, pledge, lien, security interest or encumbrance on any property of any
character of the Company.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
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"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any instalment
of principal thereof or interest thereon, means the date specified in such
Security as the fixed date on which the principal of such Security or such
instalment of principal or inter est is due and payable.
"Subsidiary" means with respect to any Person, a corporation of which more
than 50% of the outstanding stock having ordinary voting power to elect
directors is owned, directly or indirectly, by such Person or by one or more
other corporations more than 50% of such stock of which is similarly owned or
controlled.
"Support Agreement" means the Support Agreement, dated as of June 1, 1994,
between Alco Standard and the Company as in effect on the date hereof or as it
may from time to time be amended pursuant to the applicable provisions hereof or
thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the Trustee, means
any vice president, whether or not designated by a number or a word or words
added before or after the title "vice president".
"Wholly-owned Subsidiary" of any Person means any Subsidiary of which, at the
time of determination, all of the outstanding stock having ordinary voting power
to elect directors (other than directors' qualifying shares) is owned by such
Person directly and/or indirectly.
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Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (except for certificates provided for in
Section 1006) shall include,
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
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<PAGE>
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to give, make or
take any request,
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demand, authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given, made or taken by Holders of
Securities of such series, provided that the Company may not set a record date
for, and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
the next paragraph. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities of the relevant series on such record date,
and no other Holders, shall be entitled to take the relevant action, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such
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<PAGE>
change shall be effective unless notice of the proposed new Expiration Date is
given to the other party hereto in writing, and to each Holder of Securities of
the relevant series in the manner set forth in Section 106, on or prior to the
existing Expiration Date. If an Expiration Date is not designated with respect
to any record date set pursuant to this Section, the party hereto which set such
record date shall be deemed to have initially designated the 180th day after
such record date as the Expiration Date with respect thereto, subject to its
right to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or Act
of Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, which office as of the date
hereof is located at Chemical Bank, 450 West 33rd Street, 15th Floor, New York,
New York 10001, Atten tion: Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
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Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at his address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
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Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwith standing any other provision of this Indenture or of the
Securities (other than a provision of any Security which specifically states
that such provision shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest or
original issue discount with respect to such payment shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be.
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ARTICLE TWO
Security Forms
Section 201. Forms Generally.
The Securities of each series shall be in substantially the form set forth in
this Article, or in such other form as shall be established by or pursuant to a
Board Reso lution and set forth, or determined in the manner provided, in an
Officers' Certificate, or established in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, con sistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on steel
engraved borders or may be produced in any other manner, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
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Section 202. Form of Face of Security.
[Insert any legend required by the Internal Revenue Code and the regulations
thereunder.]
Alco Capital Resource, Inc.
[Title of Security]
CUSIP No. ........
No. ......... $ ........
Alco Capital Resource, Inc., a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ........................., or registered
assigns, the principal sum of ...................................... Dollars on
........................................................ [if the Security is to
bear interest prior to Maturity, insert -- , and to pay interest thereon from
............. or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on ............ and
............ in each year, commencing ........., at the rate of ....% per annum,
until the principal hereof is paid or made available for payment [if applicable,
insert -- , provided that any principal and premium, and any such instalment of
interest, which is overdue shall bear interest at the rate of ...% per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the ....... or
....... (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ....% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts
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are due until they are paid or made available for payment. Interest on any
overdue principal or premium shall be payable on demand. Any such interest on
overdue principal or premium which is not paid on demand shall bear interest at
the rate of ......% per annum (to the extent that the payment of such interest
on interest shall be legally enforceable), from the date of such demand until
the amount so demanded is paid or made available for payment. Interest on any
overdue interest shall be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable, insert
- - -- any such] interest on this Security will be made at the office or agency of
the Company maintained for that purpose in ............, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert -- ;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register] [if applicable, insert --
provided, however, that so long as this Security is registered in the name of
The Depository Trust Company or its nominee, all payments of principal, premium,
if any, and interest will be made by the Company in immediately available
funds].
Reference is hereby made to the further provisions of this Security set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
Alco Capital Resource, Inc.
By..........................
Attest:
.................
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Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of ..............., 1995 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and Chemical Bank, as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
and reference is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof [if applicable, insert -- , limited
in aggregate principal amount to $...........].
[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [if
applicable, insert -- on or after .........., 19..], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if applicable, insert -- on
or before ..............., ...%, and if redeemed] during the 12-month period
beginning ............. of the years indicated,
<TABLE>
<CAPTION>
Year Redemption Year Redemption
- - ---- Price ---- Price
---------- ----------
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
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[If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [if
applicable, insert -- on or after ............], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period
beginning ............ of the years indicated,
<TABLE>
<CAPTION>
Year Redemption Price Redemption Price For
- - ----
For Redemption Redemption Otherwise
Through Operation Than Through Operation
of the of the Sinking Fund
Sinking Fund ----------------------
-----------------
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or other wise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the Company may not,
prior to ............., redeem any Securities of this series as contemplated by
[if applicable, insert -- Clause (2) of] the preceding paragraph as a part of,
or in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than .....% per annum.]
[If applicable, insert -- The sinking fund for this series provides for the
redemption on ............ in each year beginning with the year ....... and
ending with the year ...... of [if applicable, insert -- not less than
$.......... ("mandatory sinking fund") and not more than] $......... aggregate
principal amount of Securities of this series. Securities of this series
acquired or redeemed by the Company otherwise than through [if applicable,
insert -- mandatory] sinking fund payments may be credited against subsequent
[if applicable, insert -- mandatory] sinking fund payments otherwise required to
be made [if applicable, insert -- , in the inverse order in which they become
due].]
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[If the Security is subject to redemption of any kind, insert -- In the event
of redemption of this Security in part only, a new Security or Securities of
this series and of like tenor for the unredeemed portion hereof will be issued
in the name of the Holder hereof upon the cancellation hereof.]
[If the Security is not an Original Issue Discount Security, insert -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of
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<PAGE>
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
During a period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption of Securities of the series selected for
redemption and ending at the close of business on the day of such mailing, the
Company shall not be required to issue, register the transfer of or exchange
this Security except as provided in the Indenture.
The Securities of this series are issuable only in registered form without
coupons in denominations of $....... and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
This Security shall be governed by and construed in accordance with the laws
of the State of New York.
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
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Section 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for the Securities
evidenced thereby, every Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be exchanged in whole or in part for a
Security registered, and no transfer of this Security in whole or in part may be
registered, in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the Indenture.
Section 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially the
following form:
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
Chemical Bank,
As Trustee
By.......................
Authorized Officer
Section 206. Form of Assignment.
The form of assignment on the Securities shall be substantially in the
following form:
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
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<PAGE>
_____________________________________
(Insert assignee's soc. sec. or tax ID no.)
____________________________________________________
____________________________________________________
____________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Date: _______________________
_____________________
SIGNATURE GUARANTEE
Signature Guaranteed by:
_________________________
By: _____________________
_________________________
The signature must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program), pursuant to Rule 17Ad-15 under
the Securities Exchange Act of 1934.
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the
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<PAGE>
manner provided, in an Officers' Certificate, or established in one or more
indentures supplemental hereto, prior to the issuance of Securities of any
series,
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906 or 1107 and except for any Securities which,
pursuant to Section 303, are deemed never to have been authenticated and
delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall be
payable, if other than the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest;
(4) the date or dates on which the principal of any Securities of the series
is payable;
(5) the rate or rates at which any Securities of the series shall bear
interest, if any, the date or dates from which any such interest shall accrue,
the Interest Payment Dates on which any such interest shall be payable and the
Regular Record Date for any such interest payable on any Interest Payment Date;
(6) the place or places where the principal of and any premium and interest
on any Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series may be redeemed,
in whole or in part, at the option of the Company and, if other than by a Board
Resolution, the manner in which any election by the Company to redeem the
Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous provisions
or at the option of the Holder thereof and the period or periods within which,
the price or prices at which and the terms and conditions upon which any
Securities of the series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any Securities of the series shall be issuable;
(10) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be determined;
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<PAGE>
(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any premium
or interest on any Securities of the series shall be payable and the manner of
determining the equivalent thereof in the currency of the United States of
America for any purpose, including for purposes of the definition of
"Outstanding" in Section 101;
(12) if the principal of or any premium or interest on any Securities of the
series is to be payable, at the election of the Company or the Holder thereof,
in one or more currencies or currency units other than that or those in which
such Securities are stated to be payable, the currency, currencies or currency
units in which the principal of or any premium or interest on such Securities
as to which such election is made shall be payable, the periods within which
and the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be determined);
(13) if other than the entire principal amount thereof, the portion of the
principal amount of any Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(14) if the principal amount payable at the Stated Maturity of any Securities
of the series will not be determinable as of any one or more dates prior to the
Stated Maturity, the amount which shall be deemed to be the principal amount of
such Securities as of any such date for any purpose thereunder or hereunder,
including the principal amount thereof which shall be due and payable upon any
Maturity other than the Stated Maturity or which shall be deemed to be
Outstanding as of any date prior to the Stated Maturity (or, in any such case,
the manner in which such amount deemed to be the principal amount shall be
determined);
(15) if applicable, that any Securities of the series shall be issuable in
whole or in part in the form of one or more Global Securities and, in such
case, the respective Depositaries for such Global Securities, the form of any
legend or legends which shall be borne by any such Global Security in addition
to or in lieu of that set forth in Section 204 and any circumstances in
addition to or in lieu of those set forth in Clause (2) of the last paragraph
of Section 305 in which any such Global Security may be exchanged in whole or
in part for Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the name or names of Persons other than
the Depositary for such Global Security or a nominee thereof;
(16) if applicable, that the Securities of the series, in whole or any
specified part, shall be defeasible pursuant to Section 1302 or Section 1303 or
both such Sections and, if other than by a Board Resolution, the manner in
which any election by the Company to defease such Securities shall be
evidenced;
(17) any addition to or change in the Events of Default which applies to any
Securities of the series and any change in the right of the Trustee or the
requisite
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<PAGE>
Holders of such Securities to declare the principal amount thereof due and
payable pursuant to Section 502;
(18) any deletion or addition to or change in the covenants set forth in
Article Ten which applies to Securities of the series;
(19) if other than as provided in Section 201, the form or forms of the
Securities; and
(20) any other terms of the series (which terms shall not be inconsistent
with the provisions of this Indenture, except as permitted by Section 901(5)).
All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 302. Denominations.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman of
the Board, its Vice Chairman of the Board, its President, one of its Vice
Presidents or its Treasurer, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
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<PAGE>
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. In
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) the form of such Securities has been established in conformity with
the provisions of this Indenture;
(2) the terms of such Securities have been established in conformity with
the provisions of this Indenture;
(3) that such Securities, when authenticated and delivered by the Trustee
and issued by the Company in the manner and subject to any conditions specified
in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and
an Officer's Certificate stating that all conditions precedent to authentication
of such Securities have been complied with.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding paragraph,
if all Securities of a series are not to be originally issued at one time, it
shall not be necessary to deliver the Officers' Certificate otherwise required
pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise
required pursuant to such preceding paragraph at or prior to the authentication
of each Security of such series if such documents are delivered at or prior to
the authentication upon original issuance of the first Security of such series
to be issued; provided that any subsequent request by the Company to the Trustee
to authenticate Securities of such series upon original issuance shall
constitute a representation and warranty by the Company that as of the date of
such request, the statements made in the Officers' Certificate or other
certificates delivered pursuant to Sections 102 and 301 shall be true and
correct as if made on such date.
A Company Order, Officers' Certificate or Board Resolution or supplemental
indenture delivered by the Company to the Trustee in the circumstances set forth
in the preceding paragraph may provide that Securities which are the subject
thereof will be authenticated and delivered by the Trustee or its agent on
original issue from time to time
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<PAGE>
in the aggregate principal amount, if any, established for such series pursuant
to such procedures acceptable to the Trustee as may be specified from time to
time by Company Order upon the telephonic, electronic or written order of
Persons designated in such Company Order, Officers' Certificate, supplemental
indenture or Board Resolution (any such telephonic or electronic instructions to
be promptly confirmed in writing by such Persons) and that such Persons are
authorized to determine, consistent with such Company Order, Officers'
Certificate, supplemental indenture or Board Resolution, such terms and
conditions of said Securities as are specified in such Company Order, Officers'
Certificate, supplemental indenture or Board Resolution.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.
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Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series at
the office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of like tenor and aggregate
principal amount.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly autho rized in writing.
No service charge shall be made for any registration of transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 306 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor) are to
be redeemed in part, the Company shall not be required (A) to issue, register
the transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, or (B) to
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register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the
name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (A) such Depositary (i) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Security or
(ii) has ceased to be a clearing agency registered under the Exchange Act, (B)
there shall have occurred and be continuing an Event of Default with respect to
such Global Security or (C) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this purpose
as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global Security for other
Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon registration of transfer
of, or in exchange for or in lieu of, a Global Security or any portion thereof,
whether pursuant to this Section, Section 304, 306, 906 or 1107 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security
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<PAGE>
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obli gation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301 with respect to
any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
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Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series (or their respective
Prede cessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security of such
series and the date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given to each Holder of Securities of such
series in the manner set forth in Section 106, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
of such series (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security delivered
under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
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Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of transfer
or exchange or for credit against any sinking fund payment shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may deliver to
the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be destroyed and a certificate of destruction delivered to the
Company.
Section 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
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(1) either
(A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within one
year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose money in an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of such
deposit (in the case of Securities which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
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Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that series
when it becomes due and payable, and continuance of such default for a period
of 30 days; or
(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Security of that series; or
(4) default in the performance, or breach, of any term or provision of
Section 1004; or
(5) default in the performance, or breach, of any covenant or warranty of
the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with or which has expressly been included in this Indenture solely for
the benefit of series of Securities other than that series), and continuance of
such default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 10% in principal amount of the
Outstanding Securities of that series a written notice specifying such
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default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(6) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company (including a default with
respect to Securities of any series other than that series), or under any
mortgage, indenture or instrument (including this Indenture) under which there
may be issued or by which there may be secured or evidenced any indebtedness
for money borrowed by the Company, whether such indebtedness now exists or
shall hereafter be created, which default shall constitute a failure to pay any
portion of the principal of such indebtedness in a principal amount in excess
of $15,000,000 when due and payable after the expiration of any applicable
grace period with respect thereto or shall have resulted in such indebtedness
in a principal amount in excess of $15,000,000 becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, without such portion or such indebtedness, as the case may be,
becoming no longer due and payable or having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10 days
after there shall have been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 10% in principal amount of the Outstanding Securities of that series a
written notice specifying such default and requiring the Company to cause such
indebtedness to be discharged or cause such acceleration to be rescinded or
annulled, as the case may be, and stating that such notice is a "Notice of
Default" hereunder; or
(7) the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or compo sition of or in
respect of the Company under any applicable Federal or State law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(8) the commencement by the Company of a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or the making
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by it of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such action; or
(9) in connection with any proceeding under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors involving Alco Standard or
one of its Subsidiaries, an order for relief shall be entered by a court of
competent jurisdiction which affects any significant part of the assets of the
Company or any of its Subsidiaries; or
(10) any other Event of Default provided with respect to Securities of that
series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate or rates prescribed therefor in such Securities,
and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and all other amounts due to the Trustee under Section 607;
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and
(2) all Events of Default with respect to Securities of that series, other
than the non-payment of the principal of Securities of that series which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security when such
interest becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (or premium, if any,
on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for princi pal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
If an Event of Default with respect to Securities of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
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Section 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be applied
in the following order, at the date or dates fixed by the Trustee and, in case
of the distribution of such money on account of principal or any premium or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
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First: To the payment of all amounts due the Trustee under Section 607; and
Second: To the payment of the amounts then due and unpaid for principal of
and any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively.
Section 507. Limitation on Suits.
No Holder of any Security of any series shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance with
such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
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Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
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Section 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
of any series 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 Securities of
such series, provided that
(1) the Trustee shall have the right to decline to follow any such direction
if the Trustee, being advised by counsel, determines that the action so
directed may not lawfully be taken or would conflict with this Indenture or if
the Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed would involve it in personal liability or be unjustly
prejudicial to the Holders not taking part in such direction, and
(2) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on any
Security of such series, or
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Inden ture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
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Section 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture,
or in any suit against the Trustee for any action taken, suffered or omitted by
it as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; provided that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company.
Section 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, (a) no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and (b) no provision of this Indenture
shall require the Trustee to determine the maximum interest rate permissible
under applicable law.
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Section 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of any series, the
Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by of the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(5) with respect to Securities of such series, no such notice to Holders
shall be given until at least 60 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
The Trustee shall not be deemed to have knowledge of any default or Event of
Default except (i) an Event of Default described in Section 501(1), (2) or (3)
or (ii) any default or Event of Default of which the Trustee shall have received
written notification or a Responsible Officer charged with the administration of
the Indenture shall have obtained actual knowledge, and such notification shall
not be deemed to include receipt of information obtained in any report or other
documents furnished under Section 704 of this Indenture, which reports and
documents the Trustee shall have no duty to examine.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a Board
Resolution;
(3) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically pre scribed) may, in the absence of bad faith on its part, rely
upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
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(5) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(6) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(7) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authen ticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 606. Money Held in Trust.
Subject to Section 1003, money held by the Trustee in trust hereunder need
not be segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
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Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation for all
services rendered by it hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the Trustee
and each predecessor Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel and of all agents and
other persons not regularly in its employ and the reasonable fees of in-house
counsel in the regular employ of the Trustee which are allocable to this trust
and the expenses and disbursements of such counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(3) to indemnify the Trustee and each predecessor Trustee and the officers,
directors, employees and agents of the Trustee or any such predecessor Trustee
(the Trustee, each predecessor Trustee and such officers, directors, employees
and agents being hereinafter referred to in this Section collectively as the
"Indemnified Parties" and individually as an "Indemnified Party") for, and to
hold each Indemnified Party harmless against, any loss, damage, claim, cost,
liability or expenses (including reasonable attorneys fees) incurred without
negligence or bad faith on the part of such Indemnified Party, arising out of
or in connection with the acceptance or administration of this Indenture or the
trusts hereunder and the duties of the Trustee hereunder, and the costs and
expenses incurred by such Indemnified Party in the course of defending itself
against or investigating any claim of liability in the premises.
The obligations of the Company under this Section to compensate and indemnify
the Indemnified Parties and to pay or reimburse each Indemnified Party for
expenses, disbursements and advances shall constitute an additional obligation
hereunder and shall survive resignation or removal of the Trustee and the
satisfaction and discharge of this Indenture.
If the Trustee incurs expenses or renders services after the occurrence of an
Event of Default specified in clause (7) or (8) of Section 501 of this
Indenture, the expenses and the compensation for the services will be intended
to constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any other applicable federal or state law for the relief of
debtors.
As security for the performance of the obligations of the Company under this
Section the Trustee shall have a lien prior to the Securities upon all property
and funds held or
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collected by the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Securities.
Section 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the meaning
of the Trust Indenture Act, the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee hereunder with respect
to the Securities of each series, which may be Trustee hereunder for Securities
of one or more other series. Each Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has either (i) a reported
capital and surplus aggregating at least $50,000,000 or (ii) a reported capital
and surplus aggregating at least $10,000,000 and is a wholly-owned subsidiary of
a bank, a trust company or a bank holding company having a reported capital and
surplus aggregating at least $50,000,000. If any such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section and to
the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of one or
more series by giving written notice thereof to the Company. If the instrument
of acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
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The Trustee may be removed at any time with respect to the Securities of any
series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail
to resign after written request therefor by the Company or by any such Holder,
or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable of acting, or if
a vacancy shall occur in the office of Trustee for any cause, with respect to
the Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
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The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with respect to
all Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder, subject nevertheless to its lien, if
any, provided in Section 607.
In case of the appointment hereunder of a successor Trustee with respect to
the Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto wherein each
successor Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any suc-
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cessor Trustee, such retiring Trustee shall, upon payment of its charges, duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates,
subject to the lien, if any, of the retiring Trustee provided in Section 607.
Upon request of any such successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in the first or
second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or any
other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
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Section 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect to one
or more series of Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities of such series issued upon original issue and
upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any corporation succeeding to the corporate agency or corporate
trust business of an Authenti cating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
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Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this
Section, the Securities of such series may have endorsed thereon, in addition to
the Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
Chemical Bank,
As Trustee
By........................,
As Authenticating Agent
By.........................
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than June 15 and December 15 in each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities of each series as of the preceding May
31 or November 30, as the case may be, and
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(2) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. Preservation of Information; Communications to Holders.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to their
rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
Section 703. Reports by Trustee.
Any Trustee's report required under Section 313(a) of the Trust Indenture Act
shall be transmitted by July 15 of each year, and shall be dated as of the
preceding May 15, commencing July 15, 1996.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
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Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.
The Company will deliver to the Trustee, within forty days of the date of
original issuance of any Original Issue Discount Securities, an Officers'
Certificate, setting forth (i) the amount of the original issue discount on such
Original Issue Discount Securities, expressed as a U.S. dollar amount per $1,000
of principal amount at Stated Maturity, (ii) the yield to maturity for such
Original Issue Discount Securities, and (iii) a table of the amount of the
original issue discount on such Original Issue Discount Securities, expressed as
a U.S. dollar amount per $1,000 of principal amount at Stated Maturity.
On or before December 15 of each year during which any Original Issue
Discount Securities are outstanding, the Company shall furnish to the Trustee
such information as may be reasonably requested by the Trustee in order that the
Trustee may prepare the information which it is required to report for such year
on Internal Revenue Services Forms 1096 and 1099 pursuant to Section 6049 of the
Internal Revenue Code of 1986, as amended. Such information shall include the
amount of original issue discount includible in income for each $1,000 of
principal amount at Stated Maturity of Outstanding Original Issue Discount
Securities during such year.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company shall not permit any Person to consolidate with
or merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties
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and assets of the Company substantially as an entirety shall be a cor poration,
partnership or trust, shall be organized and validly existing under the laws of
the United States of America, any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all the
Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or any Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger or such conveyance,
transfer or lease, properties or assets of the Company would become subject to
a mortgage, pledge, lien, security interest or other encumbrance which would
not be permitted by this Indenture, the Company or such successor Person, as
the case may be, shall take such steps as shall be necessary effectively to
secure the Securities equally and ratably with (or prior to) all indebtedness
secured thereby; and
(4) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with.
Section 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.
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ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or
(2) to add to the covenants of the Company for the benefit of the Holders of
all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default for the benefit of the Holders
of all or any series of Securities (and if such additional Events of Default
are to be for the benefit of less than all series of Securities, stating that
such additional Events of Default are expressly being included solely for the
benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of Securities
in bearer form, registrable or not registrable as to principal, and with or
without interest coupons, or to permit or facilitate the issuance of Securities
in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this Indenture
in respect of one or more series of Securities, provided that any such
addition, change or elimination (A) shall neither (i) apply to any Security of
any series created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (ii) modify the rights of the
Holder of any such Security with respect to such provision or (B) shall become
effective only when there is no such Security Outstanding; or
(6) to secure the Securities pursuant to the requirements of Section 1005 or
otherwise; or
(7) to establish the form or terms of Securities of any series as permitted
by Sections 201 and 301; or
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(8) to evidence and provide for the acceptance of appointment hereunder by a
successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 611; or
(9) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture, provided that such action pursuant to this Clause (9) shall not
adversely affect the interests of the Holders of Securities of any series in
any material respect.
Section 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than 66_% in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supple mental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any instalment of
principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security or any other Security which would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502, or
change any Place of Payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or
(2) reduce the percentage in principal amount of the Outstanding Securities
of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or Section
1010, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent
of the Holder of each Outstanding Security affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to
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"the Trustee" and concomitant changes in this Section and Section 1010, or the
deletion of this proviso, in accordance with the requirements of Sections 611
and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform
to the requirements of the Trust Indenture Act.
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Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of Securities
that it will duly and punctually pay the principal of and any premium and
interest on the Securities of that series in accordance with the terms of the
Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
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Section 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect to
any series of Securities, it will, on or before each due date of the principal
of or any premium or interest on any of the Securities of that series, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, on or before each due date of the principal of or any
premium or inter est on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will (1) comply with the provisions of the
Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of or any premium or interest
on any Security of any series and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before
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being required to make any such repayment, may at the expense of the Company
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
Section 1004. Maintenance of Support Agreement.
The Company covenants that it:
(1) will observe and perform in all material respects all covenants or
agreements of the Company contained in the Support Agreement;
(2) to the extent possible, will cause Alco Standard to observe and perform
in all material respects all covenants or agreements of Alco Standard contained
in the Support Agreement; and
(3) will not waive compliance under, amend in any material respect or
terminate the Support Agreement; provided, however, that the Support Agreement
may be amended or terminated if either (i) all the outstanding debt of the
Company is repaid or (ii) both Moody's Investor Service, Inc. and Standard &
Poor's Ratings Group confirm in writing prior to the effectiveness of any such
amendment or termination that the Company's debt rating would not be downgraded
as a result of any such amendment or termination
Section 1005. Restriction on Creation of Secured Debt.
The Company will not at any time create, assume or guarantee any Secured Debt
without making effective provision (and the Company covenants that in such case
it will make or cause to be made effective provision) whereby the Securities of
any series then outstanding and, if the Company shall so determine, any other
indebtedness of or guaranteed by the Company, subject to applicable priorities
of payment, shall be secured by such mortgage, pledge, lien, security interest
or encumbrance equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations and
indebtedness shall be so secured; provided, however, that the foregoing
covenants shall not be applicable to the following:
(a) (i) Any mortgage, pledge, lien, security interest or encumbrance on
any fixed asset or other physical or real property hereafter acquired
(including acquisition through merger or consolidation) or hereafter
constructed or improved by the Company and created, or for the creation of
which a bona fide firm commitment in writing was executed, prior to,
contemporaneously with or within 180 days after such acquisition or the
completion of such construction or improvement or the
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commencement of commercial operation or the placing in service of such
property by the Company, whichever is later, to secure or provide for the
payment of all or a part of the purchase price or cost of construction or
improvement of such property; or (ii) the acquisition of property subject to
any mortgage, pledge, lien, security interest or encumbrance upon such
property existing at the time of acquisition thereof, whether or not assumed
by the Company; or (iii) any mortgage, pledge, lien, security interest or
encumbrance on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or at the time of
a sale, lease or other disposition of the properties of a corporation or firm
as an entirety or substantially as an entirety to the Company; provided,
however, that the lien of any such mortgage, pledge, lien, security interest
or encumbrance permitted by clauses (ii) or (iii) of this subparagraph (a)
shall not extend to property owned by the Company prior to any event referred
to in such clauses or to other property thereafter acquired by the Company,
other than additions and improvements to the property referred to in such
clauses; or
(b) Mortgages, including mortgages, pledges, liens, security interests or
encumbrances, on property of the Company in favor of the United States of
America or any State thereof, or any department, agency or instrumentality or
political subdivision of the United States of America or any State thereof,
or in favor of any other country, or any department, agency or
instrumentality or political subdivision thereof, to secure partial,
progress, advance or other payments pursuant to any contract or statute or to
secure any indebtedness incurred for the purpose of financing all or any part
of the purchase price or the cost of construction or improvement of the
property subject to such mortgages; or
(c) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage, pledge, lien,
security interest or encumbrance referred to in the foregoing subparagraphs
(a) and (b); provided, however, that the principal amount of Secured Debt
secured thereby shall not exceed the principal amount outstanding at the time
of such extension, renewal or replacement, and that such extension, renewal
or replacement shall be limited to the property which secured the mortgage so
extended, renewed or replaced and additions to such property; or
(d) Any mortgage, pledge, lien, security interest or encumbrance securing
indebtedness owing by the Company to one or more Wholly-owned Subsidiaries.
Notwithstanding the foregoing provisions of this Section 1005, the Company
may create, assume or guarantee Secured Debt which would otherwise be subject to
the foregoing restrictions in an aggregate amount which, together with all other
Secured Debt of the Company which would otherwise be subject to the foregoing
restrictions (not including Secured Debt permitted to be secured under
subparagraphs (a) through (d) above), does not at the time exceed 5% of
Consolidated Net Tangible Assets.
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Section 1006. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
(b) The Company will, so long as any of the Securities are outstanding,
deliver to the Trustee, forthwith upon any officer becoming aware of (i) any
default or Event of Default or (ii) any default or event of default on the part
of the Company under any other mortgage, indenture or instrument to which the
Company is a party, an Officers' Certificate specifying such default, Event of
Default or default and what action the Company is taking or proposes to take
with respect thereto.
Section 1007. Existence.
Subject to Article Eight, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
Section 1008. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
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Section 1009. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
Section 1010. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for Securities
of such series, the Company may, with respect to the Securities of any series,
omit in any particular instance to comply with any term, provision or condition
set forth in any covenant provided pursuant to Section 301(18), 901(2) or 901(7)
for the benefit of the Holders of such series or in any of Sections 1004, 1005,
1008 or 1009 if before the time for such compliance the Holders of at least 66_%
in principal amount of the Outstanding Securities of such series shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision or condition except to the extent
so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for such Securities) in accordance with
this Article.
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Section 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by a
Board Resolution or in another manner specified as contemplated by Section 301
for such Securities. In case of any redemption at the election of the Company of
less than all the Securities of any series (including any such redemption
affecting only a single Security), the Company shall, at least 60 days prior to
the Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the
principal amount of Securities of such series to be redeemed and, if applicable,
of the tenor of the Securities to be redeemed. In the case of any redemption of
Securities prior to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this Indenture, the
Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed (unless all
the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of any Security of such series, provided that
the unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption as aforesaid and, in case of any Securities selected for
partial redemption as aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with respect
to any redemption affecting only a single Security, whether such Security is to
be redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities
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redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities which has been or is to be redeemed.
Section 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price (and accrued interest, if any),
(3) the CUSIP or other identifying number of the Securities to be redeemed,
(4) if less than all the Outstanding Securities of any series consisting of
more than a single Security are to be redeemed, the identification (and, in the
case of partial redemption of any such Securities, the principal amounts) of
the particular Securities to be redeemed and, if less than all the Outstanding
Securities of any series consisting of a single Security are to be redeemed,
the principal amount of the particular Security to be redeemed,
(5) that on the Redemption Date the Redemption Price and accrued interest,
if any, will become due and payable upon each such Security to be redeemed and,
if applicable, that interest thereon will cease to accrue on and after said
date,
(6) the place or places where each such Security is to be surrendered for
payment of the Redemption Price and accrued interest, if any, and
(7) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date.
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Section 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.
Section 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
If a Global Security is so surrendered, the Company shall execute, and the
Trustee shall authenticate and deliver to the Depositary as shall be specified
in the Company Order to the Trustee with respect thereto, without service
charge, a Global Security in a denomination equal to and in exchange for the
unredeemed portion of the principal amount of the Global Security so
surrendered.
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ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms of
any Securities is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.
Section 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to any Securities of such series required to be made pursuant to the terms of
such Securities as and to the extent provided for by the terms of such
Securities; provided that the Securities to be so credited have not been
previously so credited. The Securities to be so credited shall be received and
credited for such purpose by the Trustee at the Redemption Price, as specified
in the Securities so to be redeemed, for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
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Section 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 days prior to each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.
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Section 1302. Defeasance and Discharge.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations with
respect to such Securities as provided in this Section on and after the date the
conditions set forth in Section 1304 are satisfied (hereinafter called
"Defeasance"). For this purpose, such Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Securities and to have satisfied all its other obligations under such Securities
and this Indenture insofar as such Securities are concerned (and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1304 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 304, 305, 306, 1002
and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, including, without limitation, the rights set forth under Section
607, and (4) this Article. Subject to compliance with this Article, the Company
may exercise its option (if any) to have this Section applied to any Securities
notwithstanding the prior exercise of its option (if any) to have Section 1303
applied to such Securities.
Section 1303. Covenant Defeasance.
Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, (1)
the Company shall be released from its obligations under Section 801(3),
Sections 1004, 1005, 1008 or 1009 and any covenants provided pursuant to Section
301(18), 901(2) or 901(7) for the benefit of the Holders of such Securities, and
(2) the occurrence of any event specified in Sections 501(5) (with respect to
any of Section 801(3), Sections 1004, 1005, 1008 or 1009 and any such covenants
provided pursuant to Section 301(18), 901(2) or 901(7)), 501(6) and 501(10)
shall be deemed not to be or result in an Event of Default, in each case with
respect to such Securities as provided in this Section on and after the date the
conditions set forth in Section 1304 are satisfied (hereinafter called "Covenant
Defeasance"). For this purpose, such Covenant Defeasance means that, with
respect to such Securities, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such specified Section (to the extent so specified in the case of Section
501(4)), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.
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Section 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section 1302 or
Section 1303 to any Securities or any series of Securities, as the case may be:
(1) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefits of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment, money in an
amount, or (C) a combination thereof, in each case sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or any such other qualifying
trustee) to pay and discharge, the principal of and any premium and interest on
such Securities on the respective Stated Maturities, in accordance with the
terms of this Indenture and such Securities. As used herein, "U.S. Government
Obligation" means (x) any security which is (i) a direct obligation of the
United States of America for the payment of which the full faith and credit of
the United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is uncondi tionally guaranteed as
a full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (y) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Govern ment Obligation which is specified in Clause (x) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal or interest evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply to any Securities
or any series of Securities, as the case may be, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this instrument, there has been a change in the
applicable Federal income tax law, in either case (A) or (B) to the effect
that, and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for Federal income tax purposes as a
result of the deposit, Defeasance and discharge to be effected with respect to
such Securities and will be subject to Federal income tax on the same amount,
in the same manner and at the same times as would be the case if such deposit,
Defeasance and discharge were not to occur.
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(3) In the event of an election to have Section 1303 apply to any Securities
or any series of Securities, as the case may be, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders
of such Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit and Covenant Defeasance to be effected with
respect to such Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the case if
such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an Officer's Certificate
to the effect that neither such Securities nor any other Securities of the same
series, if then listed on any securities exchange, will be delisted as a result
of such deposit.
(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such deposit
or, with regard to any such event specified in Sections 501(7) and (8), at any
time on or prior to the 90th day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until after such
90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to
have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Securities are in default within the meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in the trust
arising from such deposit constituting an investment company within the meaning
of the Investment Company Act unless such trust shall be registered under such
Act or exempt from registration thereunder.
(9) The Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent with
respect to such Defeasance or Covenant Defeasance have been complied with.
-71-
<PAGE>
Section 1305. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee pursuant to Section 1304 in respect of any Securities shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
such Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 1304 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.
Section 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in accordance
with this Article with respect to any Securities by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.
-72-
<PAGE>
In Witness Whereof, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Alco Capital Resource, Inc.
By /s/ Signature
................................
Attest:
/s/ Signature
...................
Chemical Bank
By /s/ Signature
.................................
Attest:
/s/ Signature
...................
-73-
<PAGE>
State of New York )
) ss.:
County of New York)
On the .... day of ..........., ...., before me personally came
............., to me known, who, being by me duly sworn, did depose and say that
he is .................... of ................................., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
.........................
State of New York )
) ss.:
County of New York)
On the .... day of ..........., ...., before me personally came
______________, to me known, who, being by me duly sworn, did depose and say
that he is a _____________ of ____________________________________________, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
.........................
-74-
<PAGE>
EXHIBIT 11
ALCO STANDARD CORPORATION
COMPUTATIONS OF EARNINGS PER SHARE
(in thousands, except earnings (loss) per share)
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- -----------------------
Fully Fully Fully
Primary Diluted(1) Primary Diluted(1) Primary Diluted(1)
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended September 30
Average Shares Outstanding
Common shares 110,342 110,342 105,382 105,382 93,314 93,314
Preferred stock
Considered common equivalents 10 10
Senior securities 9,016 2,066 2,372 96 96
Options 2,178 2,472 1,382 1,502
-------- -------- -------- -------- -------- --------
Total shares 112,520 121,830 107,458 107,764 94,792 94,912
======== ======== ======== ======== ======== ========
Income (Loss)
Continuing operations $ 219,273 $ 219,273 $ 70,609 $ 70,609 $ 7,615 $ 7,615
Discontinued operations (16,541) (16,541) (7,515) (7,515)
-------- -------- -------- -------- -------- --------
Net Income 202,732 202,732 70,609 70,609 100 100
Less: Preferred dividends 15,209 3,637 11,572 11,572 9,571 9,571
-------- -------- -------- -------- -------- --------
Net income available to
common shareholders $ 187,523 $ 199,095 $ 59,037 $ 59,037 $ (9,471) $ (9,471)
======== ======== ======== ======== ======== ========
Earnings (Loss) Per Share
Continuing operations $1.81 $1.77 $0.55 $0.55 ($0.02) ($0.02)
Discontinued operations (0.14) (0.14) (0.08) (0.08)
-------- -------- -------- -------- -------- --------
$1.67 $1.63 $0.55 $0.55 ($0.10) ($0.10)
======== ======== ======== ======== ======== ========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601 (b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
Note: All amounts give effect of common stock split announced October 17, 1995.
<PAGE>
EXHIBIT 12.1
ALCO STANDARD CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------
9/30/95 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 219,273 $ 70,609 $ 7,615 $ 104,217 $ 76,642
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 140,630 86,203 16,984 68,303 49,160
Fixed charges 130,684 101,779 86,615 70,168 68,748
--------- --------- --------- --------- ---------
Earnings, as adjusted (A) $ 490,587 $ 375,749 $ 113,752 $ 242,688 $ 194,550
========= ========= ========= ========= =========
Fixed charges
Other interest expense, including
interest on capital leases $ 96,054 $ 71,780 $ 63,851 $ 51,203 $ 53,173
Estimated interest component of
rental expense 34,630 29,999 22,764 18,965 15,575
--------- --------- --------- --------- ---------
Total fixed charges (B) $ 130,684 $ 101,779 $ 86,615 $ 70,168 $ 68,748
========= ========= ========= ========= =========
Ratio of earnings to fixed charges
(A) divided by (B) 3.8 3.7 1.3 * 3.5 2.8
=== === === === ===
</TABLE>
* Excluding the effect of the restructuring costs, the ratio of earnings to
fixed charges for fiscal 1993 is 3.3.
<PAGE>
EXHIBIT 12.2
ALCO STANDARD CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES (EXCLUDING CAPTIVE FINANCE SUBSIDIARIES)
(dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
9/30/95 1994 1993 1992 1991
----------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Earnings
Income (loss) from continuing
operations $ 204,801 $ 57,262 $ 11,025 $ 98,162 $ 73,051
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 129,067 77,792 11,512 64,592 46,221
Fixed charges 90,468 73,751 62,535 50,595 52,951
----------- ---------- --------- ---------- ---------
Earnings, as adjusted (A) $ 424,336 $ 325,963 $ 87,610 $ 213,349 $ 172,223
=========== ========== ========= ========== =========
Fixed charges
Other interest expense, including
interest on capital leases $ 55,838 $ 43,802 $ 40,189 $ 31,680 $ 37,426
Estimated interest component of
rental expense 34,630 29,949 22,346 18,915 15,525
----------- ----------- --------- ---------- ---------
Total fixed charges (B) $ 90,468 $ 73,751 $ 62,535 $ 50,595 $ 52,951
=========== =========== ========= ========== =========
Ratio of earnings to fixed charges
(A) divided by (B) 4.7 4.4 1.4 * 4.2 3.3
--- --- --- --- ---
</TABLE>
* Excluding the effect of the restructuring costs, the ratio of earnings to
fixed charges (excluding captive finance subsidiaries) for fiscal 1993 is
4.2.
<PAGE>
EXHIBIT 12.3
ALCO STANDARD CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------------------------------------
9/30/95 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 219,273 $ 70,609 $ 7,615 $ 104,217 $ 76,642
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 140,630 86,203 16,984 68,303 49,160
Fixed charges 130,684 101,779 86,615 70,168 68,748
---------- ---------- ---------- ---------- ----------
Earnings, as adjusted (A) $ 490,587 $ 375,749 $ 113,752 $ 242,688 $ 194,550
========== ========== ========== ========== ==========
Fixed charges and preferred stock dividends
Other interest expense, including
interest on capital leases $ 96,054 $ 71,780 $ 63,851 $ 51,203 $ 53,173
Estimated interest component of
rental expense 34,630 29,999 22,764 18,965 15,575
---------- ---------- ---------- ---------- ----------
Total fixed charges 130,684 101,779 86,615 70,168 68,748
Preferred stock dividends, as adjusted 24,974 19,002 15,846 129 228
Total fixed charges and preferred ---------- ---------- ---------- ---------- ----------
stock dividends (B) $ 155,658 $ 120,781 $ 102,461 $ 70,297 $ 68,976
========== ========== ========== ========== ==========
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (B) 3.2 3.1 1.1 * 3.5 2.8
--- --- --- --- ---
</TABLE>
* Excluding the effect of the restructuring costs, the ratio of earnings to
fixed charges and preferred stock dividends for fiscal 1993 is 2.8.
<PAGE>
EXHIBIT 12.4
ALCO STANDARD CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(EXCLUDING CAPTIVE FINANCE SUBSIDIARIES)
(dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------
9/30/95 1994 1993 1992 1991
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Earnings
Income (loss) from continuing
operations $ 204,801 $ 57,262 $ 11,025 $ 98,162 $ 73,051
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 129,067 77,792 11,512 64,592 46,221
Fixed charges 90,468 73,751 62,535 50,595 52,951
----------- ---------- ---------- ---------- -----------
Earnings, as adjusted (A) $ 424,336 $ 325,963 $ 87,610 $ 213,349 $ 172,223
=========== ========== ========== ========== ===========
Fixed charges and preferred stock dividends
Other interest expense, including
interest on capital leases $ 55,838 $ 43,802 $ 40,189 $ 31,680 $ 37,426
Estimated interest component of
rental expense 34,630 29,949 22,346 18,915 15,525
----------- ---------- ---------- ---------- -----------
Total fixed charges 90,468 73,751 62,535 50,595 52,951
Preferred stock dividends, as adjusted 24,811 19,002 15,613 129 227
Total fixed charges and preferred ----------- ---------- ---------- ---------- -----------
stock dividends (B) $ 115,279 $ 92,753 $ 78,148 $ 50,724 $ 53,178
=========== ========== ========== ========== ===========
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (B) 3.7 3.5 1.1 * 4.2 3.2
--- --- --- --- ---
</TABLE>
* Excluding the effect of the restructuring costs, the ratio of earnings to
fixed charges and preferred stock dividends (excluding captive finance
subsidiaries) for fiscal 1993 is 3.4.
<PAGE>
Exhibit 13
FINANCIAL SECTION
24 Management's Responsibility for Financial Reporting
24 Report of Ernst & Young LLP, Independent Auditors
25 Consolidated Financial Statements
40 Financial Review
44 Corporate Financial Summary
46 Segment Data
48 Quarterly Data
ALCO STANDARD CORPORATION AND SUBSIDIARIES 23
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Alco Standard Corporation is responsible for the preparation
and presentation of the financial statements and related financial information
included in this annual report. The financial statements include amounts that
are based on management's best estimates and judgements. These statements have
been prepared in conformity with generally accepted accounting principles
consistently applied and have been audited by Ernst & Young LLP, independent
auditors.
Management is also responsible for maintaining systems of internal
accounting controls that are designed to provide reasonable assurance as to the
integrity of the financial records and the protection of corporate assets. Alco
Standard Corporation supports an active program of auditing to monitor the
proper functioning of its systems. The reports issued by the Alco Audit
Department, as well as comment letters from Ernst & Young LLP, are reviewed
regularly by the Audit Committee of the Board of Directors, which is composed of
four directors who are not employees of the Company. The Audit Committee meets
periodically with Ernst & Young LLP, the Alco Audit Department and management to
review audit scope, timing and results.
/s/ Kurt E. Dinkelacker
Kurt E. Dinkelacker
Executive Vice President
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Alco Standard Corporation
We have audited the accompanying consolidated balance sheets of Alco Standard
Corporation and subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Alco Standard Corporation and subsidiaries at September 30, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 17, 1995,
except for the stock split described
in note 1, as to which the date is
November 9, 1995
24 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended September 30 (in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Net sales $9,794,186 $7,925,784 $6,387,078
Dividends, interest and other income 4,621 3,537 6,332
Finance subsidiaries (note 12) 93,019 66,731 51,149
- - ----------------------------------------------------------------------------------------------------------------------------
9,891,826 7,996,052 6,444,559
- - ----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of goods sold 7,326,721 5,884,819 4,799,757
Selling and administrative 2,109,148 1,765,483 1,378,814
Interest 55,838 43,802 40,189
Finance subsidiaries interest (note 12) 40,216 27,978 23,662
Restructuring costs (note 15) 175,000
- - ----------------------------------------------------------------------------------------------------------------------------
9,531,923 7,722,082 6,417,422
- - ----------------------------------------------------------------------------------------------------------------------------
LOSS FROM UNCONSOLIDATED AFFILIATE (note 4) (117,158) (2,538)
- - ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 359,903 156,812 24,599
TAXES ON INCOME (note 7) 140,630 86,203 16,984
- - ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 219,273 70,609 7,615
LOSS FROM DISCONTINUED OPERATIONS, net of taxes (note 2) (16,541) (7,515)
- - ----------------------------------------------------------------------------------------------------------------------------
NET INCOME 202,732 70,609 100
PREFERRED DIVIDENDS (note 6) 15,209 11,572 9,571
- - ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ 187,523 $ 59,037 $ (9,471)
============================================================================================================================
EARNINGS (LOSS) PER SHARE (note 1)
Continuing operations $ 1.81 $ .55 $ (.02)
Discontinued operations (.14) (.08)
- - ----------------------------------------------------------------------------------------------------------------------------
$ 1.67 $ .55 $ (.10)
============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 25
<PAGE>
CONSOLIDATED BALANCE SHEETS
September 30 (dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 90,106 $ 53,369
Accounts receivable, less allowance for doubtful accounts:
1995-$48,628; 1994-$29,428 (note 13) 1,175,699 915,495
Inventories (note 1) 747,895 609,974
Prepaid expenses and deferred taxes 146,867 131,638
- - -------------------------------------------------------------------------------------------------------
Total current assets 2,160,567 1,710,476
- - -------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS AND LONG-TERM RECEIVABLES 56,086 68,472
PROPERTY AND EQUIPMENT, at cost (note 5)
Land 30,717 29,308
Buildings and improvements 225,011 213,037
Machinery and equipment 489,507 411,377
- - -------------------------------------------------------------------------------------------------------
745,235 653,722
Less accumulated depreciation 375,285 299,775
- - -------------------------------------------------------------------------------------------------------
369,950 353,947
- - -------------------------------------------------------------------------------------------------------
OTHER ASSETS
Goodwill (note 1) 1,058,214 747,629
Miscellaneous 109,436 59,331
- - -------------------------------------------------------------------------------------------------------
1,167,650 806,960
- - -------------------------------------------------------------------------------------------------------
FINANCE SUBSIDIARIES ASSETS (note 12) 983,322 562,403
- - -------------------------------------------------------------------------------------------------------
$4,737,575 $3,502,258
=======================================================================================================
</TABLE>
26 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
September 30 (dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 26,319 $ 12,299
Notes payable (note 5) 280,832 91,999
Trade accounts payable 501,316 500,166
Accrued salaries, wages and commissions 115,874 96,987
Deferred revenues 172,900 134,485
Restructuring costs (note 15) 33,302 56,971
Other accrued expenses 259,534 164,023
- - -------------------------------------------------------------------------------------------------------
Total current liabilities 1,390,077 1,056,930
- - -------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (note 5) 325,314 340,771
DEFERRED TAXES AND OTHER LIABILITIES
Deferred taxes 96,082 32,192
Restructuring costs (note 15) 6,000 50,000
Other long-term liabilities 178,782 156,511
- - -------------------------------------------------------------------------------------------------------
280,864 238,703
- - -------------------------------------------------------------------------------------------------------
FINANCE SUBSIDIARIES LIABILITIES (note 12) 872,783 498,710
SHAREHOLDERS' EQUITY (note 6)
Series AA convertible preferred stock, no par value:
4,025,000 depositary shares issued and outstanding 201,924 199,912
Series BB conversion preferred stock, no par value:
3,877,200 depositary shares issued and outstanding 290,152
Common stock, no par value: authorized 150,000,000 shares;
issued 1995-112,182,000 shares;1994-109,044,000 shares 637,414 551,215
Retained earnings 765,309 642,634
Foreign currency translation adjustment (21,536) (22,550)
Cost of common shares in treasury: 1995-118,000 shares;
1994-148,000 shares (4,726) (4,067)
- - -------------------------------------------------------------------------------------------------------
1,868,537 1,367,144
- - -------------------------------------------------------------------------------------------------------
$4,737,575 $3,502,258
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 27
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Fiscal Year Ended September 30 (in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------------
Shares Amounts Shares Amounts Shares Amounts
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERIES AA CONVERTIBLE PREFERRED STOCK
Balance, beginning of year 4,025 $199,912 4,025 $197,900
Issued in public offering 4,025 $196,335
Dividend accretion 2,012 2,012 1,565
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 4,025 $201,924 4,025 $199,912 4,025 $197,900
=================================================================================================================================
SERIES BB CONVERSION PREFERRED STOCK
Issued in public offering 3,877 $290,152
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 3,877 $290,152
=================================================================================================================================
COMMON STOCK
Balance, beginning of year 109,044 $551,215 97,544 $259,031 97,544 $257,069
Issued in public offering 11,500 293,500
Mergers, acquisitions and other 3,138 81,478 (4,104)
Tax benefit relating to stock plans 4,721 2,788 1,962
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 112,182 $637,414 109,044 $551,215 97,544 $259,031
=================================================================================================================================
RETAINED EARNINGS
Balance, beginning of year $642,634 $651,373 $699,015
Net income 202,732 70,609 100
Cash dividends declared:
Series AA preferred stock, per share:
1995-$2.875; 1994-$2.875;
1993-$2.236 (11,572) (11,572) (9,571)
Series BB preferred stock, per share:
1995-$.938 (3,637)
Common stock, per share: 1995-$.52;
1994-$.50; 1993-$.48 (57,267) (52,222) (44,858)
Pooled companies, prior to merger (1,259) (2,408)
Credits (charges) from issuance of
treasury shares and other (6,322) (13,146) 6,687
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $765,309 $642,634 $651,373
=================================================================================================================================
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance, beginning of year $(22,550) $(23,640) $ (6,622)
Translation adjustment 1,014 (1,347) (17,018)
Sale of investment in unconsolidated affiliate 2,437
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $(21,536) $(22,550) $(23,640)
=================================================================================================================================
COST OF COMMON SHARES IN TREASURY
Balance, beginning of year 148 $ (4,067) 3,616 $(64,048) 5,646 $(89,099)
Purchases 2,783 (91,430) 1,774 (47,733) 1,512 (32,389)
Reissued for
Exercise of options (544) 16,652 (908) 18,027 (810) 13,063
Sales to employee stock plans (2,267) 74,067 (2,344) 47,799 (2,500) 40,564
Mergers, acquisitions and other (2) 52 (1,990) 41,888 (232) 3,813
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 118 $ (4,726) 148 $ (4,067) 3,616 $(64,048)
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
28 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended September 30 (in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 202,732 $ 70,609 $ 100
Additions (deductions) to reconcile net income to
net cash provided by operating activities
Depreciation 75,765 70,037 57,272
Amortization 33,959 26,791 22,137
Provision for losses on accounts receivable 21,900 19,668 19,702
Provision (benefit) for deferred income taxes 68,298 22,487 (55,042)
Change in deferred liabilities 32,513 2,816 15,232
Restructuring costs (60,364) (46,588) 169,939
Loss on sale of
Investment in unconsolidated affiliate 115,265
Alco Diversified Services 9,841
Changes in operating assets and liabilities
Decrease (increase) in
Accounts receivable (193,717) (74,369) (72,064)
Inventories (111,933) 3,154 (52,877)
Prepaid expenses (10,407) (17,873) (5,083)
Increase (decrease) in accounts payable,
deferred revenues, and accrued expenses 59,979 79,855 (52,563)
Miscellaneous (3,808) 364 (13,267)
- - -----------------------------------------------------------------------------------------------------------------------
Net cash provided 114,917 272,216 43,327
- - -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale (net of cash retained) of
Investment in unconsolidated affiliate 8,226
Alco Diversified Services 69,836
Cost of companies acquired, net of cash acquired (299,840) (46,705) (439,447)
Proceeds from sale of property and equipment 25,926 24,833 21,769
Expenditures for property and equipment (99,234) (107,969) (83,789)
Payments received on long-term receivables 6,837 9,251 5,369
Purchases of miscellaneous assets (51,445) (7,973) (10,702)
Finance subsidiaries receivables - Additions (696,217) (408,412) (278,503)
Finance subsidiaries receivables - Collections 247,798 210,969 166,274
- - -----------------------------------------------------------------------------------------------------------------------
Net cash used (866,175) (317,780) (549,193)
- - -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from
Issuance of long-term debt 42,813 20,835 319,338
Issuance of Series BB conversion preferred stock, net 290,152
Issuance of common stock, net 293,500
Issuance of Series AA convertible preferred stock, net 196,335
Option exercises and sale of treasury shares 91,848 69,914 62,284
Sale of finance subsidiaries lease receivables 66,677 125,000
Life insurance borrowings 3,342 31,055
Issuance (repayment) of short-term borrowings, net 158,569 (68,278) 163,563
Proceeds (repayments) of accounts receivable sold 10,741 14,985 (3,440)
Long-term debt repayments (66,956) (369,238) (241,827)
Finance subsidiaries debt - Issuance 534,717 248,098 228,307
Finance subsidiaries debt - Repayments (182,014) (196,308) (124,201)
Dividends paid (70,464) (59,392) (49,995)
Purchase of treasury shares (91,430) (47,733) (32,389)
- - -----------------------------------------------------------------------------------------------------------------------
Net cash provided 787,995 62,438 517,975
- - -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 36,737 16,874 12,109
- - -----------------------------------------------------------------------------------------------------------------------
CASH AT BEGINNING OF YEAR 53,369 36,495 24,386
- - -----------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 90,106 $ 53,369 $ 36,495
=======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Alco Standard
Corporation and its wholly owned subsidiaries (the Company). Significant
intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Revenues are recorded at the time of shipment of products or performance of
services. Revenues from service contracts are recognized in earnings over the
term of the contract. The present values of payments due under sales-type lease
contracts are recorded as revenues and cost of goods sold is charged with the
book value of the equipment at the time of shipment. Future interest income is
deferred and recognized over the related lease term.
Inventories
Inventories are stated at the lower of cost or market and consist of finished
goods available for sale. The Company uses the LIFO method of determining cost
for approximately 60% of its inventories and the FIFO method for the balance. If
the FIFO method of accounting had been used for all inventories, these balances
would have been $92,590,000 higher at September 30, 1995 and $36,877,000 higher
at September 30, 1994.
Goodwill
Substantially all goodwill (excess of cost of acquired companies over equity) is
amortized over 40 years by the straight-line method. The recoverability of
goodwill is evaluated at the operating unit level by an analysis of operating
results and consideration of other significant events or changes in the business
environment. If an operating unit has current operating losses and based upon
projections there is a likelihood that such operating losses will continue, the
Company will evaluate whether impairment exists on the basis of undiscounted
expected future cash flows from operations before interest for the remaining
amortization period. If impairment exists, the carrying amount of the goodwill
is reduced by the estimated shortfall of cash flows.
Depreciation
Properties and equipment are depreciated over their useful lives by the
straight-line method.
Earnings (Loss) Per Share
Earnings (loss) per share are based on 112,520,000 weighted average shares in
1995, 107,458,000 shares in 1994 and 94,792,000 shares in 1993, and include the
dilutive effect of common stock equivalents, principally stock options.
Reclassifications
Certain prior-year amounts have been reclassified to conform with the current-
year presentation.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are translated into US
dollars at fiscal year-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the fiscal year. The
resulting translation adjustments are recorded as a component of shareholders'
equity.
Accounting Changes
During fiscal 1994, the Company changed its methods of accounting for income
taxes and retiree healthcare benefits. The cumulative effect of adopting each of
these new accounting methods was immaterial.
Pending Accounting Change
In March 1995, the FASB issued Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
in the first quarter of fiscal 1996 and, based on current circumstances, does
not believe the effect of adoption will be material.
Interest Rate Swap Agreements
The Company has entered into several interest rate swap agreements as a means of
managing its interest rate exposure. These agreements have the effect of
converting certain of the Company's variable rate obligations to fixed rate
obligations. Net amounts paid or received are reflected as adjustments to
interest expense.
Stock Split
All common shares and per share amounts have been adjusted to give retroactive
effect to a two-for-one stock split effected in the form of a stock dividend
distributed on November 9, 1995 to holders of record on October 27, 1995.
2 DISCONTINUED OPERATIONS AND DIVESTITURES
The Company has owned several manufacturing and industrial businesses, all of
which have been sold. There are currently environmental remediation claims
pending for manufacturing or landfill sites in the United States that relate to
these discontinued operations. As a result of several recent environmental
remediation claims, and increased estimated costs associated with existing
environmental remediation sites, primarily related to discontinued manufacturing
operations divested by the Company in 1991 and prior, the Company took a fourth
quarter charge in fiscal 1995 to increase its liabilities for environmental
remediation. The discontinued operations charge was $23,630,000 ($16,541,000 net
of tax) or $.14 per share. The adjustment reflects management's best estimate,
based on information currently available, of costs to be incurred for existing
and probable environmental claims of discontinued operations.
In July 1993, the Company completed the sale of the Alco Diversified
Services (ADS) assets of approximately $102,000,000 to an investor group for
$84,000,000 in cash and notes. Accordingly, ADS results for fiscal 1993 are
reported in the accompanying Statements of Income as discontinued operations. In
fiscal 1993, ADS had revenues of $153,063,000, an operating loss of $3,946,000,
a loss on disposal of $9,841,000, and tax benefits of $6,272,000, resulting in a
net loss from discontinued operations of $7,515,000.
30 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
2. DISCONTINUED OPERATIONS AND DIVESTITURES (CONTINUED)
In September 1995, the Company divested Central Products Company for
$80,000,000 in cash and notes, and recorded a continuing operations pretax gain
of approximately $4,000,000 on the sale. Also included in the Company's
continuing operations and related to Central Products Company are fiscal 1995
revenues of $120,219,000 and net income from operations of $2,668,000.
During 1995, the Company agreed to pay $10,000,000 to settle a claim by a
former subsidiary, which had asserted that the Company was liable for certain
employee liabilities. This amount has been primarily charged against existing
reserves for discontinued operations. The Company paid $5,000,000 during 1995
with the remaining $5,000,000 to be paid over the next four years.
3 ACQUISITIONS
In June 1995, Erskine Limited, a U.K. subsidiary of the Company, purchased all
of the outstanding shares of Southern Business Group PLC (renamed A:Copy (UK)
PLC on October 1, 1995), for approximately $133,800,000. A:Copy (UK) sells,
leases, services and remanufactures copiers and other office equipment in
Southern England. Total assets acquired were $163,359,000, which includes
goodwill of $119,556,000. In addition, 111 other acquisitions were made in
fiscal 1995 for an aggregate purchase price of $266,773,000 in cash, notes and
stock. Total assets related to these 111 acquisitions were $368,836,000,
including goodwill of $244,668,000. The Company also issued 675,106 common
shares for two acquisitions accounted for as poolings-of-interests and their
results of operations were included from the beginning of the fiscal year.
$4,998,000 of additional cash was paid and capitalized in fiscal 1995 relating
to prior-years' acquisitions.
In fiscal 1994, the Company issued 1,397,350 common shares from treasury
for three acquisitions accounted for as poolings-of-interests and their results
of operations were included from the beginning of the fiscal year. Also during
fiscal 1994, 47 other acquisitions were made for an aggregate purchase price of
$62,009,000 in cash, notes and stock. Total assets related to these 47
acquisitions were $111,099,000, including goodwill of $55,165,000. An additional
$4,900,000 was paid and capitalized in fiscal 1994 relating to prior-years'
acquisitions.
In June 1993, the Company acquired over 90% of the outstanding shares of
Erskine House Group PLC (Erskine), a United States and European distributor of
office products, and the remaining outstanding shares were acquired during the
fourth quarter of fiscal 1993. The purchase price was approximately
$103,000,000, plus the assumption of approximately $101,000,000 of debt and
redeemable preferred stock. Total assets acquired were $278,975,000, including
goodwill of $180,408,000.
In July 1993, the Company acquired the paper distribution businesses of
Butler Paper Company for a purchase price of $140,000,000. Total assets acquired
were $277,843,000 and negative goodwill (excess of acquired equity over cost) of
approximately $37,157,000 was allocated to fixed assets.
During fiscal 1993, 21 other acquisitions were made for an aggregate
purchase price of $50,606,000 in cash and stock. Total assets acquired were
$68,878,000 including goodwill of $30,645,000. An additional $30,236,000 was
paid and capitalized in 1993 relating to prior-years' acquisitions.
All acquisitions, unless otherwise noted, are included in results of
operations from their dates of acquisition.
Had the purchase acquisitions been made at the beginning of the fiscal year
prior to their acquisition and the poolings been made on October 1, 1992, pro
forma results from continuing operations would have been:
Fiscal Year Ended September 30
(in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $10,294,905 $8,753,729 $7,754,354
Income from
continuing
operations 256,452 122,244 25,636
Earnings per share $1.98 $.81 $.13
- - --------------------------------------------------------------------------------
</TABLE>
The pro forma results assume that $290,000,000 of the purchase price of
1995 acquisitions was funded by the proceeds from issuance of Series BB
conversion preferred stock, while $285,000,000 of the total purchase price of
1994 and 1993 acquisitions was funded by the proceeds from issuance of common
stock in December 1993 and $201,250,000 of the purchase price of 1993
acquisitions was funded by the proceeds from issuance of the Series AA
convertible preferred stock.
4 LOSS FROM UNCONSOLIDATED AFFILIATE
In October 1992, the Company purchased a 49.9% interest in IMM Office Systems
GmbH (IMMOS), a European distributor of office products, for $122,500,000 in
cash, which included goodwill of $107,478,000. In September 1994, the Company
completed the sale of this investment 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 profitable operations in
Denmark and France and retained limited operations in Germany. The Company
recognized a loss on the sale of its investment in IMMOS in the quarter ended
June 30, 1994, recording a pretax loss of $115,300,000 ($95,100,000, net of tax)
equating to a loss per share of $.87 in the quarter ended June 30, 1994 and $.88
for the fiscal year ended September 30, 1994. This loss represents the write-off
of the Company's investment in IMMOS, plus certain transactional costs less the
cash proceeds from the sale together with related tax benefits. In addition, the
Company recorded losses totaling $1,900,000, which represent the Company's share
of IMMOS operating losses for the first half of fiscal 1994.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 31
<PAGE>
5 NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consisted of:
<TABLE>
<CAPTION>
September 30 (in thousands) 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Notes payable to banks at
average interest rate:
1995-6.8%; 1994-5.5% $279,496 $ 91,419
Other notes payable at
average interest rate:
1995-7.2%; 1994-7.1% 1,336 580
- - -------------------------------------------------------------------------------
$280,832 $ 91,999
===============================================================================
</TABLE>
Long-term debt consisted of:
<TABLE>
<CAPTION>
September 30 (in thousands) 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Bond issue at interest rate of
8 7/8% due 2001 $150,000 $150,000
Private placement debt at
average interest rate:
1995-8.3%; 1994-8.2%;
due 1998 50,000 70,000
Notes payable to insurance
company at average interest
rate of 9.7% due 1997-2005 60,000 60,000
Industrial revenue bonds at
average interest rate:
1995-5.1%; 1994-8.4%;
due 1996-2001 10,328 10,537
Sundry notes, bonds and
mortgages at average
interest rate of 7.5%
due 1996-2005 51,893 38,341
Present value of capital lease
obligations (gross amount:
1995-$45,894; 1994-$40,928) 29,412 24,192
- - -------------------------------------------------------------------------------
351,633 353,070
Less current maturities 26,319 12,299
- - -------------------------------------------------------------------------------
Long-term debt $325,314 $340,771
===============================================================================
</TABLE>
Long-term debt matures in fiscal years: 1996-$26,319,000; 1997-$17,507,000;
1998-$59,432,000; 1999-$7,791,000; 2000-$5,139,000; 2001-2005-$235,445,000.
On December 1, 1994, the Company entered into a credit agreement with 14
banks under which it may borrow up to $500,000,000. The agreement has two parts:
$150,000,000 is available for 364 days subject to annual renewal for successive
364-day periods through December 1, 1999; the other $350,000,000 terminates on
December 1, 1999. Facility fees of 8 basis points per annum on the 364-day
portion and 10 basis points per annum on the five-year portion are charged for
these commitments. The agreement provides that loans may be made under either
domestic or Eurocurrency notes at rates computed under a selection of rate
formulas including prime or Eurocurrency rates.
The Company may also borrow up to $100,000,000 or the Canadian dollar
equivalent under its amended April 1993 credit agreement with four banks. The
agreement has two parts: $50,000,000 is available for 364 days, subject to
annual renewal through April 19, 1996; the other $50,000,000 is available
through April 21, 1996. Facility fees of 8 basis points per annum on the 364-day
portion and 10 basis points per annum for the three-year portion are charged for
these commitments. Loans under the agreement may be made under a selection of
rate formulas including prime, the Eurodollar rate in the United States or
Canada, or the Canadian Bankers Acceptance rate.
At September 30, 1995, short-term borrowings supported by the combined
lines of credit totaled $252,496,000 leaving $347,504,000 unused and available.
The Company has entered into an agreement to borrow $55,000,000 in November
1995 with an interest rate of 7.15% maturing in November 2005. The proceeds will
be used to repay short-term notes payable.
The Company is in compliance with all covenants, including financial, for
all loan agreements. The industrial revenue bonds, capital lease obligations and
mortgages are secured by property and equipment that had a net book value of
$31,978,000 at September 30, 1995.
Interest paid, including finance subsidiaries, approximated $87,000,000,
$72,000,000 and $63,500,000 for fiscals 1995, 1994 and 1993, respectively.
32 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
6 SHAREHOLDERS' EQUITY
On July 25, 1995, the Company sold 3,877,200 depositary shares, each
representing 1/100th of a share of Series BB conversion preferred stock, for
$77.375 per depositary share totaling $299,998,350, and used the net proceeds to
reduce debt. Dividends are cumulative at $5.04 per year per depositary share.
This series of preferred stock has one vote per share (equivalent to 1/100 vote
per depositary share) and has a liquidation preference of $77.375 per depositary
share plus an amount equal to accrued and unpaid dividends. Prior to October 1,
1998, each depositary share is convertible at the option of the holder into
1.6393 shares of common stock of the Company. On October 1, 1998, 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 (a) 1.6393 shares of common stock per depositary
share if the current market price of the Company's common stock is greater than
or equal to $47.20 per share, (b) between 1.6393 and two shares, equivalent to
the current market price of the common stock if the stock price is between
$47.20 and $38.6875, and (c) two shares of common stock per depositary share if
the current market price of the Company's common stock is at or below $38.6875
per share. The current market price to be used in the conversion calculation
will be the average closing price per share of common stock of the Company on
the twenty trading days immediately prior to, but not including, October 1,
1998. At September 30, 1995, 7,754,400 shares of common stock were reserved for
conversion of the Series BB conversion preferred stock.
In December 1993, the Company issued 11,500,000 shares of common stock in a
public offering. The net proceeds from the offering of $293,500,000 were used
for repayment of debt. Income and earnings per share from continuing operations
for fiscal 1993 would have been $13,288,000 and $.03, respectively, if the
offering had occurred on October 1, 1992. Income from continuing operations for
fiscal 1994 would have been $71,896,000 and earnings per share would have been
unchanged if the offering had occurred on October 1, 1993.
On December 22, 1992, the Company sold 4,025,000 depositary shares, each
representing 1/100th of a share of Series AA convertible preferred stock at
$50.00 per depositary share totaling $201,250,000, and used the net proceeds to
reduce debt. Dividends are cumulative at $2.375 per year per depositary share
through January 2, 1996 and $3.25 per depositary share per year thereafter. The
dividend is accrued on a straight-line basis ($2.875 per depositary share) and
accretion for the difference between the accrued and cash dividend amounting to
$5,589,000 at September 30, 1995 has been credited to Series AA convertible
preferred stock. This series of preferred stock has one vote per share
(equivalent to 1/100 vote per depositary share) and is convertible at a rate of
2.2402 shares of the Company's common stock per depositary share at any time.
The Series AA convertible preferred stock, unless previously converted into
common stock, is redeemable by issuance of common stock at the Company's option
at the rate of 2.2402 shares of common stock per depositary share (with certain
limitations) on or after January 9, 1996 through January 9, 2000. On or after
January 9, 2000, this series of preferred stock is redeemable at the Company's
option at $50.00 per depositary share. Upon liquidation, the Series AA
convertible preferred stock has preference equivalent to $50.00 per depositary
share plus an amount equal to accrued and unpaid dividends. At September 30,
1995, 9,016,806 shares of common stock were reserved for conversion of the
Series AA convertible preferred stock.
Employee stock options are granted at the market price at dates of grant
and expire in ten years. The proceeds of options exercised are credited to
shareholders' equity. There are no charges or credits to income in connection
with these options. A 1989 plan for the Company's directors enables participants
to receive their annual directors' fees in the form of options to purchase
shares of common stock at a discount. The discount is equivalent to the annual
directors' fees and is charged to expense.
Changes in common shares under option were:
<TABLE>
<CAPTION>
Directors Employees
- - ----------------------------------------------------------------------------------------------------------------
Shares Option Price Range Shares Option Price Range
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 30, 1992 173,366 $ 9.78 to $14.34 4,511,194 $ 8.06 to $19.13
Granted 49,338 15.09 to 20.13 1,135,634 17.63 to 20.13
Exercised (34,448) 9.78 to 13.17 (775,832) 8.06 to 19.13
Cancelled (423,434) 11.44 to 20.13
- - ----------------------------------------------------------------------------------------------------------------
September 30, 1993 188,256 9.78 to 20.13 4,447,562 8.06 to 20.13
Granted 34,832 21.14 to 28.19 924,670 24.50 to 31.00
Exercised (42,630) 9.78 to 20.13 (865,482) 8.06 to 20.13
Cancelled (1,520) 15.09 (21,102) 8.06 to 28.81
- - ----------------------------------------------------------------------------------------------------------------
September 30, 1994 178,938 9.78 to 28.19 4,485,648 9.09 to 31.00
Granted 32,604 24.56 to 32.75 789,632 28.62 to 40.31
Exercised (39,852) 9.78 to 15.09 (814,398) 9.09 to 28.19
Cancelled (46,214) 14.31 to 32.81
- - ----------------------------------------------------------------------------------------------------------------
September 30, 1995 171,690 $ 9.78 to $32.75 4,414,668 $ 9.09 to $40.31
================================================================================================================
</TABLE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES 33
<PAGE>
6. SHAREHOLDERS' EQUITY (CONTINUED)
At September 30, 1995, options to purchase 2,291,248 shares were
exercisable (1995: employees - 2,144,162, directors - 147,086; 1994: employees -
2,199,040, directors - 144,106) and 6,028,870 shares were available for grant
(1995: employees - 5,131,744, directors - 897,126; 1994: employees - 367,534,
directors - 929,730).
In fiscal 1995, with Board of Director and shareholder approvals, the
Company amended and restated its Long Term Incentive Compensation Plan (LTIP).
The plan is intended to motivate, recognize and reward key management employees
for long-term performance at the corporate or group level. Under the plan, key
management employees are granted stock awards to receive company stock, which
are earned upon achieving predetermined performance objectives during three-year
intervals. The value of these awards is charged to expense over the related plan
period. In fiscal 1995, the Company granted 602,530 stock awards under the plan,
including 403,824 to replace stock options granted under the original LTIP. At
September 30, 1995, 128,818 of these awards had been earned.
One preferred share purchase right (Right) exists for each outstanding
share of common stock (the Shares). The Rights become exercisable ten days after
the earlier of a public announcement by another entity that it has acquired
beneficial ownership of 20% or more of the Shares or a public announcement of
another entity's intention to commence a tender offer to acquire beneficial
ownership of 30% or more of the Shares.
When the Rights become exercisable, each Right will entitle a holder to
purchase 1/100th of a share of Series 12 preferred stock for an exercise price
of $75. If the Company consolidates or merges with another entity, or sells
assets that aggregate 50% of its consolidated assets, or generates more than 50%
of its consolidated operating income or cash flow, then each Right holder will
have the right to purchase, for the exercise price, a number of shares of the
other entity having a then-current market value equal to twice the exercise
price.
If another entity owning 20% or more of the Shares (a) engages in certain
transactions with the Company, or (b) causes the Company to forgo or reduce
quarterly dividends or take an action that would result in a more than 2%
increase in the other entity's proportionate share of the outstanding shares; or
if another entity becomes the beneficial owner of 30% or more of the outstanding
shares; then each Right holder (other than the other entity) will have the right
to purchase, for the exercise price, a number of shares of the Company having a
then-current market value equal to twice the exercise price.
The Rights are redeemable by the Company prior to becoming exercisable at
$.05 per Right and expire on February 10, 1998.
7 TAXES ON INCOME - CONTINUING OPERATIONS
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 permitted
the Company to recognize the benefit of certain deferred tax assets that could
not be recognized under the previous standard, SFAS No. 96, which the Company
adopted in fiscal 1988. The cumulative effect of adopting SFAS No. 109 as of
October 1, 1993 was to increase net income by $1,421,000 or $.01 per share in
fiscal 1994. As permitted under SFAS No. 109, prior-years' financial statements
have not been restated.
Provision for income taxes:
Fiscal Year Ended September 30 (in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------
Current Deferred Current Deferred Current Deferred
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal $38,904 $66,793 $46,349 $29,421 $57,200 $(48,149)
Foreign 10,869 9,911 11,862 (7,855) 6,602 (948)
State 15,470 (1,317) 5,505 921 3,706 (1,427)
- - --------------------------------------------------------------------------------------------------------------------------
Taxes on income $65,243 $75,387 $63,716 $22,487 $67,508 $(50,524)
==========================================================================================================================
</TABLE>
34 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
7. TAXES ON INCOME - CONTINUING OPERATIONS (CONTINUED)
The components of deferred income tax assets and liabilities, including
finance subsidiaries, were as follows:
<TABLE>
<CAPTION>
September 30 (in thousands) 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ 74,118 $ 62,487
Lease income recognition 119,783 82,837
Total deferred tax liabilities 193,901 145,324
- - -------------------------------------------------------------------------------
Deferred tax assets:
Nondeductible reserves 143,257 145,067
Net operating loss carryforwards 29,516 29,510
Other-net 1,511 12,092
- - -------------------------------------------------------------------------------
Total deferred tax assets 174,284 186,669
Valuation allowance (31,048) (28,587)
- - -------------------------------------------------------------------------------
Net deferred tax assets 143,236 158,082
- - -------------------------------------------------------------------------------
Net deferred tax liabilities (assets) $ 50,665 $(12,758)
===============================================================================
</TABLE>
Net operating loss carryforwards consist primarily of foreign carryforwards
of $50,858,000 principally expiring in years 1996 through 2000.
Deferred taxes resulting from temporary differences between financial and
tax accounting, which have not been restated for SFAS No.109 as of September 30,
1993, were as follows (in thousands):
<TABLE>
<S> <C>
Depreciation $4,741
Lease income recognition 11,993
Nondeductible reserves (67,115)
Other (143)
- - -------------------------------------------------------------------------------
Deferred taxes $(50,524)
===============================================================================
</TABLE>
Components of the effective income tax rate:
Fiscal Year Ended September 30
<TABLE>
<CAPTION>
1995 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal 35.0% 35.0% 34.8%
State 2.6 2.3 6.1
Goodwill 1.8 3.5 16.1
Foreign .2 1.0 8.2
Effect of sale of IMMOS 12.9
Other (.5) .3 3.8
- - -------------------------------------------------------------------------------
Effective income tax rate 39.1% 55.0% 69.0%
===============================================================================
</TABLE>
The effective tax rate for the fiscal year ended September 30, 1994,
excluding the effects of the loss on the sale of the investment in IMMOS, is
39.1%. The effective tax rate for the fiscal year ended September 30, 1993,
excluding the effects of the restructuring costs, is 39.6%.
Net income tax payments for all operations amounted to $30,436,000, net of
$30,000,000 refund, in 1995, $62,270,000 in 1994 and $77,487,000 in 1993.
Undistributed earnings of the Company's foreign subsidiaries were
approximately $45,656,000 at September 30, 1995. Those earnings are considered
to be indefinitely reinvested and, therefore, no provision has been recorded for
U.S. federal and state income taxes.
8 PENSION AND STOCK PURCHASE PLANS
The Company sponsors defined benefit pension plans for the majority of its
employees. The benefits generally are based on years of service and
compensation. The Company funds at least the minimum amount required by
government regulations. The cost of these plans, together with contributions to
multiemployer and defined contribution pension plans ($4,915,000 in 1995,
$6,880,000 in 1994 and $5,134,000 in 1993) charged to continuing operations
amounted to $25,396,000 for 1995, $18,283,000 for 1994 and $12,684,000 for 1993.
The components of net periodic pension cost for the Company-sponsored
defined benefit pension plans are:
Fiscal Year Ended September 30 (in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 21,506 $ 16,991 $ 11,123
Interest cost on
projected benefit
obligation 22,620 18,507 13,416
Actual return on
plan assets (60,170) (11,020) (34,238)
Net amortization
and deferral 36,525 (13,075) 17,249
- - -------------------------------------------------------------------------------
Net pension cost $ 20,481 $ 11,403 $ 7,550
===============================================================================
</TABLE>
Assumptions used in accounting for the Company-sponsored defined benefit
pension plans were:
<TABLE>
<CAPTION>
1995 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average
discount rates 7.50% 7.75% 7.25%
Rates of increase in
compensation levels 6.00% 6.25% 5.75%
Expected long-term
rate of return on
assets 10.00% 10.00% 10.00%
</TABLE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES 35
<PAGE>
8. PENSION AND STOCK PURCHASE PLANS (CONTINUED)
The funded status and amounts recognized in the Consolidated Balance Sheets for
the Company-sponsored defined benefit pension plans are:
<TABLE>
<CAPTION>
September 30 (in thousands) 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations
Vested $260,292 $237,874
===============================================================================
Accumulated $266,176 $241,069
===============================================================================
Projected $325,210 $277,500
Plan assets at fair value 285,788 256,610
- - -------------------------------------------------------------------------------
Plan assets less than
projected benefits (39,422) (20,890)
Items not yet recognized
Net gain (12,432) (3,873)
Prior service cost 19,409 11,657
Net asset existing
at transition date (14,424) (16,397)
Adjustment required to
recognize minimum liability (7,406) (8,385)
- - -------------------------------------------------------------------------------
Net pension liability $(54,275) $(37,888)
===============================================================================
</TABLE>
Substantially all of the plan assets at September 30, 1995 are invested in
listed stocks, bonds and government securities including common stock of the
Company of $67,800,000.
The Company increased its net pension liability by $1,048,000 and
$5,949,000 in fiscal 1995 and 1994, respectively, due to early retirement
benefits granted to employees in connection with the Unisource restructuring
program (note 15).
The majority of the Company's employees were eligible to participate in the
Company's Stock Participation Plan, under which they were permitted to invest 2%
to 6% of regular compensation before taxes. The Company contributed an amount
equal to two-thirds of the employees' investments and all amounts were invested
in the Company's common shares. Effective October 2, 1995, the Stock
Participation Plan was replaced by a Retirement Savings Plan (RSP). The RSP will
allow employees to invest 1% to 16% of regular compensation before taxes in six
different investment funds. The Company will contribute an amount equal to two-
thirds of the employees' investments, up to 4% of the employees' regular
compensation. All Company contributions are invested in the Company's common
shares. Employees vest in a percentage of the Company's contribution after two
years of service, with full vesting at the completion of five years of service.
There is a similar plan for eligible management employees. The cost of the stock
participation plans charged to continuing operations amounted to $26,885,000 in
1995, $23,484,000 in 1994 and $16,174,000 in 1993.
9 SEGMENT REPORTING
A description of each of the Company's industry segments appears elsewhere in
this report. Dollar amounts for revenues, income before taxes, assets, capital
expenditures, and depreciation and amortization for each segment for 1995, 1994
and 1993 are reported on page 46.
Revenues, income before taxes and identifiable assets by geographic area
from continuing operations for the fiscal years ended September 30 are as
follows:
<TABLE>
<CAPTION>
(in millions) 1995 1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Domestic $8,805.6 $7,153.8 $5,649.8
Foreign 1,093.4 843.1 799.9
- - ------------------------------------------------------------------------------
Operating 9,899.0 7,996.9 6,449.7
Eliminations and
nonallocated (7.2) (.9) (5.1)
- - ------------------------------------------------------------------------------
Total $9,891.8 $7,996.0 $6,444.6
==============================================================================
INCOME BEFORE TAXES
Domestic $ 407.9 $ 332.6 $ 73.5
Foreign 69.0 29.1 27.3
- - ------------------------------------------------------------------------------
Operating 476.9 361.7 100.8
Unconsolidated affiliate (117.2) (2.5)
Nonallocated (117.0)* (87.7)* (73.7)*
- - ------------------------------------------------------------------------------
Total $359.9 $156.8 $24.6
==============================================================================
ASSETS
Domestic $3,775.1 $2,787.7 $2,547.5
Foreign 792.3 572.5 536.4
- - ------------------------------------------------------------------------------
Operating 4,567.4 3,360.2 3,083.9
Unconsolidated affiliate 118.1
Nonallocated 170.2 142.1 146.9
- - ------------------------------------------------------------------------------
Total $4,737.6 $3,502.3 $3,348.9
==============================================================================
</TABLE>
* Includes interest costs and net corporate expenses.
Included in income before taxes for fiscal 1993 are restructuring costs of
$171,500,000 for domestic operations and $3,500,000 for foreign operations.
36 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
10 LEASES
Equipment acquired under capital leases is included in property and equipment in
the amount of $38,171,000 in 1995 and $37,160,000 in 1994 and the related
amounts of accumulated amortization are $15,657,000 in 1995 and $15,888,000 in
1994. Related obligations are in long-term debt and related amortization is
included in depreciation.
At September 30, 1995, future minimum payments under noncancelable
operating leases with initial or remaining terms of more than one year were:
1996-$88,430,000; 1997-$76,041,000; 1998-$61,576,000; 1999-$47,943,000; 2000-
$33,192,000; thereafter-$75,175,000.
Total rental expense was $103,891,000 in 1995, $89,998,000 in 1994 and
$68,293,000 in 1993.
11 CONTINGENCIES
There are contingent liabilities for taxes, guarantees, lawsuits, environmental
remediation claims relating to continuing and discontinued operations (see note
2) and various other matters occurring in the ordinary course of business. On
the basis of information furnished by counsel and others, management believes
that none of these contingencies will materially affect the Company.
12 FINANCE SUBSIDIARIES
The Company's wholly owned finance subsidiaries are engaged in purchasing office
equipment from Company dealers and leasing the equipment to customers under
direct financing leases.
Summarized financial information of the finance subsidiaries is as follows:
<TABLE>
<CAPTION>
September 30 (in thousands) 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C>
Future minimum lease
payments receivable $1,084,967 $ 645,083
Less: Unearned income (165,492) (109,416)
- - -------------------------------------------------------------------------------
Lease receivables 919,475 535,667
Accounts receivable and other assets 63,847 26,736
- - -------------------------------------------------------------------------------
Finance subsidiaries assets $ 983,322 $ 562,403
===============================================================================
Debt at average interest rate:
1995-6.8%; 1994-5.8%
due 1996-2000 $ 817,585 $ 464,882
Other liabilities 55,198 33,828
- - -------------------------------------------------------------------------------
Finance subsidiaries liabilities $ 872,783 $ 498,710
===============================================================================
</TABLE>
Net income of the finance subsidiaries included in the Company's
consolidated results of operations was $14,472,000 in 1995, $13,347,000 in 1994,
and $8,180,000 in 1993.
At September 30, 1995, future minimum payments to be received under direct
financing leases were: 1996-$396,931,000; 1997-$334,613,000; 1998-$206,212,000;
1999-$103,880,000; 2000-$42,248,000; thereafter-$1,083,000.
On June 30, 1995, Alco Capital Resource, Inc. (Alco Capital), a wholly
owned finance subsidiary of the Company, increased the amount available to be
offered under its medium term notes program by $1,000,000,000 or the equivalent
thereof in foreign currency. The medium term note program effective July 1, 1994
of $500,000,000 was fully subscribed as of July 1995. The program allows Alco
Capital to offer to the public from time to time medium term notes having an
aggregate initial offering price not exceeding the total program amount. These
notes will be offered at varying maturities of nine months or more from their
dates of issue and may be subject to redemption at the option of Alco Capital or
repayment at the option of the holder, in whole or in part, prior to the
maturity date in conjunction with meeting specified provisions. Interest rates
are determined based on market conditions at the time of issuance. As of
September 30, 1995, $602,000,000 of medium term notes are outstanding with a
weighted average interest rate of 7.0%.
Alco Capital has followed a policy of matching the maturities of borrowed
funds to the underlying direct financing leases in order to minimize the impact
of interest rate changes on its operations. Alco Capital has therefore entered
into interest rate swap agreements to eliminate the impact of interest rate
changes on its variable rate notes payable. The interest rate swap agreements
effectively convert the variable rate notes into fixed rate obligations. During
fiscal 1995, there were two variable rate notes outstanding and two related
interest rate swap agreements on a principal/notional amount of $57,000,000. The
weighted average interest rate on these variable rate notes and related interest
rate swap agreements was 6.58% and 4.76%, respectively, during 1995.
In September 1994, Alco Capital entered into an agreement to sell, under an
asset securitization program, an undivided ownership interest in $125,000,000 of
eligible direct financing lease receivables. The agreement, which expires in
September 1996, contains limited recourse provisions that require Alco Capital
to assign an additional undivided interest in leases to cover any potential
losses to the purchaser due to uncollectible leases. As collections reduce
previously sold interests, new leases can be sold up to $125,000,000. The
weighted average interest rate on the agreement, which is partially fixed by
three interest rate swap agreements totaling a principal/notional amount of
$90,000,000 is 7.0% at September 30, 1995. In fiscal 1995, Alco Capital sold
$67,000,000 in leases, replacing leases liquidated during the year.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 37
<PAGE>
13 SALE OF ACCOUNTS RECEIVABLE
The Company entered into an agreement to sell, with limited recourse, up to
CN$95,000,000 of certain eligible Canadian accounts receivable through
December 1, 1995. The agreement, which is expected to be extended, provides
limited recourse to the Company in the event that any of the previously sold
receivables become uncollectible. As collections reduce previously sold
interests, new receivables will be sold up to CN$95,000,000. The amount of
receivables sold under the agreement was CN$95,000,000 (US$71,000,000) and
CN$80,000,000 (US$60,000,000) at September 30, 1995 and 1994, respectively.
14 FINANCIAL INSTRUMENTS
The Company uses financial instruments in the normal course of its business.
These financial instruments include debt, commitments to extend credit and
interest rate swap agreements. The notional or contractual amounts of these
commitments and other financial instruments are discussed below.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables and short-term
cash investments. Credit risk with respect to trade receivables is minimized
because of a large customer base and its geographic dispersion. Short-term cash
investments are placed with high credit quality financial institutions and in
short duration corporate and government debt securities funds. By policy, the
Company limits the amount of credit exposure in any one type of investment
instrument.
Interest Rate Swap Agreements
In addition to the interest rate swap agreements related to finance subsidiaries
financial instruments discussed in note 12, the Company has several other
interest rate swap agreements. These agreements have a total principal/notional
amount of $47,000,000 and have fixed rates from 6.99% to 7.855%. The Company is
required to make payments to the counterparties at the fixed rate stated in the
agreements and in return the Company receives payments at variable rates
(LIBOR).
The Company is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate swap agreements. However, the Company does
not anticipate nonperformance by the counterparties.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments.
Cash, Notes Payable and Long-Term Receivables
The carrying amounts reported in the consolidated balance sheets approximate
fair value.
Long-Term Debt
The fair value of long-term debt instruments is estimated using a discounted
cash flow analysis. For more information on these instruments, refer to note 5.
Off-Balance-Sheet Instruments
Fair values for the Company's off-balance-sheet instruments (interest rate
swaps) are based on the termination of the agreements.
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
1995 1994
- - ------------------------------------------------------------------------------------------------------------------
September 30 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt:
Bond issue $150,000 $165,311 $150,000 $156,833
Private placement debt 50,000 52,043 70,000 71,837
Notes payable to insurance company 60,000 65,286 60,000 62,614
Industrial revenue bonds 10,328 9,765 10,537 11,442
Sundry notes, bonds and mortgages 51,893 53,160 38,341 36,786
Finance subsidiaries debt 817,585 824,989 464,882 455,674
Interest rate swaps (3,671) 1,426
</TABLE>
38 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
15 RESTRUCTURING COSTS
On September 29, 1993, the Company adopted a plan to restructure paper
distribution business including the following: installation of a customer-
focused information system, redesigning of warehouse and transportation
management functions, regionalization of management and administrative support
functions and consolidation of service center locations. In connection with
certain elements of the restructuring plan, the Company recorded a charge to
earnings of $175,000,000 ($112,875,000 net of taxes or $1.19 per share) in the
fourth quarter of fiscal 1993. The charge provided for facility consolidation
($60,700,000), severance costs ($48,000,000) and related organizational and
system redesign ($22,000,000).
At September 30, 1995, the remaining restructuring reserve is $39,302,000,
which management believes is adequate to complete the restructuring plan by mid-
fiscal 1997. As of September 30, 1995, 84 facility consolidations had been
substantially completed. The estimated cost to complete the facility
consolidations is $17,000,000 of which a significant portion relates to costs to
dispose and maintain facilities that have been or will be vacated. Severance
costs have been incurred during 1995 and 1994 in accordance with the plan and
$10,000,000 is the estimated balance for severance costs. The related
organizational and system redesign is estimated to have a remaining cost of
$6,000,000. The Company estimates the remaining cash expenditures for the
restructuring plan will be $31,000,000 and will be spent in fiscal 1996 and
early fiscal 1997.
16 COMMITMENTS
Effective January 1, 1994, the Company entered into an outsourcing agreement
that will provide the information technology system to be implemented as part of
the Unisource restructuring plan (note 15). This agreement calls for the payment
of $300,000,000 over a ten-year period. At September 30, 1995, the remaining
commitment under the agreement is $217,000,000.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 39
<PAGE>
FINANCIAL REVIEW
The discussion of the results of operations for the three years ended
September 30, 1995 reviews the continuing operations of the Company as contained
in the Consolidated Statements of Income.
RESULTS OF OPERATIONS - 1995
Revenues and income before taxes by segment for fiscal years ended September 30,
1995 and September 30, 1994 and the percentage change for 1995 versus 1994 were:
<TABLE>
<CAPTION>
Revenues Income Before Taxes
- - -----------------------------------------------------------------------------------------------------------------------
(in millions) 1995 1994 %Change 1995 1994 %Change
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products $2,912 $2,240 30.0% $251.8 $199.4 26.3%
Unisource
United States 6,183 5,108 21.0 184.1 148.8 23.7
Canada 804 649 23.9 41.0 13.5 203.7
- - -----------------------------------------------------------------------------------------------------------------------
Total Unisource 6,987 5,757 21.4 225.1 162.3 38.7
- - -----------------------------------------------------------------------------------------------------------------------
Operating 9,899 7,997 23.8 476.9 361.7 31.8
Unconsolidated affiliate (117.2)
Eliminations and nonallocated (7) (1) (117.0)* (87.7)*
- - -----------------------------------------------------------------------------------------------------------------------
$9,892 $7,996 23.7 $359.9 $156.8
=======================================================================================================================
</TABLE>
* Includes interest costs and net corporate expenses.
FISCAL 1995 COMPARED TO FISCAL 1994
The Company increased revenues $1.9 billion to $9.9 billion in fiscal 1995 from
$8 billion in fiscal 1994. Income before taxes increased from $156.8 million in
fiscal 1994 to $359.9 million in fiscal 1995. Earnings per share increased from
$.55 to $1.67. Earnings per share from continuing operations in fiscal 1995 were
$1.81, a 26.6% increase over $1.43 per share in 1994, excluding the loss on the
sale of IMM Office Systems (IMMOS).
Alco Office Products (AOP) generated $672 million in increased revenues of
which $387 million is related to AOP's base companies, while $68 million relates
to fiscal 1994 acquisitions and $217 million to current-year acquisitions.
Internal growth in AOP's base companies continues to be across all revenue
segments but primarily in equipment sales, outsourcing and supplies. Revenues
from Unisource's US operations increased $1.1 billion, of which $74 million
relates to current- and prior-year acquisitions. Unisource's Canadian operations
increased revenues $155 million, which is net of a negative impact of
approximately $12 million relating to foreign currency rate fluctuations.
Increased revenue at Unisource is primarily related to substantial price
increases experienced in the paper industry during fiscal 1995, as well as sales
volume increases.
AOP's operating income increase of $52.4 million includes $6.1 million from
fiscal 1994 acquisitions and $20.2 million from current-year acquisitions. The
remaining $26.1 million increase from its base companies is primarily the result
of higher operating contributions from the equipment, outsourcing and supply
areas of AOP's businesses, along with increased operating income relating to its
leasing activities through Alco Capital Resource, Inc. (Alco Capital), net of
transformation program costs. Operating margins were 8.6% in 1995 compared to
8.9% in 1994. Excluding costs related to the AOP transformation program, the
operating margin for 1995 was 9.0%.
Operating income for Unisource's US operations increased $35.3 million.
This increase includes $3.9 million contributed by current- and prior-year
acquisitions. The remaining $31.4 million is from base companies, reflecting the
impact of price and volume increases along with the net benefits realized from
its restructuring program. Operating income for the Canadian paper operations
increased $27.5 million primarily as a result of price increases and growth in
the fine paper distribution business and restructuring benefits. Unisource's
operating margins increased to 3.2% in fiscal 1995, from 2.8% in the prior year.
The Company's foreign operations of AOP and Unisource generated $1.1
billion in revenues for fiscal 1995 compared with $843 million for the same
period of the prior fiscal year. The Canadian paper distribution business
represents $155 million or 62% of the total increase. The increase also includes
$78 million from AOP's European operations and $17 million from AOP's Canadian
operations. Operating income from foreign operations was $69 million for 1995,
up $40 million from the prior year primarily as a result of the increase in
operating income of the Canadian paper distribution business. In fiscal 1994,
the Company recorded a total pretax loss of $117.2 million from its investment
in IMMOS.
In September 1995, the Company divested Central Products Company for $80
million in cash and notes and recorded a continuing operations pretax gain of
approximately $4 million on the sale. Also included in the Company's continuing
operations, and related to Central
40 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
Products Company, are fiscal 1995 revenues of approximately $120 million and net
income of $2.7 million.
Interest expense increased $12 million from the comparable period in fiscal
1994, as a result of higher interest rates and borrowing levels during the year
to fund acquisitions and working capital requirements, offset by the effect of
the debt reductions resulting from the Company's conversion preferred stock
offering in July 1995. The increase in income from continuing operations before
taxes of $203.1 million consists of $85.9 million relating to the combined
effect of improved operations from base companies and earnings contributed by
acquisitions, net of increased interest costs and other corporate items and the
$117.2 million loss on the investment in IMMOS recorded in 1994. The effective
income tax rate for the current period is 39.1%. The effective tax rate for 1994
was 55%; however, excluding the IMMOS loss, the effective rate was 39.1%. Fiscal
1995 weighted average shares were 5.1 million shares greater than the 107.5
million shares for fiscal 1994, primarily the result of issuance of shares for
acquisitions.
The Company has owned several manufacturing and industrial businesses, all
of which have been sold. There are currently environmental remediation claims,
pending for manufacturing or landfill sites in the United States that relate to
these discontinued operations. As a result of several recent environmental
remediation claims and increased estimated costs associated with existing
environmental remediation sites, primarily related to discontinued manufacturing
operations divested by the Company in 1991 and prior, the Company took a fourth
quarter charge in fiscal 1995 to increase its liabilities for environmental
remediation. The discontinued operations charge was $24 million ($17 million net
of tax), or $.14 per share. The adjustment is management's best estimate, based
on information currently available, of costs to be incurred for existing and
probable environmental claims of discontinued operations. The Company presently
does not expect that additional environmental remediation charges for these
sites will be required in the future.
The major components of the Unisource restructuring plan are proceeding as
planned. Unisource management has reduced the pace at which certain 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 net benefits. Unisource expects to achieve the full benefit of the
projected $100 million net annual benefits resulting from the completion of the
restructuring in fiscal 1997. The restructuring reserve at September 30, 1995 is
$39.3 million, which management believes is adequate to complete the
restructuring plan.
AOP has initiated a three-year transformation program to change its
organization into a more cohesive and efficient network by building a uniform
information technology system and implementing best practices for critically
important management functions throughout the AOP companies. The initiative will
include the exploration of new vendor alliances, the establishment of a national
identity for the group and a targeted national accounts program.
The Company was in arbitration with a former subsidiary, which had asserted
that the Company was liable for certain employee liabilities. During the second
quarter of fiscal 1995, the Company agreed to pay $10 million to the former
subsidiary to settle this claim, which primarily has been charged against
existing reserves for discontinued operations. The Company paid $5 million
during the second quarter with the remaining $5 million to be paid over the next
four years.
In fiscal 1996, the Company plans to early adopt Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The effect on earnings of
this accounting change is expected to be immaterial.
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
- - ---------------------------------------------------------------------------------------------------------------------
(in millions) 1994 1993 %Change 1994 1993 %Change
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products $2,240 $1,586 41.2% $199.4 $138.8 43.7%
Unisource
United States 5,108 4,174 22.4 148.8 118.7 25.4
Canada 649 690 (5.9) 13.5 18.3 (26.2)
Restructuring costs (175.0)
- - ---------------------------------------------------------------------------------------------------------------------
Total Unisource 5,757 4,864 18.4 162.3 (38.0)
- - ---------------------------------------------------------------------------------------------------------------------
Operating 7,997 6,450 24.0 361.7 100.8
Unconsolidated affiliate (117.2) (2.5)
Eliminations and nonallocated (1) (5) (87.7)* (73.7)*
- - ---------------------------------------------------------------------------------------------------------------------
$7,996 $6,445 24.1 $156.8 $ 24.6
=====================================================================================================================
</TABLE>
* Includes interest costs and net corporate expenses.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 41
<PAGE>
FISCAL 1994 COMPARED WITH 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
$.55 compared to $(.02) for fiscal 1993 which included a loss of $1.19 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 $1.43 and $1.17, 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 outsourcing businesses. The $934 million increase in
revenues from Unisource's US 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 outsourcing areas of AOP's businesses, along with
increased operating income related to its leasing activities through Alco
Capital. Operating income from Unisource's US 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 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 $.87 for the quarter ($.88 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 a 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 and borrowing levels during the year. 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 was 55% com-
42 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
pared to 69% in fiscal 1993. The effective income tax rate for fiscal 1994,
excluding the effect of the sale of IMMOS, was 39.1% compared with 39.6% in
fiscal 1993, excluding the effect of the restructuring costs. Fiscal 1994
weighted average shares were 12.7 million shares greater than the 94.8 million
shares for fiscal 1993, primarily the result of a public offering of common
stock in December 1993.
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 $632 million at September 30, 1995, an
increase of $187 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, net of the proceeds from
the July 1995 conversion preferred stock offering described below. On December
1, 1994, the Company entered into a credit agreement under which it may borrow
up to $500 million. The Company may also borrow up to $100 million under another
credit agreement. At September 30, 1995, short-term borrowings supported by
these two facilities totaled $252.5 million, leaving $347.5 million unused and
available. Debt as a percentage of capitalization was 25.3%, while the current
ratio was 1.6 to 1. In July 1995, Moody's Investor Services upgraded the
Company's debt rating to A3, from Baa1. At the end of fiscal 1995, the Company's
commitments for capital expenditures were approximately $23 million, all of
which are expected to be expended during fiscal 1996.
In July 1995, the Company completed a public offering of approximately 3.9
million depositary shares, each representing 1/100 of a share of Series BB
Conversion Preferred Stock. The Series BB Preferred Stock carries a dividend
yield of 6.5% and automatically converts into the Company's common stock on
October 1, 1998, unless previously converted at the option of the holder. The
purpose of the offering is to fund the Company's ongoing acquisition program.
Net proceeds of approximately $290 million were used to repay short-term
borrowings incurred to fund working capital requirements and acquisitions.
The Company recorded a pretax charge of approximately $24 million for
environmental claims associated with discontinued manufacturing operations
during the fourth quarter of fiscal 1995. Since most environmental claims are
paid over a period of years, the impact on annual cash flow is expected to be
minimal.
The Company's change in cash from operating activities during fiscal 1995
primarily relates to working capital requirements. Unisource's working capital
primarily reflects the effects of substantial price increases experienced in the
paper business along with the increased sales volume. Changes in AOP's working
capital primarily relate to inventory from 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 $143 million, of which approximately
$112 million has been spent to date, with the $31 million balance anticipated to
be paid in fiscal 1996 and early fiscal 1997. Effective January 1, 1994,
Unisource entered into a ten-year agreement with ISSC for $300 million, to
provide the information technology system to be implemented as part of the
restructuring plan. At September 30, 1995, the remaining commitment under the
agreement is $217 million. The foregoing commitments are anticipated to be
funded from Unisource's operating cash flow.
Finance subsidiaries debt grew by $352.7 million from September 30, 1994, a
result of increased leasing activity. On June 30, 1995, Alco Capital increased
the amount available to be offered under its medium term note program by $1
billion or the equivalent thereof in foreign currency, of which $898 million is
unused and available. The program allows Alco Capital to offer to the public
from time to time medium term notes having an aggregate initial offering price
not exceeding the total program amount. These notes are offered at varying
maturities of nine months or more from their dates of issue and may be subject
to redemption at the option of Alco Capital or repayment at the option of the
holder, in whole or in part, prior to the maturity date in conjunction with
meeting specified provisions. Interest rates are determined based on market
conditions at the time of issuance. As of September 30, 1995, $602 million of
medium term notes bearing a weighted average interest rate of 7.0% were
outstanding.
In addition, Alco Capital entered into an agreement in September 1994 to
sell under an asset securitization program, an undivided ownership interest in
$125 million of eligible direct financing lease receivables. The agreement,
which expires in September 1996, contains limited recourse provisions that
require Alco Capital to assign an additional undivided interest in leases to
cover any potential losses to the purchaser due to uncollectible leases. As
collections reduce previously sold interests, new lease receivables can be sold
up to $125 million. During fiscal 1995, Alco Capital sold $67 million in direct
financing leases, replacing those leases liquidated and leaving the total amount
of contracts sold unchanged at $125 million.
The Company believes that its operating cash flow together with unused
lines of credit and other financing arrangements will be sufficient to finance
current operating requirements including capital expenditures, acquisitions and
restructuring and transformation programs.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 43
<PAGE>
CORPORATE FINANCIAL SUMMARY
(in millions except per share data, shareholders of record, employees)
<TABLE>
<CAPTION>
Eight-Year
Compound Growth 1995 1994 1993
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS
Revenues 15.3% $9,891.8 $7,996.0 $6,444.6
Gross profit 18.6 2,524.9 2,083.3 1,621.1
% of revenues 25.5 26.1 25.2
Selling and administrative 18.2 2,109.1 1,765.5 1,378.8
% of gross profit 83.5 84.7 85.1
Operating income 22.3 476.9 361.7 100.8
% of revenues 4.8 4.5 1.6
Income before taxes 19.8 359.9 156.8 24.6
% of revenues 3.6 2.0 .4
Effective income tax rate (%) 39.1 55.0 69.0
Income 20.4 219.3 70.6 7.6
% of revenues 2.2 .9 .1
Earnings (loss) per share
Primary 1.81 .55 (.02)
Fully diluted (e) (e) (e)
Capital expenditures 13.5 99.2 108.0 78.8
Depreciation and amortization 14.8 109.7 96.8 76.1
- - ---------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Income (loss) $ (16.6) $ (7.5)
Earnings (loss) per share
Primary (.14) (.08)
Fully diluted (e) (e)
- - ---------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATIONS
Net income 12.3% $ 202.7 $ 70.6 $ .1
Earnings (loss) per share
Primary 1.67 .55 (.10)
Fully diluted (e) (e) (e)
- - ---------------------------------------------------------------------------------------------------------------------------
SHARE ACTIVITY
Dividends per share 6.2% $ .52 $ .50 $ .48
Per share book value 8.9 12.28 10.72 8.76
Return on shareholders' equity (a) 16.0 14.8(b) 11.5(b)
Average common and common equivalent shares 112.5 107.5 94.8
Shareholders of record 15,099 14,348 13,999
- - ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Days sales outstanding 36.8 37.8 38.9
Inventory turns (FIFO basis) 6.1 6.3 6.3
Current ratio 1.6 1.6 1.5
Pretax return on capital employed 17.2 17.1(b) 14.7(b)
Pretax return on capital employed with
finance subsidiaries on equity method 21.3 18.4(b) 15.7(b)
Working capital 6.6% $ 770.5 $ 653.5 $ 556.6
Total assets 16.6 4,737.6 3,502.3 3,348.9
Total debt 25.9 1,450.1 910.0 1,207.4
% of capitalization 43.7 40.0 53.6
Total debt excluding finance subsidiaries 15.1 632.5 445.1 794.3
% of capitalization 25.3 24.6 43.2
Serial preferred stock .3
Employees 36,500 30,600 28,500
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From continuing operations.
(b) Excludes the effect of the sale of IMMOS (note 4) in fiscal 1994 and
restructuring costs (note 15) in fiscal 1993.
(c) Includes the sale of an automobile leasing subsidiary that resulted in a
pretax gain of $17,637,000.
(d) Includes unusual pretax charges relating to the Hillman Companies of
$10,323,000.
(e) Dilution is immaterial after 1987; therefore no disclosure.
(f) Excludes gain on sale of Alco Health Services Corporation of pretax -
$96,800,000; net income - $61,900,000.
Note: All share and per share amounts are post-stock split.
44 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONTINUING OPERATIONS
Revenues $4,925.1 $4,516.0 $4,293.4 $3,783.6 $3,379.4 $3,173.7
Gross profit 1,267.1 1,110.0 1,022.4 841.9 690.3 646.8
% of revenues 25.7 24.6 23.8 22.3 20.4 20.4
Selling and administrative 1,069.6 946.8 864.4 711.1 584.7 552.1
% of gross profit 84.4 85.3 84.5 84.5 84.7 85.4
Operating income 225.7 195.3 190.0 153.0 128.4 95.2
% of revenues 4.6 4.3 4.4 4.0 3.8 3.0
Income before taxes 172.5 125.8 111.5(d) 97.8 90.2 84.7(c)
% of revenues 3.5 2.8 2.6 2.6 2.7 2.7
Effective income tax rate (%) 39.6 39.1 42.3 17.1 18.2 38.3
Income 104.2 76.7 64.3(d) 81.1 72.5 49.7(c)
% of revenues 2.1 1.7 1.5 2.1 2.1 1.6
Earnings (loss) per share
Primary 1.11 .85 .72(d) .90 .74 .55(c)
Fully diluted (e) (e) (e) (e) (e) .52(c)
Capital expenditures 54.8 47.4 57.9 57.1 38.3 35.9
Depreciation and amortization 59.3 58.2 49.5 43.8 37.3 36.4
- - --------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Income (loss) $ (8.4) $ 40.9 $ 29.2 $ 85.5 $ 37.0 $ 30.5
Earnings (loss) per share
Primary (.09) .45 .33 .94 .38 .34
Fully diluted (e) (e) (e) (e) (e) .31
- - --------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATIONS
Net income $ 95.8 $ 117.6 $ 93.5(d) $ 166.6 $ 109.5 $ 80.2(c)
Earnings (loss) per share
Primary 1.02 1.30 1.05(d) 1.84 1.12 .89(c)
Fully diluted (e) (e) (e) (e) (e) .83(c)
- - --------------------------------------------------------------------------------------------------------------------------------
SHARE ACTIVITY
Dividends per share $ .46 $ .44 $ .42 $ .38 $ .34 $ .32
Per share book value 9.36 9.20 8.47 7.48 7.04 6.21
Return on shareholders' equity (a) 11.4 15.0 13.5 16.9(f) 16.9 15.8
Average common and common equivalent shares 93.8 90.1 89.1 90.4 97.5 90.3
Shareholders of record 13,726 14,096 14,152 13,410 14,103 12,875
- - --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY INFORMATION
Days sales outstanding 37.8 38.6 39.7 39.3 38.5 38.9
Inventory turns (FIFO basis) 5.9 5.7 5.7 5.7 5.6 5.3
Current ratio 1.7 1.9 1.7 1.6 1.9 2.1
Pretax return on capital employed 15.3 20.8 20.1 20.8(f) 19.9 21.3
Pretax return on capital employed with
finance subsidiaries on equity method 16.2 22.5 21.6 21.7(f) 20.3 21.3
Working capital $ 496.0 $ 516.0 $ 404.3 $ 342.8 $ 412.3 $ 462.5
Total assets 2,444.8 2,020.6 1,916.5 1,623.9 1,512.4 1,389.3
Total debt 782.2 524.9 450.6 378.0 253.6 229.4
% of capitalization 47.6 38.9 37.4 36.9 26.6 26.3
Total debt excluding finance subsidiaries 481.7 304.2 291.0 283.5 201.4 205.8
% of capitalization 35.8 27.0 27.8 30.5 22.4 24.2
Serial preferred stock 1.6 2.9 4.9 7.4 9.9 11.4
Employees 23,500 18,800 20,900 19,800 17,300 17,300
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Unless otherwise noted, ratios and operating results include the effect
of: fiscal 1994 - loss on sale of investment in IMMOS (note 4), pretax income
($115,265,000), net income ($95,086,000), earnings per share ($.88); fiscal
1993 - restructuring costs (note 15), operating income ($175,000,000), net
income ($112,875,000), earnings per share ($1.19).
ALCO STANDARD CORPORATION AND SUBSIDIARIES 45
<PAGE>
SEGMENT DATA
(continuing operations, in millions)
<TABLE>
<CAPTION>
Depreciation
Income Capital and
Revenues Before Taxes Assets Expenditures Amortization
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EIGHT-YEAR COMPOUND GROWTH
1987-1995
Alco Office Products 32.7% 39.5% 40.3% 14.0% 22.0%
Unisource 15.0 14.2 18.1 22.9 15.3
================================================================================================================================
1995
Alco Office Products $2,911.7 $ 251.8 $2,570.4 $ 48.4 $ 74.4
Unisource
United States 6,183.3 184.1 1,666.7 48.5 27.1
Canada 804.0 41.0 330.3 1.5 6.2
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 6,987.3 225.1 1,997.0 50.0 33.3
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 9,899.0 476.9 4,567.4 98.4 107.7
Eliminations and nonallocated (7.2) (117.0)* 170.2 .8 2.0
- - --------------------------------------------------------------------------------------------------------------------------------
$9,891.8 $ 359.9 $4,737.6 $ 99.2 $109.7
================================================================================================================================
1994
Alco Office Products $2,240.4 $ 199.4 $1,672.2 $ 72.5 $ 62.7
Unisource
United States 5,107.6 148.8 1,391.5 30.5 26.1
Canada 648.9 13.5 296.5 3.4 6.4
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 5,756.5 162.3 1,688.0 33.9 32.5
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 7,996.9 361.7 3,360.2 106.4 95.2
Unconsolidated affiliate (117.2)
Eliminations and nonallocated (.9) (87.7)* 142.1 1.6 1.6
- - --------------------------------------------------------------------------------------------------------------------------------
$7,996.0 $ 156.8 $3,502.3 $108.0 $ 96.8
================================================================================================================================
1993
Alco Office Products $1,585.6 $ 138.8 $1,450.0 $ 55.9 $ 45.4
Unisource
United States 4,173.7 118.7 1,319.6 18.8 22.3
Canada 690.4 18.3 314.3 2.9 6.9
Restructuring costs (175.0)
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 4,864.1 (38.0) 1,633.9 21.7 29.2
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 6,449.7 100.8 3,083.9 77.6 74.6
Unconsolidated affiliate (2.5) 118.1
Eliminations and nonallocated (5.1) (73.7)* 146.9 1.2 1.5
- - --------------------------------------------------------------------------------------------------------------------------------
$6,444.6 $ 24.6 $3,348.9 $ 78.8 $ 76.1
================================================================================================================================
1992
Alco Office Products $1,259.2 $ 105.2 $967.5 $ 33.8 $ 37.0
Unisource
United States 3,585.1 118.2 988.7 19.1 20.0
Canada 82.8 2.3 295.8 1.1 .6
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 3,667.9 120.5 1,284.5 20.2 20.6
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 4,927.1 225.7 2,252.0 54.0 57.6
Investment gain, net 6.7
Eliminations and nonallocated (2.0) (59.9)* 69.2 .8 1.7
- - --------------------------------------------------------------------------------------------------------------------------------
$4,925.1 $ 172.5 $2,321.2 $ 54.8 $ 59.3
================================================================================================================================
</TABLE>
46 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
<TABLE>
<CAPTION>
Depreciation
Income Capital and
Revenues Before Taxes Assets Expenditures Amortization
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1991
Alco Office Products $1,047.1 $ 79.6 $ 781.3 $ 28.6 $ 36.3
Unisource
United States 3,441.1 113.8 897.3 16.1 18.4
Canada 35.8 1.9 8.2 .2 .4
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 3,476.9 115.7 905.5 16.3 18.8
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 4,524.0 195.3 1,686.8 44.9 55.1
Eliminations and nonallocated (8.0) (69.5)* 177.8 2.5 3.1
- - --------------------------------------------------------------------------------------------------------------------------------
$4,516.0 $125.8 $1,864.6 $ 47.4 $ 58.2
================================================================================================================================
1990
Alco Office Products $ 951.7 $ 58.9 $ 680.5 $ 32.3 $ 33.2
Unisource
United States 3,316.3 129.4 843.9 24.6 14.9
Canada 22.2 1.7 8.5 .1 .2
- - --------------------------------------------------------------------------------------------------------------------------------
Total Unisource 3,338.5 131.1 852.4 24.7 15.1
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 4,290.2 190.0 1,532.9 57.0 48.3
Investment gain 5.6
Unusual charges (AOP) (10.3)
Eliminations and nonallocated 3.2 (73.8)* 88.8 .9 1.2
- - --------------------------------------------------------------------------------------------------------------------------------
$4,293.4 $111.5 $1,621.7 $ 57.9 $ 49.5
================================================================================================================================
1989
Alco Office Products $ 729.5 $ 41.3 $ 540.4 $ 26.5 $ 26.7
Unisource - United States 3,047.3 111.7 692.7 27.5 14.5
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 3,776.8 153.0 1,233.1 54.0 41.2
Eliminations and nonallocated 6.8 (55.2)* 108.3 3.1 2.6
- - --------------------------------------------------------------------------------------------------------------------------------
$3,783.6 $ 97.8 $1,341.4 $ 57.1 $ 43.8
================================================================================================================================
1988
Alco Office Products $ 484.8 $ 28.9 $ 328.7 $ 19.6 $ 19.4
Unisource - United States 2,755.5 99.5 670.9 15.9 13.9
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 3,240.3 128.4 999.6 35.5 33.3
Gains, net of losses, from divestitures 7.9
Eliminations and nonallocated 139.1 (46.1)* 140.0 2.8 4.0
- - --------------------------------------------------------------------------------------------------------------------------------
$3,379.4 $ 90.2 $1,139.6 $ 38.3 $ 37.3
================================================================================================================================
1987
Alco Office Products $ 303.7 $ 17.6 $ 171.0 $ 17.0 $ 15.2
Unisource - United States 2,281.7 77.6 528.8 9.6 10.7
- - --------------------------------------------------------------------------------------------------------------------------------
Operating 2,585.4 95.2 699.8 26.6 25.9
Gains, net of losses, from divestitures 17.6
Eliminations and nonallocated 588.3 (28.1)* 348.5 9.3 10.5
- - --------------------------------------------------------------------------------------------------------------------------------
$3,173.7 $ 84.7 $1,048.3 $ 35.9 $ 36.4
================================================================================================================================
</TABLE>
* Includes interest costs and net corporate expenses.
ALCO STANDARD CORPORATION AND SUBSIDIARIES 47
<PAGE>
QUARTERLY DATA
(unaudited, in millions except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Revenues $2,181.6 $2,445.8 $2,595.9 $2,668.5 $9,891.8
Gross profit 565.8 619.6 658.0 681.5 2,524.9
Income before taxes 74.5 81.9 97.1 106.4 359.9
Income (loss)
Continuing operations 45.5 49.1 58.9 65.8 219.3
Discontinued operations (16.6)(a) (16.6)(a)
- - -----------------------------------------------------------------------------------------------------------------------------
Net income $ 45.5 $ 49.1 $ 58.9 $ 49.2 $ 202.7
=============================================================================================================================
Earnings (loss) per share
Continuing operations $ .38 $ .41 $ .50 $ .52 $ 1.81
Discontinued operations (.14)(a) (.14)(a)
- - -----------------------------------------------------------------------------------------------------------------------------
$ .38 $ .41 $ .50 $ .38 $ 1.67
=============================================================================================================================
Dividends per share $ .13 $ .13 $ .13 $ .13 $ .52
Common stock price
High/Low 31 7/8-26 1/2 36 7/8-30 7/8 40 1/8-34 3/8 43 5/8-38 1/4 43 5/8-26 1/2
- - -----------------------------------------------------------------------------------------------------------------------------
1994
Revenues $1,921.8 $1,969.4 $2,001.3 $2,103.5 $7,996.0
Gross profit 485.4 511.7 535.4 550.8 2,083.3
Income (loss) before taxes 53.4 63.0 (38.9)(b) 79.3 156.8(b)
Net income (loss) 31.9 38.0 (48.3)(b) 49.0 70.6(b)
=============================================================================================================================
Earnings (loss) per share .30 .32 (.48)(b) .42 .55(b)
=============================================================================================================================
Dividends per share $ .125 $ .125 $ .125 $ .125 $ .50
Common stock price
High/Low 27 3/8-21 3/4 29 3/8-25 3/4 30 1/8-24 3/4 32 3/4-28 1/2 32 3/4-21 3/4
</TABLE>
(a) The Company recorded a pretax charge of $23,630,000 ($16,541,000 net of
taxes or $.14 per share) for environmental liabilities of discontinued
operations.
(b) Includes a pretax charge of $115,265,000 ($95,086,000 net of taxes or $.87
per share for the third quarter and $.88 for the fiscal year) for the sale
of the investment in IMMOS.
Note: All share and per share amounts are post-stock split.
48 ALCO STANDARD CORPORATION AND SUBSIDIARIES
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF REGISTRANT
--------------------------
The registrant is Alco Standard Corporation ("Alco"), an Ohio corporation,
which has no parent. The following sets forth information with respect to Alco's
subsidiaries as of September 30, 1995.
<TABLE>
<CAPTION>
State or other
jurisdiction of
% Voting Securities incorporation or
Subsidiary Owned (by whom) organization
- - ---------- ------------------- ----------------
<S> <C> <C>
Alco Realty, Inc. (ARI) 100% Alco Delaware
Alco Canada Realty, Inc. 100% ARI Canada
375347 British Columbia Ltd. 100% ARI Canada
Alco Cash Management Company 100% Alco Delaware
The Alco Standard Foundation 100% Alco Pennsylvania
Alco-Texas Realty, Inc. 100% Alco Texas
Chesterbrook Insurance Limited 100% Alco Bermuda
MDR Corporation (MDR) 100% Alco Delaware
AOP Brands, Inc. 100% AOS Delaware
Alco Office Systems, Inc. (AOS) 100% MDR Delaware
AOS North America, Inc. 100% AOS Delaware
Alco Office Systems-Canada, Inc. 100% AOS North America, Inc. Canada
Alco Capital Resource, Inc. 100% AOS Georgia
Alco Office Products (UK) Plc (AOPUK) 100% AOS England
Erskine House Group PLC (EHGPLC) 100% AOPUK England
Erskine Limited 100% EHGPLC England
Office Group, Inc. 100% AOS Delaware
Office Products, Inc. 100% AOS Delaware
Office World Trade, Inc. 100% AOS Florida
Alco Standard Acquisition Capital Corporation 100% MDR Delaware
Alco Standard Ltd. 100% MDR Delaware
Alco Standard Petroleum Corporation 100% MDR Delaware
Alco Venture Capital Company 100% MDR Delaware
Unisource Worldwide, Inc. (UWI) 100% MDR Delaware
Paper Corporation of North America (PCNA) 100% UWI Delaware
Unisource Distribuidora, S.A. de C.V. 99% PCNA and 1% UWI Mexico
3813 Holdings, Ltd. 100% PCNA Canada
Unisource Canada, Inc. 100% PCNA Canada
Unisource Brands, Inc. 100% UWI Delaware
Unisource Direct, Inc. 100% UWI Delaware
Unisource International, Inc. 100% UWI Delaware
Unisource Realty, Inc. 100% UWI Delaware
Unisource Sales Corporation 100% UWI Delaware
Partners Securities Company 100% Alco Delaware
TDFC Corporation 100% Alco Delaware
Upshur Coals Corporation 100% Alco West Virginia
1148189 Onatario Inc. 100% Alco Canada
</TABLE>
<PAGE>
EXHIBIT 23
----------
Alco Standard Corporation
Form 10-K - Fiscal Year Ended
September 30, 1995
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
--------------------------------------------------
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Alco Standard Corporation of our report dated October 17, 1995, (except for
the stock split described in Note 1, as to which the date is November 9,
1995), included in the 1995 Annual Report to the Shareholders of Alco Standard
Corporation.
Our audits also included the financial statement schedule of Alco Standard
Corporation listed in item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We consent to the incorporation by reference in the following registration
statements on Form S-8 and Form S-3 of Alco Standard Corporation and in the
related Prospectuses of our report dated October 17, 1995, (except for the stock
split described in Note 1, as to which the date is November 9, 1995), with
respect to the consolidated financial statements of Alco Standard Corporation
incorporated by reference in its Annual Report (Form 10-K) for the fiscal year
ended September 30, 1995 filed with the Securities and Exchange Commission and
the related financial statement schedule included therein.
<TABLE>
<CAPTION>
Registration Filing
Number Date Description
------------ ------ -----------
<S> <C> <C>
2-66880 March 10, 1980 Alco Standard Corporation
1980 Deferred Compensation Plan
2-75296 December 11, 1982 Alco Standard Corporation
1982 Deferred Compensation Plan
2-70630 December 30, 1982 Alco Standard Corporation
1981 Stock Option Plan
33-00120 September 6, 1985 Alco Standard Corporation
1985 Deferred Compensation Plan
33-3046 February 10, 1987 Alco Standard Corporation
1986 Stock Option Plan
33-26732 January 27, 1989 Alco Standard Corporation
1989 Directors' Stock Option Plan
33-36745 September 10, 1990 Alco Standard Corporation
1991 Deferred Compensation Plan
33-38192 December 10, 1990 Alco Standard Corporation
Partners' Stock Purchase Plan
33-38193 December 10, 1990 Alco Standard Corporation
1986 Stock Option Plan
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
33-41689 July 12, 1991 Alco Standard Corporation
292,864 Shares of Common Stock
33-41690 July 12, 1991 Alco Standard Corporation
3,300,001 Shares of Common
Stock
33-84376 June 4, 1992 Alco Standard Corporation
Stock Award Plan
33-50974 August 17, 1992 Alco Standard Corporation
1,034,061 Shares of Common
Stock
33-50976 August 17, 1992 Alco Standard Corporation
382,250 Shares of Common Stock
33-55004 November 24, 1992 Alco Standard Corporation
Stock Participation Plan
33-55096 November 24, 1992 Alco Standard Corporation
Stock Option Plan for Non-
Employee Directors
33-49863 July 30, 1993 Alco Standard Corporation
42,200 Shares of Common Stock
33-51183 November 24, 1993 Alco Standard Corporation
Partners' Stock Purchase Plan
33-53711 May 19, 1994 Alco Standard Corporation
496,090 Shares of Common Stock
33-54779 July 28, 1994 Alco Standard Corporation
365,871 Shares of Common Stock
33-54781 July 28, 1994 Alco Standard Corporation
Stock Award Plan
33-55947 October 7, 1994 Alco Standard Corporation
122,409 Shares of Common Stock
33-56455 November 14, 1994 Alco Standard Corporation
25,655 Shares of Common Stock
33-56457 November 14, 1994 Alco Standard Corporation
46,774 Shares of Common Stock
33-56469 November 15, 1994 Alco Standard Corporation
1995 Stock Option Plan
33-56471 November 15, 1994 Alco Standard Corporation
Long Term Incentive Compensation
Plan
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
33-_____ November 14, 1995 Alco Standard Corporation
$750,000,000 Debt Securities,
Preferred Stock or Common
Stock
/s/ Ernst & Young LLP
---------------------
Philadelphia, Pennsylvania Ernst & Young LLP
November 14, 1995
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ J. MAHLON BUCK, JR.
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /S/ PAUL J. DARLING, II
-------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is Chief Financial Officer of Alco
Standard Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ KURT E. DINKELACKER
-------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ WILLIAM F. DRAKE, JR.
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ JAMES J. FORESE
-----------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with he Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ FREDERICK S. HAMMER
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that she is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as her attorneys-in-fact, each with the power of
substitution, to execute, on her behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995
SIGNED: /s/ BARBARA BARNES HAUPTFUHRER
--------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ DANA G. MEAD
-------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and EXchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ RAY B. MUNDT
-------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard Corporation
("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ PAUL C. O'NEILL
-----------------------
<PAGE>
POWER ATTORNEY
--------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ ROGELIO G. SADA
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ JAMES W. STRATTON
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing Report on Form 10-K, and
any and all amendments thereto, for filing with the Securities and Exchange
Commission ("SEC"), and to do all such other acts and execute all such other
documents which said attorney may deem necessary or desirable.
Dated this 14th day of November 1995.
SIGNED: /s/ JOHN E. STUART
---------------------
<PAGE>
Exhibit 24.1
CERTIFICATION
I, J. Kenneth Croney, Secretary of Alco Standard Corporation do hereby
certify that the following resolutions were duly passed by the Board of
Directors of the Corporation on November 10, 1995, and that such resolutions
are, as of the date hereof, in full force and effect:
RESOLVED, that each of the officers and directors of the corporation
is hereby authorized to appoint Hugh G. Moulton, J. Kenneth Croney and
Michael J. Dillon as his or her attorneys-in-fact on behalf of each of them
each attorney-in-fact with the power of substitution, to execute on such
officer's or director's behalf, one or more registration statements and
annual reports of the corporation for filing with the Securities and
Exchange Commission ("SEC"), and any and all amendments to said documents
which said attorney may deem necessary or desirable to enable the
corporation to register the offering of (i) serial preferred stock; (ii)
common stock; (iii) debt securities; and/or (iv) participation interest in
employee benefit plans under the Federal securities law, and to further
enable the corporation to file such reports as are necessary under Section
13 or 15(d) of the Securities Exchange Act of 1934 and such other documents
as are necessary to comply with all rules, regulations or requirements of
the SEC in respect thereto; and
FURTHER RESOLVED, that any officer of the corporation is hereby
authorized to do and perform, or cause to be done or performed, any and all
things and to execute and deliver any and all agreements, certificates,
undertakings, documents or instruments necessary or appropriate in order to
carry out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of November,
1995.
/s/ J. KENNETH CRONEY
---------------------------------
(J. Kenneth Croney)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
consolidated financial statements of Alco Standard Corporation and subsidiaries
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 90,106,000
<SECURITIES> 0
<RECEIVABLES> 1,224,327,000
<ALLOWANCES> 48,628,000
<INVENTORY> 747,895,000
<CURRENT-ASSETS> 2,160,567,000
<PP&E> 745,235,000
<DEPRECIATION> 375,285,000
<TOTAL-ASSETS> 4,737,575,000<F2>
<CURRENT-LIABILITIES> 1,390,077,000
<BONDS> 325,314,000
<COMMON> 637,414,000
0
492,076,000<F1>
<OTHER-SE> 739,047,000
<TOTAL-LIABILITY-AND-EQUITY> 4,737,575,000<F3>
<SALES> 9,794,186,000
<TOTAL-REVENUES> 9,891,826,000
<CGS> 7,326,721,000
<TOTAL-COSTS> 7,366,937,000<F4>
<OTHER-EXPENSES> 2,109,148,000<F5>
<LOSS-PROVISION> 21,900,000
<INTEREST-EXPENSE> 55,838,000
<INCOME-PRETAX> 359,903,000
<INCOME-TAX> 140,630,000
<INCOME-CONTINUING> 219,273,000
<DISCONTINUED> (16,541,000)<F6>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,732,000
<EPS-PRIMARY> 1.67<F7>
<EPS-DILUTED> 1.63<F8>
<FN>
<F1>Redeemable solely at the Company's option.
<F2>Includes Finance Subsidiaries assets (primarily lease receivables) of
$983,322,000
<F3>Includes Finance Subsidiaries liabilities (primarily debt) of $872,783,000
<F4>Includes Finance Subsidiaries interest of $40,216,000
<F5>Represents selling, general, and administrative expenses.
<F6>Represents loss on discontinued operations net of income tax benefit of
$7,089,000.
<F7>Primary earnings per share from continuing operations is $1.81, from
discontinued operations ($0.14).
<F8>Fully diluted earnings per share from continuing operations is $1.77, from
discontinued operations ($0.14).
</FN>
</TABLE>
