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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1996
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Annual report pursuant in section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1996 or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period to
FORM 10-K
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 OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (610) 296-8000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF CLASS ON WHICH 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 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 DECEMBER 26, 1996 WAS APPROXIMATELY $6,354,764,085 BASED UPON
THE CLOSING SALES PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE OF
$50.875 PER COMMON SHARE (ON DECEMBER 26, 1996), AND $94.75 PER DEPOSITARY
SHARE OF SERIES BB CONVERSION PREFERRED STOCK (ON DECEMBER 23, 1996). 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 DECEMBER 26, 1996 WAS 133,583,326.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II--REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR FISCAL YEAR
ENDED SEPTEMBER 30, 1996
PART III--REGISTRANT'S PROXY STATEMENT FOR THE 1997 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 address of the Company's principal executive offices is P.O. Box
834, Valley Forge, Pennsylvania 19482 (telephone number: (610) 296-8000).
Since its original incorporation, Alco has been engaged in a number of
different manufacturing and distribution operations. Beginning in 1987, Alco
began divesting its manufacturing businesses in order to focus exclusively on
select distribution businesses. By fiscal 1993, Alco was engaged in two core
distribution operations--office products and paper distribution. On December
31, 1996, as a result of a growing strategic conflict between these two
businesses, Alco will spin off its paper and supply systems business,
Unisource Worldwide, Inc. ("Unisource"), to Alco's common shareholders. Alco's
sole remaining business will be IKON Office Solutions, Inc. Alco has accounted
for Unisource as a discontinued operation for all periods presented in its
Annual Report to Shareholders for the fiscal year ended September 30, 1996.
Information concerning Unisource's business is set forth under the caption
"Discontinued Operations."
IKON Office Solutions, Inc. ("IKON") sells, rents and leases photocopiers,
fax machines, digital printers and other automated office equipment for use in
both traditional and integrated office environments. IKON also provides
equipment service and supplies, and equipment financing. In recent years, IKON
has expanded its business to include outsourcing and imaging services, such as
reprographic facilities management and specialized document copying services.
IKON has also recently begun to offer network consulting and design, computer
networking, technology training and software solutions for the networked
office environment, providing one-stop shopping to customers who seek quality,
accessible office productivity solutions.
IKON 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. IKON competes against numerous competitors over a
wide range of markets, competing on the basis of quality, customer service,
price and product performance.
IKON distributes the products of numerous manufacturers, including Canon,
Oce, Ricoh and Sharp, throughout 49 states, seven Canadian provinces, in
Europe and in Mexico. Customers include large and small businesses,
professional firms and government agencies.
In fiscal 1996, IKON generated approximately $4.1 billion in revenues and
$310 million in operating income. Finance subsidiaries contributed 15.1% of
IKON's operating income in fiscal 1996.
During fiscal 1996, IKON acquired 100 companies in the United States,
Canada, and Europe, with an aggregate of approximately $878 million in
annualized revenues. Of the 100 companies acquired in fiscal 1996, 82 were
traditional copier companies, 13 were outsourcing and imaging companies and
five were systems integrators. IKON's international expansion during fiscal
1996 included the acquisition of companies in France and Mexico.
INFORMATION CONCERNING ALCO'S BUSINESS IN GENERAL
UNISOURCE SPIN-OFF
On June 19, 1996, Alco announced that it would separate Unisource, its
printing and imaging and supply systems distribution business, from IKON, with
each business operating as a stand-alone publicly traded company. In order to
effect the separation of these businesses, Alco has declared a dividend
payable to holders of record of Alco common stock at the close of business on
December 13, 1996 (the "Record Date") of one share of Unisource common stock,
$.001 par value ("Unisource Common Stock"), for every two shares of Alco
common stock owned on the Record Date. As a result of the distribution, 100%
of the outstanding shares of
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Unisource Common Stock will be distributed to Alco's shareholders. Except for
any cash received in lieu of fractional shares, the Unisource spin-off will be
tax-free to Alco and Alco's U.S. shareholders. Alco expects to complete the
spin-off and to mail the Unisource Common Stock share certificates on December
31, 1996.
In conjunction with the separation of their businesses, Unisource and Alco
entered into various agreements that address the allocation of assets and
liabilities between them and define their relationship after the separation,
including a Distribution Agreement ("Distribution Agreement"), a Benefits
Agreement ("Benefits Agreement") and a Tax Sharing and Indemnification
Agreement ("Tax Sharing Agreement"), all of which have been filed as exhibits
to this report. The Distribution Agreement provides for, among other things,
the principal transactions required to effect the Distribution, the conditions
to the Distribution, the allocation between Alco and Unisource of certain
assets and liabilities, and cooperation by Alco and Unisource in the provision
of information and certain facilities necessary to perform the administrative
functions incident to their respective businesses. The Distribution Agreement
includes cross indemnification provisions pursuant to which Unisource and Alco
indemnify each other for damages that may arise out a breach of their
respective obligations under the agreement.
Under the Benefits Agreement, the wages, salaries and employee benefits of
all employees of Unisource will be the responsibility of Unisource. Generally,
Unisource's obligation to provide benefits will include all obligations with
respect to Unisource employees under pension plans, savings plans and
multiemployer plans, welfare plans (retiree medical plans), supplemental
benefit plans, certain deferred compensation plans, incentive plans, stock-
based plans and other plans covering Unisource employees and will include
liabilities that arose while the individuals were employed by Alco. The
Benefits Agreement requires Alco to reimburse Unisource for a portion of any
payments made by Unisource to former Unisource employees under Alco's 1985,
1991 and 1994 deferred compensation plans. Unisource will assume certain Alco
pension plans covering Unisource employees, and assets and liabilities
attributable to Unisource employees under Alco's participating companies
pension plan and Alco's 401(k) plan will be transferred to a new Unisource
pension plan and 401(k) plan, respectively.
Under the Tax Sharing Agreement, Unisource will bear its respective share of
(i) Alco's federal consolidated income tax liability (or benefit), (ii) any
unitary state income tax liability, and (iii) Alco's consolidated personal
property tax liability for all tax periods that end before or that include the
Distribution Date. For the taxable year ended September 30, 1996, Unisource's
share of Alco's federal consolidated tax liability (or benefit) will be 40% of
such liability (or benefit) and Alco's share of such liability (or benefit)
will be 60%. Unisource is responsible for paying any tax liabilities arising
for any tax returns that it files separately. If any tax year ending before or
including the Distribution Date is subsequently examined by the IRS, and an
adjustment results from such examination, then Unisource's share of Alco's
additional federal consolidated income tax liability (or benefit for that tax
year) shall be computed and agreed to by the parties. The Tax Sharing Agreement
generally provides that in the event either Alco or Unisource takes any action
inconsistent with, or fails to take any action required by, or in accordance
with the qualification of the Distribution as tax-free, then Alco or Unisource,
as the case may be, will be liable for and indemnify and hold the other
harmless from any tax liability resulting from such action. For further
information concerning the Unisource spin-off, reference is made to Unisource's
Form 10 Registration Statement (effective November 26, 1996) and the
Information Statement contained therein.
ADJUSTMENT TO PREFERRED STOCK CONVERSION RATE
As a result of the Unisource spin-off, adjustments have been made to the
number of Alco common shares which holders of depositary shares of Alco's
Series BB Preferred Stock ("Series BB Holders") are entitled to receive upon
conversion. Effective December 16, 1996, Series BB Holders are entitled to
receive 2.0468 shares of common stock for each depositary share converted (for
optional conversion). Adjustments have also been made to the number of common
shares to be received per depositary share of Series BB Preferred Stock upon
the mandatory conversion date (October 1, 1998), as follows: (a) if the Current
Market Price of the common stock is greater than or equal to $37.80 per share,
2.0468 shares of common stock per depositary share, (b) if the Current Market
Price of the common stock is less than $37.80 but greater than $30.98 per
share, the number of
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shares of common stock per depositary share having a value (determined at the
Current Market Price) equivalent to $77.375, and (c) if the Current Market
Price is less than or equal to $30.98 per share, 2.4972 shares of common stock
per depositary share, subject in each case to adjustment in certain events. The
"Current Market Price" means the average closing price per share of common
stock of the Company on the 20 trading days immediately prior to, but not
including, the mandatory conversion date.
NAME CHANGE
Effective January 1, 1997, IKON will be Alco's sole continuing business.
Therefore, on January 23, 1997, Alco's shareholders will be asked to approve an
amendment to Alco's Articles of Incorporation to change the name of the
corporation from Alco Standard Corporation to IKON Office Solutions, Inc.
The name IKON Office Solutions, Inc. is currently being used by the Alco
subsidiary which, until the Unisource spin-off, has operated the IKON Office
Solutions business. The IKON Office Solutions name has been well-received by
the Company's existing customer base and the Company believes that
advertisements using this name have successfully appealed to new customers.
After shareholder approval of the Company's name change, the subsidiary will
cease using the name and will be merged into the Company. For further
information regarding the IKON Office Solutions name, see "Proprietary
Matters."
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.
BOARD AND MANAGEMENT CHANGES
In August 1996, Kurt E. Dinkelacker, President and Chief Operating Officer of
IKON, was elected to the Board of Directors. In addition, Richard A. Jalkut,
President and Group Executive of the NYNEX Telecommunications Group, was
elected to the Board in August 1996, and James R. Birle, Chairman of Resolute
Partners, a private merchant bank, was elected to the Board in November 1996.
Among other executive changes during fiscal 1996 and the first quarter of
fiscal 1997, Robert M. Kearns was named Senior Vice President and Chief
Financial Officer, David M. Gadra was named Senior Vice President and Chief
Information Officer, William F. Drake, who had been serving as the Company's
Vice Chairman, was named General Counsel, and Karin M. Kinney was named
Corporate Counsel and Secretary.
DEBT OFFERING
In December 1995, Alco completed a public offering of $300 million of 30-year
bonds with a stated interest rate of 6.75% at a discount price of 98.48% and
used the net proceeds of approximately $290 million to reduce outstanding
short-term debt. The effective yield on the bonds is 6.87%.
SUPPLIERS AND CUSTOMERS
Products distributed by IKON are purchased from numerous domestic and
overseas suppliers, primarily Canon, Oce, Ricoh and Sharp. There has been no
significant difficulty in obtaining products from these suppliers. Supplier
relationships are good and are expected to continue. IKON has a large number of
customers, and is not 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 IKON's
business taken as a whole.
Many of the Company's operations are required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. At September 30,
1996, inventories accounted for approximately 23% of IKON's total current
assets.
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PROPRIETARY MATTERS
The Company has a number of trademarks and tradenames which the Company
believes to be important to its business. However, except for the IKON Office
Solutions name, IKON is not dependent upon any single name, trademark or
tradename. Nikon Camera has sued the Company alleging that its use of the IKON
Office Solutions name infringes upon Nikon's proprietary rights. The Company
believes that the Nikon lawsuit is without merit and is vigorously defending.
ENVIRONMENTAL REGULATION
IKON is engaged in distribution and services businesses which do not generate
significant hazardous wastes. Some of IKON's distribution facilities have tanks
for storage of diesel fuel and other petroleum products which are subject to
laws regulating such storage tanks. Federal, state and local provisions
relating to the protection of the environment have not had and are not expected
to have a material adverse effect upon the Company's capital expenditures,
liquidity, earnings or competitive position. Certain environmental claims,
however, are now pending against the Company for manufacturing or landfill
sites relating to predivestiture activities of discontinued manufacturing
operations. While it is not possible to estimate what expenditures may be
required in order for the Company to comply with environmental laws or
discharge environmental liabilities in the future, the Company does not believe
that such expenditures will have a material adverse effect on it or its
operations as a whole.
EMPLOYEES
At September 30, 1996, IKON had approximately 31,300 employees. IKON believes
its relations with its employees are good.
FOREIGN OPERATIONS
IKON has operations in Canada, Europe (primarily in the United Kingdom) and
Mexico.
Information concerning revenues, income before taxes and identifiable assets
of the Company's foreign continuing operations for each of the three years in
the period ended September 30, 1996 set forth in note 10 to the consolidated
financial statements (included on page 36 of Alco's 1996 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.
DISCONTINUED OPERATIONS
UNISOURCE
Unisource, which Alco will spin off to shareholders on December 31, 1996, is
the largest marketer and distributor of quality paper products in North
America, and is also a leading North American distributor of paper and plastic
shipping and foodservice supplies, sanitary maintenance supplies and equipment
and packaging supplies and equipment.
Unisource distributes these products through two businesses: a Printing and
Imaging business which markets and distributes quality papers to printers,
publishers and corporate imaging customers; and a Supply Systems business,
which distributes a wide range of paper and plastic products, sanitary
maintenance supplies and equipment and packaging equipment and supplies,
principally to manufacturers, food processors and grocery stores.
Unisource's Printing and Imaging suppliers include all of the major North
American paper producers, and its Supply Systems suppliers include 31 core
suppliers. Supplier relationships are good, and there has been no
4
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difficulty obtaining products from suppliers. Unisource has a large number of
customers, the loss of any one or more of which would not have a material
adverse effect on Unisource's business taken as a whole.
In fiscal 1996, Unisource generated approximately $7 billion in revenues and
$184 million in operating income, excluding a $50 million restructuring
charge, with its Printing and Imaging business accounting for approximately
68% of total revenues and the Supply Systems business accounting for
approximately 32% of total revenues.
Unisource is engaged in distribution businesses which do not generate
significant hazardous wastes. Some of Unisource's distribution facilities have
tanks for storage of diesel fuel and other petroleum products which are
subject to laws regulating such storage tanks. Federal, state and local
provisions relating to the protection of the environment or the discharge of
hazardous materials have not had, and are not expected to have, a material
adverse effect on Unisource's capital expenditures, liquidity, earnings or
competitive position.
Unisource has a number of trademarks and tradenames, which Unisource
believes to be important to its business. However, except for the Unisource
trademark, Unisource is not dependent upon any single trademark or tradename,
or group of trademarks or tradenames.
At September 30, 1996, Unisource had approximately 11,800 employees, of whom
approximately 10% are unionized. Unisource believes its relations with its
employees and unions are good.
ITEM 2. PROPERTIES.
At September 30, 1996, IKON owned or leased facilities in 49 states, seven
Canadian provinces, in Europe and in Mexico. These properties occupy a total
of approximately 7.4 million square feet of which approximately 231,000 square
feet are owned and the balance are leased under lease agreements with various
expiration dates.
At September 30, 1996, Unisource had approximately 190 facilities in the
United States, Canada and Mexico. Unisource's leased facilities comprised
approximately 12 million square feet of space and owned facilities comprised
approximately 6 million square feet of space.
Both IKON and Unisource believe that their facilities are suitable and
adequate for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
A number of ordinary course legal proceedings are pending against the
Company and its subsidiaries (including IKON and Unisource). Except for the
outcome of the Nikon suit, the outcome of legal proceedings is not expected to
have an adverse effect on IKON or its operations as a whole. Similarly, with
respect to legal proceedings pending against Unisource, such proceedings are
not expected to have an adverse effect on Unisource 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 the Company's executive officers, their ages and
their positions for the last five years. Unless otherwise indicated, positions
shown are with Alco or its subsidiaries.
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NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
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John E. Stuart.......... 52 Chairman (1995), Chief Executive Officer (1993), President
(1993-1996), and a director (1993); Vice President (1989-
1993) and Group President--Alco Office Products (1985-1993)
William F. Drake, Jr. .. 64 General Counsel (1996), Vice Chairman (1984-1996), and a
director (1969); Of Counsel (1996), Partner (1984-1996),
Montgomery, McCracken, Walker & Rhoads
Kurt E. Dinkelacker..... 43 Group President--IKON Office Solutions (formerly Alco
Office Products) (1995) Executive Vice President (1993),
and a director (1996); Chief Financial Officer (1993-
1995); Executive Vice President--Finance, Alco Office
Products (1989-1993); Group Controller, Alco Office
Products (1987-1989)
James J. Forese......... 60 Executive Vice President and President of International
Operations (1996), and a director (1994); Chief Operating
Officer (1996-1996); General Manager, IBM Customer
Financing, and Chairman, IBM Credit Corporation (1993-
1996); IBM Vice President, Finance (1990-1993); IBM Vice
President and Group Executive (1988-1990)
Hugh G. Moulton......... 63 Executive Vice President (1992); General Counsel (1979-
1994); Senior Vice President--Administration (1983-1992)
Robert M. Kearns, II.... 44 Senior Vice President and Chief Financial Officer (1996);
Vice President--Finance, IKON Office Solutions (1993-
1996); Vice President--Finance, Copyrite (an IKON dealer
acquired by Alco in 1989) (1983-1990)
David M. Gadra.......... 48 Senior Vice President and Chief Information Officer (1996)
Manager, General Electric Corporation Corporate
Information Services (1992-1996); Vice President,
Information Services, General Electric Corporation--
Budapest (1990-1992)
Elisabeth H. Barrett.... 51 Vice President--Administrative Services (1995); Director--
Administrative Services (1994-1995); Director--Corporate
MIS/HR (1992-1993)
O. Gordon Brewer, Jr. .. 60 Vice President--Finance (1986)
Kathleen M. Burns....... 44 Vice President (1994) and Treasurer (1989); Assistant
Treasurer (1987-1989)
Stephen K. Deay......... 49 Vice President--Tax (1993); Director--Taxes (1989-1993)
Michael J. Dillon....... 43 Vice President (1994) and Controller (1993); Group
Controller, Alco Office Products (1991-1993); Associate
Audit Director (1991); Senior Audit Manager (1987-1991)
Karin M. Kinney......... 36 Corporate Secretary (1996) and Corporate Counsel (1992);
Counsel (1990-1992)
</TABLE>
On December 31, 1996, Hugh G. Moulton, Kathleen M. Burns and Stephen K. Deay
will resign their positions as executive officers of the Company and will
continue in executive officer positions with Unisource, which will become a
separate public company effective January 1, 1997. James J. Forese will
continue in his current role as an executive officer of the Company, but will
resign from the Company's Board of Directors in order to accept his nomination
to the Board of Directors of Unisource. For more information concerning
Unisource's business and management, reference is made to Unisource's Form 10
Registration Statement (effective November 26, 1996), and the Information
Statement contained therein.
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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 the Company's
common stock is traded (ticker symbol ASN). Alco's common stock is also traded
on the Philadelphia and Chicago Stock Exchanges. At Alco's annual
shareholders' meeting to be held on January 23, 1997, the Company's
shareholders are being asked to approve the Company's name change from Alco
Standard Corporation to IKON Office Solutions, Inc. After the name change has
been approved, the Company will trade under the ticker symbol IKN.
The New York Stock Exchange is also the principal market on which Unisource
common stock is expected to trade. Unisource's common stock has been listed on
the New York, Philadelphia and Chicago Stock Exchanges under the ticker symbol
UWW.
As of December 26, 1996, there were approximately 15,076 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 Financial
Summary" on page 42 of the 1996 Annual Report is incorporated herein by
reference.
IKON anticipates that it will pay a quarterly dividend of $.04 per common
share in March 1997 and Unisource anticipates that it will pay a quarterly
dividend of $.20 per common share on approximately the same date. Both IKON
and Unisource currently expect to continue their policies 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 1992
through 1996 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 40 and 41 of the
1996 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 38 and 39 of the
1996 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 22 through 37 and the information appearing
under "Quarterly Financial Summary" for fiscal 1996 and 1995 on page 42 of the
1996 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 23, 1997 annual meeting of
shareholders (the "1997 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 1997 Proxy Statement is incorporated herein by
reference.
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ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Executive Compensation" in the 1997 Proxy
Statement is incorporated herein by reference.
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 1997 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Certain Transactions" in the 1997 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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<C> <S>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco"), filed as Exhibit 3.1 to Alco's Form 10-Q for
the quarter ended March 31, 1996, are incorporated herein by
reference.
3.2 Code of Regulations of Alco, as amended on January 25, 1996, filed
as Exhibit 3.2 to Alco's Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.
4.1 Credit Agreement, dated December 16, 1996, among Alco and various
institutional lenders, with CoreStates Bank, N.A., as Agent.
4.2 Note Purchase Agreement between Alco and various purchasers dated
July 15, 1995 for $55 million in 7.15% Notes due November 15, 2005,
filed as Exhibit 4.9 to Alco's 1995 Form 10-K, is incorporated
herein by reference.
4.3 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, filed as Exhibit 4.5 to Alco's 1995 Form
10-K, is incorporated herein by reference.
4.4 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.
4.5 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 Distribution Agreement between Alco and Unisource dated as of
November 20, 1996, filed as Exhibit 2.1 to Unisource's Registration
Statement on Form 10 (effective November 26, 1996), is incorporated
herein by reference.
10.2 Tax Sharing and Indemnification Agreement between Alco and Unisource
dated as of November 20, 1996, filed as Exhibit 10.1 to Unisource's
Registration Statement on Form 10 (effective November 26, 1996), is
incorporated herein by reference.
10.3 Benefits Agreement between Alco and Unisource dated as of November
20, 1996, filed as Exhibit 10.5 to Unisource's Registration
Statement on Form 10 (effective November 26, 1996), is incorporated
herein by reference.
</TABLE>
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<C> <S>
10.4 Support Agreement dated as of October 22, 1996 between Alco and
IKON Capital, Inc. (Alco's leasing subsidiary), filed as Exhibit
10.4 to IKON Capital, Inc.'s Form 8-K dated October 22, 1996, is
incorporated herein by reference.
10.5 Receivables Transfer Agreement dated as of September 30, 1996 among
IKON Funding, Inc., IKON Capital, Inc., Old Line Funding Corp. and
Royal Bank of Canada.
10.6 Transfer Agreement dated as of September 30, 1996 between IKON
Capital, Inc. and IKON Funding, Inc.
10.7 Indenture, dated as of December 11, 1995 between Alco and First
Union Bank, N.A., as Trustee, filed as Exhibit 4 to Alco's
Registration Statement No. 33-64177, is incorporated herein by
reference.
10.8 Indenture dated as of July 1, 1995 between IKON Capital, Inc. and
Chase Manhattan Bank, N.A. (formerly Chemical Bank, N.A.), as
Trustee.
10.9 Distribution Agreement dated as of June 30, 1995 between IKON
Capital, Inc. and various distribution agents, filed as Exhibit
10.21 to Alco's 1995 Form 10-K, is incorporated herein by
reference.
10.10 Receivables Transfer Agreement dated as of September 23, 1994 Among
IKON Capital, Inc., Twin Towers, Inc. and Deutsche Bank AG, New
York Branch, portions of which contain confidential material, filed
as Exhibit 10.20 to Alco's 1994 10-K/A filed on March 17, 1995, is
incorporated herein by reference. First Amendment dated as
September 15, 1995 and Second Amendment dated as of March 15, 1996
to Receivables Transfer Agreement, filed as Exhibit 10.20 to Alco's
Report on Form 10-Q for the quarter ended March 31, 1996, are
incorporated herein by reference.
10.11 Indenture dated as of July 1, 1994 between IKON Capital, Inc. and
NationsBank, N.A., as Trustee, filed as Exhibit 4 to IKON Capital,
Inc.'s Registration Statement No. 33-53779, is incorporated herein
by reference.
10.12 Distribution Agreement dated July 1, 1994, filed as Exhibit 1 to
IKON Capital Inc.'s Form 10-Q for the quarter ended June 30, 1994,
is incorporated herein by reference.
10.13 Maintenance Agreement, dated as of August 15, 1991 between Alco and
IKON Capital, Inc., filed as Exhibit 10.2 to IKON Capital, Inc.'s
Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.14 Operating Agreement, dated as of August 15, 1991 between Alco and
IKON Capital, Inc., filed as Exhibit 10.3 to IKON Capital, Inc.'s
Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.15 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.
10.16 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.
10.17 Alco Standard Corporation Amended and Restated Long Term Incentive
Compensation Plan, filed as Exhibit 10.1 to Alco's Form 10-Q for
the quarter ended March 31, 1996, is incorporated herein by
reference.**
10.18 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit 10.3
to Alco's 1994 10-K, is incorporated herein by reference.**
10.19 Alco Standard Corporation Partners' Stock Purchase Plan, filed as
Exhibit 10.4 to Alco's Form 10-Q for the quarter ended March 31,
1996, is incorporated herein by reference.**
10.20 Alco Standard Corporation 1986 Stock Option Plan, filed as Exhibit
10.6 to Alco's 1995 Form 10-K, is incorporated herein by
reference.**
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
10.21 Alco Standard Corporation 1995 Stock Option Plan, filed as Exhibit
10.5 to Alco's Form 10-Q for the quarter ended March 31, 1996, is
incorporated herein by reference.**
10.22 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.**
10.23 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.**
10.24 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.**
10.25 Alco Standard Corporation 1980 Deferred Compensation Plan, filed as
Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.26 Alco Standard Corporation 1985 Deferred Compensation Plan, filed as
Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.27 Alco Standard Corporation 1991 Deferred Compensation Plan, filed as
Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated herein by
reference.**
10.28 Alco Standard Corporation 1994 Deferred Compensation Plan.**
10.29 Alco Standard Corporation Executive Deferred Compensation Plan.**
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, 1996 (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>
- --------
* 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 August 2, 1996, Alco filed a Current Report on Form 8-K to describe under
Item 5 the long-term growth goals of IKON and Unisource as presented at an
investors' conference and to describe the capitalization and anticipated
dividend policies of IKON and Unisource after the Unisource spin-off.
On November 12, 1996, Alco filed a Current Report on Form 8-K to file under
Item 5 the 1996 Support Agreement between Alco and IKON Capital, Inc. and to
report that Alco had declared a special dividend consisting of 100% of the
common stock of Unisource Worldwide, Inc., payable on December 31, 1996 to
shareholders of record of Alco common stock on December 13, 1996.
(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.
10
<PAGE>
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 1996 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, 1996, September 30, 1995 and
September 30, 1994
Consolidated Balance Sheets
--September 30, 1996 and September 30, 1995
Consolidated Statements of Cash Flows
--Fiscal years ended September 30, 1996, September 30, 1995 and
September 30, 1994
Consolidated Statements of Changes in Shareholders' Equity
--Fiscal years ended September 30, 1996, September 30, 1995 and
September 30, 1994
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES: The following consolidated financial
statement schedule of Alco Standard Corporation and its subsidiaries is
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>
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
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1996
- -----------------------------
Allowance for doubtful
accounts.................... $32,856,000 $18,296,000 $ 6,634,000(1) $22,478,000(2) $35,308,000
YEAR ENDED SEPTEMBER 30, 1995
- -----------------------------
Allowance for doubtful
accounts.................... $13,494,000 $ 8,940,000 $17,062,000(1) $ 6,640,000(2) $32,856,000
YEAR ENDED SEPTEMBER 30, 1994
- -----------------------------
Allowance for doubtful
accounts.................... $11,848,000 $ 6,813,000 $ 604,000(1) $5,771,000(2) $13,494,000
</TABLE>
- --------
(1) Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
S-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 REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1996 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
Alco Standard Corporation
Date: December 30, 1996
By /s/ Michael J. Dillon
------------------------------------
(MICHAEL J. DILLON) VICE
PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED BELOW ON DECEMBER 30, 1996 BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
---------- -----
*John E. Stuart Chairman and Chief Executive
- ------------------------------------ Officer (Principal Executive
(JOHN E. STUART) Officer)
/s/ Kurt E. Dinkelacker President, Chief Operating Officer
- ------------------------------------ and a Director
(KURT E. DINKELACKER)
*Robert M. Kearns Senior Vice President and Chief
- ------------------------------------ Financial Officer (Principal
(ROBERT M. KEARNS) Financial Officer)
/s/ Michael J. Dillon Vice President and Controller
- ------------------------------------ (Principal Accounting Officer)
(MICHAEL J. DILLON)
*James R. Birle Director
- ------------------------------------
(JAMES R. BIRLE)
*Paul J. Darling Director
- ------------------------------------
(PAUL J. DARLING)
*William F. Drake, Jr. Vice Chairman, General Counsel and
- ------------------------------------ a Director
(WILLIAM F. DRAKE, JR.)
*James J. Forese Executive Vice President and a
- ------------------------------------ Director
(JAMES J. FORESE)
*Frederick S. Hammer Director
- ------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director
- ------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Richard A. Jalkut Director
- ------------------------------------
(RICHARD A. JALKUT)
*Dana G. Mead Director
- ------------------------------------
(DANA G. MEAD)
<PAGE>
SIGNATURES TITLE
---------- -----
*Ray B. Mundt Director
- -------------------------------------
(RAY B. MUNDT)
*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, Michael J. Dillon, 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/ Michael J. Dillon December 30, 1996
- -------------------------------------
(MICHAEL J. DILLON)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NO.
------- ----
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco"), filed as Exhibit 3.1 to Alco's Form 10-Q
for the quarter ended March 31, 1996, are incorporated herein
by reference...................................................
3.2 Code of Regulations of Alco, as amended on January 25, 1996,
filed as Exhibit 3.2 to Alco's Form 10-Q for the quarter ended
March 31, 1996, is incorporated herein by reference............
4.1 Credit Agreement, dated December 16, 1996, among Alco and
various institutional lenders, with CoreStates Bank, N.A., as
Agent..........................................................
4.2 Note Purchase Agreement between Alco and various purchasers
dated July 15, 1995 for $55 million in 7.15% Notes due November
15, 2005, filed as Exhibit 4.9 to Alco's 1995 Form 10-K, is
incorporated herein by reference...............................
4.3 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, filed as Exhibit 4.5 to Alco's
1995 Form 10-K, is incorporated herein by reference............
4.4 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...............................
4.5 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 Distribution Agreement between Alco and Unisource dated as of
November 20, 1996, filed as Exhibit 2.1 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference.....................
10.2 Tax Sharing and Indemnification Agreement between Alco and
Unisource dated as of November 20, 1996, filed as Exhibit 10.1
to Unisource's Registration Statement on Form 10 (effective
November 26, 1996), is incorporated herein by reference........
10.3 Benefits Agreement between Alco and Unisource dated as of
November 20, 1996, filed as Exhibit 10.5 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference.....................
10.4 Support Agreement dated as of October 22, 1996 between Alco and
IKON Capital, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.4 to IKON Capital, Inc.'s Form 8-K dated October 22,
1996, is incorporated herein by reference......................
10.5 Receivables Transfer Agreement dated as of September 30, 1996
among IKON Funding, Inc., IKON Capital, Inc., Old Line Funding
Corp. and Royal Bank of Canada.................................
10.6 Transfer Agreement dated as of September 30, 1996 between IKON
Capital, Inc. and IKON Funding, Inc. ..........................
10.7 Indenture, dated as of December 11, 1995 between Alco and First
Union Bank, N.A. (formerly First Fidelity Bank), as Trustee,
filed as Exhibit 4 to Alco's Registration Statement No. 33-
64177, is incorporated herein by reference.....................
10.8 Indenture dated as of July 1, 1995 between IKON Capital, Inc.
and Chase Manhattan Bank, N.A. (formerly Chemical Bank, N.A.),
as Trustee, filed as Exhibit 10.23 to Alco's 1995 Form 10-K, is
incorporated herein by reference...............................
10.9 Distribution Agreement dated as of June 30, 1995 between IKON
Capital, Inc. and various distribution agents, filed as Exhibit
10.21 to Alco's 1995 Form 10-K, is incorporated herein by
reference......................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NO.
------- ----
<C> <S> <C>
10.10 Receivables Transfer Agreement dated as of September 23, 1994
Among IKON Capital, Inc., Twin Towers, Inc. and Deutsche Bank
AG, New York Branch, 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.
First Amendment dated as September 15, 1995 and Second
Amendment dated as of March 15, 1996 to Receivables Transfer
Agreement, filed as Exhibit 10.20 to Alco's Form 10-Q for the
quarter ended March 31, 1996, are incorporated herein by
reference......................................................
10.11 Indenture dated as of July 1, 1994 between IKON Capital, Inc.
and The Bank of New York (formerly NationsBank, N.A.), as
Trustee, filed as Exhibit 4 to IKON Capital, Inc.'s
Registration Statement No. 33-53779, is incorporated herein by
reference......................................................
10.12 Distribution Agreement dated July 1, 1994, filed as Exhibit 1
to IKON Capital, Inc.'s Form 10-Q for the quarter ended June
30, 1994, is incorporated herein by reference..................
10.13 Maintenance Agreement, dated as of August 15, 1991 between Alco
and IKON Capital, Inc., filed as Exhibit 10.2 to IKON Capital,
Inc.'s Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference...............................
10.14 Operating Agreement, dated as of August 15, 1991 between Alco
and IKON Capital, Inc., filed as Exhibit 10.3 to IKON Capital,
Inc.'s Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference...............................
10.15 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............................................
10.16 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............................................
10.17 Alco Standard Corporation Amended and Restated Long Term
Incentive Compensation Plan, filed as Exhibit 10.1 to Alco's
Form 10-Q for the quarter ended March 31, 1996, is incorporated
herein by reference............................................
10.18 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit
10.3 to Alco's 1994 Form 10-K, is incorporated herein by
reference......................................................
10.19 Alco Standard Corporation Partners' Stock Purchase Plan, filed
as Exhibit 10.4 to Alco's Form 10-Q for the quarter ended March
31, 1996, is incorporated herein by reference..................
10.20 Alco Standard Corporation 1986 Stock Option Plan, filed as
Exhibit 10.6 to Alco's 1995 Form 10-K, is incorporated herein
by reference...................................................
10.21 Alco Standard Corporation 1995 Stock Option Plan, filed as
Exhibit 10.5 to Alco's Form 10-Q for the quarter ended March
31, 1996, is incorporated herein by reference..................
10.22 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............................................
10.23 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............................................
10.24 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...............................
10.25 Alco Standard Corporation 1980 Deferred Compensation Plan,
filed as Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated
herein by reference............................................
10.26 Alco Standard Corporation 1985 Deferred Compensation Plan,
filed as Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated
herein by reference............................................
10.27 Alco Standard Corporation 1991 Deferred Compensation Plan,
filed as Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated
herein by reference............................................
10.28 Alco Standard Corporation 1994 Deferred Compensation Plan......
10.29 Alco Standard Corporation Executive Deferred Compensation Plan.
11 Statement re: Computation of earnings per share................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NO.
------- ----
<C> <S> <C>
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, 1996 (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>
- --------
* 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.
<PAGE>
EXHIBIT 4.1
________________________________________________________________________________
ALCO STANDARD CORPORATION
CERTAIN OF ITS SUBSIDIARIES
and
THE BANKING INSTITUTIONS NAMED HEREIN
and
CORESTATES BANK, N.A.,
as Agent
______________________
CREDIT AGREEMENT
dated December 16, 1996
U.S. $400,000,000
________________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. Definitions.................................................................. 1
1.1 Certain Definitions............................................... 1
2. The Credit .................................................................. 9
2.1 Revolving Credit Facility Loans................................... 9
(a) Revolving Credit Facility................................... 9
(b) Selected Currency........................................... 10
(c) The Revolving Credit Facility Notes......................... 11
2.2 Revolving Credit Facility Funding Procedures...................... 11
(a) Request for Advances........................................ 11
(b) Actions by Agent............................................ 12
(c) Availability of Funds....................................... 12
(d) Funding Assumptions......................................... 12
(e) Maximum Borrowings Outstanding.............................. 13
2.3 Swingline Loans................................................... 13
(a) Swingline Facility.......................................... 13
(b) Funding Procedure........................................... 13
(c) Swingline Facility Note..................................... 14
2.4 Letters of Credit................................................. 15
(a) General Requirements........................................ 15
(b) Minimum Stated Amount....................................... 15
(c) Letter of Credit Requests................................... 15
(d) Letter of Credit Participations............................. 16
(e) Agreement to Repay Letter of Credit Drawings................ 19
2.5 Bid Option Facility............................................... 20
(a) Bid Loans General Requirements.............................. 20
(b) Bid Loan Notes.............................................. 20
(c) Procedure for Bid Borrowings................................ 21
2.6 Joint and Several Obligations..................................... 24
2.7 Interest Rates.................................................... 24
(a) Alternate Base Rate Loans................................... 24
(b) Eurocurrency Rate Loans..................................... 25
(c) Post Maturity Rate.......................................... 25
2.8 Fees.............................................................. 25
(a) Facility Fee................................................ 25
(b) Letter of Credit Fee........................................ 26
(c) Bid Loan Fee................................................ 26
2.9 Termination or Reduction of Credit; Recomputation Date............ 26
(a) Termination or Reduction of Credit.......................... 26
(b) Reduction................................................... 26
(c) Recomputation Date.......................................... 27
2.10 Optional Loan Prepayments......................................... 27
2.11 Payments.......................................................... 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2.12 Illegality........................................................ 29
2.13 Increased Cost ................................................... 29
2.14 Indemnity Against Funding Losses or Expenses...................... 31
2.15 Substitution of Bank.............................................. 31
3. Representations and Warranties ............................................... 31
3.1 Organization and Good Standing.................................... 31
3.2 Corporate Power and Authority..................................... 31
3.3 Validity of Agreement and Notes................................... 32
3.4 Litigation........................................................ 32
3.5 Financial Statements.............................................. 32
3.6 ERISA............................................................. 32
3.7 Regulations G, T, U and X......................................... 33
3.8 Compliance with Laws.............................................. 33
3.9 Taxes and Assessments............................................. 34
3.10 Investment Company................................................ 34
3.11 Environmental Matters............................................. 34
3.12 Liens............................................................. 34
3.13 Disclosure Generally.............................................. 34
3.14 Ownership of Subsidiary Borrowers................................. 35
4. Conditions .................................................................. 35
4.1 Effectiveness of Agreement........................................ 35
(a) Compliance................................................. 35
(b) Evidence of Corporate Action............................... 35
(c) Opinions of Counsel........................................ 35
(d) Incumbency Certificate..................................... 35
(e) Executed Agreements........................................ 36
(f) Notes...................................................... 36
(g) Material Adverse Change.................................... 36
(h) Satisfaction of 1994 Credit................................ 36
4.2 Conditions to Loans............................................... 36
4.3 Copies of Documents............................................... 37
5. Covenants..................................................................... 37
5.1 Financial Statements and Information.............................. 37
5.2 Funded Debt to Total Capitalization Ratio......................... 38
5.3 Subsidiaries' Debt................................................ 38
5.4 Sale of Assets.................................................... 39
5.5 Mergers and Acquisitions.......................................... 39
5.6 Negative Pledge................................................... 39
5.7 Sale, Discount of Receivables; Sale, Leaseback Transactions....... 41
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5.8 Regulations G, T, U and X.......................................... 41
5.9 Corporate Existence................................................ 41
5.10 Books and Records.................................................. 41
5.11 Insurance.......................................................... 41
5.12 Litigation; Event of Default....................................... 41
5.13 Taxes.............................................................. 42
5.14 Compliance with Laws............................................... 42
5.15 Employee Benefit Plans............................................. 42
5.16 Use of Proceeds.................................................... 42
5.17 Continued Ownership of each Subsidiary Borrower.................... 43
6. Defaults....................................................................... 43
6.1 Defaults........................................................... 43
6.2 Acceleration by Reason of Default.................................. 45
7. The Banks and the Agent ....................................................... 45
7.1 Authority of Agent................................................. 45
7.2 Responsibility of Agent............................................ 46
7.3 Pro-Rata Payments.................................................. 46
7.4 Indemnification of Agent........................................... 46
7.5 Credit Decision.................................................... 47
7.6 The Agent as a Bank................................................ 47
7.7 Successor Agent.................................................... 47
7.8 Withholding Taxes.................................................. 48
7.9 Allocations Made By Agent.......................................... 48
8. Indemnification................................................................ 48
8.1 Indemnification of the Agent and the Banks......................... 48
9. Miscellaneous.................................................................. 49
9.1 Notices............................................................ 49
9.2 Effective Date, Successors and Assigns and Survival of Terms ...... 49
9.3 Participations..................................................... 49
9.4 Expenses........................................................... 50
9.5 Modifications and Waivers.......................................... 50
9.6 No Implied Rights or Waivers....................................... 50
9.7 Offsets............................................................ 50
9.8 Application of Payments............................................ 50
9.9 Counterparts....................................................... 51
9.10 Governing Law; Submission to Jurisdiction.......................... 51
9.11 Severability of Provisions......................................... 53
9.12 Captions........................................................... 53
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9.13 Plural and Singular................................................ 53
9.14 Judgment Currency.................................................. 53
9.15 Termination of the 1994 Credit..................................... 53
Exhibits
- --------
A List of Subsidiary Borrowers
B List of Banks and Commitments
C-1 Form of Revolving Facility Note
C-2 Form of Bid Loan Note
C-3 Form of Swingline Facility Note
D Opinion of Counsel Form
E Opinion of Counsel to Subsidiary Borrower Form
F-1 Form of Competitive Bid Request
F-2 Form of Competitive Bid
F-3 Bid Loan Notice
</TABLE>
-iv-
<PAGE>
CREDIT AGREEMENT
This Agreement, dated December 16, 1996 between and among ALCO STANDARD
CORPORATION, an Ohio corporation, with its main business office located at
Valley Forge, Pennsylvania 19482 (herein called the "COMPANY"), those
subsidiaries of the Company set forth on Exhibit A hereto (the "SUBSIDIARY
BORROWERS"), the banking institutions named in Exhibit B attached hereto (herein
called collectively the "BANKS" and individually a "BANK") and CORESTATES BANK,
N.A., a national banking association, as agent for the Banks under this
Agreement (herein in such capacity called the "AGENT").
WITNESSETH:
WHEREAS, the Company and the Subsidiary Borrowers anticipate the need to
borrow money from time to time for working capital, acquisitions and general
corporate purposes and have requested the Banks establish credit facilities and
make available loans to one or more of them under the terms and conditions
hereinafter set forth;
WHEREAS, the Company, the Subsidiary Borrowers, certain of the Banks and
the Agent are parties to a Credit Agreement dated December 1, 1994, as amended
(the "1994 CREDIT"); and
WHEREAS, in connection with the establishment of the credit facilities
provided hereunder, the Borrower, the Subsidiary Borrowers, each Bank that is a
party to the 1994 Credit and the Agent are terminating the 1994 Credit.
NOW, THEREFORE, in consideration of the premises and promises hereinafter
set forth and intending to be legally bound hereby, the parties hereto agree as
follows:
1. DEFINITIONS
1.1 CERTAIN DEFINITIONS. The terms defined in this Section 1.1, whenever
used and capitalized in this Agreement, shall, unless the context otherwise
requires, have the respective meanings herein specified:
"1934 ACT" shall have the meaning assigned to it in Section 6.1(g) hereof.
--------
"1994 CREDIT" shall have the meaning assigned to it in the recitals to this
-----------
Agreement.
"AGENT" shall mean CoreStates Bank, N.A., a national banking association in
-----
its capacity as agent for the Banks hereunder.
"ALTERNATE BASE RATE" shall mean the higher of (i) the rate of interest for
-------------------
commercial loans established and publicly announced by the Agent from time
to time as its prime rate, or (ii) the Federal Funds Rate plus 1/2 of 1%
per annum .
<PAGE>
"ALTERNATE BASE RATE LOAN" shall mean a Loan made at the Alternate Base
------------------------
Rate pursuant to the applicable Request for Advance.
"APPLICABLE MARGIN" shall mean with respect to each Eurocurrency Rate Loan,
-----------------
the margin determined by the then Applicable Rate.
"APPLICABLE RATE" shall mean, with respect to each Eurocurrency Rate Loan
---------------
or with respect to the Facility Fee and the Letter of Credit Fee payable
hereunder, as the case may be, the applicable rate per annum set forth
below corresponding to such Loans or fees as of the applicable date:
<TABLE>
<CAPTION> Letter of
Applicable Facility Fee Credit Fee
Level Ratings Margin Rate Rate
<S> <C> <C> <C> <C>
1 A+ or better from S&P 13.0 basis points 6.5 basis points 13.0 basis points
A1 or better from Moody's
2 A from S&P 14.0 basis points 7.0 basis points 14.0 basis points
A2 from Moody's
3 A- from S&P 14.5 basis points 8.0 basis points 14.5 basis points
A3 from Moody's
4 BBB+ or lower from S&P 18.5 basis points 9.0 basis points 18.5 basis points
Baa1 or lower from Moody's
</TABLE>
The ratings applicable to the foregoing chart shall be based on the ratings
established with respect to the Company's senior, unsecured long-term debt. If
the ratings established by S&P and Moody's fall within different Levels, the
Applicable Rate shall be based on the higher of the two ratings unless one of
the ratings is two or more Levels higher than the other, in which case the
Applicable Rate shall be determined by reference to the Level immediately above
the Level determined by the lower rating. If the ratings of either S&P or
Moody's changes, the Applicable Rate shall adjust, and such adjustment shall be
effective, on the date on which such change in rating is first publicly
announced.
"BANK" shall mean any bank listed in Exhibit B hereto.
----
"BID BORROWING" shall mean each individual loan under the Bid Loan
-------------
Facility.
"BID LOAN" shall have the meaning assigned to it in Section 2.5 hereof.
--------
"BID LOAN BORROWING DATE" shall mean the date on which a Borrower receives
-----------------------
a Bid Loan.
"BID LOAN FEE" shall have the meaning assigned to it in Section 2.9 hereof.
------------
-2-
<PAGE>
"BID LOAN LENDER" shall mean the Bank issuing the Bid Loan.
---------------
"BID LOAN NOTE" shall have the meaning assigned to it in Section 2.5(b).
-------------
"BORROWING" shall mean a borrowing hereunder consisting of Loans made to a
---------
Borrower by the Banks on a given occasion. A Borrowing is an "ALTERNATE
BASE RATE BORROWING" if such Loans are Alternate Base Rate Loans or a
"EUROCURRENCY RATE BORROWING" if such Loans are Eurocurrency Rate Loans.
"BORROWER" shall mean the Company or a Subsidiary Borrower.
--------
"BORROWERS" shall mean the Company and each Subsidiary Borrower.
---------
"BUSINESS DAY" shall mean (i) for all purposes other than as covered by
------------
clauses (ii) and (iii) below, any day excluding Saturday, Sunday and any
day which shall be in the City of New York a legal holiday or a day on
which banking institutions are authorized by law or other government action
to close, (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, any U.S. Dollar Loan, any
day which is a Business Day described in clause (i) above and which is also
a day for trading by and between banks in U.S. Dollar deposits in the
London interbank Eurodollar market and (iii) with respect to all notices
and determinations in connection with, and payments of principal and
interest on any Eurocurrency Rate Loan, any day which is a Business Day
described in clause (i) above and which is also (a) any day except a day
which, in London, shall be a legal holiday or a day on which banking
institutions are authorized by law or other government action to close and
(b) a day for trading by and between banks in deposits of the Selected
Currency of such Eurocurrency Rate Loans in the interbank market.
"CODE" shall have the meaning assigned to it in Section 5.17 hereof.
----
"COMMITMENT" shall have the meaning assigned to it on Exhibit B hereto
----------
under the caption "Banks' Commitments and Percentages."
"COMMITMENT PERCENTAGE" shall have the meaning assigned to it in Section
---------------------
2.1(a) hereof.
"COMPANY" shall mean Alco Standard Corporation, an Ohio corporation.
-------
"CONSOLIDATED NET WORTH" shall be determined in accordance with GAAP and
----------------------
shall mean the sum (as reflected in the consolidated balance sheet of the
Company and its Consolidated Subsidiaries) of (i) the stated dollar amount
of outstanding capital stock, (ii) the stated dollar amount of additional
paid in capital, if any, plus (iii) the amount of surplus and retained
earnings minus (iv) the cost of treasury shares and the excess of
redemption value over the stated value of preferred stock of the Company
and its Consolidated Subsidiaries.
-3-
<PAGE>
"CONSOLIDATED SUBSIDIARIES" shall mean all Subsidiaries.
-------------------------
"CONSOLIDATED TOTAL ASSETS" shall mean the total assets of the Company and
-------------------------
its Consolidated Subsidiaries computed on a consolidated basis in
accordance with GAAP.
"CONTROLLING PERSON" shall have the meaning assigned to it in Section
------------------
6.1(g) hereof.
"CREDIT" shall mean the aggregate amounts of the Commitments of the Banks
------
hereunder at any time.
"DANISH KRONER" shall mean lawful currency of the Kingdom of Denmark.
-------------
"DEBT" shall mean (i) Funded Debt and (ii) any portions of notes payable
----
and capital lease obligations which are classified as current liabilities.
"DEUTSCHE MARK" shall mean lawful currency of the Federal Republic of
-------------
Germany.
"EMPLOYEE BENEFIT PLAN" shall have the meaning assigned to it in Section
---------------------
3.6 hereof.
"ENVIRONMENTAL CONTROL STATUTES" shall have the meaning assigned to it in
------------------------------
Section 3.11 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA AFFILIATE" shall have the meaning assigned to it in Section 3.6
---------------
hereof.
"EUROCURRENCY RATE LOAN" shall mean a Loan to be made at the LIBO Rate
----------------------
pursuant to the applicable Request for Advance.
"EURODOLLAR RATE LOAN" shall mean a Eurocurrency Rate Loan for which the
--------------------
Selected Currency is U.S. Dollars.
"EVENT OF DEFAULT" shall have the meaning assigned to it in Section 6.1
----------------
hereof.
"FACILITY" shall mean either of the Revolving Credit Facility, the Bid
--------
Option Facility or the Swingline Facility.
"FACILITY FEE" shall have the meaning assigned to it in Section 2.8 hereof.
------------
"FAX" shall mean any means of facsimile transmission.
---
-4-
<PAGE>
"FEDERAL FUNDS RATE" shall mean the daily rate of interest announced from
------------------
time to time by the Board of Governors of the Federal Reserve System in
publication H.-15 as the "Federal Funds Rate," or if such publication is
unavailable, such rate as is available to Agent on such day.
"FEES" shall mean the Facility Fee, the Letter of Credit Fee and the Bid
----
Loan Fee.
"FINANCE LEASING SUBSIDIARIES" shall mean IKON Capital, Inc., a Delaware
----------------------------
corporation, IKON Capital Inc., a Canadian corporation, IKON Capital, PLC, an
English company, and their respective successor corporations, and such
additional subsidiaries whose primary business is the leasing of products
distributed by Alco and its Subsidiaries.
"FINANCIAL OFFICER" shall mean Chief Financial Officer, Treasurer or
-----------------
Controller.
"FOREIGN SUBSIDIARY BORROWER" shall mean any Subsidiary Borrower that is
---------------------------
not formed under the laws of the United States or any of the states
therein.
"FRENCH FRANCS" shall mean lawful currency of the Republic of France.
-------------
"FUNDED DEBT" shall mean any obligation payable more than one year from the
-----------
date of the creation thereof which under GAAP is shown on the consolidated
balance sheet as a liability (excluding reserves for deferred income taxes
and other reserves to the extent that such reserves do not constitute
obligations for borrowed money) and including, without limitation, the
portion of any such obligation properly classified as a current liability
and capitalized leases.
"GAAP" shall mean generally accepted accounting principles applied on a
----
consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or in such other
statements by such other entity as the Agent and the Company may reasonably
approve, which are applicable in the circumstances and as of the date in
question, and the requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current
period are comparable, in all material respects to those applied in a
preceding period, except for the adoption within any permissible period of
new accounting standards required by the Financial Accounting Standards
Board from time to time.
"INTEREST PERIOD" shall mean:
---------------
(1) with respect to each Alternate Base Rate Borrowing the period
commencing on the date of such Alternate Base Rate Borrowing and ending not
more than 180 days thereafter, as the Company may elect in the applicable
Request for
-5-
<PAGE>
Advance (and ending 90 days thereafter if the Company shall fail to so
elect), provided that no Interest Period shall end later than the
Revolving Credit Facility Termination Date, as applicable;
(2) with respect to each Eurocurrency Rate Borrowing the period
commencing on the date of such Eurocurrency Rate Borrowing and ending
one, two, three, or six months thereafter, as the Company may elect in
the applicable Request for Advance; provided that:
--------
(a) any Interest Period which would otherwise end on a day
which is not a London Business Day shall be extended to the next
succeeding London Business Day unless such London Business Day
falls in another calendar month, in which case such Interest
Period shall end on the next preceding London Business Day;
(b) any Interest Period which begins on the last London
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end
of such Interest Period) shall, subject to clause (c) below, end
on the last London Business Day of a calendar month; and
(c) no Interest Period shall end later than the Revolving
Credit Facility Termination Date; and
(3) with respect to each Bid Loan, the period commencing on the
date of such Bid Loan and ended at the end of the applicable Bid Loan
Duration, provided that no Interest Period shall end later than the
Revolving Credit Facility Termination Date, as applicable.
The end of an Interest Period shall be deemed a maturity for purposes
of all Loans.
"ISSUING BANK" shall mean CoreStates Bank, N.A.
------------
"LETTER OF CREDIT" shall mean the standby letters of credit available
----------------
pursuant to Section 2.4 hereof.
"LETTER OF CREDIT FEE" shall have the meaning assigned to it in Section 2.8
--------------------
hereof.
"LETTER OF CREDIT OUTSTANDINGS" shall mean, at any time, the aggregate
-----------------------------
Stated Amount of all outstanding Letters of Credit plus the aggregate
amount of Unpaid Drawings.
"LETTER OF CREDIT SUBLIMIT" shall mean $25,000,000.
-------------------------
-6-
<PAGE>
"LIBO RATE" shall mean the average (rounded upward, if necessary, to the
---------
next 1/16 of 1%) of the rates per annum at which the Reference Banks are
offered deposits in the Selected Currency as of 11:00 a.m., London time, on
the second London Business Day preceding the date of the proposed
Eurocurrency Rate Borrowing by prime banks in the London interbank
eurocurrency market for delivery on the date of such Borrowing, for the
applicable Interest Period of such Borrowing, and in an amount equal to the
aggregate amount of such Borrowing and in like funds.
"LOAN" shall mean any Revolving Credit Facility Loan, Swingline Loan or Bid
----
Loan.
"LONDON BUSINESS DAY" shall mean any Business Day described in clause (iii)
-------------------
of the definition of "Business Day."
"MAJORITY BANKS" shall mean the Banks whose Commitment Percentages under
--------------
this Agreement aggregate at least 51.0% of the total Commitment Percentages
of all the Banks; provided, however, that for all purposes after the Loans
become due and payable pursuant to Article 6 or the expiration or
termination of the Revolving Credit Facility, Majority Banks shall mean
Banks holding at least 51.0% of the aggregate outstanding principal amount
of all Loans then outstanding.
"MOODY'S"shall mean Moody's Investors Service, Inc.
-------
"MULTIEMPLOYER PLAN" shall have the meaning assigned to it in Section 3.6
------------------
hereof.
"NOTES" shall mean the Revolving Credit Facility Notes, the Bid Loan Notes
-----
and the Swingline Facility Note or any of them.
"PBGC" shall have the meaning assigned to it in Section 3.6 hereof.
----
"PARTICIPANT" shall have the meaning assigned to it in Section 9.3 hereof.
-----------
"PARTICIPATIONS" shall have the meaning assigned to it in Section 9.3
--------------
hereof.
"PENSION PLAN" shall have the meaning assigned to it in Section 3.6 hereof.
------------
"POUNDS STERLING" means lawful currency of the United Kingdom of England,
---------------
Scotland, Northern Ireland and Wales.
"RECOMPUTATION DATE" shall have the meaning assigned to it in Section
------------------
2.10(c).
-7-
<PAGE>
"REFERENCE BANK" shall mean each of CoreStates Bank, N.A. and The Chase
--------------
Manhattan Bank, N.A.
"REQUEST FOR ADVANCE" shall have the meaning assigned to it in Section
-------------------
2.3(a) hereof.
"REVOLVING CREDIT FACILITY" shall have the meaning assigned to it in
-------------------------
Section 2.1(a) hereof.
"REVOLVING CREDIT FACILITY AMOUNT" shall have the meaning assigned to it in
--------------------------------
Section 2.1(a) hereof.
"REVOLVING CREDIT FACILITY COMMITMENT" shall have the meaning assigned to
------------------------------------
it in Section 2.1(a) hereof.
"REVOLVING CREDIT FACILITY LOANS" shall have the meaning assigned to it in
-------------------------------
Section 2.1(a) hereof.
"REVOLVING CREDIT FACILITY NOTES" shall have the meaning assigned to it in
-------------------------------
Section 2.1(c).
"REVOLVING CREDIT FACILITY TERMINATION DATE" shall have the meaning
assigned to it in Section 2.1(a) hereof.
"S&P" shall mean Standard & Poor's.
---
"SECURITIZATION" means with respect to the Company and its Consolidated
--------------
Subsidiaries the transfer or pledge of assets or interests in assets to a
trust, partnership, corporation or other entity, which transfer or pledge
is funded by such entity in whole or in part by the issuance of instruments
or securities that are paid principally from the cash flow derived from
such assets or interests in assets.
"SELECTED CURRENCY" shall mean, with respect to each Eurocurrency Rate
-----------------
Borrowing, the currency, which may be U.S. Dollars, Pounds Sterling,
Deutsche Marks, French Francs, Danish Kroner, or such currency as may be
approved from time to time by the Agent and the Majority Banks, so long as
such Selected Currency remains freely transferable and convertible into
U.S. Dollars and readily available to banks in the London interbank market,
selected by the Company pursuant to Section 2.2 and designated by the
Company as such in the Request for Advance for such Borrowing.
"SIGNIFICANT SUBSIDIARY" shall mean a Subsidiary which is a 'significant
----------------------
subsidiary' as defined in (S)210.1-02(v) of Regulation S-X of the
Securities and Exchange Commission, 17 C.F.R. Part 210, as in effect on the
date hereof.
"SPIN-OFF" shall have the meaning assigned to it in Section 4.1(i).
--------
-8-
<PAGE>
"STATED AMOUNT" of each Letter of Credit shall mean, at any time, the
-------------
maximum amount available to be drawn thereunder, determined without regard
to whether any conditions to drawing could then be met.
"SUBSIDIARY" shall mean any corporation of which the Company directly or
----------
indirectly owns or controls at least a majority of the outstanding stock
having general voting power, including without limitation the right, under
ordinary circumstances, to vote for the election of a majority of the Board
of Directors of such corporation.
"SWINGLINE FACILITY NOTE" shall have the meaning assigned to it in Section
-----------------------
2.3(c).
"SWINGLINE LOANS" shall have the meaning assigned to it in Section 2.3
---------------
hereof.
"U.S. DOLLARS" or "U.S. $" means lawful currency of the United States of
------------ ------
America.
"U.S. DOLLAR EQUIVALENT" of any amount of a Selected Currency other than
----------------------
U.S. Dollars on any date shall mean the equivalent amount in U.S. Dollars
on such date, after giving effect to a conversion of such amount of such
Selected Currency to U.S. Dollars at the buy spot rate quoted for wholesale
transactions by the Agent at approximately 11:00 a.m. Philadelphia time on
such date in accordance with its normal practice. The U.S. Dollar
Equivalent of all Loans the Selected Currency of which is not U.S. Dollars
shall be calculated as of the date two London Business Days preceding the
date on which such Loan was made and thereafter as of the London Business
Day immediately preceding the applicable Recomputation Date.
"U.S. DOLLAR LOAN" shall mean an Alternate Base Rate Loan and/or a
----------------
Eurodollar Rate Loan.
"UNFUNDED PENSION LIABILITIES" shall have the meaning assigned to it in
----------------------------
Section 3.6 hereof.
"UNRECOGNIZED RETIREE WELFARE LIABILITY" shall have the meaning assigned to
--------------------------------------
it in Section 3.6 hereof.
"UNPAID DRAWING" shall have the meaning assigned to it in Section 2.4
--------------
hereof.
2. THE CREDIT
2.1 REVOLVING CREDIT FACILITY LOANS.
-------------------------------
(a) REVOLVING CREDIT FACILITY. Each Bank severally agrees, upon the terms
-------------------------
and conditions hereinafter set forth, to make loans to the Borrowers (the
"REVOLVING CREDIT FACILITY LOANS") from time to time during the period beginning
on the date hereof and ending on December 15, 2001 or on the earlier date of
termination in full, pursuant to Section 2.9 or Section 6.2 hereof,
-9-
<PAGE>
of the obligations of such Bank under this Section 2.1(a) (December 15, 2001 or
such earlier date of termination being herein called the "REVOLVING CREDIT
FACILITY TERMINATION DATE") in amounts not to exceed at any time outstanding in
the aggregate the commitment amount set forth opposite the name of such Bank on
Exhibit B hereto under the caption "BANKS' COMMITMENTS AND PERCENTAGES" (each
such amount, as the same may be reduced pursuant to Section 2.9 hereof being
hereinafter called such Bank's "REVOLVING CREDIT FACILITY COMMITMENT"). (The
Banks' collective commitment to make Revolving Credit Facility Loans shall be
the "REVOLVING CREDIT FACILITY").
The obligation of each Bank to make a Revolving Credit Facility Loan to the
Borrowers at any time shall be limited to the Bank's Commitment Percentage, as
defined on Exhibit B hereto under the caption "BANKS' COMMITMENTS AND
PERCENTAGES" (the "COMMITMENT PERCENTAGE") times the aggregate amount of the
Revolving Credit Facility Loans requested. No Bank shall be required to make
any Revolving Credit Facility Loan if, immediately after giving effect to such
Revolving Credit Facility Loan and the application of the proceeds thereof to
the extent applied to the repayment of Revolving Credit Facility Loans, (i) the
sum of (a) the aggregate principal amount of such Bank's Revolving Credit
Facility Loans in U.S. Dollars outstanding, (b) the U.S. Dollar Equivalent of
the aggregate principal amount of such Bank's Revolving Credit Facility Loans
in a Selected Currency other than U.S. Dollars outstanding, (c) such Bank's
Commitment Percentage of Swingline Loans participated pursuant to Section
2.3(b)(3) and (d) such Bank's Commitment Percentage of Letter of Credit
Outstandings would exceed such Bank's Revolving Credit Facility Commitment, or
(ii) the sum of (a) the aggregate principal amount of all Revolving Credit
Facility Loans in U.S. Dollars outstanding, (b) the U.S. Dollar Equivalent of
the aggregate principal amount of all Revolving Credit Facility Loans in a
Selected Currency other than U.S. Dollars outstanding, (c) the aggregate
principal amount of all Bid Loans outstanding, (d) the aggregate principal
amount of all Swingline Loans outstanding and (e) Letter of Credit Outstandings,
would exceed the Revolving Credit Facility.
The failure of any one or more of the Banks to make Revolving Credit
Facility Loans in accordance with its or their obligations shall not relieve the
other Banks of their several obligations hereunder, but in no event shall the
aggregate amount at any one time outstanding which any Bank shall be required to
lend under this Revolving Credit Facility exceed its Revolving Credit Facility
Commitment.
Within the limits of this Section 2.1(a) and subject to Section 2.11 below,
the Borrower may borrow, prepay pursuant to Section 2.10 and reborrow under this
Section 2.1(a).
(b) SELECTED CURRENCY. Subject to the provisions of this Article 2, each
-----------------
Borrower shall have the right to receive the proceeds of Eurocurrency Rate
Borrowings in either U.S. Dollars or any other Selected Currency. All Alternate
Base Rate Loans shall be made in U.S. Dollars. The Selected Currency of
Eurocurrency Rate Borrowings sought by a Borrower shall be designated by the
Borrower in its Request for Advance for such Borrowing. All Eurocurrency Rate
Loans to be made on the occasion of a particular Eurocurrency Rate Borrowing
shall be made in a single currency.
-10-
<PAGE>
(C) THE REVOLVING CREDIT FACILITY NOTES. The obligation of Borrowers to
-----------------------------------
repay the Revolving Credit Facility Loans of each Bank shall be evidenced by a
separate promissory note issued by the Borrowers in the form attached hereto as
Exhibit C-1 (the "REVOLVING CREDIT FACILITY NOTES"). Each Revolving Credit
Facility Note shall be in a stated amount equal to the Revolving Credit Facility
Commitment of such Bank and each such Revolving Credit Facility Note shall bear
interest as provided herein and be payable at the times and in the manner herein
provided; provided, however, that notwithstanding the stated amount of such
Revolving Credit Facility Notes, the Borrowers' liability under the Revolving
Credit Facility Notes shall be limited at all times to the outstanding principal
amount of the Revolving Credit Facility Loans evidenced thereby (which principal
amount may be less than or may exceed the stated amount of such Revolving Credit
Facility Note), plus all interest accrued thereon and the amount of all costs
and expenses then payable thereunder, as established by each such Bank's books
and records, which books and records shall be conclusive absent manifest error.
2.2 REVOLVING CREDIT FACILITY FUNDING PROCEDURES.
--------------------------------------------
(A) REQUEST FOR ADVANCES. Revolving Credit Facility Loans to the
--------------------
Borrowers on the occasion of each Borrowing shall be made pursuant to a written
request by the Borrowers therefor (a "REQUEST FOR ADVANCE"), delivered to the
Agent by 12:00 noon at least one Business Day, in the case of Alternate Base
Rate Loans, by 12:00 noon at least three London Business Days, in the case of
Eurocurrency Rate Loans for which the Selected Currency is U.S. Dollars, and by
9:30 a.m. at least three London Business Days in the case of Eurocurrency Rate
Loans for which the Selected Currency is any currency other than U.S. dollars,
prior to the date on which such Loan is desired, stating:
(1) the date of such Borrowing, which shall be a Business Day in the
case of an Alternate Base Rate Borrowing and shall be a London Business Day
in the case of a Eurocurrency Rate Borrowing, the identities of the
Borrowers and the allocation of such Loans among the Borrowers;
(2) the amount of such Borrowing by each Borrower, which on the date
of each Borrowing shall be (a) in the case of an Alternate Base Rate
Borrowing, U.S. $25,000,000 in the aggregate by all Borrowers or any larger
integral multiple of U.S. $1,000,000, and (b) in the case of a Eurocurrency
Borrowing, the amount of the Selected Currency with a U.S. Dollar
equivalent of U.S. $25,000,000 in the aggregate by all Borrowers or any
larger integral multiple of the amount of the Selected Currency with a U.S.
Dollar equivalent of U.S. $1,000,000;
(3) whether the Revolving Credit Facility Loans comprising such
Borrowing are to be Alternate Base Rate Loans or Eurocurrency Rate Loans;
-11-
<PAGE>
(4) if the Borrowing is to be comprised of Eurocurrency Rate Loans,
the Selected Currency; and
(5) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period.
Each written Request for Advance shall be signed by an authorized officer of the
Company on behalf of the Borrowers and shall be for Revolving Credit Facility
Loans at a single interest rate option for all Borrowers. No Request for
Advance shall become effective until actually received by the Agent.
(B) ACTIONS BY AGENT. Upon the Agent's receipt of any Request for
----------------
Advance, such Request for Advance shall not thereafter be revocable by the
Borrowers and the Agent shall promptly provide to each Bank such Request for
Advance and amount of the Revolving Credit Facility Loan to be made by such
Bank. In addition, upon receipt of a Request for Advance in which the Borrowers
specify a Eurocurrency Rate Borrowing, the Agent shall inform each Bank of the
amount of the U.S. Dollar Equivalent of such Eurocurrency Rate Loan.
(C) AVAILABILITY OF FUNDS. Each Bank shall make available to the Agent
---------------------
the amount of such Bank's Revolving Credit Facility Loan at the main office of
the Agent, or at such other office or account of the Agent as is designated in
writing by the Agent to the Bank, in immediately available funds no later than
12:00 noon, Philadelphia time, on the date of each Borrowing. All such funds
shall be in U.S. Dollars, in the case of Alternate Base Rate Loans, and in the
applicable Selected Currency, in the case of Eurocurrency Rate Loans. On each
such Borrowing date, and subject to the prior receipt of funds from each Bank,
the Agent shall make available to the Borrowers in immediately available funds,
no later than 2:00 p.m., Philadelphia time, all of the proceeds of the Revolving
Credit Facility Loans to be made on such date upon satisfaction by the Borrowers
of all the applicable conditions specified in Article 4 hereof.
(D) FUNDING ASSUMPTIONS. Unless the Agent has been notified by any Bank
-------------------
at least one Business Day prior to the date of such Revolving Credit Facility
Loan that such Bank does not intend to make available to the Agent such Bank's
portion of the total amount of the Loan to be made on such date, the Agent may
assume that each Bank has made the amount of such Bank's Revolving Credit
Facility Loan available to the Agent on the date for the Borrowing of such
Revolving Credit Facility Loan and the Agent may, in reliance upon such
assumption, make available to the Borrowers a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank,
the Agent shall be entitled to recover such corresponding amount on demand from
such Bank, which demand shall be made in a reasonably prompt manner. If such
Bank does not pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrowers and the Borrowers shall
pay such corresponding amount to the Agent. The Agent shall also be entitled to
recover from such Bank or the Borrowers, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrowers to the date such
corresponding amount is recovered
-12-
<PAGE>
by the Agent at a rate equal to (i) if recovered from such Bank, the Federal
Funds Rate for three Business Days, and thereafter at the Alternative Base Rate
and (ii) if recovered from the Borrowers, the rate otherwise accruing on such
Revolving Credit Facility Loan. Nothing herein shall be deemed to relieve any
Bank of its obligation to fulfill its Commitment hereunder or to prejudice any
rights which any Borrower may have against any Bank as a result of any default
by such Bank hereunder.
(E) MAXIMUM BORROWINGS OUTSTANDING. The Borrowers may not have more than
------------------------------
ten Borrowings outstanding at any one time. For such purpose, one Borrowing by
one Borrower or Borrowings by more than one Borrower commenced on the same date
shall be deemed a single Borrowing.
2.3 SWINGLINE LOANS.
---------------
(A) SWINGLINE FACILITY. The Agent, in its individual capacity and under
------------------
the terms and subject to the conditions of this Agreement, shall provide
advances in U.S. Dollars (herein called "SWINGLINE LOANS"), to the Borrowers,
from time to time, as requested by the Company, provided that:
(1) the aggregate amount of Swingline Loans outstanding at any one
time shall not exceed the least of (A) $25,000,000; and (B) such amount, if
any, as will, when added to the sum of (a) the aggregate principal amount
of all Revolving Credit Facility Loans in U.S. Dollars outstanding, (b) the
U.S. Dollar Equivalent of the aggregate principal amount of all Revolving
Credit Facility Loans in a Selected Currency other than U.S. Dollars
outstanding, (c) the aggregate principal amount of all Bid Loans
outstanding, and (d) Letter of Credit Outstandings, would exceed the
Revolving Credit Facility; and
(2) no Swingline Loan shall be outstanding for more than thirty (30)
calendar days.
(B) FUNDING PROCEDURE.
-----------------
(1) The Company may request a Swingline Loan (on their own behalf or
on behalf of any Subsidiary Borrower) by delivering a Request For Swingline Loan
(in the form attached hereto as Exhibit B, the "REQUEST FOR SWINGLINE LOAN")
signed by an authorized officer of the Company to the Agent on or before 12:00
noon Philadelphia time on the date the Swingline Loan is to be made. Upon
receipt of such Request For Swingline Loan and if the conditions provided herein
shall be satisfied at the time of such receipt, the Agent shall make the
Swingline Loan on the date specified therein.
(2) Swingline Loans shall bear interest for any day at the Alternate
Base Rate or at an overnight money market rate determined by the Agent in good
faith if such rate is lower than
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the Alternate Base Rate.
(3) The Agent may by written notice given to the Banks not later than
10:00 a.m. (Philadelphia time), on any Business Day require the Banks to acquire
participations on such Business Day in all or a portion of the Swingline Loans
outstanding. Such notice shall specify the aggregate amount of Swingline Loans
in which Banks will participate, which participation will be based upon each
Bank's Commitment Percentage of the Swingline Loans to be participated. Each
Bank hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Agent such Bank's Commitment Percentage of such
Swingline Loan or Loans. Each Bank acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of an Event of Default or
event that, with the giving of notice or lapse of time or both would constitute
an Event of Default or reduction or termination of the Revolving Credit Facility
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever. Each Bank shall comply with its
obligation under this paragraph by wire transfer of immediately available funds,
in the same manner as provided in Section 2.2(c) with respect to Revolving
Credit Facility Loans made by such Bank. Any amounts received by the Agent from
a Borrower (or other party on behalf of a Borrower) in respect of a Swingline
Loan after receipt by the Agent of the proceeds of a sale of participations
therein shall be promptly remitted by the Agent to the Banks that shall have
made their payments pursuant to this paragraph, as their interests may appear.
The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the relevant Borrower of any default in the payment thereof.
(4) Within the foregoing limits, the Borrowers may request Swingline
Loans without regard to any minimum amount, repay them within thirty calendar
days and request new Swingline Loans. The Borrowers agree that the Swingline
Loans facility shall be used only for their convenience and need for very short
term funds. This facility shall not be used as a substitute for Loans by
continuously maintaining a significant dollar amount of Swingline Loans
outstanding.
(5) All Swingline Loans shall, in any event, be repaid by the
Borrowers on the Revolving Credit Facility Termination Date.
(C) SWINGLINE FACILITY NOTE. At the signing of this Agreement, the
-----------------------
Borrowers shall deliver to the Agent a properly completed and duly executed
Swingline Facility Note substantially in the form of Exhibit C-3 hereto (the
"SWINGLINE FACILITY NOTE") which shall evidence the Swingline Loans made by the
Agent and be payable to the order of the Agent in the principal amount equal to
the $25,000,000; provided, however, that notwithstanding the stated amount of
such Swingline Facility Note, the Borrowers' liability under the Swingline
Facility Note shall be limited at all times to the outstanding principal amount
of the Swingline Facility evidenced thereby, plus all interest accrued thereon
and the amount of all costs and expenses then payable thereunder, as established
by the Agent's books and records.
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2.4 LETTERS OF CREDIT.
------------------
(A) GENERAL REQUIREMENTS.
(1) Subject to and upon the terms and conditions herein set forth,
the Company, on behalf of the applicable Borrower, may request the Issuing Bank,
at any time and from time to time prior to the Revolving Credit Facility
Termination Date, to issue, and subject to the terms and conditions contained
herein the Issuing Bank shall issue, for the account of the Borrower, one or
more Letters of Credit in U.S. Dollars in such form as is approved by the
Issuing Bank in its sole discretion; provided, however, that no Letter of Credit
shall be issued if, upon such issuance, (A) all Letter of Credit Outstandings
would exceed the Letter of Credit Sublimit or (B) the sum of (a) the aggregate
principal amount of all Revolving Credit Facility Loans in U.S. Dollars
outstanding, (b) the U.S. Dollar Equivalent of the aggregate principal amount of
all Revolving Credit Facility Loans in a Selected Currency other than U.S.
Dollars outstanding, (c) the aggregate principal amount of all Bid Loans
outstanding, (d) the aggregate principal amount of all Swingline Loans
outstanding and (e) Letter of Credit Outstandings, exceed the Revolving Credit
Facility.
(2) No Letter of Credit shall bear an expiry date later than 365 days
from issuance, and no Letter of Credit issued less than 90 days prior to the
Revolving Credit Facility Termination Date shall bear an expiry date later than
90 days from issuance.
(B) MINIMUM STATED AMOUNT. The Stated Amount of each Letter of Credit
shall not be less than such amount as may be acceptable to the Issuing Bank.
(C) LETTER OF CREDIT REQUESTS.
(1) Whenever a Borrower desires that a Letter of Credit be issued for
its account, the Company shall give the Issuing Bank at least five Business
Days' prior written request therefor (or such shorter period of notice as the
Issuing Bank may agree upon with the Borrower from time to time).
(2) The execution and delivery of each request for a Letter of Credit
shall be deemed to be a representation and warranty by the Borrowers that such
Letter of Credit may be issued in accordance with, and will not violate the
requirements of, this Section 2.4. Unless the Issuing Bank has received notice
from the Agent or the Majority Banks before it issues the respective Letter of
Credit that one or more of the conditions specified in Section 4.2 are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.4, then the Issuing Bank may issue the requested Letter of Credit for the
account of the Borrower in accordance with the terms of this Agreement and, with
respect to any matters not specifically covered by this Agreement, in accordance
with the Issuing Bank's usual and customary practices and any Letter of Credit
Agreement in effect with such Borrower. In the event that any conflict shall
exist between the terms of this Agreement and the terms of any such Letter of
Credit Agreement, the terms of this
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Agreement shall prevail.
(D) LETTER OF CREDIT PARTICIPATIONS.
(1) Immediately upon the issuance by the Issuing Bank of any Letter
of Credit, the Issuing Bank shall be deemed to have sold and transferred to each
Bank (other than the Issuing Bank), and each such Bank shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Bank's Commitment Percentage, in such Letter of Credit, each
substitute letter of credit, each drawing made thereunder and the obligations of
the Borrowers under this Agreement with respect thereto, and any security
therefor or guaranty pertaining thereto. Upon any change in the Revolving Credit
Facility Commitments of the Banks, it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings (as defined in Section 2.4(e)
hereof), there shall be an automatic adjustment to the participations pursuant
to this Section 2.4(d) to reflect the new Revolving Credit Facility Commitment
Percentages of the assigning and assignee Banks.
(2) In determining whether to pay under any Letter of Credit, the
Issuing Bank shall have no obligation relative to the Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Letter of Credit. Any action taken or omitted to be
taken by the Issuing Bank under or in connection with any Letter of Credit if
taken or omitted in the absence of gross negligence or wilful misconduct, shall
not create for the Issuing Bank any resulting liability to any Bank.
(3) In the event that the Issuing Bank makes any payment under any
Letter of Credit and the Borrowers shall not have reimbursed such amount in full
in cash to the Issuing Bank pursuant to and as required by Section 2.4(e), the
Issuing Bank shall promptly notify the Agent, which shall promptly notify each
Bank of such failure, and each Bank shall promptly and unconditionally pay to
the Agent for the account of the Issuing Bank, the amount of such Bank's
Commitment Percentage of such unreimbursed payment in U.S. Dollars and in same
day funds. If the Agent so notifies, prior to 11:00 A.M. (Philadelphia time) on
any Business Day, any Bank required to fund a payment under a Letter of Credit,
such Bank shall make its required payment on the same Business Day. If and to
the extent such Bank shall not have so made its Commitment Percentage of the
amount of such payment available to the Agent for the account of the Issuing
Bank, such Bank agrees to pay to the Agent for the account of the Issuing Bank,
forthwith on demand, such amount, together with interest thereon at the Federal
Funds Rate, for each day from such date until the date such amount is paid to
the Agent for the account of the Issuing Bank. The failure of any Bank to make
available to the Agent for the account of the Issuing Bank its Commitment
Percentage of any payment under any Letter of Credit shall not relieve any other
Bank of its obligation hereunder to make available to the Agent for the account
of the Issuing Bank its Commitment Percentage of any payment under any Letter of
Credit on the date required, as specified
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<PAGE>
above; but no Bank shall be responsible for the failure of any other Bank to
make available to the Agent for the account of the Issuing Bank such other
Bank's Commitment Percentage of any such payment.
(4) Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which the Agent has received for the account of the Issuing
Bank any payments from the Banks pursuant to clause (3) above, the Issuing Bank
shall pay to the Agent and the Agent shall promptly pay to each Bank which has
paid its Commitment Percentage thereof, in U.S. Dollars and in same day funds,
an amount equal to such Bank's Commitment Percentage thereof.
(5) Upon the request of any Bank, the Issuing Bank shall furnish to
such Bank copies of any Letter of Credit to which the Issuing Bank is party and
such other documentation relating to such Letter of Credit as may reasonably be
requested by such Bank.
(6) As between the Borrowers on the one hand and the Issuing Bank and
the Banks on the other hand, the Borrowers assume all risks of the acts and
omissions of, or misuse of the Letters of Credit by the respective beneficiaries
of such Letters of Credit. Without limiting the generality of the foregoing,
neither the Issuing Bank nor any other Bank shall be responsible (except in the
case of its gross negligence or willful misconduct) for the following:
(A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any documents submitted by any party in connection with the
application for and issuance of or any drawing under such Letters of
Credit, even if it should in fact prove to be in any respects invalid,
insufficient, inaccurate, fraudulent or forged;
(B) the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any such Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason;
(C) failure of the beneficiary of any such Letter of Credit to
comply fully with conditions required in order to draw upon such Letter of
Credit, other than material conditions or instructions that expressly
appear in such Letter of Credit;
(D) errors, omissions, interruptions or delays in the
transmission or delivery of any messages by mail, cable,, telecopier, telex
or otherwise, whether or not they are encoded;
(E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any
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document required in order to make a drawing under any such Letter of
Credit or the proceeds thereof;
(G) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing of any such Letter of Credit; and
(H) any consequences arising from causes beyond the control of
the Issuing Bank, including without limitation any acts of governments.
(7) The obligations of the Borrowers to make payments to the Agent
for the account of the Issuing Bank with respect to Letters of Credit shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which any Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, the Issuing Bank, any
Bank, or any other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions;
(C) any draft, certificate or any other document presented under
the Letter of Credit shall prove to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein shall prove to be
untrue or inaccurate in any respect;
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(E) the occurrence of any Event of Default or event which, with
giving of notice or lapse of time, or both, would constitute an Event of
Default; or
(F) the termination of this Agreement or any Revolving Credit
Facility Commitment (but only with respect to Letters of Credit issued
prior to such termination).
(8) Immediately upon the issuance by the applicable Issuing Bank of
any Letter of Credit, such Issuing Bank will provide to each other Bank a copy
of the Borrower's written request therefor. In addition, promptly upon receipt
by the applicable Issuing Bank of fees payable
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<PAGE>
with respect to a Letter of Credit, such Issuing Bank will pay to the Agent for
distribution to each of the Banks (including such Issuing Bank) the Letter of
Credit Fee, and shall pay to the Issuing Bank such fronting fee and customary
charges as shall be agreed by the Company and the Issuing Bank.
(E) AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS
(1) Each Borrower agrees to reimburse the Issuing Bank, in U.S.
Dollars and in immediately available funds, for any payment made by the Issuing
Bank under any Letter of Credit issued at the request of such Borrower (each
such amount so paid until reimbursed, an "UNPAID DRAWING") immediately after,
and in any event on the date of, such payment, with interest on the amount so
paid by the Issuing Bank, to the extent not reimbursed prior to 1:00 p.m.
(Philadelphia time) on the date of such payment, from and including the date
paid to but excluding the date reimbursement is made as provided above, at a
rate per annum equal to the Alternative Base Rate plus 200 basis points, such
interest to be payable promptly following demand.
(2) The obligations of each Borrower under this Section 2.4(e) to
reimburse the Issuing Bank with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which any Borrower may have or have had against any Bank (including in its
capacity as the Issuing Bank or as a participant in any Letter of Credit),
including, without limitation, any defense based upon any non-application or
misapplication by the beneficiary of the proceeds of any drawing under a Letter
of Credit (each, a "DRAWING"); provided, however, that no Borrower shall be
obligated to reimburse the Issuing Bank for any wrongful payment made by the
Issuing Bank under a Letter of Credit as a result of acts or omissions
constituting wilful misconduct or gross negligence on the part of the Issuing
Bank.
(3) On the Revolving Credit Facility Termination Date, the Borrowers
shall deliver to the Agent cash or U.S. Treasury Bills with maturities of not
more than ninety (90) days from the date of delivery (discounted in accordance
with customary banking practice to present value to determine amount) in an
amount equal at all times to one hundred five percent (105%) of the Letter of
Credit Outstandings, such cash or U.S. Treasury Bills and all interest earned
thereon to constitute cash collateral for the Borrowers' reimbursement
obligation with respect to all Letters of Credit outstanding on the Revolving
Credit Facility Termination Date. If such cash collateral or U.S. Treasury Bills
has not been deposited within five (5) days after the date required, one or more
of the Banks shall be entitled to charge any account maintained by any Borrower
with such Bank or Banks to the extent necessary to create such cash collateral.
Any cash collateral deposited under this paragraph, and all interest earned
thereon, shall be held by the Agent and invested and reinvested at the expense
and the written direction of the Company, in U.S. Treasury Bills with maturities
of no more than ninety (90) days from the date of investment.
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2.5 BID OPTION FACILITY.
-------------------
(A) BID LOANS GENERAL REQUIREMENTS.
------------------------------
(1) The Company may, in accordance with the provisions of this
Section 2.5, from time to time prior to the Revolving Credit Facility
Termination Date request from the Banks offers to make Bid Loans in U.S. Dollars
to a Borrower (the "Bid Loans"); provided, however, that the Banks may, but
shall have no obligation to, submit such offers and the Company may, but shall
have no obligation to, accept any such offers. After giving effect to the Bid
Loans so requested by the Company and all other Loans to be made on the same Bid
Loan Borrowing Date, at no time shall (i) the aggregate number of Bid Loans
outstanding exceed five (5), provided that all Bid Loans issued on the same day
for the same duration shall be deemed to be one (1) Bid Loan or (ii) the sum of
(a) the aggregate principal amount of all Revolving Credit Facility Loans in
U.S. Dollars outstanding, (b) the U.S. Dollar Equivalent of the aggregate
principal amount of all Revolving Credit Facility Loans in a Selected Currency
other than U.S. Dollars outstanding, (c) the aggregate principal amount of all
Bid Loans outstanding, (d) the aggregate principal amount of all Swingline Loans
outstanding and (e) Letter of Credit Outstandings, exceed the Revolving Credit
Facility.
(2) No Bid Loan shall have a duration less than seven (7) days or
greater than one hundred eighty (180) days the ("BID LOAN DURATION").
(i) Interest on each Bid Loan (or any portion thereof) shall
accrue during each Bid Loan Duration at the rate of interest per annum
rounded upward to the nearest 1/100 of 1% (the "ABSOLUTE RATE") applicable
to such Bid Loan.
(ii) The principal amount of a Bid Loan is due and payable by
the Company at the maturity of such Bid Loan. Accrued interest on Bid Loans
shall be paid pursuant to Section 2.12 below. Interest accrued on any
amount of a Bid Loan prepaid pursuant to Section 2.11 is due and payable on
the date of such prepayment. The Company shall make all payments of
principal and interest on each Bid Loan to the Agent and the Agent shall
remit such payments to the Bid Loan Lender.
(3) All Bid Loans shall, in any event, be repaid by the Borrowers on
the Revolving Credit Facility Termination Date.
(B) BID LOAN NOTES. At the signing of this Agreement, the Borrowers shall
--------------
deliver to each Bank a properly completed and duly executed Bid Loan Note
substantially in the form of Exhibit C-2 hereto (the "BID LOAN NOTES") which
shall evidence the Bid Loans made by such Bank and be payable to the order of
such Bank in the principal amount equal to the Revolving Credit Facility;
provided, however, that notwithstanding the stated amount of such Bid Loan
Notes, the Borrowers' liability under the Bid Loan Notes shall be limited at all
times to the outstanding principal amount of the Bid Loans evidenced thereby,
plus all interest accrued thereon and the
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amount of all costs and expenses then payable thereunder, as established by each
such Bank's books and records.
(c) PROCEDURE FOR BID BORROWINGS.
----------------------------
(1) When the Company wishes to request offers to make Bid Loans
hereunder, it shall notify the Agent by FAX of a notice in substantially the
form of Exhibit F-1 (a "COMPETITIVE BID REQUEST") no later than 9:00 a.m.
(Philadelphia time), two Business Days prior to the proposed Bid Loan Borrowing
Date of a Bid Borrowing, specifying: (i) the date of such Bid Borrowing, which
shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which
shall be a minimum amount of $10,000,000 or in any integral multiple of
$1,000,000 in excess thereof; (iii) the Bid Loan Duration applicable thereto;
(iv) the Borrower requesting such Bid Loan; and (v) the Company's account to
which the proceeds of the Bid Loan should be credited. The Company may neither
request Competitive Bids for more than two Bid Loan Durations in a single
Competitive Bid Request nor request Competitive Bids more frequently than once
every three Business Days.
(2) Upon receipt of a Competitive Bid Request, the Agent will
promptly notify each Bank by FAX of the Competitive Bid Request. Such
notification shall constitute an invitation by the Company to each Bank to
submit Competitive Bids to make the Bid Loans to which such Competitive Bid
Request relates in accordance with this Section 2.5(c).
(3) Each Bank may at its sole discretion submit a bid ("COMPETITIVE
BID") containing an offer or offers to make Bid Loans in response to any
Competitive Bid Request. Each Competitive Bid must comply with the requirements
of this Section 2.5(c)(3) and must be submitted to the Agent (which may be by
FAX) at the Agent's office set forth on the signature page hereto not later than
9:45 a.m. (Philadelphia time) on the proposed Bid Loan Borrowing Date; provided
that Competitive Bids submitted by the Agent (or any Affiliate of the Agent) may
only be submitted if the Agent or such Affiliate notifies the Company of the
terms of its Competitive Bid not later than 9:30 a.m. (Philadelphia time) on the
proposed Bid Loan Borrowing Date.
Each Competitive Bid shall be in substantially the form of Exhibit F-
2, specifying therein:
(i) the proposed Bid Loan Borrowing Date;
(ii) the principal amount of each Bid Loan for which such
Competitive Bid is being made, which principal amount (x) may be equal
to, greater than or less than the Revolving Credit Facility Commitment
of the quoting Bank, (y) must be $1,000,000 or in multiples of
$1,000,000 in excess thereof, and (z) may not exceed the principal
amount of the Bid Loan for which Competitive Bids were requested;
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(iii) the Absolute Rate offered for each such Bid Loan and the
Bid Loan Duration applicable thereto; and
(iv) the identity of the quoting Bank.
A Competitive Bid may contain separate offers by the quoting Bank with respect
to each Bid Loan Duration specified in the related Competitive Bid Request.
Any Competitive Bid shall be disregarded if it:
(i) is not substantially in conformity with Exhibit F-2 or
does not specify all of the information required by this Section 2.5;
(ii) contains qualifying, conditional or similar language;
(iii) proposes terms other than or in addition to those set
forth in the applicable Competitive Bid Request; or
(iv) arrives after the time set forth in this Section 2.5.
(4) Promptly on receipt and not later than 10:00 a.m. (Philadelphia
time) on the proposed Bid Loan Borrowing Date, the Agent will notify the Company
by telephone (confirmed the same day by FAX) of the terms (i) of any Competitive
Bid submitted by a Bank that is in accordance with Section 2.5, and (ii) of any
Competitive Bid that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid submitted by such Bank with respect to the same
Competitive Bid Request. Any such subsequent Competitive Bid shall be
disregarded by the Agent unless such subsequent Competitive Bid is submitted
solely to correct a manifest error in such former Competitive Bid and only if
received within the times set forth in this Section 2.5. The Agent's notice to
the Company shall specify (1) the aggregate principal amount of Bid Loans for
which offers have been received for each Bid Loan Duration specified in the
related Competitive Bid Request; and (2) the respective principal so offered and
the Bid Loan Durations applicable thereto. Subject only to the provisions of
this subsection (4), any Competitive Bid shall be irrevocable except with the
written consent of the Company.
(5) Not later than 10:15 a.m. (Philadelphia time) on the proposed Bid
Loan Borrowing Date, the Company shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to this Section 2.5 by
telephone, such verbal notice to be confirmed the same day by FAX of a written
notice substantially in the form of Exhibit F-3 hereto (the "BID LOAN NOTICE"),
which notice shall set forth the amounts, interest rates, dates of borrowings
and maturities of each Bid Loan comprising such Borrowing and of the Banks
making such Loans. The Company shall be under no obligation to accept any offer
and may choose to reject all offers. The Company's failure to accept an offer in
accordance with the provisions of this Section 2.5 shall
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constitute the Company's rejection of such offer. In the case of acceptance,
such notice shall specify the aggregate principal amount of offers for each Bid
Loan Duration that is accepted. The Company may accept any Competitive Bid in
whole or in part; provided that:
(i) the aggregate principal amount of each Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive
Bid Request;
(ii) each Bid Loan must be in a minimum principal amount of
$10,000,000 or in any multiple of $1,000,000 in excess thereof,
provided that all Bid Loans made on the same day for the same duration
shall be deemed to be one (1) Bid Loan;
(iii) acceptance of offers may only be made on the basis of
ascending Absolute Rates within each Bid Loan Duration; and
(iv) the Company may not accept any offer that is required to
be disregarded pursuant to this Section 2.5(c) or that otherwise fails
to comply with the requirements of this Agreement.
(6) If offers are made by two or more Banks with the same
Absolute Rates for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Bid Loan Duration, the
principal amount of Bid Loans in respect of which such offers are accepted shall
be allocated by the Company in consultation with the Agent among such Banks as
nearly as possible (in such multiples as the Company in consultation with the
Agent may deem appropriate) in proportion to the aggregate principal amounts of
such offers. Determination by the Company in consultation with the Agent of the
amounts of Bid Loans shall be conclusive in the absence of manifest error.
(7) Promptly upon receipt of notice from the Company in
accordance with Section 2.5(c)(5), the Agent shall notify each Bank having
submitted a Competitive Bid whether or not its offer has been accepted and, if
its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be
made by it on the Bid Loan Borrowing Date. Promptly following each Bid
Borrowing, the Agent shall notify each Bank that submitted a Competitive Bid
(and each other Bank that so requests) of the ranges of the bids submitted and
the highest and lowest bids accepted for each Bid Loan Duration requested by the
Company and the aggregate amount borrowed pursuant to such Bid Borrowing.
(8) On the Bid Loan Borrowing Date, upon satisfaction of all
applicable conditions specified in Article 3 hereof, each Bank whose Competitive
Bid was accepted by the Company shall make the proceeds of its Bid Loan
available to the Agent by 1:00 p.m. (Philadelphia
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time) at the address set forth opposite its name on the signature page hereof or
at such office or account as the Agent shall specify to the Banks. The Agent
will make the funds so received from the Banks available not later than 3:00
p.m. (Philadelphia time) to the Company on the Bid Loan Borrowing Date by a
credit to the account of the Company set forth in the Bid Loan Notice.
2.6 JOINT AND SEVERAL OBLIGATIONS.
------------------------------
(a) Each Borrower (including without limitation the Company) shall bear
liability under the Notes and Letter of Credit Outstandings for all amounts as
aforesaid jointly and severally with each other Borrower and whether or not such
Borrower is designated in any Request for Advance as the Borrower requesting any
Loans, it having been determined by each Borrower that it will benefit from the
availability of credit to all Borrowers under the terms and conditions of this
Agreement. Notwithstanding the foregoing, no Foreign Subsidiary Borrower shall
be liable for the obligations of any other Borrower hereunder, and each Foreign
Subsidiary Borrower shall be liable solely for the Loans where it is designated
as Borrower, for Letters of Credit issued to it, and for its pro rata share of
all fees and expenses and other sums due hereunder (other than principal and
interest on the Loans) based upon the ratio of Loans and Letters of Credit
outstanding to such Borrower to the total amount of Loans outstanding and Letter
of Credit Outstandings hereunder.
(b) The liability of each Borrower under this Agreement and each Note for
any and all obligations of the Borrowers, individually and collectively, owed to
the Banks under this Agreement and each Note shall be unconditional and absolute
irrespective of (a) any lack of enforceability of any obligation, (b) any change
of the time, manner, place of payment, or any other term of any obligation, (c)
any law, regulation or order of any jurisdiction affecting the genuineness,
validity, or rights of the Banks, individually and collectively, with respect to
any obligation or any instrument evidencing any obligation, or (d) any other
circumstance which might otherwise constitute a defense to or discharge of any
Borrower, including, without limitation, the release of any other Borrower from
such obligations. Each Borrower agrees that its obligations hereunder are
irrevocable; that a separate action or actions may be brought and prosecuted
against it or other remedies hereunder may be sought regardless of whether any
other Borrower is joined in any such action or actions or subject to enforcement
of any such remedies; and that it waives the benefit of any statute of
limitations affecting its liabilities hereunder and each Note or the enforcement
hereof or thereof if the action otherwise barred by such statute of limitations
is brought against any other Borrower within such statute of limitations. Each
Borrower hereby irrevocably waives any right of subrogation or contribution it
may have against any other Borrower for amounts paid hereunder.
2.7 INTEREST RATES.
--------------
(A) ALTERNATE BASE RATE LOANS. Each Alternate Base Rate Loan shall bear
-------------------------
interest on the unpaid principal balance thereof from day to day at a rate per
annum which at all times shall be equal to the Alternate Base Rate. Any change
in such interest rate due to a change in the Alternate Base Rate shall be
effective on the date of such change. Interest on an Alternate Base Rate Loan
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shall be computed on the basis of a year of 360 days and shall be payable
quarterly on the last Business Day of each March, June, September and December
after the date hereof and at maturity of the applicable Interest Period, subject
to the Company's prepayment option set forth at Section 2.10 hereof.
(B) EUROCURRENCY RATE LOANS. Each Eurocurrency Rate Loan shall bear
-----------------------
interest from its date on the unpaid principal amount thereof at a rate per
annum equal to the LIBO Rate plus the Applicable Margin. Interest on each
Eurocurrency Rate Loan shall be computed on the basis of a year of 360 days and
shall be payable at the maturity thereof, except that interest on each
Eurocurrency Rate Loan having a maturity of more than three months shall be
payable at intervals of three months after the date of such Loan and at maturity
of the applicable Interest Period, subject to the Company's prepayment option
set forth at Section 2.10 hereof.
The Agent shall give prompt notice by FAX to the Company and to each of the
Banks of the LIBO Rate determined in respect of each Eurocurrency Rate Loan and
of any change therein. If the Agent shall not so notify the Company and each
Bank of a rate, or if otherwise the Agent shall determine (which determination
shall be, in the absence of fraud or manifest error, conclusive and binding upon
all parties hereto) that by reason of abnormal circumstances affecting the
interbank eurodollar or applicable eurocurrency market, adequate and reasonable
means do not exist for ascertaining the LIBO Rate to be applicable to the
requested Eurocurrency Rate Loan or that applicable funds in amounts sufficient
to fund such Eurocurrency Rate Loan are not obtainable on reasonable terms, the
Agent shall give notice of such inability or determination by FAX to the Company
and to each of the Banks at least one Business Day prior to the date of the
proposed Eurocurrency Rate Loan and thereupon the obligations of the Banks to
make such Eurocurrency Rate Loans shall be excused, subject, however, to the
right of the Company at any time thereafter to submit another such request.
(C) POST MATURITY RATE. After maturity (whether by acceleration or
------------------
otherwise) each Loan shall bear interest at a rate per annum equal to 3% in
excess of the rate otherwise in effect from time to time thereafter, from the
date when due, until such Loan is fully paid, which interest shall be payable by
the Borrowers on demand.
2.8 FEES.
----
(A) FACILITY FEE. The Borrowers agree to pay to the Agent in U.S.
-------------
Dollars, for the account of each Bank, an annual facility fee (the "FACILITY
FEE") computed on the basis of a year of 360 days, in amounts equal to the then
Applicable Rate of such Bank's Revolving Credit Facility Commitment. The
Facility Fee shall be payable in arrears in quarterly installments on the last
Business Day of each March, June, September and December and on the Revolving
Credit Facility Termination Date.
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(B) LETTER OF CREDIT FEE. The Borrowers agree to pay the Agent in U.S.
--------------------
Dollars, a Letter of Credit fee (the "LETTER OF CREDIT FEE"), computed on the
basis of a year of 360 days, in an amount equal to the then Applicable Rate
multiplied by the Stated Amount of all outstanding Letters of Credit, which
Letter of Credit Fee shall be distributed by the Agent to the Banks in
accordance with their respective Commitment Percentage. The Letter of Credit
Fee shall be payable in arrears in quarterly installments on the last Business
Day of each March, June, September and December and on the Revolving Credit
Facility Termination Date.
(C) BID LOAN FEE
------------
The Borrowers will pay to the Agent a fee as agreed upon between the
Company and the Agent (the "BID LOAN FEE") due the Agent in connection with the
Competitive Bid Request, such fee to be due and payable on the date of each
Competitive Bid Request.
2.9 TERMINATION OR REDUCTION OF CREDIT; RECOMPUTATION DATE.
------------------------------------------------------
(A) TERMINATION OR REDUCTION OF CREDIT. The Borrowers shall have the
----------------------------------
right at any time and from time to time, upon five Business Days' written notice
to the Agent (which shall promptly relay such notice to the other Banks), to
terminate in whole or reduce in part, in each case permanently but without
premium or penalty, the Revolving Credit Facility, provided that each such
partial reduction shall be in the aggregate amount of U.S. $25,000,000 or an
integral multiple thereof, and provided that each Bank's Commitment shall be
reduced pro rata in proportion to its Commitment Percentage.
(B) REDUCTION. In the event the Revolving Credit Facility is reduced, the
---------
Borrowers shall, simultaneously with such reduction, make a prepayment of
principal and interest in respect of the Alternate Base Rate Loans borrowed
under such Facility in such amount as is necessary to assure that the aggregate
principal amount of Loans outstanding and Letter of Credit Outstandings under
such Facility immediately after such reduction will not exceed the Revolving
Credit Facility as reduced. If prepayment in full of the Alternative Base Rate
Loans does not reduce the amount of all Loans outstanding and Letter of Credit
Outstandings under such Facility to an amount that will not exceed the Revolving
Credit Facility as reduced, the Borrowers shall deposit with the Agent cash in
an amount sufficient to repay that portion of the principal amount of
Eurocurrency Rate Loans outstanding, with interest thereon through the end of
each applicable Interest Period, as is necessary to assure that the aggregate
principal amount of Loans and Letters of Credit outstanding under such Facility
immediately after such reduction less the principal amount of Eurocurrency Rate
Loans under each Facility repaid by such deposit will not exceed the Revolving
Credit Facility as reduced, such deposit to be held by the Agent on behalf of
the Banks until the maturity date of such Loans and then applied to the
repayment of such Loans. If prepayment in full of the Alternative Base Rate
Loans and Eurocurrency Rate Loans does not reduce the amount of all Loans
outstanding and Letter of Credit Outstandings under such Facility to an amount
that will not exceed the Revolving Credit Facility as reduced, the Borrowers
shall deposit with the Agent cash in an amount sufficient to repay
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<PAGE>
that portion of the principal amount of Bid Loans outstanding, with interest
thereon through the end of each applicable Interest Period, as is necessary to
assure that the aggregate principal amount of Loans outstanding and Letter of
Credit Outstandings under such Facility immediately after such reduction less
the principal amount of Bid Loans under each Facility repaid by such deposit
will not exceed the Revolving Credit Facility as reduced, such deposit to be
held by the Agent on behalf of the Banks until the maturity date of such Loans
and then applied to the repayment of such Loans. Interest on amounts so held by
the Agent shall accrue at the Federal Funds Rate and shall be paid to each Bank
in accordance with their Commitment Percentage.
(C) RECOMPUTATION DATE. Notwithstanding any other provisions of this
------------------
Agreement to the contrary, if there are any Eurocurrency Rate Loans outstanding
the Selected Currency of which is not U.S. Dollars, the Agent shall recompute,
on and as of the last day of each calendar quarter and on the date of the
reduction of the Revolving Credit Facility (each such date, a "RECOMPUTATION
DATE"), the U.S. Dollar Equivalent of such Eurocurrency Rate Loans. If pursuant
to such recomputations the Agent determines that the aggregate principal amount
of Revolving Credit Facility Loans when added to (a) the aggregate principal
amount of all Bid Loans outstanding, (b) the aggregate principal amount of all
Swingline Loans and (c) Letter of Credit Outstandings is greater than 105% of
the Revolving Credit Facility, as then in effect, the Agent shall so advise the
Borrowers, and the Borrowers shall prepay the amount in excess of 100% of the
Revolving Credit Facility, together with accrued interest on the amount so
prepaid within five Business Days of receipt of such notice from the Agent.
(d) If the Borrower prepays any Eurocurrency Rate Loan pursuant to this
Section 2.9, simultaneously with such prepayment the Borrower shall pay the
applicable Bank or Banks pursuant to Section 2.14 hereof all funding costs and
loss of earnings which may arise in connection with such prepayment as
determined by each such Bank in good faith. The Agent shall promptly notify
each Bank of each such prepayment of Loans.
2.10 OPTIONAL LOAN PREPAYMENTS. Any Borrower, upon two Business Days'
-------------------------
written notice to the Agent (which shall promptly relay such notice to the other
Banks), may prepay one or more Loans as such Borrower shall designate in such
notice, in whole at any time or in part from time to time without premium or
penalty but with accrued interest to the date of such prepayment on the
principal amount being prepaid, provided that (a) each such partial prepayment
shall be in the aggregate principal amount of (i) U.S. $10,000,000 plus
integrals of U.S. $1,000,000, if U.S. Dollar Loans are to be prepaid, and (ii)
at least $10,000,000 in U.S. Dollar Equivalent plus integrals of $1,000,000 in
U.S. Dollars Equivalents, if Eurocurrency Rate Loans are to be prepaid, and
shall be applied as among the Banks pro rata in accordance with their respective
Commitments or, if such payment relates to a Bid Loan or Swingline Loan, based
upon the proportion of such Bid Loan or Swingline Loan made by or participated
to such Bank, (b) the Borrower shall specify the date, type and amount of each
Loan being prepaid and (c) if such prepayment applies to Eurocurrency Rate
Loans, simultaneously with such prepayment the Borrower shall pay the applicable
Bank or Banks pursuant to Section 2.14 hereof all funding costs and loss of
earnings which may arise in connection
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with such prepayment as determined by each such Bank in good faith. The Agent
shall promptly notify each Bank of each such prepayment of Loans.
2.11 PAYMENTS.
--------
(A) All payments (including prepayments) to a Bank of the principal of or
interest on any Eurocurrency Rate Loan shall be made in the Selected Currency of
such Loan, and all other payments hereunder, including in respect of any Fee and
all payments (including prepayments) to a Bank of the principal of or interest
on any U.S. Dollar Loan shall be made in U.S. Dollars. All payments (including
prepayments) to a Bank of the principal of or interest on any Loan or in respect
of any Fee shall be remitted for the account of such Bank to the Agent at the
main office of the Agent, or at such office or account in London as the Agent
shall specify to the Banks and the Borrowers with respect to Loans denominated
in a Selected Currency other than U.S. Dollars, not later than 11 a.m.
Philadelphia time or London time, as applicable, on the due date thereof in
immediately available funds.
(B) Each such payment for the account of a Bank shall be made absolutely
net of, without deduction or offset for and altogether free and clear of any and
all present and future taxes, levies, imposts, deductions, charges and
withholdings and all liabilities with respect thereto under the laws of the
United States or any foreign jurisdiction (or any state, county, or political
subdivision thereof), excluding income and franchise taxes imposed on such Bank
under the laws of the United States or any foreign jurisdiction (or any state,
county or political subdivision thereof). If a Borrower is compelled by law to
deduct any such taxes (other than such excluded taxes) or to make any such other
deductions or withholdings, it will pay such additional amounts as may be
necessary in order that the net payments after such deduction, and after giving
effect to any income taxes under the laws of the United States or any foreign
jurisdiction (or any state, county or political subdivision thereof) required to
be paid by any Bank in respect of such additional amounts, shall equal the
amount provided for herein or in any Note.
(C) Any payments to a Bank of the principal or interest due under any
Alternate Base Rate Loan or Eurocurrency Rate Loan or in respect of the Fee,
shall be made simultaneously with corresponding payments for the respective
accounts of the other Banks. All such simultaneous payments shall, as among the
Banks, be in amounts pro rata in accordance with their respective Commitment
Percentages. Payments received by the Agent shall be applied in accordance with
Section 9.8.
(D) Each Revolving Credit Facility Loan shall mature on the earlier of the
last day of the applicable Interest Period therefor and Revolving Credit
Facility Termination Date.
(E) If the Banks make a Loan on a day on which all or any part of
outstanding Loans from the Banks denominated in the same Selected Currency are
to be repaid, each Bank shall apply the proceeds of its new Loan to make such
repayment and only an amount equal to the difference
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(if any) between the amount being borrowed and the amount being repaid shall be
made available by such Bank to the Agent and by the Agent to the Borrowers.
2.12 ILLEGALITY. Notwithstanding any other provisions herein, if any
----------
requirement of law, regulation, order or decree of any jurisdiction applicable
to any Bank (including the United States, the United Kingdom or any state,
county or political subdivision thereof) or any change therein or in the
interpretation or application thereof shall make it unlawful for any Bank to
make or maintain certain or all of the Loans contemplated by this Agreement,
such Bank shall so notify the Agent and the Borrowers and the Agent shall
forthwith give notice thereof to the other Banks. Upon the giving of any such
notice to the Agent and the Borrowers (a) such Bank shall no longer be obligated
to make those types of Loans determined by such Bank to be unlawful and (b) the
Borrowers shall prepay in full such Loans made by such Bank then outstanding,
together with accrued interest thereon and any other amounts which may be due to
such Bank under this Agreement (including, without limitation, amounts owing to
such Bank pursuant to Sections 2.13 and 2.14) on the earlier of (i) the last day
of the then current Interest Period applicable to each Loan of such Bank or (ii)
on the date after which such Bank may no longer lawfully continue to maintain
and fund such Loans. If a circumstance of the type described in this Section
2.12 occurs, the Banks agree to negotiate in good faith with the Borrowers to
amend this Agreement to provide Loans hereunder which will not be unlawful. In
addition, as soon as practicable after the Agent or any Bank obtains knowledge
of any event which will cause, or is likely to cause, a circumstance of the type
described in this Section 2.12, the Agent or the Bank, as the case may be, shall
notify the Borrowers thereof and each affected Bank shall designate a different
lending office for its Loans or take such other action to avoid the need for
repayment of its Loans pursuant to this Section 2.12 to the extent that such a
designation or the taking of such action would not, in the reasonable opinion of
such Bank, be disadvantageous to such Bank.
2.13 INCREASED COST.
--------------
(a) If Regulation D of the Board of Governors of the Federal Reserve
System, as the same may be amended or supplemented from time to time, or any
other requirement of law or regulation applicable to any Bank, including,
without limitation, the United States or the United Kingdom or any state, county
or political subdivision thereof, or any order or decree or in the
interpretation or application thereof or compliance by a Bank with any request
or directive (whether or not having the force of law) occurring after the date
hereof from any central bank or monetary authority or other governmental
authority:
(1) does or shall subject such Bank to any tax of any kind whatsoever
with respect to this Agreement or any Eurocurrency Rate Loan, or change the
basis of taxation of payments to such Bank of principal, Facility Fees,
interest or other amount payable hereunder (except for changes in the rate
of tax on general income and similar taxes on the overall net income of
such Bank in any jurisdiction); or
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<PAGE>
(2) does or shall impose, modify or hold applicable or change any
reserve, special deposit, Federal Deposit Insurance Corporation premium,
compulsory loan or similar requirement against assets held by, or deposits
or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office
of such Bank which are not otherwise included in the determination of the
LIBO Rate hereunder; or
(3) does or shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing, converting or maintaining advances or extensions of credit as
Eurocurrency Rate Loans, or to reduce any amount receivable in respect of such
Eurocurrency Rate Loans then, in any such case, the Borrowers shall promptly pay
to such Bank such additional amount which will compensate the Bank for such
additional cost or reduced amount receivable which the Bank deems to be material
as determined by the Bank with respect to this Agreement or the Eurocurrency
Rate Loans hereunder.
(b) If any Bank shall have determined that compliance by such Bank with
any applicable law, governmental rule, regulation or order of any jurisdiction
applicable to such Bank (including, without limitation, the United States or the
United Kingdom or any state, county or political subdivision thereof) regarding
capital adequacy of banks or bank holding companies, or any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank with any request or directive regarding capital adequacy (whether
or not having the force of law and whether or not failure to comply therewith
would be unlawful) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Bank's capital
as a consequence of such Bank's obligations hereunder to a level below that
which such Bank could have achieved but for such compliance (taking into
consideration such Bank's policies with respect to capital adequacy immediately
before such compliance and assuming that such Bank's capital was fully utilized
prior to such compliance) by an amount deemed by such Bank to be material, then,
upon demand, the Borrowers shall immediately pay to such Banks as are so
affected such additional amounts as shall be sufficient to compensate such Banks
for such reduced return, together with interest on each such amount from four
Business Days after the date demanded until payment in full thereof at the rate
of interest of 3% per annum over the Alternate Base Rate. In determining such
amount, such Bank may use any reasonable averaging and attribution methods. No
liability or cost pursuant to this Section 2.13(b) shall be incurred by the
Borrowers prior to, or relating to any period before, the date that the
Borrowers receive a demand from a Bank under this Section 2.13(b).
(c) If a Bank becomes entitled to claim any additional amounts pursuant to
this Section 2.13, it shall promptly notify the Borrowers thereof. A
certificate as to any additional amounts payable pursuant to the foregoing
submitted by a Bank to the Borrowers shall be conclusive absent
manifest error. For purposes of the application of this Section 2.13, and in
calculating the amount
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<PAGE>
necessary to compensate such Bank for any imposition of or increase in capital
requirements or taxes hereunder, such Bank shall determine the applicability of
this provision and calculate the amount payable to it hereunder in a manner
consistent with the manner in which it shall apply and calculate similar
compensation payable to it by other borrowers having provisions in their credit
agreements comparable to this Section 2.13.
(d) If any Bank shall, at any time, incur costs associated with reserve
requirements pursuant to Regulation D in connection with the making or
maintenance of any Eurocurrency Rate Loan, then the Borrowers shall immediately
pay such costs to such Bank in accordance with Section 2.13(c) hereof.
2.14 INDEMNITY AGAINST FUNDING LOSSES OR EXPENSES. The Borrowers shall
--------------------------------------------
indemnify each Bank against any loss, funding cost, expense or loss of earnings,
which such Bank may, as a consequence of the Borrowers' failure to accept Loans
requested at any time, failure to make a payment on the due date thereof or the
payment, prepayment or conversion of any Eurocurrency Rate Loans or Bid Loans on
a day other than the maturity date thereof, reasonably sustain or reasonably
incur in liquidating or employing deposits from third parties acquired to
effect, fund or maintain such or any part thereof. If a Bank becomes entitled
to claim any additional amounts pursuant to this Section 2.14, it shall promptly
notify the Agent, which shall promptly notify the Borrowers thereof.
2.15 SUBSTITUTION OF BANK. If any Bank has demanded compensation under
--------------------
Section 2.13 or Section 2.14, the Borrowers shall have the right, after
consultation with the Agent, to seek a substitute bank or banks (which may be
one or more of the Banks) to purchase the Notes for cash without recourse to
such Bank and assume the Commitment of such Bank, which shall thereupon be
released from all of its obligations hereunder.
3. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant that:
3.1 ORGANIZATION AND GOOD STANDING. The Company, each Subsidiary Borrower
------------------------------
and each Significant Subsidiary is a corporation duly organized and in good
standing (where such concept exists) under the laws of the jurisdiction of its
incorporation and has the power to carry on its business as now conducted. The
officers of the Company have exercised due diligence to qualify the Company, and
to cause the qualification of each Subsidiary Borrower and each Significant
Subsidiary, as a foreign corporation in the various jurisdictions wherein the
nature of the business they transact makes such qualification necessary. The
Company's only Significant Subsidiaries on the date hereof are IKON Capital
Inc., Alco Standard Acquisition Capital Corporation, IKON Office Solutions, Inc.
and IKON Office Solutions, Inc. (Canada).
3.2 CORPORATE POWER AND AUTHORITY. The execution, delivery and
-----------------------------
performance of this Agreement and the Notes are within the corporate power and
authority of each Borrower, have been
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<PAGE>
duly authorized by proper corporate proceedings, will not contravene any
provision of law or the Certificate or Articles of Incorporation, Memorandum and
Articles of Association or Bylaws or Code of Regulations of any Borrower or
constitute a default under any agreement binding upon any Borrower, and do not
require the consent or approval of, or registration with, any governmental body,
agency or authority.
3.3 VALIDITY OF AGREEMENT AND NOTES. This Agreement is a legal, valid and
-------------------------------
binding obligation of each Borrower, and the Notes when issued will be legal,
valid and binding obligations of each Borrower, enforceable in accordance with
their respective terms.
3.4 LITIGATION. Except as set forth on Schedule A, there are no suits,
----------
litigation or other proceedings pending, or to the knowledge of any officer of
any Borrower threatened, against or affecting the Company or any Subsidiary or
any of their respective properties, before any court, governmental commission,
bureau or other regulatory body, the outcome of which might materially and
adversely affect the financial condition or business of the Company and its
Subsidiaries considered in the aggregate or the ability of any Borrower to
perform its obligations hereunder.
3.5 FINANCIAL STATEMENTS. The Company has heretofore furnished to the
--------------------
Banks
(a) consolidated balance sheets of the Company and its Subsidiaries
as at September 30, 1996 and September 30, 1995 and the related
consolidated statements of income and retained earnings, with a report
thereon by Ernst & Young, independent certified public accountants, stating
in comparative form the amounts for the corresponding dates and periods for
the previous fiscal year. Such balance sheets and such statements of income
and retained earnings fairly present the consolidated financial position of
the Company and its Consolidated Subsidiaries as of the dates thereof and
the results of their operations for the periods then ended and
(b) the pro forma consolidated balance sheets of the Company and its
Subsidiaries as of September 30, 1996 and the related statements of income
and retained earnings, assuming the spin-off of Unisource Worldwide, Inc.
to the shareholders of the Company as of such date.
All such financial statements were prepared in accordance with GAAP. Since
September 30, 1996, there has not been any material adverse change in the
financial condition, business or operations of the Company and its Subsidiaries.
3.6 ERISA. Each Employee Benefit Plan of the Company and any ERISA
-----
Affiliate is in compliance with ERISA and the Code, where applicable, in all
material respects. As of the date hereof, (i) the amount of all Unfunded
Pension Liabilities under the Pension Plans, (ii) the amount of the aggregate
Unrecognized Retiree Welfare Liability under all applicable Employee Benefit
Plans, and (iii) the aggregate potential annual withdrawal liability payments,
as determined in
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accordance with Title IV of ERISA, of the Company and any ERISA Affiliate with
respect to all Pension Plans which are Multiemployer Plans, are, in the
aggregate, no more than U.S. $5,000,000. The Company and each ERISA Affiliate
have complied with the requirements of ERISA Section 515 with respect to each
Pension Plan which is a Multiemployer Plan. The Company and/or any ERISA
Affiliate has, as of the date hereof, made all contributions or payments to or
under each such Pension Plan required by law or the terms of such Pension Plan
or any contract or agreement. No material liability on a consolidated basis to
the Pension Benefit Guaranty Corporation ("PBGC") has been, or is expected by
the Company or any ERISA Affiliate.
For purposes of ERISA matters under this Agreement, "EMPLOYEE BENEFIT PLAN"
means any employee benefit plan within the meaning of ERISA Section 3(3)
maintained, sponsored or contributed to by the Company or any ERISA Affiliate;
"ERISA AFFILIATE" means any entity that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c), (m) or (o) of
which the Company is a member; "MULTIEMPLOYER PLAN" means a pension plan that is
a multiemployer plan as defined in ERISA Section 4001(a)(3); "PENSION PLAN"
means any Employee Benefit Plan, including a Multiemployer Plan, the funding
requirements of which (under ERISA Section 302 or Code Section 412) are or, at
any time within the six years immediately preceding the time in question, were
in whole or in part, the responsibility of the Company or any ERISA Affiliate;
"UNFUNDED PENSION LIABILITIES" means, with respect to any Pension Plan at any
time, the amount determined by taking the accumulated benefit obligation, as
disclosed in accordance with FAS number 87, over the fair market value of
Pension Plan assets; and "UNRECOGNIZED RETIREE WELFARE LIABILITY" means, with
respect to any Employee Benefit Plan that provides post-retirement benefits
other than pension benefits, the amount of the transition obligation, as
determined in accordance with FAS number 106, as of the most recent valuation
date that has not been recognized as an expense on the income statement of the
Company and its Subsidiaries.
3.7 REGULATIONS G, T, U AND X. Except for Partners Securities Company,
-------------------------
neither the Company nor any of its Subsidiaries is or will be engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying or trading in any margin stocks
or margin securities (within the meaning of Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any Loan made hereunder will be applied for the purpose of purchasing or
carrying or trading in any such stocks or securities, or of refinancing any
credit previously extended or of extending credit to others for the purpose of
purchasing or carrying or trading in any such margin stocks or margin
securities.
3.8 COMPLIANCE WITH LAWS. The Company and each Subsidiary is in
--------------------
compliance in all material respects with all applicable laws and regulations,
federal, state and local, the violation of which would have a material adverse
effect on the Company and its Consolidated Subsidiaries taken as a whole; the
Company and each Subsidiary possess all the material franchises, permits and
licenses necessary or required in the conduct of its business, and the same are
valid, binding and enforceable.
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3.9 TAXES AND ASSESSMENTS. The Company and each Subsidiary have filed all
---------------------
required tax returns or have filed for extensions of time for the filing
thereof, and have paid all applicable taxes, governmental charges and similar
obligations, including United States federal, state and local taxes, other than
taxes, governmental charges and similar obligations not yet due or which may be
paid hereafter without material penalty; the Internal Revenue Service has
completed audits of tax returns filed through September 30, 1992; and neither
the Company nor any Subsidiary has knowledge of any material deficiency or
additional assessment against it in connection with any applicable taxes not
provided for in the financial statements referred to in Section 3.5 hereof.
3.10 INVESTMENT COMPANY. Neither the Company nor any Subsidiary is an
------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
3.11 ENVIRONMENTAL MATTERS. The Company and each Subsidiary have received
---------------------
all permits and filed all notifications necessary to carry on their businesses
and are in compliance in all material respects with all federal, state or local
laws and regulations governing the control, removal, spill, release or discharge
of hazardous or toxic wastes, substances and petroleum products; including
without limitation as provided in the provisions or the regulations, as amended,
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986,
the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, and the
Occupational Safety and Health Act, and any regulations thereunder (all of the
foregoing enumerated and non-enumerated statutes, including without limitation
any applicable state or local environmental statutes, collectively the
"ENVIRONMENTAL CONTROL STATUTES"), the effect of which if not received, filed or
complied with could have a material adverse affect on the financial condition,
business or operations of the Company and its Subsidiaries. Also, neither the
Company nor any Subsidiary has received notice of potential responsibility for
costs associated with responding to the release or threatened release of
hazardous substances for any site where the Company's potential responsibility
could have a material adverse affect on the financial condition, business or
operations of the Company and its Subsidiaries.
3.12 LIENS. Except as disclosed on Schedule B hereto, mortgages, pledges,
-----
security interests, encumbrances and other liens upon properties of the Company
and its Subsidiaries which are in existence at the date hereof do not secure
indebtedness that is, in the aggregate, material to the Company and its
Consolidated Subsidiaries and do not encumber properties which are material to
the Company and its Consolidated Subsidiaries.
3.13 DISCLOSURE GENERALLY. The representations and statements made by or
--------------------
on behalf of the Company and its Subsidiaries in connection with this credit
facility, and each Loan, do not and will not contain any untrue statement of a
material fact or omit to state a material fact or any fact necessary to make the
representations made not materially misleading. No written information,
exhibit, report or financial statement furnished by the Company or any
Subsidiary to the Banks in connection with this credit facility or the Loans
contains or will contain any material misstatement
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of fact or omit to state a material fact or any fact necessary to make the
statements contained therein not materially misleading.
3.14 OWNERSHIP OF SUBSIDIARY BORROWERS. The Company owns, directly or
---------------------------------
indirectly, all of the issued and outstanding capital stock of each Subsidiary
Borrower other than qualifying shares held by the directors of such Subsidiary
Borrower.
4. CONDITIONS
4.1 EFFECTIVENESS OF AGREEMENT. No Bank shall have an obligation to make
--------------------------
a Loan hereunder unless all the following conditions shall have been satisfied
on or before the date hereof, and all documents submitted and actions taken
shall be, in each instance, in form and substance, satisfactory to the Agent:
(A) COMPLIANCE. (i) Each Borrower shall have complied and be in
----------
compliance with all of the terms, covenants and conditions of this Agreement
which are binding upon it, (ii) there shall exist no Event of Default and no
event which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default, and (iii) the representations and
warranties contained in Article 3 hereof shall be true and correct. As evidence
hereof, the Agent shall have received for the account of each Bank a
certificate, dated the date hereof, signed by an executive officer of the
Company verifying the foregoing, to the best of his or her knowledge and belief.
Each Request for Advance in respect of any Loan hereunder, and the acceptance of
the proceeds of such Loan, shall constitute a reaffirmation by the officer
signing such Request for Advance (to the best of his or her knowledge and
belief) as of the time thereof and by the Borrowers of the continuing truth and
accuracy of the foregoing.
(B) EVIDENCE OF CORPORATE ACTION. The Agent shall have received copies,
----------------------------
certified as of the date hereof, of all corporate action taken by each Borrower
to authorize this Agreement, the Notes and the borrowing hereunder, and such
other evidence of corporate power and authority as the Banks shall reasonably
require.
(C) OPINIONS OF COUNSEL. The Agent shall have received a favorable
-------------------
written opinion of the Company's General Counsel in the form and substance
attached hereto as Exhibit D or Exhibit E, in the case of a Foreign Subsidiary.
(D) INCUMBENCY CERTIFICATE. The Agent shall have received a certificate
----------------------
of the Secretary or an Assistant Secretary of each Borrower setting forth the
name of the officer or officers of each Borrower authorized to sign on behalf of
such Borrower this Agreement and the Notes and other documents and certificates
to be delivered by such Borrower hereunder, together with the true signatures of
such officer or officers, upon which certificate each Bank and the Agent may
rely conclusively until they shall have received a further certificate of the
Secretary or an Assistant
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Secretary of such Borrower amending the prior certificate and submitting the
signatures of the appropriate officers named in such certificate.
(E) EXECUTED AGREEMENTS. The Agent shall have received this Agreement or
-------------------
counterparts hereof executed by all parties to this Agreement.
(F) NOTES. The Agent shall have received for each Bank a Revolving Credit
-----
Facility Note and a Bid Loan Note, duly executed, completed and issued in
accordance herewith.
(G) MATERIAL ADVERSE CHANGE. Since September 30, 1996, there shall not
-----------------------
have been any material adverse change in the financial condition, operations or
assets of the Company and its Subsidiaries taken as a whole, and there shall not
be any other event or circumstance which gives the Majority Banks reasonable
grounds to conclude that any Borrower may not or will not be able to perform or
observe (in the normal course) its obligations hereunder and under the Notes.
Notwithstanding anything contained in this Agreement to the contrary, the Spin-
off in itself shall not be deemed a material adverse change.
(H) SATISFACTION OF 1994 CREDIT. The Agent shall have received evidence
---------------------------
acceptable to it of the termination of 1994 Credit and the satisfaction by the
Company and its Subsidiaries of all obligations thereunder.
(I) CERTIFICATE OF COMPLIANCE. The Agent shall have received a
-------------------------
certificate, dated the effective date of this Agreement and signed by the
President, a Vice President or a Financial Officer of the Company, confirming
(i) compliance with the conditions set forth in Section 4.2 and (ii) that all
governmental and third-party approvals necessary or advisable in connection with
the spin-off of Unisource Worldwide, Inc. to the shareholders of the Company
(the "SPIN-OFF") and the transactions contemplated thereby and the continuing
operations of the Company and its Subsidiaries after the Spin-off have been
obtained and are in full force and effect, and all applicable waiting periods
have expired without any action being taken or threatened by any competent
authority which restrain, prevent or otherwise impose adverse conditions on the
Spin-off or any of the transactions contemplated thereby.
4.2 CONDITIONS TO LOANS. After this Agreement has become effective, the
-------------------
obligation of each Bank to make each Loan to be made by it hereunder is further
conditioned upon the following:
(a) The Agent shall have received a Request for Advance;
(b) The Company and its Subsidiaries, including but not limited to each
Subsidiary Borrower, shall be in compliance with all of the terms, covenants and
conditions of this Agreement which are binding upon it;
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(c) After giving effect to such Loan and the receipt of the proceeds
thereof, no Event of Default or no event which, with the giving of notice or the
lapse of time, or both, would constitute such an Event of Default, shall have
occurred and be continuing;
(d) Each representation and warranty contained herein shall be true and
accurate on and as of the date of the proposed Loan as though such was made on
such date; provided, however, that such condition shall include the truth and
accuracy of the representation contained in Section 3.14 only as such
representation applies to those Subsidiary Borrowers with Loans then outstanding
or to whom such Loan is to be made; and
(e) If such Loan is requested to be made to a Subsidiary Borrower, the
Agent shall have received a favorable written opinion from counsel to such
Subsidiary Borrower (which counsel shall be reasonably acceptable to the Agent)
in the form and substance attached hereto as Exhibit E or in such form as shall
be reasonably acceptable to the Agent.
4.3 COPIES OF DOCUMENTS. All documents and instruments to be delivered
-------------------
hereunder in satisfaction of the conditions set forth in Section 4.1 and Section
4.2 (other than the Notes themselves) shall be delivered in sufficient numbers
of original counterparts to enable separate counterparts thereof to be furnished
to the Agent and each of the Banks. Upon its receipt of the same, the Agent
shall promptly supply each Bank with a counterpart of each document, certificate
and other paper delivered to the Agent in fulfillment of the conditions set
forth in Section 4.1 and Section 4.2.
5. COVENANTS
The covenants set forth in this Section shall be effective until the
expiration or prior termination of the Commitments or until payment in full of
all Notes issued and other amounts owing hereunder, whichever is later.
5.1 FINANCIAL STATEMENTS AND INFORMATION. The Company will furnish to
------------------------------------
each Bank:
(a) as soon as available and in any event within 60 days after the
end of the first, second and third quarterly accounting periods in each
fiscal year of the Company, copies of a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such accounting
period and of the related consolidated income and retained earnings
statements of the Company and its Consolidated Subsidiaries for the elapsed
portion of the fiscal year ended with the last day of such accounting
period, all in reasonable detail and stating in comparative form the
amounts for the corresponding date and period in the previous fiscal year,
and all prepared in accordance with GAAP, subject to year end audit
adjustments and certified by an authorized financial officer of the
Company;
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<PAGE>
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Company, copies of consolidated balance
sheets of the Company and its Consolidated Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained
earnings of the Company and its Consolidated Subsidiaries for such fiscal
year, in reasonable detail and stating in comparative form the figures as
of the end of and for the previous fiscal year prepared in accordance with
GAAP and certified by independent public accountants of recognized standing
as may be selected by the Company and reasonably satisfactory to the Agent;
(c) concurrently with each of the financial statements furnished
pursuant to the foregoing subsections (a) and (b), a certificate of the
Chairman of the Board, President, a Vice President (whose duties are in the
finance area) or Financial Officer, stating that in the opinion of the
signer, based upon a review made under their supervision, no Event of
Default or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, has occurred is continuing, and
the Company has performed and observed all of, and the Company is not in
default in the performance or observance of any of, the terms and covenants
hereof or, if the Company shall be in default, specifying all such
defaults, and the nature thereof, of which the signer of such certificate
may have knowledge;
(d) concurrently with their being filed, mailed or delivered, as
applicable, copies of all proxy statements, financial statements and
reports which the Company shall send or make available generally to its
shareholders, and copies of all reports on Forms 10-K, 10-Q and 8-K and all
other filings and reports specifically requested by a Bank which the
Company or any Subsidiary may be required to file with the Securities and
Exchange Commission or any similar or corresponding governmental
commission, department or an agency substituted therefor or with any
securities exchange located in the United States of America; and
(e) such other information relating to the business, affairs and
financial condition of the Company and its Subsidiaries as the Agent (when
requested so to do by any Bank) may from time to time reasonably request.
5.2 FUNDED DEBT TO TOTAL CAPITALIZATION RATIO. The Company will not
-----------------------------------------
permit Funded Debt of the Company and its Consolidated Subsidiaries to exceed
45% of the sum of (1) Funded Debt of the Company and its Consolidated
Subsidiaries plus (2) the consolidated minority interest obligations shown on
the consolidated balance sheet of the Company and its Consolidated Subsidiaries
plus (3) the Consolidated Net Worth of the Company and its Consolidated
Subsidiaries. For purposes of calculating such ratio, Finance Leasing
Subsidiaries shall be excluded from the definition of "CONSOLIDATED
SUBSIDIARIES."
5.3 SUBSIDIARIES' DEBT. The Company will not permit any of its
------------------
Subsidiaries directly or indirectly to create, incur, assume, suffer to exist,
guarantee or otherwise become, be or remain
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<PAGE>
liable with respect to any Debt (other than Excluded Debt, as defined below) in
an aggregate amount outstanding (as to all Subsidiaries) at any time in excess
of 20% of Consolidated Net Worth plus the amount of Debt outstanding on the date
hereof (other than Excluded Debt outstanding on the date hereof). For the
purposes of this Agreement, Excluded Debt shall mean: (i) Debt owing exclusively
to the Company or another Subsidiary, (ii) Debt of a Subsidiary outstanding on
the date that the Company acquires such Subsidiary, (iii) Debt with respect to
property to be used by the Company or its Subsidiaries, the interest on which
Debt is exempt from Federal income tax pursuant to (S)103 of the Internal
Revenue Code of 1986, as amended, (iv) Debt of any foreign Subsidiary that is
not guaranteed by the Company or any other Subsidiary, (v) Debt of Finance
Leasing Subsidiaries owing to the Company or any of its Consolidated
Subsidiaries, (vi) Debt of Finance Leasing Subsidiaries to a person or persons
other than the Company and its Consolidated Subsidiaries provided that such Debt
is not guaranteed by the Company or any of its Consolidated Subsidiaries or
(vii) Debt hereunder or under the Existing Credit Agreement.
5.4 SALE OF ASSETS. The Company will not, and will not permit any
--------------
Consolidated Subsidiary to, sell, lease or transfer all or substantially all of
its assets unless (i) immediately after giving effect thereto the Company is in
compliance with the covenants and provisions of this Agreement and (ii) such
sale, lease or transfer shall not have any materially adverse effect upon the
financial condition of the Company and its Subsidiaries taken as a whole or the
Company's ability to perform its obligations hereunder. Notwithstanding this
provision, any Consolidated Subsidiary that is not a Subsidiary Borrower may
sell, lease or transfer all or substantially all of its assets to any other
Consolidated Subsidiary or to the Company, and any Subsidiary Borrower may sell,
lease or transfer all or substantially all of its assets to any other Subsidiary
Borrower or to the Company.
5.5 MERGERS AND ACQUISITIONS. Neither the Company nor any Subsidiary
------------------------
Borrower will merge or consolidate with, or otherwise acquire control of the
assets of, any other corporation or other entity, unless (i) the Company is the
surviving or parent corporation of any merger or other acquisition involving the
Company, (ii) a Subsidiary Borrower is the surviving or parent corporation of
any merger or other acquisition involving one or more Subsidiary Borrowers and
(iii) the Company and each Subsidiary Borrower are in compliance with this
Agreement prior to and after such merger or acquisition; provided, however, that
the provisions of this Section 5.5 shall apply to a Subsidiary Borrower only if
and so long as such Subsidiary Borrower has outstanding Loans.
5.6 NEGATIVE PLEDGE. The Company will not, and will not permit any
---------------
Consolidated Subsidiary to, create, incur, assume or suffer to exist any
mortgage, pledge, security interest, encumbrance or other lien upon any
property, now owned or hereafter acquired, of the Company or any Consolidated
Subsidiary (the sale with recourse of receivables or any sale and lease back of
any fixed assets being deemed to be the giving of a lien thereon for money
borrowed), other than:
(a) liens existing on the date of this Agreement on any property,
provided that the amount secured by any such lien is not greater than the
amount secured thereby on the date of this Agreement;
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<PAGE>
(b) liens on any property (including but not limited to margin stock
(within the meaning of Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System)) hereafter acquired existing at the time of such
acquisition or created within a period of 120 days following any such
acquisition to secure or provide for the payment of any part of the purchase
price thereof or liens to secure indebtedness incurred to fund or refund any
liens within the scope of this subsection (b) provided that the amount secured
by any such lien is not greater than the amount secured thereby on the date of
such acquisition or within the 120 day period, as the case may be;
(c) liens securing indebtedness of a Consolidated Subsidiary outstanding
on the date that the Company acquires such Consolidated Subsidiary;
(d) liens for taxes, assessments or governmental charges or levies not yet
due and payable or being contested in good faith and by appropriate proceedings
promptly initiated and diligently conducted, provided that a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor and no foreclosure, distraint, sale or other similar proceedings shall
have been commenced;
(e) statutory liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for sums
not yet due or being contested in good faith by appropriate proceedings promptly
initiated and diligently conducted, provided that a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;
(f) liens incurred or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money);
(g) liens created hereafter in connection with borrowing or pledges of
receivables which liens when added to all sales and discounting transactions
contemplated by Section 5.7 do not in the aggregate exceed 10% of Consolidated
Net Worth;
(h) liens, security interests and any other encumbrances on any of its
treasury shares; and
(i) liens arising in connection with a Securitization permitted by Section
5.7 hereof, limited in each case to the accounts therein or in any trust or
similar entity utilized to effect such Securitizations and to any equipment
giving rise to such accounts.
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<PAGE>
5.7 SALE, DISCOUNT OF RECEIVABLES; SALE, LEASEBACK TRANSACTIONS. The
-----------------------------------------------------------
Company will not, and will not permit its Consolidated Subsidiaries to, enter
into any Securitization which, when added to the aggregate amount of all
Securitizations then outstanding, exceeds the lesser of 15% of Consolidated
Total Assets or $775,000,000. Exclusive of such Securitizations, the Company
will not, and will not permit its Consolidated Subsidiaries to, sell or discount
receivables with recourse or sell and lease back fixed assets the aggregate
amount of which when added to all liens permitted by Section 5.6(g) exceed 10%
of Consolidated Net Worth.
5.8 REGULATIONS G, T, U AND X. The Company will not, and will not permit
-------------------------
any Subsidiary to, use Borrowings hereunder in any manner which may cause a
violation of or non-compliance with Regulations G, T, U or X of the Board of
Governors of the Federal Reserve Board.
5.9 CORPORATE EXISTENCE. The Company will maintain its existence and,
-------------------
except as otherwise allowed by Section 5.5 above, the existence of each
Subsidiary in good standing as a business corporation under the laws of the
jurisdiction of its incorporation, and remain qualified and cause each
Subsidiary to remain qualified to do business in all jurisdictions wherein the
nature of the business it transacts or the character of the properties owned by
it makes such qualification necessary.
5.10 BOOKS AND RECORDS. The Company will keep and maintain, and cause each
-----------------
Subsidiary to keep and maintain, satisfactory and adequate books and records of
account in accordance with GAAP and make or cause the same to be made available
to Banks or their agents or nominees at any reasonable time upon reasonable
notice for inspection and to make extracts thereof.
5.11 INSURANCE. The Company will insure and keep insured, and cause each
---------
Subsidiary to insure and keep insured, with reputable insurance companies, so
much of their respective properties, to such an extent and against such risks
(including liability and fire) as companies engaged in similar businesses
customarily insure properties of a similar character; or, in lieu thereof, the
Company or any one or more of its Subsidiaries will maintain or cause to be
maintained a system or systems of self-insurance which will be in accord with
the approved practices of companies owning or operating properties of a similar
character and maintaining such systems, and, in such cases of self-insurance,
maintain or cause to be maintained an insurance reserve or reserves in adequate
amounts.
5.12 LITIGATION; EVENT OF DEFAULT. The Company will notify the Banks in
----------------------------
writing immediately of the institution of any litigation, the commencement of
any administrative proceedings, the happening of any event or the assertion or
threat of any claim which might materially or adversely affect its and its
Subsidiaries' business, operations or financial condition (taken as a whole), or
the occurrence of any Event of Default hereunder or an event which with the
passage of time or the giving of notice or both would constitute an Event of
Default hereunder.
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5.13 TAXES. The Company will pay and discharge, and cause each Subsidiary
-----
to pay and discharge, all taxes, assessments or other governmental charges or
levies imposed on it or any of its property or assets prior to the date on which
any material penalty for non-payment or late payment is incurred, unless the
same is currently being contested in good faith by appropriate proceedings and
reserves in accordance with GAAP are being maintained.
5.14 COMPLIANCE WITH LAWS. The Company will comply and cause each
--------------------
Subsidiary to comply in all material respects with all local, state and federal
laws and regulations material to its business and operations, including but not
limited to: (i) all rules and regulations of the Securities and Exchange
Commission, (ii) local, state and federal laws governing the control, removal,
spill, release, or discharge of hazardous or toxic wastes, substances or
petroleum products, including without limitation the Environmental Control
Statutes, and (iii) the provisions and requirements of all franchises, permits
and licenses applicable to its business, including, but not limited to, those
required by the Environmental Control Statutes. The Company shall notify the
Banks promptly in detail of any actual or alleged failure to comply with or
perform, breach, violation or default under any such laws or regulations or if
the Company receives notice of potential responsibility for the release or
threatened release of hazardous substances, or of the occurrence or existence of
any facts or circumstances which with the passage of time, the giving of notice
or both or otherwise could create such a breach, violation or default or could
occasion the termination of any of such franchises or grants of authority or the
creation of potential responsibility for releases or threatened releases of
hazardous substances, if any of the foregoing would have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
5.15 EMPLOYEE BENEFIT PLANS. The Company will and will cause each ERISA
----------------------
Affiliate (a) to comply in all material respects with the provisions of ERISA to
the extent applicable to any Employee Benefit Plan maintained by it and cause
all Employee Benefit Plans maintained by it to satisfy the conditions under the
Internal Revenue Code of 1986, as amended (the "CODE"), for tax qualification of
all such plans intended to be tax qualified; and (b) to avoid (1) any material
accumulated funding deficiency (within the meaning of ERISA section 302 and Code
section 412(a)) (whether or not waived) (2) any act or omission on the basis of
which it or an ERISA Affiliate might incur a material liability to the PBGC
(other than for the payment of required premiums) or to a trust established
under ERISA section 4049; (3) any transaction with a principal purpose described
in ERISA section 4069; and (4) any act or omission that might result in the
assessment by a Multiemployer Plan of withdrawal liability against the Company
or any ERISA Affiliate, but only to the extent that the liability arising from a
failure to comply with any covenant set forth in (a) or (b) of this Section 5.15
could reasonably be expected to result in a liability to the Company or a
Subsidiary or an ERISA Affiliate for any one such event in excess of U.S.
$10,000,000.
5.16 USE OF PROCEEDS. Each Borrower shall use the proceeds of its Loans to
---------------
repay any and all loans outstanding under the 1994 Credit, to pay all other
obligations under the 1994 Credit and for working capital, acquisitions and
general corporate purposes.
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5.17 CONTINUED OWNERSHIP OF EACH SUBSIDIARY BORROWER. The Company shall
-----------------------------------------------
continue to own, directly or indirectly, all of the issued and outstanding
capital stock of each Subsidiary Borrower, other than qualifying shares held by
the directors of such Subsidiary Borrower; provided, however that this Section
5.17 shall apply to the Company's direct or indirect ownership of a Subsidiary
Borrower (i) as a condition to such Subsidiary Borrower obtaining a Loan
hereunder and (ii) if and so long as such Subsidiary Borrower has outstanding
Loans.
6. DEFAULTS
6.1 DEFAULTS. Any of the following shall constitute an "EVENT OF DEFAULT"
--------
with respect to this Agreement and the Notes:
(a) Failure of any Borrower to pay any amount payable on account of
the principal of or interest on any Note when due, or the failure to pay
any Fee or other payment due hereunder within 10 days after the same shall
become due;
(b) Failure of any Borrower to observe or perform any term, covenant
or agreement contained in this Agreement, the Notes or any other document
evidencing the Loans (other than that specified in (a) above) and the
continuation of such failure for 30 days after written notice thereof has
been given to the Borrowers by the Agent at the request of the holder of
any Note (including but not limited to itself);
(c) Any statement, certificate, report, representation or warranty
made or furnished by any Borrower in this Agreement or in compliance with
the provisions hereof shall prove to have been false or misleading in any
material respect at the time when made;
(d) Any obligation(s) of the Company and/or any Subsidiary in excess
of U.S. $15,000,000, individually or in the aggregate (as principal or
guarantor or other surety), to any person other than the Banks in
connection with this Agreement and the Notes for borrowed money (other than
the Notes) shall become or is declared to be due and payable prior to its
stated maturity or any event of default or event which with the passing of
time or notice or both shall have occurred the effect of which permits
payment of any such obligation to be demanded prior to its stated maturity;
(e) If (1) any Employee Benefit Plan shall cease to have "QUALIFIED"
status under the Code, (2) the minimum funding standards applicable to any
Employee Benefit Plan shall not be complied with, (3) any excise tax or tax
lien shall be incurred in connection with any Employee Benefit Plan and the
administration thereof, (4) any claim shall be incurred with respect to any
Employee Benefit Plan other than in the ordinary operation of such Plan,
(5) any "PROHIBITED TRANSACTION" as defined by the Code or ERISA shall have
occurred, (6) any liability shall be incurred to the PBGC, (7) any
withdrawal liability shall be incurred with respect to a Multiemployer
Plan, (8) any liability shall be incurred in connection with a
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failure to make timely reports and filings with respect to Employee Benefit
Plans, or (9) any other thing shall have occurred with respect to any
Employee Benefit Plan, the result of which (in any one of the foregoing
clauses (1) through (8), any combination of said clauses, or otherwise) is
that the Company or any Subsidiary, in the reasonable judgment of the
Majority Banks, has or is likely to incur liabilities (whether the
liability is direct or indirect, current or deferred, fixed or contingent)
of U.S. $10,000,000 or more;
(f) Any judgment or judgments against the Company and/or any
Subsidiary or any attachments against any of their assets or property in an
amount in excess of U.S. $10,000,000 in any one instance or in the
aggregate shall remain unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of 30 days;
(g) If (1) any person or group within the meaning of (S)13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "1934 ACT") and the
rules and regulations promulgated thereunder shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act), directly or
indirectly, of securities of the Company (or other securities convertible
into such securities) representing twenty percent (20%) of the combined
voting power of all securities of the Company entitled to vote in the
election of directors, other than securities having such power only by
reason of the happening of a contingency (hereinafter called a "CONTROLLING
PERSON"); or (2) a majority of the Board of Directors of the Company shall
cease for any reason to consist of (A) individuals who on the date of this
Agreement were serving as directors of the Company and (B) individuals who
subsequently become members of the Board if such individuals' nomination
for election or election to the Board is recommended or approved by a
majority of the Board of Directors of the Company. For purposes of clause
(1) above, a person or group shall not be a Controlling Person if such
person or group holds voting power in good faith and not for the purpose of
circumventing this Section 6.1(g) as an agent, bank, broker, nominee,
trustee, or holder of revocable proxies given in response to a solicitation
pursuant to the 1934 Act, for one or more beneficial owners who do not
individually, or, if they are a group acting in concert, as a group have
the voting power specified in clause (1).
(h) The Company and/or any Subsidiary shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or of its
property, (ii) be unable, or admit in writing inability, to pay its Debts
as they mature, (iii) make a general assignment for the benefit of
creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a
voluntary petition in bankruptcy, or a petition or answer seeking
reorganization or an arrangement with creditors to take advantage of any
insolvency law, or an answer admitting the material allegations of a
bankruptcy, reorganization or insolvency petition filed against it, (vi)
take corporate action for the purpose of effecting any of the foregoing, or
(vii) have an order for relief entered against it in any proceeding under
the United States Bankruptcy Code;
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(i) An order, judgment or decree shall be entered, without the
application, approval or consent of the Company and/or any Subsidiary by
any court of competent jurisdiction, approving a petition seeking
reorganization of the Company or such Subsidiary or appointing a receiver,
trustee or liquidator of the Company or such Subsidiary or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 60 consecutive days; or
(j) The Company shall fail to continue to maintain its ownership of
each of the Subsidiary Borrowers to the extent required by Section 5.17.
6.2 ACCELERATION BY REASON OF DEFAULT. If an Event of Default occurs
---------------------------------
under Section 6.1(a) through Section 6.1(g) or Section 6.1(j) above, the Agent
shall (a), if requested by the Majority Banks, immediately terminate the
Commitments by notice in writing to the Borrowers and (b), if requested by the
Majority Banks, immediately declare the Notes to be and they shall thereupon
forthwith become due and payable without presentment, demand, or notice of any
kind, all of which are hereby expressly waived. Simultaneously with the giving
of any such notice to the Borrowers, the Agent shall notify the Banks of any
such action. If an Event of Default occurs under Section 6.1(h) or Section
6.1(i) above, then, forthwith and without any election or notice, the
Commitments shall terminate and the Notes shall forthwith become due and payable
without presentment, demand or other notice of any kind, all of which are hereby
expressly waived.
7. THE BANKS AND THE AGENT
7.1 AUTHORITY OF AGENT. Each of the Banks authorizes the Agent to act on
------------------
its behalf to the extent herein provided and to exercise such other powers as
are reasonably incidental thereto, including the receipt of all payments of
principal of and interest on the Notes, fees and other amounts payable
hereunder, with full power and authority as attorney-in-fact for the Banks to
institute and maintain actions, suits or proceedings for the collection and
enforcement of the Notes and to file such proofs of debt or other documents as
may be necessary to have the claims of the Banks allowed in any proceeding
relative to any Borrower or its creditors or affecting its properties and to
take such other action for the protection, collection and enforcement of the
Notes as the Agent may deem advisable. The Agent may take any such action in its
discretion and shall take such action for the protection, collection and
enforcement of the Notes as may be requested by the Majority Banks. The
relationship between the Agent and each Bank has no fiduciary aspects, and the
Agent's duties (as Agent) hereunder are acknowledged to be only ministerial and
not involving the exercise of discretion on its part. Nothing in this Agreement
or any Note shall be construed to impose on the Agent any duties or
responsibilities other than those for which express provision is made herein or
therein. In performing its duties and functions hereunder, the Agent does not
assume and shall not be deemed to have assumed, and hereby expressly disclaims,
any obligation with or for the Borrowers. As to matters not expressly provided
for in this Agreement or any Note, the Agent shall not be required to exercise
any discretion or to take any action or communicate any notice, but shall be
fully protected in so acting or refraining from acting upon the instructions of
the Majority Banks
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<PAGE>
and their respective successors and assigns; provided, however, that in no event
shall the Agent be required to take any action which exposes it to personal
liability or which is contrary to this Agreement, any Note or applicable law,
and the Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be specifically indemnified to its satisfaction
by the Banks against any and all liability and expense which may be incurred by
it by reason of taking or omitting to take any such action. If an indemnity
furnished to the Agent for any purpose shall, in the reasonable opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity from the Banks and not commence or cease to do the acts for which such
indemnity is requested until such additional indemnity is furnished. The
Majority Banks may revoke the authority of the Agent set forth herein effective
upon receipt of written notice by the Agent of such revocation. The Agent shall
promptly notify the Banks of any Event of Default.
7.2 RESPONSIBILITY OF AGENT. In performing its functions and duties
-----------------------
hereunder on behalf of the Banks, the Agent shall exercise the same care and
skill as it would exercise in dealing with loans for its own account. Neither
the Agent nor any of its directors, officers or employees shall be liable for
any action taken or omitted in the absence of gross negligence or willful
misconduct. Each Borrower shall certify to the Agent the names and signatures of
its officers authorized to sign Notes, execute certificates and otherwise act in
respect hereof, and the Agent may conclusively rely thereon until receipt by it
of notice to the contrary. The Agent shall be entitled to rely upon any opinion
of counsel (including counsel for the Borrowers) in relation to this Agreement.
The Agent may treat the payee of any Note as the holder thereof until written
notice of transfer shall have been filed with it. The Agent shall promptly
notify the Borrowers of any such notice received by it.
7.3 PRO-RATA PAYMENTS. If any Bank, by exercising any right of set-off or
-----------------
counterclaim or otherwise, receives payment of principal or interest or other
amount due on any Loan or Letter of Credit, which is greater than the percentage
share of such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
or Letter of Credit obligations held by the other Banks, and such other
adjustments shall be made as may be required, so that all such payments shall be
shared by the Banks on the basis of their percentage shares; provided that if
all or any portion of such proportionately greater payment of such indebtedness
is thereafter recovered from, or must otherwise be restored by, such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest being paid by such purchasing
Bank. The percentage share of each Bank shall be based on the portion of the
outstanding Loans and Letter of Credit Outstandings due such Bank (prior to
receiving any payment for which an adjustment must be made under this Section
7.3)) in relation to the aggregate outstanding Loans and Letter of Credit
Outstandings due all the Banks (prior to receiving any payment of which an
adjustment must be made under this Section 7.3).
7.4 INDEMNIFICATION OF AGENT. Each of the Banks agrees (which agreement
------------------------
shall survive payment of the Notes) to indemnify the Agent (to the extent not
reimbursed by the Borrowers), in amounts which are pro rata to their respective
Commitments, if such amounts are due prior to the making of the Loans hereunder,
and thereafter to the outstanding principal amount of their respective
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<PAGE>
Loans, from and against any and all losses, claims, damages, liabilities and
expenses which may be imposed on, incurred by or asserted against the Agent in
any way related to or arising out of this Agreement, the Notes or the Loans or
any action taken or omitted by the Agent, except any losses, claims, damages,
liabilities or expenses resulting from the Agent's gross negligence or willful
misconduct; provided, however, that in the event any Bank is required hereunder
to make available to the Agent the amount of a Loan, and any such Bank fails to
make such amount available to the Agent, such Bank agrees to indemnify the Agent
to the extent provided in Section 2.2 hereof. All reasonable expenses, including
reasonable counsel fees, incurred by the Agent in taking any action hereunder
shall be borne, subject to the Borrowers' liability therefor, by the Banks pro
rata in accordance with their respective Commitment Percentages under this
Agreement, and the Banks hereby agree to reimburse the Agent for all such
expenses on request.
7.5 CREDIT DECISION. Each Bank acknowledges that it has, independently
---------------
and without reliance upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement. Each of the Banks agrees that the Agent shall
not have any responsibility for the accuracy or adequacy of any information
contained in any document, or any oral information, supplied to such Bank by the
Borrowers directly or through the Agent.
7.6 THE AGENT AS A BANK. With respect to its Commitment and the Loans
-------------------
made and to be made by it, CoreStates Bank, N.A. shall have the same rights,
powers and obligations under this Agreement and its Notes as the other Banks and
may exercise the same as if it were not the Agent, and the terms "BANK" and
"BANKS" as used herein shall, unless otherwise expressly indicated, include
CoreStates Bank, N.A. in its individual capacity. CoreStates Bank, N.A. and any
successor Agent which is a commercial bank, and their respective affiliates, may
accept deposits from, lend money to, act as trustee under indentures of and
generally engage in any kind of business with, any Borrower and its affiliates
from time to time, all as if the Agent were not the agent hereunder and without
any duty to account therefor to any Bank.
7.7 SUCCESSOR AGENT. The Agent may resign at any time by giving written
---------------
notice of such resignation to the Banks and the Borrowers, such resignation or
removal to be effective only upon the appointment of a successor Agent as
hereinafter provided. Upon any such notice of resignation, the Banks other than
the Bank, if any, then serving as Agent shall jointly appoint a successor Agent
upon written notice to the Borrowers and the retiring Agent. If no successor
Agent shall have been jointly appointed by such Banks and shall have accepted
such appointment within 30 days after the retiring Agent shall have given notice
of resignation, the retiring Agent may, upon notice to the Borrowers and the
Banks, appoint a successor Agent. Upon its acceptance of any appointment as
Agent hereunder, the successor Agent shall succeed to and become vested with all
of the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from
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<PAGE>
its duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder, the provisions hereof shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Agent under this
Agreement.
7.8 WITHHOLDING TAXES. Each Bank (a) represents and warrants to, and
-----------------
agrees with, the Agent that with respect to Loans to Borrowers that are not
Foreign Subsidiaries under applicable law and treaties no taxes will be required
to be withheld by the Agent with respect to any payments to be made to such Bank
hereunder, and (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent
prior to the time that the Agent pays over to such Bank its portion of any
payment of interest or principal or their amounts hereunder either (i) U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein such Bank claims entitlement to the benefits of a tax treaty that
provides for a complete exemption from U.S. federal income withholding tax on
all interest payments hereunder) and (ii) a new Form 1001 or Form 4224 upon the
obsolescence of any previously delivered form or comparable statements in
accordance with applicable U.S. laws and regulations and amendments thereto,
duly executed and completed by such Bank, and (c) agrees to comply, from time to
time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption. Upon request of the Agent from time to time, each
Bank shall deliver to the Agent such evidence of compliance with this Section as
the Agent requires.
7.9 ALLOCATIONS MADE BY AGENT. As between the Agent and the Banks, unless
-------------------------
a Bank objecting to a determination or allocation made by the Agent pursuant to
this Agreement delivers to the Agent written notice of such objection within one
hundred twenty (120) days after the date any distribution was made by the Agent,
such determination or allocation shall be conclusive on such one hundred
twentieth day and only those items expressly objected to in such notice shall be
deemed disputed by such Bank. The Agent shall not have any duty to inquire as
to the application by the Banks of any amounts distributed to them.
8. INDEMNIFICATION
8.1 INDEMNIFICATION OF THE AGENT AND THE BANKS. Each Borrower hereby
------------------------------------------
agrees to indemnify and defend the Agent, each Bank and each Participant and
their respective directors, officers, agents, employees and counsel, from and
hold each of them harmless against, any and all losses, liabilities, claims,
damages, interests, costs, judgments or expenses, including reasonable
attorneys' fees, asserted against or incurred by any of them by or to any third
party arising out of or in connection with any Bank's Commitment, this
Agreement, or the Bank's financing of such Borrower's business and operations,
except any such amount claimed by a Bank resulting from such Bank's gross
negligence or wilful misconduct. All obligations provided for in this Section
8.1 shall survive any termination of this Agreement or the Notes, the repayment
of indebtedness hereunder, or any action taken by any Bank in the enforcement of
its rights and remedies, hereunder or thereunder, or any condition or event
relating to any Borrower or its business or operations.
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<PAGE>
9. MISCELLANEOUS
9.1 NOTICES. All notices, requests, demands, directions and other
-------
communications provided for herein (other than telephonic communications to be
confirmed promptly thereafter in writing) shall be in writing (including
communication by FAX) and mailed, FAXED or delivered in hand to the applicable
party at the addresses and FAX numbers indicated opposite its signature on the
signature pages hereto or at such other addresses or FAX numbers as such party
may specify in prior written notice given to the Agent and the Company for
itself and on behalf of the Subsidiary Borrowers. All such notices, requests,
demands, directions and other communications shall, when mailed, or FAXED, be
effective when deposited in the mails or sent by FAX, respectively, addressed as
aforesaid, except that notices or requests or directions to the Agent pursuant
to any provision hereof shall not be effective until received by the Agent.
9.2 EFFECTIVE DATE, SUCCESSORS AND ASSIGNS AND SURVIVAL OF TERMS. This
------------------------------------------------------------
Agreement shall become effective upon receipt by the Agent from all parties
hereto of either an executed counterpart of this Agreement or written advice by
telex, telegram or FAX that a counterpart has been executed by the respective
party and is being concurrently sent to the Agent. The terms and provisions of
this Agreement shall be binding upon the parties hereto and their respective
successors and assigns except that no Borrower shall have the right to assign
any of its rights hereunder or any interest of it herein without the written
consent of all the Banks, and no Bank shall have the right to assign any of its
rights under or interest in this Agreement or any Note without (i) the written
consent of the Agent and the Company on behalf of the Borrowers received no
later than 14 days prior to such proposed assignment, (ii) execution and
delivery to the Agent and the Borrowers of an assignment agreement acceptable to
the Agent and the Borrower, and (iii) payment to the Agent (by the proposed
assignor or assignee) of an assignment fee of $3,000. All representations,
warranties and agreements herein contained on the part of the Borrowers shall
survive the execution of the Agreement and the execution of the Notes, the
expiration or prior termination of the Commitments, the payment of interest or
principal evidenced by any Note, and the payment of all fees and expenses, costs
or other payments due hereunder.
9.3 PARTICIPATIONS. Each Borrower hereby acknowledges and agrees that any
--------------
Bank may at any time grant participations in all or any portion of its Loans or
its Note or of its right, title and interest therein or in or to this Agreement,
(collectively, "PARTICIPATIONS") to any other lending office or to any other
bank, lending institution, or any other entity which has the requisite
sophistication to evaluate the merits and risks of investments in Participations
(collectively, "PARTICIPANTS"); provided, however, that: (i) all amounts payable
by the Borrowers hereunder shall be determined as if such Bank had not granted
such Participation, and (ii) any agreement pursuant to which any Bank may grant
a participation in its rights with respect to any particular Loans (x) shall
provide that with respect to any such Loans such Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrowers relating to
such Loans including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement, (y) may provide that
such Bank will not agree to any modification, amendment or
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<PAGE>
waiver of this Agreement without the consent of the Participant if such
amendment, modification or waiver would reduce the principal of or rate of
interest on such Loans or postpone the date fixed for any payment of principal
of or interest on such Loans, and (z) shall not relieve such Bank from its
obligations, which shall remain absolute, to make Loans hereunder. No
Participant shall have the benefit of the provisions contained in Section 2.13
hereof. Nothing contained herein shall restrict the ability of any Bank to
assign, pledge or hypothecate all or any portion of its Note to any Federal
Reserve Bank.
9.4 EXPENSES. The Borrowers agree to pay the reasonable out-of-pocket
--------
fees and expenses of the Agent incurred in connection with the negotiation and
documentation of this Agreement, the Notes and all related documents, the
enforcement of this Agreement and the Notes, and the enforcement of any other
rights of the Banks in connection herewith and therewith. The Borrowers agree
to pay the reasonable out-of-pocket fees and expenses of the Banks, including
reasonable counsel fees, in connection with the enforcement of this Agreement
and the Notes and the enforcement of any other rights of the Banks in connection
herewith and therewith.
9.5 MODIFICATIONS AND WAIVERS. No modifications or waivers of any
-------------------------
provision of this Agreement or any Note and no consent to any departure by any
Borrower therefrom shall in any event be effective, unless the same shall be in
writing, and approved by the Majority Banks, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given; provided, however, that without the written consent of all of the Banks
no such modification, waiver or consent shall (a) change the amount or maturity
date of the principal of, or change the rate or extend the time of payment of
interest on, any Loan, Letter of Credit Outstanding, or any fees hereunder, (b)
change any of the terms of the Commitments, (c) change or affect the provisions
of Section 2.1, Section 2.4(a)(2), Section 2.6, Section 2.7, Section 2.8,
Section 2.11, Section 2.12, Section 2.13, Section 2.14, Section 6.1, Section 6.2
or Section 8.1 hereof or modify the definition of "MAJORITY BANKS," (d)
subordinate any Note in right of payment to any other indebtedness or obligation
whatsoever, or (e) change or affect any provision of this Section 9.5.
9.6 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on any Borrower
----------------------------
in any case shall entitle any Borrower to any other or further notice or demand
in the same, similar or other circumstances. Neither any failure nor any delay
on the part of the Banks in exercising any right, power or privilege hereunder
or under any Note shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of the same or
the exercise of any other right, power or privilege.
9.7 OFFSETS. Nothing in this Agreement shall be deemed a waiver or
-------
prohibition of any Bank's right of banker's lien or offset.
9.8 APPLICATION OF PAYMENTS. Subject to the provisions of Sections 2.10
-----------------------
and 2.11, the Agent and each Bank agree that all payments on account of the
Loans and Unpaid Drawings shall be applied by the Agent and the Banks as
follows:
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(1) First, to the Agent for any fees, costs or expenses (including
expenses described in Section 9.4) accrued to or incurred by the Agent
under this Agreement or any of the Notes, then due and payable and not
reimbursed by the Borrowers or the Banks until such fees, costs and
expenses are paid in full;
(2) Second, as to all Loans other than Swingline Loans and Bid Loans
and other than Unpaid Drawings, to the Banks for their percentage shares of
the Fees then due and payable under this Agreement until such Fee is paid
in full;
(3) Third, as to all Loans other than Swingline Loans and Bid Loans
and other than Unpaid Drawings, to the Banks for their respective shares of
all costs, expenses and fees then due and payable from the Borrowers until
such costs, expenses and fees are paid in full;
(4) Fourth, as to all Loans other than Swingline Loans and Bid Loans
and other than Unpaid Drawings, to the Banks for their Commitment
Percentages of all interest then due and payable from the Borrowers until
such interest is paid in full, and, as to Swingline Loans, Bid Loans and
Unpaid Drawings, to the Agent or the Bank advancing such Bid Loan or to
which such Unpaid Drawing is due, respectively, in payment of all interest
then due and payable with respect to the applicable Swingline Loan, Bid
Loan or Unpaid Drawing; and
(5) Fifth, as to all Loans other than Swingline Loans and Bid Loans
and other than Unpaid Drawings, to the Banks for their Commitment
Percentages of the principal amount of the Loans then due and payable from
the Borrowers until such principal is paid in full, and, as to Swingline
Loans, Bid Loans and Unpaid Drawings, to the Agent or the Bank advancing
such Bid Loan or to which such Unpaid Drawing is due, respectively, in
payment of the principal amount of such Swingline Loan, Bid Loan or Unpaid
Drawing, until such principal is paid in full.
9.9 COUNTERPARTS. This Agreement and any amendment hereto or waiver of
------------
any provision hereof may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
9.10 GOVERNING LAW; SUBMISSION TO JURISDICTION, ENTIRE AGREEMENT.
-----------------------------------------------------------
(a) THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE CONTRACTS MADE
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OF THE CONFLICT OF LAWS.
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<PAGE>
(b) EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA IN ANY ACTION OR
PROCEEDING WHICH MAY BE BROUGHT AGAINST IT UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE NOTES EXECUTED AND DELIVERED HEREUNDER OR TO ENFORCE ANY
COVENANT OR AGREEMENT CONTAINED HEREIN OR IN ANY NOTE, AND IN THE EVENT ANY
SUCH ACTION OR PROCEEDING SHALL BE BROUGHT AGAINST IT, EACH BORROWER AGREES
NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OF THE
VENUE THEREOF IN ANY SUCH COURT. EACH BORROWER HEREBY WAIVES ANY AND ALL
RIGHTS TO A TRIAL BY JURY.
(c) Each Borrower also agrees that any legal action or proceeding
arising out of or in connection with this Agreement or any Note may be
brought against it, at the sole election of the Banks in the jurisdiction
of incorporation of any Subsidiary Borrower.
(d) Each Subsidiary Borrower hereby agrees at all times to maintain,
and the Company agrees to cause each Subsidiary Borrower at all times to
maintain, the Company as its agent for service of process for all purposes
of this Agreement and the Notes. Each Subsidiary Borrower hereby appoints
the Company as its agent for such purpose and agrees that service may be
made upon it by mailing to the attention of the Treasury Department, FAXING
or delivering a copy of such process to it in care of the Company at the
Company's address as provided in Section 9.1 hereof and it hereby
irrevocably authorizes and directs the Company to accept such service on
its behalf. As an alternative method of service, each Subsidiary Borrower
also irrevocably consents to the service of process in any suit, action or
proceeding in Pennsylvania or its home jurisdiction ar ising out of this
Agreement or any Note by the mailing, FAXING or delivery of copies of such
process to it at its address set forth on the signature pages hereto.
(e) Each Borrower hereby waives as a defense in any action brought
against it in respect of the Agreement or any Note, if brought in a court
described above with respect to it, that such action has been brought in an
inconvenient forum. Each Borrower agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.
(f) To the extent, if any, to which any Borrower or any of its
properties may be deemed to have or hereafter to acquire immunity from any
judicial process or proceeding to enforce this Agreement or any Note or to
collect amounts due hereunder or under any Note (including without
limitation, attachment proceedings prior to judgment) in any jurisdiction,
such Borrower waives such immunity and agrees not to claim the same.
(g) This Agreement and the Notes issued hereunder constitute the
entire understanding of the parties hereto as of the date hereof with
respect to the subject matter hereof and thereof and supersede any prior
agreements, written or oral, with respect hereto or thereto.
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9.11 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is
--------------------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
9.12 CAPTIONS. Article and section captions in this Agreement are included
--------
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
9.13 PLURAL AND SINGULAR. All words used herein in the plural shall be
-------------------
deemed to have been used in the singular and all words used herein in the
singular shall be deemed to have been used in the plural where the context and
construction so require.
9.14 JUDGMENT CURRENCY. The obligations of the Borrowers in respect of any
-----------------
sum due to any Bank or the Agent hereunder or under the Notes shall,
notwithstanding any judgment in a currency (the "JUDGMENT CURRENCY") other than
the currency in which sum was originally denominated or required to be paid (the
"ORIGINAL CURRENCY"), be discharged only to the extent that on the Business Day
following receipt by such Bank or the Agent of any sum adjudged to be so due in
the Judgment Currency, such Bank or Agent, in accordance with normal banking
procedures, purchases the Original Currency with the Judgment Currency. If the
amount of Original Currency so purchased is less than the sum originally due to
such Bank or the Agent, the Borrowers agree, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of Original Currency so
purchased exceeds the sum originally due to such Bank or the Agent, as the case
may be, such Bank or the Agent agrees to remit such excess to the Company on
behalf of the Borrowers.
9.15 TERMINATION OF THE 1994 CREDIT. Upon the execution and delivery of
-------------------------------
this Agreement by the parties hereto that also are parties to the 1994 Credit,
all agreements relating to any such facility shall be deemed terminated and be
of no further force and effect without need of further action on the part of any
Bank or any Borrower that is a party thereto, and any rights to prior notice of
such termination provided thereunder are hereby waived; provided, however, that
-------- -------
such termination shall not relieve any Borrower that is a party to any such
facility of any obligation with respect to fees, charges or other matters under
or pertaining to such facilities, and all such fees and charges thereunder shall
be paid upon the effective date of this Agreement.
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<PAGE>
[SIGNATURE PAGE TO ALCO STANDARD CORPORATION CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to
be duly executed by their duly authorized officers as of the date first above
written.
[CORPORATE SEAL] ALCO STANDARD CORPORATION
Attest:
/s/Karin M. Kinney By:/s/O. Gordon Brewer, Jr.
- ------------------------------------ --------------------------------
Karin M. Kinney O. Gordon Brewer, Jr.
Secretary of Alco Standard Corporation Vice President-Finance
Treasury Department
825 Duportail Road
P.O. Box 834
Valley Forge, PA 19482
FAX No. (215) 296-8419
[CORPORATE SEAL] IKON OFFICE SOLUTIONS GROUP PLC
Attest:
/s/Karin M. Kinney By:/s/John E. Stuart
- -------------------------------------- --------------------------------
Karin M. Kinney Name: John E. Stuart
Secretary of Alco Standard Corporation Title: Director
By:/s/Kurt E. Dinkelacker
--------------------------------
Name: Kurt E. Dinkelacker
Title: Director
Address: Erskine House
Oak Hill Road, SevenOaks
Kent TN13 1NW
United Kingdom
[CORPORATE SEAL] IKON OFFICE SOLUTIONS, INC.
Attest:
/s/Karin M. Kinney By:/s/O. Gordon Brewer, Jr.
- -------------------------------------- --------------------------------
Karin M. Kinney Name:
Secretary of Alco Standard Corporation Title:
Address: 100 King Street West,
Suite 6600
1 First Canadian Place
Toronto, Ontario M5X 1B8
Canada
<PAGE>
[SIGNATURE PAGE TO ALCO STANDARD CORPORATION CREDIT AGREEMENT]
CORESTATES BANK, N.A., FLEET NATIONAL BANK
for itself and as Agent
By:/s/David W. Mills By:/s/Jeffrey C. Lynch
----------------------------- -----------------------------
David W. Mills Jeffrey C. Lynch
Vice President Vice President
FC 1-8-3-16 777 Main Street
1345 Chestnut Street MSN CTMOH24B
Philadelphia, PA 19107 Hartford, CT 06115
FAX No. (215) 973-6745 Fax No. 860-986-9378
DEUTSCHE BANK AG, NEW YORK
BANK OF AMERICA ILLINOIS BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By:/s/George Poon By:/s/Hans-Josef Thiele
----------------------------- -----------------------------
George Poon Hans-Josef Thiele
Vice President
231 South LaSalle Street
Chicago, IL 60697
Attn: Celyndia Williams By:/s/Belinda J. Wheeler
Fax No. 312-874-9626 -----------------------------
Belinda J. Wheeler
Assistant Vice President
with a copy to:
335 Madison Avenue, 5th Floor 31 West 52nd Street
New York, NY 10017 New York, NY 10019
Attn: George Poon Fax No. 212-474-8212
Fax No. 212-503-7173
THE CHASE MANHATTAN BANK, N.A. NATIONSBANK N.A.
By:/s/Helene Santo By:/s/Rajesh Sood .
----------------------------- -----------------------------
Helene Santo Rajesh Sood
Vice President Vice President
One Chase Manhattan Plaza, 5th Floor 100 North Tryon Street
New York, NY 10081 NC 1007-08-04
Fax No. 212-552-7773 Charlotte, NC 28255
Fax No. 704-388-0960
<PAGE>
[SIGNATURE PAGE TO ALCO STANDARD CORPORATION CREDIT AGREEMENT]
TORONTO DOMINION (NEW YORK), INC. FIRST UNION NATIONAL BANK
By:/s/Debbie Greene .
----------------------------- By:/s/Elizabeth B. Styer
Debbie Greene -----------------------------
Vice President Elizabeth B. Styer
909 Fannin Street, 17th Floor Senior Vice President
Houston, TX 77010 Broad & Walnut Streets, PMB006
Fax No. 713-951-9921 Philadelphia, PA 19109
Fax No. 215-985-8793
PNC BANK, NATIONAL ASSOCIATION SUNTRUST BANK, ATLANTA
By:/s/Victoria Ziff By:/s/Maria Mamilovich
----------------------------- -----------------------------
Victoria Ziff Ms. Maria Mamilovich
Vice President Vice President
1600 Market Street
Philadelphia, PA 19103
Fax No. 215-585-5972 By:/s/Mary Anne Zagroba
-----------------------------
Name: Mary Anne Zagroba
Title: Vice President
711 Fifth Avenue, 16th Floor
New York, NY 10022
Fax No. 212-371-9386
<PAGE>
SCHEDULE A
Nikon Inc. v. IKON Office Solutions, Inc., et al. - On June 19, 1996,
-------------------------------------------------
plaintiff filed a complaint in the U.S. District Court for the Eastern District
of New York alleging trademark infringement, trademark dilution, false
designation of origin, unfair competition and tortious interference with
prospective business advantage. Plaintiff is seeking injunctive relief,
restitution and damages. Although the allegations are being investigated, it is
counsel's belief that all claims are without merit. Monetary damages are
difficult to estimate at this time. However, IKON will vigorously defend its
use of the IKON name.
<PAGE>
SCHEDULE B
All liens on any accounts or equipment giving rise to such accounts, arising in
connection with the Securitizations reported in the September 30, 1996 financial
statements.
<PAGE>
EXHIBIT A
SUBSIDIARY BORROWERS
IKON Office Solutions PLC
IKON Office Solutions, Inc., a Canadian corporation
A-1
<PAGE>
EXHIBIT B
BANKS' COMMITMENTS AND PERCENTAGES
<TABLE>
<CAPTION>
REVOLVING
CREDIT FACILITY
COMMITMENT COMMITMENT
BANK (U.S. DOLLARS) PERCENTAGE
<S> <C> <C>
CoreStates Bank, N.A. $ 55,000,000 13.75%
Bank of America Illinois $ 45,000,000 11.25%
The Chase Manhattan Bank, N.A. $ 45,000,000 11.25%
Deutsche Bank AG, New York Branch $ 45,000,000 11.25%
Nationsbank, N.A. $ 45,000,000 11.25%
Toronto Dominion (New York), Inc. $ 45,000,000 11.25%
Fleet National Bank $ 30,000,000 7.50%
First Union National Bank $ 30,000,000 7.50%
PNC Bank, National Association $ 30,000,000 7.50%
SunTrust Bank, Atlanta $ 30,000,000 7.50%
$400,000,000 100.00%
</TABLE>
B-1
<PAGE>
EXHIBIT C-1
REVOLVING CREDIT FACILITY NOTE
U.S.$ (U.S. Dollar Equivalent) Philadelphia, PA
[Bank's Revolving Credit Facility Commitment] December __, 1996
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, IKON
OFFICE SOLUTIONS GROUP PLC and IKON OFFICE SOLUTIONS, INC., a Canadian
corporation, (individually a "BORROWER" and together the "BORROWERS"), jointly
and severally, hereby promise to pay to the order of __________________________
(the "BANK"), in lawful currency of the United States of America or in such
other currencies as are provided in the Credit Agreement described below, in
immediately available funds, at the account of the Agent, located at Broad and
Chestnut Streets, Philadelphia, Pennsylvania, on the Revolving Credit Facility
Termination Date, or on such earlier date or dates as provided in the Credit
Agreement described below, the principal sum of U.S.$[Bank's Revolving Credit
Facility Commitment] or, if less, the then aggregate unpaid principal amount of
all Revolving Credit Facility Loans made by the Bank to the Borrowers pursuant
to the Credit Agreement.
Each Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid at the rates
and at the times provided in Article 2 of the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement, dated
December __, 1996 (as such may be further amended or modified from time to time
after such date) among the Borrowers, the financial institutions from time to
time party thereto (including the Bank) and the Agent (as amended, modified or
supplemented from time to time, the "CREDIT AGREEMENT") and is entitled to the
benefits thereof. This Note is subject to voluntary prepayment and mandatory
repayment prior to the Revolving Credit Facility Termination Date, in whole or
in part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and the accrued interest on this Note may be declared to be due and payable in
the manner and with the effect provided in the Credit Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the undersigneds' liability
hereunder shall be limited at all times to the actual aggregate outstanding
indebtedness to the Bank relating to such Bank's Revolving Credit Facility
Loans, including all principal and interest, together with all fees
C-1-1
<PAGE>
and expenses as provided in the Credit Agreement, all as established by the
Bank's books and records which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
The liability of each Borrower under this Note and the Credit Agreement for
any and all obligations of the Borrowers, individually and collectively, owed to
the Banks under this Note and the Credit Agreement shall be unconditional and
absolute irrespective of (a) any lack of enforceability of any obligation, (b)
any change of the time, manner, place of payment, or any other term of any
obligation, (c) any law, regulation or order of any jurisdiction affecting the
genuineness, validity, or rights of the Banks, individually and collectively,
with respect to any obligation or any instruments evidencing any obligation, or
(d) any other circumstance which might otherwise constitute a defense to or
discharge of any Borrower. Each Borrower agrees that its obligations hereunder
and under the Credit Agreement are irrevocable; that a separate action or
actions may be brought and prosecuted against it regardless of whether any other
Borrower is joined in any such action or actions; and that it waives the benefit
of any statute of limitations affecting its liabilities hereunder and under the
Credit Agreement or the enforcement hereof and thereof.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
ALCO STANDARD CORPORATION
By:______________________________
Title:
IKON OFFICE SOLUTIONS GROUP PLC
By:______________________________
Title:
By:______________________________
Title:
IKON OFFICE SOLUTIONS, INC.
By:______________________________
Title:
C-1-2
<PAGE>
EXHIBIT C-2
BID LOAN NOTE
U.S. $400,000,000.00 Philadelphia, PA
December __, 1996
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, IKON
OFFICE SOLUTIONS GROUP PLC and IKON OFFICE SOLUTIONS, INC., a Canadian
corporation (individually a "BORROWER" and together the "BORROWERS"), jointly
and severally, as and to the extent provided in Section 2.5 of the Credit
Agreement, hereby promise to pay to the order of __________________________ (the
"BANK"), in lawful currency of the United States of America or in such other
currencies as are provided in the Credit Agreement described below, in
immediately available funds, at the account of the Agent, located at Broad and
Chestnut Streets, Philadelphia, Pennsylvania, on the Revolving Credit Facility
Termination Date, or on such earlier date or dates as provided in the Credit
Agreement described below, the principal sum of U.S. $400,000,000.00 or, if
less, the then aggregate unpaid principal amount of all Bid Loans made by the
Bank to the Borrowers pursuant to the Credit Agreement.
Each Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid at the rates
and at the times provided in Article 2 of the Credit Agreement.
This Bid Loan Note is one of the Bid Loan Notes referred to in the Credit
Agreement, dated December __, 1996 (as such may be further amended or modified
from time to time after such date) among the Borrowers, the financial
institutions from time to time party thereto (including the Bank) and the Agent
(as amended, modified or supplemented from time to time, the "CREDIT AGREEMENT")
and is entitled to the benefits thereof. This Bid Loan Note is subject to
voluntary prepayment and mandatory repayment prior to the Revolving Credit
Facility Termination Date, in whole or in part, as provided in the Credit
Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and the accrued interest on this Bid Loan Note may be declared to be due and
payable in the manner and with the effect provided in the Credit Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Bid Loan Note.
Notwithstanding the face amount of this Bid Loan Note, the undersigneds'
liability hereunder shall be limited at all times to the actual aggregate
outstanding indebtedness to the Bank relating to such Bank's Bid Loans,
including all principal and interest, together with all fees and expenses as
C-2-1
<PAGE>
provided in the Credit Agreement, all as established by the Bank's books and
records which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
The liability of each Borrower under this Bid Loan Note and the Credit
Agreement for any and all obligations of the Borrowers, individually and
collectively, owed to the Banks under this Bid Loan Note and the Credit
Agreement shall be unconditional and absolute irrespective of (a) any lack of
enforceability of any obligation, (b) any change of the time, manner, place of
payment, or any other term of any obligation, (c) any law, regulation or order
of any jurisdiction affecting the genuineness, validity, or rights of the Banks,
individually and collectively, with respect to any obligation or any instruments
evidencing any obligation, or (d) any other circumstance which might otherwise
constitute a defense to or discharge of any Borrower. Each Borrower agrees that
its obligations hereunder and under the Credit Agreement are irrevocable; that a
separate action or actions may be brought and prosecuted against it regardless
of whether any other Borrower is joined in any such action or actions; and that
it waives the benefit of any statute of limitations affecting its liabilities
hereunder and under the Credit Agreement or the enforcement hereof and thereof.
THIS BID LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR
FEDERAL PRINCIPLES OR CONFLICT OF LAWS.
ALCO STANDARD CORPORATION
By:______________________________
Title:
IKON OFFICE SOLUTIONS PLC
By:______________________________
Title:
By:______________________________
Title:
IKON OFFICE SOLUTIONS, INC.
By:______________________________
Title:
C-2-2
<PAGE>
EXHIBIT C-3
SWINGLINE FACILITY NOTE
U.S. $25,000,000.00 Philadelphia, PA
December __, 1996
FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, IKON
OFFICE SOLUTIONS GROUP PLC and IKON OFFICE SOLUTIONS, INC., a Canadian
corporation (individually a "BORROWER" and together the "BORROWERS"), jointly
and severally, as and to the extent provided in Section 2.3 of the Credit
Agreement, hereby promise to pay to the order of CORESTATES BANK, N.A. (the
"AGENT"), in lawful currency of the United States of America or in such other
currencies as are provided in the Credit Agreement described below, in
immediately available funds, at the account of the Agent, located at Broad and
Chestnut Streets, Philadelphia, Pennsylvania, on the Revolving Credit Facility
Termination Date, or on such earlier date or dates as provided in the Credit
Agreement described below, the principal sum of U.S. $25,000,000.00 or, if less,
the then aggregate unpaid principal amount of all Swingline Facility Loans made
by the Agent to the Borrowers pursuant to the Credit Agreement.
Each Borrower promises also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid at the rates
and at the times provided in Article 2 of the Credit Agreement.
This Swingline Facility Note is one of the Swingline Facility Notes
referred to in the Credit Agreement, dated December __, 1996 (as such may be
further amended or modified from time to time after such date) among the
Borrowers, the financial institutions from time to time party thereto and the
Agent (as amended, modified or supplemented from time to time, the "CREDIT
AGREEMENT") and is entitled to the benefits thereof. This Swingline Facility
Note is subject to voluntary prepayment and mandatory repayment prior to the
Revolving Credit Facility Termination Date, in whole or in part, as provided in
the Credit Agreement.
In case an Event of Default shall occur and be continuing, the principal of
and the accrued interest on this Swingline Facility Note may be declared to be
due and payable in the manner and with the effect provided in the Credit
Agreement.
Each Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Swingline Facility Note.
Notwithstanding the face amount of this Swingline Facility Note, the
undersigneds' liability hereunder shall be limited at all times to the actual
aggregate outstanding indebtedness to the Agent relating to the Agent's
Swingline Facility Loans, including all principal and interest, together with
C-3-1
<PAGE>
all fees and expenses as provided in the Credit Agreement, all as established by
the Agent's books and records which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Credit Agreement.
The liability of each Borrower under this Swingline Facility Note and the
Credit Agreement for any and all obligations of the Borrowers, individually and
collectively, owed to the Agent under this Swingline Facility Note and the
Credit Agreement shall be unconditional and absolute irrespective of (a) any
lack of enforceability of any obligation, (b) any change of the time, manner,
place of payment, or any other term of any obligation, (c) any law, regulation
or order of any jurisdiction affecting the genuineness, validity, or rights of
the Agent with respect to any obligation or any instruments evidencing any
obligation, or (d) any other circumstance which might otherwise constitute a
defense to or discharge of any Borrower. Each Borrower agrees that its
obligations hereunder and under the Credit Agreement are irrevocable; that a
separate action or actions may be brought and prosecuted against it regardless
of whether any other Borrower is joined in any such action or actions; and that
it waives the benefit of any statute of limitations affecting its liabilities
hereunder and under the Credit Agreement or the enforcement hereof and thereof.
THIS SWINGLINE FACILITY NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO
PENNSYLVANIA OR FEDERAL PRINCIPLES OR CONFLICT OF LAWS.
ALCO STANDARD CORPORATION
By:______________________________
Title:
IKON OFFICE SOLUTIONS GROUP PLC
By:______________________________
Title:
By:______________________________
Title:
IKON OFFICE SOLUTIONS, INC.
By:______________________________
Title:
C-3-2
<PAGE>
EXHIBIT D
---------
WILLIAM F. DRAKE, JR., ESQUIRE
GENERAL COUNSEL
ALCO STANDARD CORPORATION
December __, 1996
CoreStates Bank, N.A.
Itself and as Agent to
Each of the Banks Named on
Exhibit A Attached Hereto
Broad & Chestnut Streets
Philadelphia, PA 19107
Attn: Mr. David W. Mills
Vice President
Re: Credit Agreement, dated December ___, 1996 among Alco Standard
Corporation and certain subsidiaries and the Banks named on
Schedule A attached hereto with CoreStates Bank, N.A., as Agent
------------------------------------------------------------
Gentlemen:
As General Counsel of Alco Standard Corporation, an Ohio corporation (the
"COMPANY"), I have served as counsel to the Company in connection with a Credit
Agreement, dated December __, 1996 (the "CREDIT AGREEMENT"), among the Company,
certain subsidiaries of the Company, the Banks named on Exhibit A attached
hereto and CoreStates Bank, N.A., as Agent for the Banks. Terms defined in the
Credit Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Credit Agreement.
I have examined the Credit Agreement with its exhibits and the originals or
copies, certified or otherwise authenticated to my satisfaction, of the
Certificate of Incorporation and Code of Regulations, both as amended to date,
of the Company and such other documents and instruments, and have made such
further inquiries of law and fact, as I have deemed appropriate for purposes of
this opinion.
Based upon the foregoing, I advise you that, in my opinion:
1. The Company and each Subsidiary is a corporation duly organized,
validly existing and in good standing (where such concept exists) under the laws
of its jurisdiction of incorporation and has all the corporate power and
authority necessary to own its properties and to carry on its business as now
being conducted and as is presently proposed to be conducted and, in the case of
D-1
<PAGE>
the Company, to enter into and perform its obligations under each of the Credit
Agreement and the Notes. Further, the Company and each Subsidiary is qualified
as a foreign corporation in the various jurisdictions wherein the nature of the
business they transact makes such qualification necessary.
2. The execution, delivery and performance by the Company and its
Subsidiaries of the Credit Agreement and the Notes have been duly authorized by
all necessary corporate action on its part. Neither the execution, delivery,
issuance and performance by the Company nor its Subsidiaries of this Agreement
nor the Notes (i) require any consent or approval of any shareholder of the
Company or any Subsidiary, as such, or of any public authority, (ii) violate any
provision of law (including without limitation any usury law) or any provision
of the Certificate of Incorporation or the Code of Regulations of the Company or
any rule or regulation (including without limitation Regulations G, T, U and X
of the Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect and having
application to the Company, or (iii) result in any breach of, or constitute a
default under, or result in the creation or imposition of any lien or charge
upon any property of the Company or any Subsidiary pursuant to the terms of, the
Certificate of Incorporation or Code of Regulations of the Company, the
applicable corporate documents of any Subsidiary or any indenture, loan or
credit agreement or other agreement, lease or instrument to which the Company or
any Subsidiary is a party or by which it may be bound or to which any of its
properties may be subject. Neither the Company nor any Subsidiary is in default
under any such law, order, writ, judgment, injunction, decree, determination or
award to an extent that would adversely affect the ability of the Company to
perform its obligations under this Credit Agreement or the Notes.
3. Each of the Credit Agreement and the Notes has been duly executed,
delivered and issued by the Company and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. The obligation of the Company includes but is not limited to the
obligation to pay the aggregate unpaid principal amount of all Loans made by the
Banks pursuant to the Credit Agreement whether or not the Company was the
Borrower at the time the Loan was made. The foregoing opinions as to
enforceability are subject to bankruptcy, insolvency, reorganization, moratorium
and other laws and equitable principles affecting the enforceability of
creditors' rights generally. No authorization, consent, approval, license,
exemption of or filing or registration with any court or other tribunal or any
governmental department, commission, board, bureau or agency, domestic or
foreign, is or under present law will be necessary to the valid execution,
delivery or performance by the Company of the Credit Agreement or any Note.
4. There are no actions, suits or proceedings pending or threatened
against or affecting the Company or any Subsidiary or any of their assets or
properties before any court or other tribunal or any governmental department,
commission, board, bureau or agency, domestic or foreign, which, if determined
adversely to the Company or any Subsidiary, could have a material adverse effect
on the financial condition, operations or properties of the Company or any
Subsidiary or on the ability of the Company to perform its obligations under the
Credit Agreement or the Notes. I am not aware of any challenge in any pending or
threatened action or proceeding to any material patent, copyright, franchise or
other right owned, leased or otherwise held by the Company or any Subsidiary.
D-2
<PAGE>
5. Except for Partners Securities Company, neither the Company nor any
Subsidiary is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stocks (within the meaning of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System). Assuming all of the proceeds of each
of the Loans will be applied duly in accordance with the provisions of the
Credit Agreement, no part of the proceeds of any Loan made under the Credit
Agreement will be applied for the purpose of purchasing or carrying any margin
stocks or of refinancing any credit previously extended or of extending credit
to others for the purpose of purchasing or carrying any such margin stocks.
6. None of the Banks will be required, by reason of the execution and
delivery of the Credit Agreement and the making of the Loans, to register or
qualify to do business under any law of the Commonwealth of Pennsylvania
relating to the registration or qualification of foreign corporations. There are
no documentary stamp taxes payable in connection with the execution and delivery
of any of the Credit Agreement or the Notes.
This Opinion is intended solely for the benefit of, and may only be relied
upon by, the Agent and each of the Banks.
Very truly yours,
William F. Drake, Jr.
General Counsel
D-3
<PAGE>
EXHIBIT A
BANKS
CoreStates Bank, N.A.
Bank of America Illinois
The Chase Manhattan Bank
Deutsche Bank AG, New York Branch
Nationsbank, N.A.
Toronto Dominion (New York), Inc.
Fleet National Bank
First Union National Bank
PNC Bank, National Association
SunTrust Bank, Atlanta
D-4
<PAGE>
EXHIBIT E
---------
December __, 1996
CoreStates Bank, N.A.
Itself and as Agent to
Each of the Banks Named on
Exhibit A Attached Hereto
Broad & Chestnut Streets
Philadelphia, PA 19107
Attn: Mr. David W. Mills
Vice President
Re: Credit Agreement, dated December ___, 1996 among Alco Standard
Corporation and certain subsidiaries and the Banks named on Schedule
A attached hereto with CoreStates Bank, N.A., as Agent
-------------------------------------------------------------
Gentlemen:
1. We have acted as legal advisers in [England] to [name of subsidiary] ALCO
OFFICE PRODUCTS (U.K.) PLC (the "COMPANY") in connection with a credit
agreement dated as of December 1, 1994 made between the Company and Alco
Standard Corporation (the "BORROWERS"), the Banks named on Exhibit A
attached hereto (the "BANKS") and CoreStates Bank, N.A. (as Agent for the
Banks) relating to the granting of a facility of up to $400,000,000 by the
Banks to the Borrowers (the "CREDIT AGREEMENT").
2. Terms defined in the Credit Agreement have the same meanings when used in
this opinion.
3. For the purposes of this opinion, we have examined the following documents:
(a) draft [certified] copy of the Credit Agreement;
(b) a [certified] copy of resolutions of the Board of Directors (and/or a
duly constituted and authorized committee thereof) of the Company
relating (inter alia) to the Credit Agreement;
(c) a [certified] copy of the [Memorandum and Articles of Association]
[applicable charter documents] of the Company;
E-1
<PAGE>
(d) a [certified] copy of resolutions, signed by all the shareholders of
the Company, relating to the assumption of joint liability under the
Credit Agreement; and
(e) [microfiches of the Company's files at the Companies Registry in
London as at _____________, 199__.]
4. Except as stated above, we have not examined any contracts, instruments or
other documents entered into by or affecting the Company or any corporate
records of the Company and have not made any other inquiries concerning the
Company or made any search at [the High Court, Strand, London] in respect
of winding-up or similar petitions.
5. We have not investigated the laws of any country other than [England]
[jurisdiction of incorporation] and this opinion is given only with respect
to [English] law. We assume that no foreign law affects any of the
conclusions stated below. We have not investigated whether the Company is
or will by reason of the transactions and matters contemplated by the
Credit Agreement be in breach of any of its obligations under any
agreement, document, deed or instrument.
6. Based upon the foregoing and subject to any matters not disclosed to us,
and subject to the qualifications set out below we are of the opinion that:
(1) The Company is a [limited liability] [public liability] company, duly
incorporated and subsisting under the laws of [England];
(2) The Company has all requisite corporate power to enter into and
perform the Credit Agreement and the transactions contemplated thereby
and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Credit Agreement and the
transactions and matters contemplated thereby;
(3) The entry into and performance of the Credit Agreement by the Company
and the transactions and matters contemplated thereby to be undertaken
by the Company do not and will not violate the [Memorandum of Articles
of Association] [charter documents] of the Company;
(4) No authorizations, approvals, consents, licenses, exemptions, filing,
registrations or other requirement of governmental, judicial and
public bodies and authorities of or in [England] are required in
connection with the entry into, performance, validity or
enforceability of the Credit Agreement;
(5) Subject to its enforceability under the laws of the Commonwealth of
Pennsylvania (and to the assumptions and qualifications set out in
this letter), the Credit Agreement would be enforceable against the
Company in [England] and the Credit Agreement contains, subject as
otherwise provided herein, no provisions which (if it were subject to,
and construed in accordance with, [English] law) would be contrary to
law or
E-2
<PAGE>
public policy in [England] or which would for any reason not be upheld
by the courts in [England];
(6) The choice of the law of the Commonwealth of Pennsylvania to govern
the Credit Agreement would be recognized and enforced by the courts in
[England] save that there is some doubt in the event that a contract
is avoided, as to whether as a matter of [English] law the choice of
law provision would survive;
(7) The submission to the jurisdiction of the courts in the Commonwealth
of Pennsylvania as set out in the Credit Agreement constitutes a valid
submission by the Company;
(8) A judgment of a competent state or federal court sitting in the
Commonwealth of Pennsylvania finally and conclusively establishing a
debt should be capable of enforcement in the competent courts of
[England] without a re-examination of the merits, provided that the
defendant may have defenses open to it and enforcement may not be
permitted if, inter alia, the judgement was obtained by fraud, was
contrary to public policy of [English] law, relates to foreign penal
or revenue laws, is contrary to natural justice, amounts to judgement
on a matter previously determined by an [English] court, is given in
proceedings brought in breach of agreement for settlement of disputes
[or if enforcement of the judgement is restricted by the provisions of
the Protection of Trading Interests Act 1980];
(9) To ensure the legality, validity, enforceability or admissibility into
evidence of the Credit Agreement in the courts of [England], it is not
necessary that the Credit Agreement be registered, notarized, filed or
recorded with any court or other authority in [England] or that any
stamp or similar tax be paid with respect thereto in [England];
(10) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any government department
or regulatory authority, is necessary under the laws of [England and
Wales] as a condition to the lawful execution, delivery and
performance of the Credit Agreement.
7. The searches made on [ ] 1996 at [the Companies Registry] revealed no
order or resolution for the winding-up or order for the administration of
the Company and no notice of the appointment of a receiver, liquidator or
similar person; but such a search is not capable of revealing whether or
not a winding-up petition has been presented, and notice of an order or
resolution for winding-up or an order for administration or notice of the
appointment of a receiver, liquidator or similar person may not be filed at
[the Companies Registry] immediately.
8. This opinion is given subject to the following qualifications:
E-3
<PAGE>
(a) the opinion is an opinion with respect to the matters referred to above in
so far as only [English domestic] law (as in force on the date of this
opinion) will itself determine those matters in the [English] Courts; and
we express no opinion as to the effect of any other law which may be held
to be applicable in determining any such matter or as to the enforceability
in any other jurisdiction of any judgement which may be obtained in the
[English] courts. An obligation to be performed in any other jurisdiction
may not be enforceable in [England] in so far as its performance would be
illegal, void or unenforceable under the laws of that other jurisdiction;
(b) the enforcement of a claim may be or become subject to a right of set-off
or a counter-claim [or subject to any limitations imposed by the Limitation
Act of 1980 or by liquidation, bankruptcy, insolvency, reorganization,
reconstruction or similar laws of general application];
(c) we assume:
(i) that the Credit Agreement is within the capacity and powers of and
has been validly authorized, executed and delivered by each person
(except the Company) who is a party to the Credit Agreement;
(ii) the genuineness of all signatures, the authenticity and completeness
of every document submitted to us as an original document, the
conformity to the original document and completeness of every
document submitted to us as a certified or photostatic copy of any
document and the authenticity of its original; and
(iii) [that the resolutions of the board of directors of the Company were
duly passed at a meeting of properly appointed directors duly
convened and held, that a duly qualified quorum of such directors
present throughout the meeting voted in favor of approving the
resolutions, that any provisions contained in the Companies Act 1985
or in the Company's Articles of Association relating to the
declaration of directors' interests or the power of interested
directors to vote were duly observed and that those resolutions have
not been rescinded or varied;]
(iv) the accuracy of all representations as to fact made in the Credit
Agreement by the Company;
(v) that immediately after the execution of the Credit Agreement the
Company was solvent;
[(vi) [that none of the transactions contemplated by the Credit Agreement
constituted financial assistance for the purposes of Section 151 of
the Companies Act 1985.]
E-4
<PAGE>
(d) [English] Courts are prepared to render judgements for a monetary
amount in foreign currencies but the judgement may be converted into
[sterling] for enforcement purposes. Foreign currency amounts claimed
in an [English] liquidation must be converted into [sterling] at the
rate prevailing at the commencement of the liquidation;
(e) a certificate, determination, notification or opinion of the Banks or
the Agent as to any matters provided for in the Credit Agreement might
be held by the [English] Courts not to be conclusive;
(f) an [English] Court might not enforce a provision of a document
providing that an obligation of any party is to survive a judgement on
such document whether obtained in [England] or elsewhere on the ground
that such obligation would be discharged by a judgement;
(g) an [English] Court may stay proceedings if concurrent proceedings are
being brought elsewhere;
(h) equitable remedies, such as orders for specific performance or the
issue of an injunction, are available only at the discretion of the
Court and are not normally awarded if an award of damages is
considered an adequate remedy;
(i) an [English] Court may recognize oral amendments to the Credit
Agreement by the parties thereto notwithstanding provisions therein to
the contrary;
(j) the question of whether or not any provisions of the Credit Agreement
which may be invalid on account of illegality may be severed from the
other provisions thereof in order to preserve the validity of those
other provisions would be determined by an [English] Court in its
discretion;
(k) an [English] company only has authority to carry on those businesses
specified in [the objects Clause of its Memorandum of Association];
(l) in relation to the opinion expressed at paragraph 6(5) above, the
Courts in [England] would not enforce the Credit Agreement if the
application of principles of the law of the Commonwealth of
Pennsylvania to the Credit Agreement would involve applying foreign
penal, revenue or public laws or involve applying foreign
expropriatory legislation or was contrary to public policy of
[English] law;
(m) the effectiveness of terms exculpating a party from a liability or
duty otherwise owed (including liability arising out of the non-
payment of stamp duty) is limited by law;
E-5
<PAGE>
(n) we have not been involved in the drafting, preparation or negotiation
of the Credit Agreement and accordingly express no opinion as to the
sufficiency or effectiveness of the Credit Agreement to achieve the
purposes contemplated by the parties thereto;
(o) whilst we are of the opinion that the Company has the necessary powers
under its [Memorandum and Articles of Association] to assume the joint
liability for the whole of the amounts due under the Credit Agreement,
the directors of the Company must exercise those powers bona fide in
the interest of the Company which may involve demonstrating a
sufficient commercial benefit for the Company from the arrangements
contemplated by the Credit Agreement as to which we express no
opinion;
(p) an [English] Court may refuse to give effect to paragraph 8.1 of the
Credit Agreement in respect of the costs of unsuccessful litigation
brought before an [English] Court or where the Court has itself made
an order for costs;
(q) a provision of the Credit Agreement providing for a higher rate of
interest to be paid on overdue sums may amount to a penalty if not
found to represent a genuine pre-estimate of loss and may therefore
not be recoverable;
(r) the obligations of the Company under the Credit Agreement are subject
to all laws affecting creditors' rights generally;
(s) so far as they relate to United Kingdom stamp duties, the undertakings
and indemnities given by the Company in Sections 2.10(b) and 8.1 of
the Credit Agreement may be void under Section 117 of the Stamp Act of
1891.
9. This opinion is given for the sole benefit of the person(s) to whom it is
addressed and is not to be relied upon by or communicated to any other
person or for any other purpose, nor is it to be quoted or referred to in
any public document or made public in any way or filed with anyone without
our prior written consent, save that it may be referred to in any
proceedings against us upon this opinion itself.
Yours faithfully,
E-6
<PAGE>
EXHIBIT F-1
FORM OF COMPETITIVE BID REQUEST
___________, 19__
CORESTATES BANK, N.A., as Agent
1339 Chestnut Street
Philadelphia, PA 19101
Attention: Stacy Shegda
Telecopier No.: (215) 973-1887
Re: Credit Agreement, dated December __, 1996 (as from time to
time amended, restated, supplemented or otherwise modified,
the "Credit Agreement") among Alco Standard Corporation,
certain Subsidiaries party thereto, certain Banks party
thereto, and CoreStates Bank, N.A., as agent (the "Agent").
(The terms defined in the Credit Agreement are used herein
as defined therein.)
-----------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.5(c) of the Credit Agreement, Alco Standard
Corporation (the "Borrower") hereby requests offers to make the Bid Loans
specified herein:
(1) The date of the proposed Bid Borrowing is ___________, 199__ (which
day is a Banking Business Day).
(2) The aggregate amount of the proposed Bid Borrowing is $________./*/
(3) The Competitive Bids requested are for Bid Loans in the following
amounts and having the following Bid Loan Durations:
Principal Amount Bid Loan Duration/**/
---------------- -----------------
________________ ______________________
________________ ______________________
__________________________________
/*/ Insert an amount which is a minimum amount of $10,000,000 or any multiple
of $1,000,000 in excess thereof.
/**/ The minimum Bid Loan Duration is 7 days and the maximum Bid Loan Duration
is 180 days and no more than two Bid Loan Durations may be requested in a
single Competitive Bid Request.
F-1-1
<PAGE>
(4) Borrower's Account to which the proceeds of the Bid Loan should be
credited: __________________.
Borrower hereby certifies that the following statements are true and
correct on and as of the date hereof, and will be true and correct on and as of
the date of the proposed Bid Borrowing, before and after giving effect thereto
and to the application of the proceeds therefrom:
(a) the representations and warranties of Borrower contained in the
Credit Agreement (except to the extent such representations and warranties
by their express terms relate to an earlier date) are true and correct in
all material respects and will be true and correct in all material respects
on the date of the Bid Borrowing as if made on and as of such date;
(b) Borrower has complied and on the date of the proposed Bid
Borrowing will be in compliance with all the terms, covenants and
conditions of the Credit Agreement; and
(c) no Event of Default or event which with the giving of the notice
or lapse of time, or both would constitute such Event of Default exists or
shall result from the proposed Bid Borrowing.
You are hereby authorized to debit our demand deposit account in the amount
of $300 in payment of the service fee due the Agent in connection with this
request.
Very truly yours,
ALCO STANDARD CORPORATION
By:___________________________
Name:
Title:
F-1-2
<PAGE>
EXHIBIT F-2
FORM OF COMPETITIVE BID
___________, 19__
CORESTATES BANK, N.A., as Agent
1339 Chestnut Street
Philadelphia, PA 19101
Attention: Stacy Shegda
Telecopier No.: (215) 973-1887
Re: Credit Agreement, dated December __, 1996 (as from time to
time amended, restated, supplemented or otherwise modified,
the "Credit Agreement") among Alco Standard Corporation,
certain Subsidiaries party thereto, certain Banks party
thereto, and CoreStates Bank, N.A., as agent (the "Agent").
(The terms defined in the Credit Agreement are used herein
as defined therein.)
-----------------------------------------------------------
Ladies and Gentlemen:
In response to the Competitive Bid Request made by Alco Standard
Corporation (the "Borrower") dated ________________ ___, 19__ and in accordance
with Section 2.5(c) of the Credit Agreement, the undersigned Bank offers to make
Bid Loan(s) thereunder in the following principal amount(s) at the following
interest rate(s) for the following Bid Loan Durations:
Borrowing Date: ________________ __, 19__
Offer 1: Maximum Amount $_______________; Minimum Amount $________________./*/
BID LOAN DURATION PRINCIPAL AMOUNT ABSOLUTE RATE
- ----------------- ---------------- -------------
_________________ ________________ _____________
Offer 2: Maximum Amount $_________________; Minimum Amount $_______________./*/
BID LOAN DURATION PRINCIPAL AMOUNT ABSOLUTE RATE
- ----------------- ---------------- -------------
_________________ ________________ _____________
/*/ Not less than $1,000,000
F-2-1
<PAGE>
Acceptance of any bid contained herein is subject to compliance with the
terms and conditions of the Credit Agreement.
[NAME OF BANK]
By:____________________________
Name:
Title:
F-2-2
<PAGE>
EXHIBIT F-3
FORM OF BID LOAN NOTICE
___________ ___, 19__
CORESTATES BANK, N.A., as Agent
1339 Chestnut Street
Philadelphia, PA 19101
Attention: Stacy Shegda
Telecopier No.: (215) 973-1887
Re: Credit Agreement, dated December __, 1996 (as from time to
time amended, restated, supplemented or otherwise modified,
the "Credit Agreement") among Alco Standard Corporation,
certain Subsidiaries party thereto, certain Banks party
thereto, and CoreStates Bank, N.A., as agent (the "Agent").
(The terms defined in the Credit Agreement are used herein
as defined therein.)
-----------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.5(c) of the Credit Agreement, Alco Standard
Corporation (the "Borrower") hereby notifies you of the Borrower's acceptance of
the following offers made by the Banks in response to the Competitive Bid
Request submitted on __________________, 19__:
Borrowing Date: _________________, 19___.
Name of Bid Loan Absolute Principal Amount
Bank Duration Rate of Bid Loan
---- -------- ---- -----------
_________ ________ _________ ________________
_________ ________ _________ ________________
_________ ________ _________ ________________
_________ ________ _________ ________________
F-3-1
<PAGE>
Borrower hereby certifies that its acceptance of the offers listed above
complies with the terms of the Credit Agreement, including, but not limited to,
Section 2.5(c). Borrower hereby confirms and restates each of the statements
certified by it in the Competitive Bid Request relating to this Bid Loan Notice
and further certifies that after giving effect to the above Bid Loans, there
will not be more than five (5) Bid Loans outstanding and the outstanding
aggregate principal amount of all Loans will not exceed the Revolving Credit
Facility Commitment.
Very truly yours,
ALCO STANDARD CORPORATION
By:__________________________
Name:
Title:
______________________
* Acceptance of each Bid Borrowing must be in a minimum aggregate principal
amount of $10,000,000 or in any multiple of $1,000,000 in excess thereof,
and acceptance of each Bid Loan must be in a minimum principal amount of
$10,000,000 or in any multiple of $1,000,000 in excess thereof.
<PAGE>
Exhibit 10.5
RECEIVABLES TRANSFER AGREEMENT
Dated As Of September 30, 1996
Among
IKON FUNDING INC.,
As Transferor,
IKON CAPITAL INC.,
As Originator and Collection Agent,
OLD LINE FUNDING CORP.,
As Issuer,
And
ROYAL BANK OF CANADA,
As Agent
<PAGE>
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENTS...................................................... 1
ARTICLE I
AMOUNTS AND TERMS OF THE TRANSFER.................................. 1
SECTION 1.01. Facility............................................ 1
SECTION 1.02. Consideration and Terms.......................... 2
SECTION 1.03. Settlement Procedures............................ 3
SECTION 1.04. Payment of Fees and Yield........................ 7
SECTION 1.05. Payments and Computations, Etc................... 8
SECTION 1.06. Increased Costs.................................. 9
SECTION 1.07. Additional Yield on Receivables Bearing a
Eurodollar Rate.................................. 10
SECTION 1.08. Requirements of Law.............................. 11
SECTION 1.09. Inability to Determine Eurodollar Rate........... 12
SECTION 1.10. Additional Yield for Liquidity and Credit
Enhancement...................................... 12
SECTION 1.11. Breakage Costs................................... 12
SECTION 1.12. Retransfer of Receivables........................ 13
SECTION 1.13. Security Interest................................ 14
ARTICLE II
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TRIGGER EVENTS ......................................... 15
SECTION 2.01. Representations and Warranties; Covenants........ 15
SECTION 2.02. Trigger Events................................... 15
ARTICLE III
INDEMNIFICATION, REPURCHASE, ETC................................... 16
(i)
<PAGE>
SECTION 3.01. Indemnities by the Transferor.................... 16
SECTION 3.02. Recourse for Yield............................... 18
SECTION 3.03. Repurchase of Ineligible and Certain Other
Receivables...................................... 19
ARTICLE IV
ADMINISTRATION AND COLLECTION
OF RECEIVABLES .................................................... 19
SECTION 4.01. Designation of Collection Agent..................... 19
SECTION 4.02. Duties of Collection Agent.......................... 20
SECTION 4.03. Certain Rights of the Agent......................... 21
SECTION 4.04. Rights and Remedies................................. 22
SECTION 4.05. Further Actions Evidencing Transfers................ 22
SECTION 4.06. Covenants of the Collection Agent and the
Originator.......................................... 23
SECTION 4.07. Indemnities by the Collection Agent................. 24
ARTICLE V
MISCELLANEOUS...................................................... 25
SECTION 5.01. Amendments, Etc..................................... 25
SECTION 5.02. Notices, Etc........................................ 25
SECTION 5.03. Assignability....................................... 27
SECTION 5.04. Costs, Expenses and Taxes........................... 28
SECTION 5.05. No Proceedings...................................... 29
SECTION 5.06. Confidentiality..................................... 29
SECTION 5.07. GOVERNING LAW....................................... 29
SECTION 5.08. Execution in Counterparts........................... 30
SECTION 5.09. Termination......................................... 30
SECTION 5.10. Tax Treatment....................................... 30
(ii)
<PAGE>
EXHIBITS
EXHIBIT I -- Definitions
EXHIBIT II -- Conditions of the Transfer
EXHIBIT III -- Representations and Warranties
EXHIBIT IV -- Covenants
EXHIBIT V -- Trigger Events
EXHIBIT VI -- List of Dealers
EXHIBIT VII -- Principal Place of Business and Location of Records
EXHIBIT VIII -- List of Designated States
ANNEXES
ANNEX A -- Form of Contract
ANNEX B -- Form of Transferor Report
ANNEX C -- Form of Opinion
SCHEDULES
SCHEDULE I -- Credit and Collection Policy
SCHEDULE II -- Receivables
(iii)
<PAGE>
RECEIVABLES TRANSFER AGREEMENT
Dated as of September 30, 1996
IKON FUNDING INC., a Delaware corporation (the "Transferor"), IKON CAPITAL
----------
INC., a Delaware corporation (the "Originator" and in its capacity as Collection
----------
Agent, the "Collection Agent"), OLD LINE FUNDING CORP., a Delaware corporation
----------------
(the "Issuer"), and ROYAL BANK OF CANADA, a Canadian chartered bank acting
------
through its New York Branch, as agent (the "Agent") for the Transferees, agree
-----
as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
in the Exhibits to "the Agreement" refer to this Agreement, as amended, modified
or supplemented from time to time.
The Transferor has Receivables and Related Security that it wishes to
transfer to the Issuer, and the Issuer is prepared to accept such transfer of
Receivables and Related Security on the terms set forth herein. Accordingly,
the parties agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE TRANSFER
SECTION 1.01. Facility. (a) Upon the satisfaction of the terms and
--------
conditions hereinafter set forth, the Agent may, on behalf of the Issuer, accept
Receivables from time to time (each, a "Transfer") during the period from the
--------
date hereof to the Facility Termination Date. Each Transfer of Receivables
shall include the transfer to the Agent of the Related Security and Collections
with respect thereto. Under no circumstances shall the Agent accept any
Transfer if, after giving effect to such Transfer, the aggregate outstanding
Capital would exceed the Transfer Limit. Nothing in this Agreement shall be
deemed to be or construed as a commitment by the Agent or the Issuer to accept
any Receivable at any time.
<PAGE>
(b) The Transferor may, upon at least five Business Days' notice to the
Agent, terminate this facility in whole or, from time to time, reduce in part
the unused portion of the Transfer Limit; provided that each partial reduction
--------
shall be in the amount of at least $1,000,000 or an integral multiple thereof.
SECTION 1.02. Consideration and Terms. (a) The initial Transfer shall be
-----------------------
made on at least two Business Days' notice from the Transferor to the Agent in
an amount equal to the Transfer Limit. On each Settlement Date thereafter
occurring prior to the Facility Termination Date, unless the Transferor has
given written notice to the contrary not less than two Business Days prior to
such Settlement Date, the Transferor shall be deemed to have requested a
Transfer in an amount equal to the excess of the Transfer Limit over the Capital
as of such Settlement Date (after giving effect to all payments to be made on
such date). The amount to be paid by the Issuer in respect of each Transfer
shall be equal to the Aggregate Adjusted Outstanding Balance of the Related
Contracts for the Receivables included in such Transfer (the "Consideration" for
-------------
such Receivables); provided that with respect to each Transfer other than the
--------
Initial Transfer, such amount shall not exceed the amount of the Transfer
requested in the preceding sentence. Not less than two Business Days prior to
the date of each Transfer (each, a "Transfer Date"), the Transferor shall
-------------
deliver to the Agent a written notice specifying (i) the date and duration of
the initial Fixed Periods for the Receivables to be transferred, and (ii)
detailed information regarding such Receivables.
(b) Promptly upon receipt of such notice, the Agent shall deliver a copy
thereof to the Issuer. The Issuer shall promptly notify the Agent whether the
Issuer has determined to direct the Agent to accept such Transfer. The Agent
shall promptly thereafter notify the Transferor (i) whether the Issuer has
determined to direct the Agent to accept such Transfer, and (ii) whether the
desired duration of the initial Fixed Periods for the Receivables to be accepted
is acceptable. Each Transfer other than the initial Transfer shall be made only
on a Settlement Date or as otherwise mutually agreed by the Transferor and the
Agent. On each Transfer Date, upon satisfaction of the applicable conditions
set forth in Exhibit II hereto, (x) the Issuer shall make available to the Agent
the Consideration in respect of such Transfer by deposit of such amount in same
day
2
<PAGE>
funds to the Agent's Account and, after the receipt by the Agent of such funds,
the Agent will cause such Consideration to be paid to the Transferor in
immediately available funds prior to 2:00 P.M. (New York City time) to the
Transferor's account no. 56000209038 at PNC Bank, Delaware (ABA # 031100089);
provided, however, that in the case of each Transfer other than the initial
- -------- -------
Transfer, the applicable Consideration may be netted against amounts to be
deposited to the Agent's Account on such date by the Collection Agent pursuant
to Section 1.03 and (y) the Transferor shall (effective on the date of each
Transfer automatically and without any further documentation) transfer to the
Agent for the benefit of the Issuer and the other Transferees all of the related
Receivables, the Related Contracts, the Related Security (other than the
Equipment) and the Collections in respect thereof. The Issuer shall on the date
of each Transfer and on the first day of each Fixed Period (other than the
initial Fixed Period) for such Receivables, notify the Agent, and the Agent
shall notify the Transferor, of the Transferee Rate for such Fixed Period.
SECTION 1.03. Settlement Procedures. (a) Collection of the Receivables
---------------------
shall be administered by the Collection Agent, in accordance with the terms of
this Agreement. The Transferor shall provide to the Collection Agent on a
timely basis all information needed for such administration.
(b) The Collection Agent shall, on each day on which Collections are
received by it, set aside and hold in trust for the Transferees such Collections
and shall deposit into the Agent's Account,
(i) on the last day of each Fixed Period, from such Collections, an
amount equal to accrued and unpaid Yield (and not previously deposited into
the Agent's Account pursuant to Section 1.03(b)(ii)) and any other amounts
then owed by the Transferor to any Transferee or the Agent hereunder
(including any fees owed to the Agent pursuant to Section 1.04(a) but
excluding any such amounts owed in respect of Capital);
(ii) if any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate has a duration of more than three months,
3
<PAGE>
on the day that occurs three months after the first day of such Fixed Period,
from such Collections, an amount equal to the accrued and unpaid Yield
associated with such Fixed Period;
(iii) on each Settlement Date, an amount equal to the Collection Agent Fee
accrued but unpaid during the preceding Settlement Period; and
(iv) on each Settlement Date, from such Collections, an amount equal to
the portion of Collections received during the preceding Settlement Period
remaining after application pursuant to the preceding clauses (i) through
(iii); provided that prior to the Facility Termination Date, the amount to be
--------
deposited pursuant to this clause (iv) will not exceed the product of (A) a
fraction, the numerator of which is the Required Balance and the denominator
of which is the aggregate Outstanding Balance of the Related Contracts and
(B) the amount of such Collections;
provided, however, that the aggregate amount deposited pursuant to this
- -------- -------
subsection (b) shall not exceed the sum of the Capital of, and accrued Yield and
Collection Agent Fee on, the Receivables plus the aggregate of any other amounts
then owed by the Transferor to any Transferee or the Agent hereunder.
Notwithstanding the foregoing, unless a Special Event has occurred, for so
long as the Originator is the Collection Agent, the Collection Agent shall not
be required to set aside Collections, but may commingle the Collections with its
own funds and make the deposits required to the Agent's Account pursuant to this
paragraph (b) on the dates required. For so long as the Originator is the
Collection Agent, the Collection Agent shall not be required to deposit the
Collection Agent Fee to the Agent's Account as required by clause (iii) of this
paragraph (b) but may retain such fee from the Collections remaining after the
deposits required pursuant to clauses (i) and (ii) of this paragraph (b).
(c) (i) Upon receipt of funds deposited into the Agent's Account
pursuant to subsection (b)(i) or (b)(ii) above, the Agent shall distribute
such funds as follows: first, pro rata to each Transferee in payment of
-----
accrued but unpaid Yield on the Capital of the relevant Receivables Pool
and to the
4
<PAGE>
Agent in respect of any fees owed pursuant to Section 1.04(a), and second, to
------
the Agent for the account of the Transferees or the Agent in payment of any
other amounts owed by the Transferor hereunder.
(ii) Upon receipt of funds deposited into the Agent's Account pursuant to
subsection (b)(iii) above, the Agent shall distribute such funds, in an amount
equal to the accrued but unpaid Collection Agent Fee, to the Collection Agent on
account of the Collection Agent Fee.
(iii) Upon receipt of funds deposited into the Agent's Account pursuant to
subsection (b)(iv) above, the Agent shall distribute such funds as follows:
first, to the Agent for pro rata distribution to each Transferee in reduction to
- -----
zero of all Capital, second, to the Agent for the account of the Transferees or
------
the Agent in payment of any other amounts owed by the Transferor hereunder, and
third, to the Transferor for its own account.
- -----
(d) For the purposes of this Section 1.03:
(i) if on any day the amount of any Receivable is reduced or adjusted as a
result of (A) early termination of the related Contract, or (B) any defective,
rejected, returned, or repossessed Equipment or services, or (C) any cash
discount, customer concession, trade-in or other adjustment made by the
Transferor or the Originator, or (D) any set-off, or (E) any loss or damage with
respect to any Equipment, the Transferor shall be deemed to have received on
such day a Collection in full of such Receivable and all other Receivables
relating to the same Contract, in the amount of the Outstanding Balance of such
Contract plus Yield thereon to the end of the then applicable Fixed Period, and
the amount of each such Collection shall be applied as provided in this Section
1.03;
(ii) if on any day any of the representations or warranties in paragraph
(h) of Exhibit III is no longer true with respect to any Receivable or the
Related Security, the Transferor shall be deemed to have received on such day a
Collection in full of such Receivable and all other Receivables relating to the
same Contract, in the amount of the Outstanding
5
<PAGE>
Balance of such Contract plus Yield thereon to the end of the then
applicable Fixed Period, and the amount of each such Collection shall be
applied as provided in this Section 1.03; and
(iii) if and to the extent the Agent or any Transferee shall be required
for any reason to pay over to an Obligor any amount received on its behalf
hereunder, such amount shall be deemed not to have been so received but
rather to have been retained by the Transferor and, accordingly, the Agent
or such Transferee, as the case may be, shall have a claim against the
Transferor for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect thereof.
(e) Except as provided in paragraph (i) or (ii) of Section 1.03(d), or
as otherwise required by applicable law or the relevant Contract, all Collec
tions received from an Obligor of any Receivables shall be applied to the
Receivables of such Obligor in the order of the age of the due but unpaid
amounts with respect to such Receivables, starting with the oldest such due but
unpaid amount, unless such Obligor designates its payment for application to
specific Receivables.
(f) The Transferor shall forthwith deliver to the Collection Agent an
amount equal to all Collections deemed received by the Transferor pursuant to
Section 1.03(d)(i) or (ii) above and the Collection Agent shall hold or
distribute such Collections in accordance with Section 1.03(b). If Collections
are then being paid to the Agent, the Collection Agent shall forthwith cause
such deemed Collections to be paid to the Agent. If a Special Event has
occurred, so long as the Transferor shall hold any Collections or deemed
Collections required to be paid to the Collection Agent or the Agent, it shall
hold such Collections in trust and separate and apart from its own funds and
shall clearly mark its records to reflect such trust.
(g) The Transferor may from time to time, on notice received by the
Agent not later than 12:00 noon (New York City time) three Business Days before
the last day of any Fixed Period for a Receivables Pool, allocate
6
<PAGE>
Receivables for funding purposes to future Fixed Periods (each such pool of
Receivables separately so allocated to any one Fixed Period being a "Receivables
-----------
Pool" having such Fixed Period). Each Receivables Pool shall be deemed to have
- ----
Capital equal to the total Capital multiplied by a fraction whose numerator is
the Outstanding Balance of the Related Contracts giving rise to the Receivables
in such Receivables Pool and whose denominator is the Outstanding Balance of all
Related Contracts. Notwithstanding the foregoing, two or more Receivables Pools
may not be combined unless they have Fixed Periods ending on the same day.
SECTION 1.04. Payment of Fees and Yield. (a) Fees. The Transferor shall
------------------------- ----
pay to the Agent certain fees in the amounts and on the dates set forth in a
separate fee agreement of even date between the Transferor and the Agent.
(b) Yield. (i) Yield for any Transferee for any Fixed Period for any
-----
Receivables Pool on the first day of which the Issuer will be funding the
Transfer or the maintenance of its interest in such Receivables Pool through the
issuance of commercial paper notes is calculated (pursuant to a formula set
forth in the definition of "Yield") based on the Transferee Rate for such Fixed
-----
Period for such Receivables Pool. Yield for any Transferee for any Fixed Period
for any Receivables Pool on the first day of which such Transferee will not be
funding the Transfer or the maintenance of its interest in such Receivables Pool
through the issuance of commercial paper notes is calculated (pursuant to a
formula set forth in the definition of "Yield") based on the Assignee Rate for
-----
such Fixed Period for such Receivables Pool, which (subject to the provisos set
forth in the definition of "Assignee Rate") is equal to 1.50% per annum plus the
-------------
Eurodollar Rate for such Fixed Period for such Receivables Pool.
(ii) Without prejudice to the discretion of the Issuer to select the
basis of funding or maintaining the Receivables for any Fixed Period, the Issuer
may not on any date select or approve a commercial paper note basis unless on
such date all of the long-term public senior debt securities of the Originator
are rated at least Investment Grade. It is understood that no
7
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Transferee (other than the Issuer) will intend to fund or maintain the
Receivables for any Fixed Period by issuing commercial paper notes.
(c) Collection Agent Fee. Each Transferee shall pay to the Collection
--------------------
Agent a fee (the "Collection Agent Fee") of 1.50% per annum on the average daily
--------------------
Capital of each Receivables Pool owned by such Transferee, from the date of
Transfer of the related Receivables until the date on which such Capital is
reduced to zero, payable on the last day of each Settlement Period. Upon three
Business Days' notice to the Agent, the Collection Agent (if not the Originator,
the Transferor or its designee or an Affiliate of the Transferor) may elect to
be paid, as such fee, another percentage per annum on the average daily Capital
of such Receivables Pool, but in no event in excess for all Receivables relating
to a single Receivables Pool of 110% of the reasonable costs and expenses of the
Collection Agent in administering and collecting the Receivables in such
Receivables Pool. The Collection Agent Fee shall be payable only from
Collections pursuant to, and subject to the priority of payment set forth in,
Section 1.03. So long as the Originator is acting as the Collection Agent
hereunder, amounts paid as the Collection Agent Fee pursuant to this Section
1.04(c) shall reduce, on a dollar-for-dollar basis, the obligation of the
Transferor to pay the "Collection Agent Fee" pursuant to Section 6.03 of the
Transfer Agreement; provided that such obligation of the Transferor shall in no
--------
event be reduced below zero.
SECTION 1.05. Payments and Computations, Etc. (a) All amounts to be paid
------------------------------
or deposited by the Transferor or the Collection Agent hereunder to or for the
account of the Agent, the Issuer or any other Transferee shall be paid or
deposited no later than 11:00 A.M. (New York City time) on the day when due in
same day funds to the Agent's Account. Upon receipt of funds deposited into the
Agent's Account, the Agent shall distribute such funds to the Persons entitled
thereto in accordance with the provisions of this Agreement or retain such funds
for its own account, as appropriate. Where this Agreement provides for pro rata
distribution of funds to the Transferees, the Agent shall make such distribution
in accordance with each Transferee's percentage interest in the Receivables.
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(b) The Transferor shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Transferor (whether as Collection Agent
or otherwise) when due hereunder, at an interest rate per annum equal to 2% per
annum above the Alternate Base Rate, payable on demand.
(c) All computations of interest under subsection (b) above and all
computations of Yield, fees, and other amounts hereunder shall be made on the
basis of a year of 360 days for the actual number of days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
SECTION 1.06. Increased Costs (a) If Royal Bank of Canada, the Agent, the
---------------
Issuer, a Transferee, any entity which enters into a commitment to acquire
Receivables or interests therein, any entity which provides credit enhancement
or any of their respective Affiliates (each an "Affected Person") determines
---------------
that compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person determines that the
amount of such capital is increased by or based upon the existence of any
commitment to accept transfers of or otherwise to maintain the investment in
Receivables or interests therein hereunder or under any commitments to a
Transferee related to this Agreement or to the funding thereof or any related
liquidity facility or credit enhancement facility (or any participation therein)
and other commitments of the same type, then, upon demand by such Affected
Person (with a copy to the Agent), the Transferor shall immediately pay to the
Agent, for the account of such Affected Person (as a third-party beneficiary),
from time to time as specified by such Affected Person, additional amounts
sufficient to compensate such Affected Person in the light of such
circumstances, to the extent that such Affected Person reasonably determines
such increase in capital to be allocable to the existence of any of such
commitments. A certificate as to such amounts submitted to the Transferor and
the Agent by such Affected Person shall be conclusive and binding for all
purposes, absent manifest error.
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(b) If, due to either (i) the introduction of or any change (other than any
change by way of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation or (ii) compliance with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to a
Transferee of agreeing to accept the Transfer of or accepting such Transfers, or
maintaining the ownership of Receivables Pools or interests therein in respect
of which Yield is computed by reference to the Eurodollar Rate, then upon demand
by such Transferee (with a copy to the Agent), the Transferor shall immediately
pay to the Agent, for the account of such Transferee (as a third-party
beneficiary), from time to time as specified by such Transferee, additional
amounts sufficient to compensate such Transferee for such increased costs. A
certificate as to such amounts submitted to the Transferor and the Agent by a
Transferee shall be conclusive and binding for all purposes, absent manifest
error.
SECTION 1.07. Additional Yield on Receivables Bearing a Eurodollar
----------------------------------------------------
Rate. The Transferor shall pay to each Transferee, so long as such Transferee
- ----
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional Yield on the
unpaid Capital of the Receivables Pool of such Transferee during each Fixed
Period in respect of which Yield is computed by reference to the Eurodollar
Rate, for such Fixed Period, at a rate per annum equal at all times during such
Fixed Period to the remainder obtained by subtracting (i) the Eurodollar Rate
for such Fixed Period from (ii) the rate obtained by dividing such Eurodollar
Rate referred to in clause (i) above by that percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage of such Transferee for such Fixed Period,
payable on each date on which Yield is payable on such Receivables. Such
additional Yield shall be determined by such Transferee and notice thereof given
to the Transferor through the Agent within 60 days after any Yield payment is
made with respect to which such additional Yield is requested. A certificate as
to such additional Yield submitted to the Transferor and the Agent by such
Transferee shall be conclusive and binding for all purposes, absent manifest
error.
10
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SECTION 1.08. Requirements of Law. In the event that any requirement of
-------------------
law or any change therein or in the interpretation or application thereof by the
relevant governmental authority to a Transferee after the date hereof or
compliance by a Transferee with any request or directive (whether or not having
the force of law) from any central bank or other governmental authority:
(i) does or shall subject such Transferee to any tax of any kind
whatsoever with respect to this Agreement or change the basis of taxation of
payments to such Transferee on account of Collections, Yield or any other
amounts payable hereunder (excluding taxes imposed on the income of such
Transferee, and franchise taxes imposed on such Transferee, by the
jurisdiction under the laws of which such Transferee is organized or a
political subdivision thereof); or
(ii) does or shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, purchases, advances
or loans by, or other credit extended by, or any other acquisition of funds
by, any office of such Transferee which are not otherwise included in the
determination of the Eurodollar Rate or the Alternate Base Rate hereunder;
and the result of any of the foregoing is to increase the cost to such
Transferee of maintaining an interest in Receivables or to reduce any amount
receivable hereunder, then, in any such case, the Transferor shall pay such
Transferee, upon its demand, any additional amounts necessary to compensate
such Transferee for such additional cost or reduced amount receivable with
regard to such Transferee's Receivables. All such amounts shall be payable as
incurred. A certificate from such Transferee or the Agent, as the case may be,
to the Transferor certifying, in reasonably specific detail, the basis for,
calculation of, and amount of such additional costs shall be conclusive in the
absence of manifest error.
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SECTION 1.09. Inability to Determine Eurodollar Rate. In the event that
--------------------------------------
the Agent shall have determined prior to the first day of any Fixed Period
(which determination shall be conclusive and binding upon the parties hereto) by
reason of circumstances affecting the interbank Eurodollar market, either (a)
dollar deposits in the relevant amounts and for the relevant Fixed Period are
not available, (b) adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Fixed Period or (c) the Eurodollar Rate determined
pursuant hereto does not accurately reflect the cost to the Transferees (as
conclusively determined by the Agent) of maintaining Receivables during such
Fixed Period, the Agent shall promptly give telephonic notice of such
determination, confirmed in writing, to the Transferor prior to the first day of
such Fixed Period. If such notice is given, the Assignee Rate applicable to the
relevant Receivables Pool shall be determined without reference to the
Eurodollar Rate.
SECTION 1.10. Additional Yield for Liquidity and Credit Enhancement. The
-----------------------------------------------------
Transferor shall pay to the Agent, on demand, the Alternate Base Rate on any
amounts advanced or paid with respect to liquidity or credit enhancement related
to this transaction.
SECTION 1.11. Breakage Costs. If (a) any payment of Capital with respect
--------------
to a Receivables Pool as to which Yield is computed by reference to the
Eurodollar Rate or the Transferee Rate is made by the Transferor to or for the
account of any Transferee other than on the last day of the Fixed Period for
such Receivables Pool, as a result of a payment pursuant to Sections 1.03 or
3.03 or for any other reason, or (b) the Fixed Period Termination Date for such
Receivables Pool shall occur during any Fixed Period for such Receivables Pool,
or (c) any payment of Capital with respect to such a Receivables Pool is made by
an Eligible Assignee to an Affected Person other than on the last day of the
Fixed Period for such Receivables Pool upon a purchase and assumption of rights
and obligations under this Agreement as a result of a demand by the Transferor,
the Transferor shall, upon demand by such Transferee or Affected Person (with a
copy to the Agent), immediately pay to the Agent for the account of such
Transferee or Affected Person (as a third-party beneficiary) any amounts
required to compensate such Transferee or Affected Person for any additional
losses, costs
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or expenses which it may reasonably incur as a result of such payment,
including, without limitation, any loss (including loss of anticipated profits),
costs or expenses incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Transferee or Affected Person to fund
or maintain its interest in such Receivables Pool. A certificate as to such
amounts submitted to the Transferor and the Agent by such Transferee or Affected
Person shall be conclusive and binding for all purposes, absent manifest error.
SECTION 1.12. Retransfer of Receivables. At any time after Capital
-------------------------
is reduced to less than 10% of the highest amount of Capital outstanding on or
prior to the Facility Termination Date, the Transferor may, at its option, upon
not less than thirty days notice to the Agent, accept the retransfer from the
Agent on the Settlement Date next succeeding such thirty day period or on such
other date as shall be mutually agreed to by the Agent and the Transferor (the
"Retransfer Date"), of all of the Receivables and the Related Security then held
- ----------------
by the Agent for an amount equal to the Capital of such Receivables as at the
Retransfer Date (after application of all Collections received on or prior to
such date) plus any accrued and unpaid Yield as at such date plus any other
amounts then owed by the Transferor under this Agreement. The Transferor shall
be entitled to all Collections from the Receivables retransferred to the
Transferor in accordance with this Section 1.12 which are received after the
Retransfer Date and the Collection Agent shall set aside and hold in trust for,
and shall pay forthwith to, the Transferor all such Collections. The terms and
provisions of this Agreement shall continue to be effective or be reinstated, as
the case may be, if any such payment is rescinded or must otherwise be returned
to the Transferor upon the insolvency, bankruptcy or reorganization of the
Transferor or an Obligor or otherwise, all as though such payment had never been
made. On the Retransfer Date:
(i) all of the Receivables and Related Security shall be retransferred
to the Transferor without any representation or warranty other than that
they are free and clear of any Adverse Claims created by or through the
Transferees or the Agent, and
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(ii) the Agent shall deliver to the Transferor executed UCC-3
Termination Statements, terminating the interest of the Agent in all such
Receivables and Related Security,
thereupon the Transferor shall be vested with all right, title and interest in
such Receivables and Related Security, and the Agent and the Transferees shall
no longer hold any interest in any of such Receivables or Related Security.
SECTION 1.13. Security Interest. As collateral security for the
-----------------
performance by the Transferor of all the terms, covenants and agreements on the
part of the Transferor (whether as Transferor or otherwise) to be performed
under this Agreement or any document delivered in connection with this Agreement
in accordance with the terms thereof, including the punctual payment when due of
all obligations of the Transferor hereunder or thereunder, whether for
indemnification payments, fees, expenses or otherwise, the Transferor hereby
assigns to the Agent for its benefit and the ratable benefit of the Transferees,
and hereby grants to the Agent for its benefit and the ratable benefit of the
Transferees, a security interest in, all of the Transferor's right, title and
interest in and to:
(a) the Transfer Agreement, including, without limitation, (i) all
rights of the Transferor to receive moneys due or to become due under or
pursuant to the Transfer Agreement, (ii) all security interests and property
subject thereto from time to time purporting to secure payment of monies due or
to become due under or pursuant to the Transfer Agreement, (iii) all rights of
the Transferor to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Transfer Agreement (except any rights that might
arise under the Support Agreement), (iv) claims of the Transferor for damages
arising out of or for breach of or default under the Transfer Agreement, and (v)
the right of the Transferor to compel performance and otherwise exercise all
remedies thereunder,
(b) all Receivables, the Related Security with respect thereto and
the Collections and all receivables originated by Dealers and owned by the
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<PAGE>
Transferor and not otherwise transferred or scheduled to be transferred under
this Agreement and all related collateral with respect thereto, and
(c) to the extent not included in the foregoing, all proceeds of any and
all of the foregoing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES;
COVENANTS; TRIGGER EVENTS
SECTION 2.01. Representations and Warranties; Covenants. The Transferor
-----------------------------------------
hereby makes the representations and warranties, and hereby agrees to perform
and observe the covenants, set forth in Exhibits III and IV, respectively,
hereto.
SECTION 2.02. Trigger Events. If any of the Trigger Events set forth in
--------------
Exhibit V hereto shall occur and be continuing, the Agent may, by notice to the
Transferor, take either or both of the following actions: (x) declare the Fixed
Period Termination Date to have occurred (in which case the Fixed Period
Termination Date shall be deemed to have occurred), and (y) without limiting any
right under the Collection Agent Agreement to replace the Collection Agent,
designate another Person to succeed the Originator as the Collection Agent;
provided, that, automatically upon the occurrence of any event (without any
- --------
requirement for the passage of time or the giving of notice) described in
paragraph (i) of Exhibit V, the Fixed Period Termination Date shall occur, the
Originator (if it is then serving as the Collection Agent) shall cease to be the
Collection Agent, and the Agent or its designee shall become the Collection
Agent. Upon any such declaration or designation or upon any such automatic
termination, the Transferees and the Agent shall have, in addition to the rights
and remedies which they may have under this Agreement and the Collection Agent
Agreement, all other rights and remedies provided after default under the UCC of
the appropriate jurisdiction or jurisdictions and under other applicable law,
which rights and remedies shall be cumulative.
15
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ARTICLE III
INDEMNIFICATION, REPURCHASE, ETC.
SECTION 3.01. Indemnities by the Transferor. Without limiting any
-----------------------------
other rights that the Agent or any Transferee or any of their respective
Affiliates or its agents (each, an "Indemnified Party") may have hereunder or
-----------------
under applicable law, the Transferor hereby agrees to indemnify each
Indemnified Party from and against any and all claims, losses and liabilities
(including reasonable attorneys' fees) (all of the foregoing being collectively
referred to as "Indemnified Amounts") arising out of or resulting from this
--------------------
Agreement or the use of proceeds of any Transfer or the acceptance of the
transfer of the Receivables or in respect of any Receivable, Related Contract or
Related Security, excluding, however, (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse (except as otherwise specifically provided in
this Agreement) for uncollectible Receivables or (c) any income taxes or
franchise taxes imposed on such Indemnified Party by the jurisdiction under the
laws of which such Indemnified Party is organized or any political subdivision
thereof, arising out of or as a result of this Agreement or the acceptance of
the transfer of the Receivables or in respect of any Receivable, Related
Contract or Related Security. Without limiting or being limited by the
foregoing, the Transferor shall pay on demand to each Indemnified Party any and
all amounts necessary to indemnify such Indemnified Party from and against any
and all Indemnified Amounts relating to or resulting from any of the following:
(i) any representation or warranty or statement made by the Transferor
(or any of its officers) under or in connection with this Agreement and the
other Transaction Documents which shall have been incorrect in any material
respect when made;
(ii) the failure by the Transferor or the Originator to comply with any
applicable law, rule or regulation (including, without limitation, usury or
consumer law) with respect to any Receivable, the related Contract or
16
<PAGE>
the Related Security; or the failure of any Receivable or the related
Contract to conform to any such applicable law, rule or regulation;
(iii) the failure of the Agent (for the benefit of the Transferees) to
acquire a valid and perfected interest in the Receivables and the Related
Security and Collections in respect thereof under Article 9 of the UCC, free
and clear of any Adverse Claim;
(iv) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables or the Related Security and Collections in respect thereof,
whether at the time of the transfer of an interest therein or at any
subsequent time;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the lease or sale of the related Equipment or services
related to such Receivable or the furnishing or failure to furnish such
Equipment or other services or alleging violation by the Transferor of any
laws in connection with such lease or sale activities;
(vi) any failure of the Transferor or the Originator (as Collection
Agent or otherwise) to perform its duties or obligations in accordance with
the provisions hereof or to perform its duties or obligations under the
Related Contracts;
(vii) any products or personal liability claim arising out of or in
connection with any Equipment or other merchandise, services or activities
which are the subject of any Related Contract;
17
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(viii) the commingling by the Transferor or any of its Affiliates
(including without limitation the Originator in its capacity as Collection
Agent) of Collections of Receivables at any time with other funds;
(ix) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of any Transfer or the acceptance of the
transfer of Receivables or in respect of any Receivable, Related Security or
Related Contract; or
(x) any fine, penalty, tax or other charge asserted against any
Indemnified Party by any governmental authority or agency or any other
Person resulting from any Obligor's use, possession or ownership of any
Equipment.
SECTION 3.02. Recourse for Yield. The Transferor hereby agrees to
------------------
pay to the Agent, for pro rata distribution to each Transferee, (a) on the last
day of each Fixed Period, any deficiency between (i) Collections applied to
payment of accrued but unpaid Yield on such last day pursuant to Section
1.03(c)(i), and (ii) the amount of accrued but unpaid Yield on such last day on
the Capital of the relevant Receivables Pool, and (b) on each day on which
Collections are to be deposited into the Agent's Account pursuant to Section
1.03(b)(ii), any deficiency between (i) the amount of Collections so deposited
on such day allocable to payment of accrued but unpaid Yield on the Capital
associated with the relevant Fixed Period and (ii) the amount of accrued but
unpaid Yield on such Capital on such day.
SECTION 3.03. Repurchase of Ineligible and Certain Other Receivables.
------------------------------------------------------
(a) The Transferor shall, upon not less than two Business Days' notice from the
Agent, repurchase (at the repurchase price specified in Section 3.03(b) below)
on the next succeeding Settlement Date:
(i) any Receivable that was not an Eligible Receivable at the time
of the related Transfer or that thereafter ceases to be an Eligible
Receivable; and
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(ii) any Receivable as to which the Agent (for the benefit of the
Transferees) does not have a first priority perfected interest free and
clear of any Adverse Claim.
(b) Each repurchase of a Receivable under Section 3.03(a) above shall
include the repurchase of all other Receivables relating to the same Contract.
The repurchase price shall be an amount equal to the Outstanding Balance of the
related Contract plus accrued but unpaid Yield thereon to the date of
repurchase. The proceeds of any such repurchase shall be deemed to be a
Collection in respect of such Receivables received during the Settlement Period
preceding such Settlement Date and the amount of each such Collection shall be
applied as provided in Section 1.03.
ARTICLE IV
ADMINISTRATION AND COLLECTION
OF RECEIVABLES
SECTION 4.01. Designation of Collection Agent. The servicing,
-------------------------------
administration and collection of the Receivables shall be conducted by the
Collection Agent so designated hereunder from time to time. Until the Agent
gives notice to the Transferor of the designation of a new Collection Agent, the
Originator is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms hereof. The Agent at
any time may designate as Collection Agent any Person (including itself) to
succeed the Originator or any successor Collection Agent, if such Person shall
consent and agree to the terms hereof. The Collection Agent may, with the prior
consent of the Agent, subcontract with any other Person for the servicing,
administration or collection of the Receivables. Any such subcontract shall not
affect the Collection Agent's liability for performance of its duties and
obligations pursuant to the terms hereof.
SECTION 4.02. Duties of Collection Agent. (a) The Collection Agent
--------------------------
shall take or cause to be taken all such actions as may be necessary or
19
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advisable to collect each Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy. The Transferor and the
Agent hereby appoint the Collection Agent, from time to time designated pursuant
to Section 4.01, as agent for themselves and for the Transferees to enforce
their respective rights and interests in the Receivables, the Related Security
and the related Contracts. In performing its duties as Collection Agent, the
Collection Agent shall exercise the same care and apply the same policies as it
would exercise and apply if it owned such Receivables and shall act in the best
interests of the Transferor and the Transferees.
(b) The Collection Agent shall administer the Collections in accordance
with the procedures described in Section 1.03.
(c) If no Special Event shall have occurred and be continuing, the
Originator, while it is the Collection Agent, may, in accordance with the Credit
and Collection Policy, extend the maturity or adjust the Outstanding Balance of
any Receivable as the Originator deems appropriate to maximize Collections
thereof.
(d) The Collection Agent shall hold in trust for the Transferor and each
Transferee, in accordance with their respective interests, all documents,
instruments and records (including, without limitation, computer tapes or disks)
which evidence or relate to Receivables.
(e) The Collection Agent shall, as soon as practicable following receipt,
turn over to the Transferor any cash collections or other cash proceeds received
with respect to receivables not transferred to the Transferees pursuant to the
Agreement constituting Receivables.
(f) The Collection Agent shall, from time to time at the request of the
Agent, furnish to the Agent (promptly after any such request) a calculation of
the amounts set aside for the Agent and the Transferees pursuant to Section
1.03.
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(g) Prior to the 15th calendar day of each month, the Collection Agent
shall prepare and forward to the Agent a Transferor Report relating to the
Receivables outstanding on the last day of the immediately preceding month.
SECTION 4.03. Certain Rights of the Agent.
---------------------------
Following the occurrence of a Special Event,
(a) The Agent may direct the Obligors that all payments thereunder be
made directly to the Agent or its designee.
(b) At the Agent's request and at the Transferor's expense, the
Transferor shall notify each Obligor of the interest of the Agent in the
Receivables under this Agreement and direct that payments be made directly
to the Agent or its designee.
(c) At the Agent's request and at the Transferor's expense, the
Transferor and the Collection Agent shall (A) assemble all of the
documents, instruments and other records (including, without limitation,
computer tapes and disks) that evidence or relate to the Receivables and
the Related Contracts and Related Security, or that are otherwise necessary
or desirable to collect the Receivables, and shall make the same available
to the Agent at a place selected by the Agent or its designee, and (B)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections in a manner acceptable to the Agent and,
promptly upon receipt, remit all such cash, checks and instruments, duly
indorsed or with duly executed instruments of transfer, to the Agent or its
designee.
(d) The Transferor authorizes the Agent to take any and all steps in
the Transferor's name and on behalf of the Transferor that are necessary or
desirable, in the determination of the Agent, to collect amounts due under
the Receivables, including, without limitation, endorsing the Transferor's
name on checks and other
21
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instruments representing Collections and enforcing the Receivables and the
Related Security and related Contracts.
SECTION 4.04. Rights and Remedies. (a) If the Collection Agent fails to
-------------------
perform any of its obligations under this Agreement, the Agent may (but shall
not be required to) itself perform, or cause performance of, such obligation;
and the Agent's costs and expenses incurred in connection therewith shall be
payable by the Transferor (if the Collection Agent that fails to so perform is
the Transferor or its designee).
(b) The Transferor and the Originator shall perform their respective
obligations under the Related Contracts to the same extent as if the Receivables
had not been transferred and the exercise by the Agent on behalf of the
Transferees of their rights under this Agreement shall not release the
Collection Agent or the Transferor from any of their duties or obligations with
respect to any Receivables or Related Contracts. Neither the Agent nor the
Transferees shall have any obligation or liability with respect to any
Receivables or Related Contracts, nor shall any of them be obligated to perform
the obligations of the Transferor thereunder.
(c) In the event of any conflict between the provisions of Article V of
this Agreement and Article VI of the Transfer Agreement, the provisions of this
Agreement shall control.
SECTION 4.05. Further Actions Evidencing Transfers. The Originator agrees
------------------------------------
from time to time, at its expense, to promptly execute and deliver all further
instruments and documents, and to take all further actions, that may be
reasonably necessary or desirable, or that the Agent may reasonably request, to
perfect, protect or more fully evidence the Receivables transferred hereunder,
or to enable the Transferees or the Agent to exercise and enforce their
respective rights and remedies hereunder. Without limiting the foregoing, the
Originator will upon the request of the Agent (i) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments and documents, that may be reasonably necessary or desirable, or
that the Agent may reasonably request, to perfect, protect or evidence such
Receivable Interests;
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(ii) mark conspicuously each invoice evidencing each Receivable and the Related
Contract with a legend, acceptable to the Agent, evidencing that such
Receivables have been transferred; and (iii) mark its master data processing
records evidencing such Receivables and the Related Contracts with such a
legend.
SECTION 4.06. Covenants of the Collection Agent and the Originator. (a)
----------------------------------------------------
Audits. The Collection Agent will, from time to time during regular business
- ------
hours as requested by the Agent, permit the Agent, or its agents or
representatives (including independent public accountants, which may be the
Collection Agent's independent public accountants), (i) to conduct periodic
audits of the Receivables, the Related Security and the related books and
records and collections systems of the Collection Agent, (ii) to examine and
make copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Collection Agent relating to Receivables and the Related
Security, including, without limitation, the Contracts, and (iii) to visit the
offices and properties of the Collection Agent for the purpose of examining such
materials described in clause (ii) above, and to discuss matters relating to
Receivables and the Related Security or the Collection Agent's performance
hereunder with any of the officers or employees of the Collection Agent having
knowledge of such matters.
(b) Change in Credit and Collection Policy. The Originator will not make
--------------------------------------
any change in the Credit and Collection Policy that would impair the
collectibility of any Receivable or the ability of the Originator (if it is
acting as Collection Agent) to perform its obligations under this Agreement.
SECTION 4.07. Indemnities by the Collection Agent. Without limiting any
-----------------------------------
other rights that the Agent, any Transferee or any of their respective
Affiliates (each, a "Special Indemnified Party") may have hereunder or under
-------------------------
applicable law, and in consideration of its appointment as Collection Agent, the
Collection Agent hereby agrees to indemnify each Special Indemnified Party from
and against any and all claims, losses and liabilities (including reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Special Indemnified Amounts") arising out of or resulting from any of the
- ----------------------------
following (excluding, however, (a) Special Indemnified Amounts to the extent
resulting
23
<PAGE>
from gross negligence or willful misconduct on the part of such Special
Indemnified Party, (b) recourse for uncollectible Receivables or (c) any income
taxes or any other tax or fee measured by income incurred by such Special
Indemnified Party arising out of or as a result of this Agreement or the
ownership of interests in the Receivables or in respect of any Receivable or any
Contract):
(i) any representation or warranty or statement made or deemed made
by the Collection Agent under or in connection with this Agreement which
shall have been incorrect in any material respect when made;
(ii) the failure by the Collection Agent to comply with any
applicable law, rule or regulation with respect to any Receivable or
Contract; or the failure of any Receivable or Contract to conform to any
such applicable law, rule or regulation;
(iii) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pools, the
Contracts and the Related Security and Collections in respect thereof,
whether at the time of any purchase or reinvestment or at any subsequent
time;
(iv) any failure of the Collection Agent to perform its duties or
obligations in accordance with the provisions of this Agreement;
(v) the commingling of Collections at any time by the Collection
Agent with other funds;
(vi) any action or omission by the Collection Agent reducing or
impairing the rights of the Transferees with respect to any Receivable or
the value of any Receivable;
24
<PAGE>
(vii) any Collection Agent Fees or other costs and expenses payable to
any replacement Collection Agent, to the extent in excess of the Collection
Agent Fees payable to the Collection Agent hereunder; or
(viii) any claim brought by any Person other than a Special Indemnified
Party arising from any activity by the Collection Agent or its Affiliates
in servicing, administering or collecting any Receivable.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement and no consent to any departure by the Transferor
therefrom shall be effective unless in a writing signed by the Agent, as agent
for the Transferees and, in the case of any amendment, also signed by the
Transferor, and then such amendment, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
failure on the part of any Transferee or the Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
SECTION 5.02. Notices, Etc. All notices, demands and other
------------
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (which shall include electronic transmission), shall be personally
delivered, express couriered, electronically transmitted (in which case a hard
copy shall also be sent by regular mail) or mailed by registered or certified
mail and shall, unless otherwise expressly provided herein, be effective when
received at the address specified below for the listed parties or at such other
address as shall be specified in a written notice furnished to the other parties
hereunder.
25
<PAGE>
If to the Transferor:
IKON FUNDING INC.
501 Silverside Road, Suite 28,
Wilmington, Delaware 19809
Attention: Robert McLain
If to the Originator or Collection Agent:
IKON CAPITAL INC.
1738 Bass Road
Macon, Georgia 31210
Attention: Harry G. Kozee
Tel. No.: (912) 471-2306
Facsimile No.: (912) 471-2376
with a copy to:
ALCO STANDARD CORPORATION
925 Duportail Road
Wayne, Pennsylvania 19087
Attention: Jack Quinn
Tel. No.: (610) 296-8000
Facsimile: (610) 296-3248
26
<PAGE>
If to the Agent:
ROYAL BANK OF CANADA
One Financial Square (corner of Front Street
and Old Slip)
23rd Floor
New York, NY 10005-3531
Attention: Managing Director,
North American Securitization Group
Tel. No.: (212) 428-6474
Facsimile No.: (212) 428-2304
If to the Issuer:
OLD LINE FUNDING CORP.
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Andrew L. Stidd
Vice President
Tel. No.: (212) 346-9000
Facsimile No.: (212) 346-9012
SECTION 5.03. Assignability. (a) This Agreement and each
-------------
Transferee's rights and obligations herein (including rights in the Receivables)
shall be assignable by each Transferee and its successors and assigns. Each
assignor of Receivables or any interest therein shall notify the Agent and the
Transferor of any such assignment. Each assignor of Receivables may, in
connection with the assignment or participation, disclose to the assignee or
participant any information, relating to the Transferor or the Receivables,
which was furnished to such assignor by or on behalf of the Transferor or by the
Agent; provided that, prior to any such disclosure, the assignee or participant
agrees to preserve the confidentiality of any confidential information relating
to the Transferor received by it from any of the foregoing entities.
27
<PAGE>
(b) This Agreement and the rights and obligations of the Agent herein shall
be assignable by the Agent and its successors and assigns; provided that any
--------
costs incurred by the Agent in connection with such assignment shall be for the
account of the Agent.
(c) The Transferor may not assign its rights or obligations hereunder or
any interest herein without the prior written consent of the Agent, which
consent will not be unreasonably withheld.
(d) Without limiting any other rights that may be available under
applicable law, the rights of the Transferees may be enforced through them or by
their agents.
SECTION 5.04. Costs, Expenses and Taxes. (a) In addition to the
-------------------------
rights of indemnification granted under Section 3.01 hereof, the Transferor
agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
of Receivables) of this Agreement, any transfer agreement or similar agreement
relating to the transfer of interests in Receivables and the other documents and
agreements to be delivered hereunder and thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent, the Issuer and their respective Affiliates and agents with respect
thereto and with respect to advising the Agent, the Issuer and their respective
Affiliates and agents as to their rights and remedies under this Agreement and
all costs and expenses, if any (including reasonable counsel fees and expenses)
of the Agent, the Transferees and their respective Affiliates and agents, in
connection with the enforcement of this Agreement, and the other documents and
agreements to be delivered hereunder.
(b) The Transferor shall pay any and all stamp and other taxes and fees
payable in connection with the execution, delivery, filing and recording of this
Agreement or the other documents or agreements to be delivered hereunder. The
Transferor agrees to save each Indemnified Party harmless from and against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees, any and all stamp and other taxes and fees payable in
28
<PAGE>
connection with the execution, delivery, filing and recording of this Agreement
or the other documents or agreements to be delivered hereunder. The Transferor
agrees to save each Indemnified Party harmless from and against any liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.
SECTION 5.05. No Proceedings. Each of the Originator, the
--------------
Transferor, the Agent, each Transferee, each assignee of a Receivable or any
interest therein and each entity which enters into a commitment to acquire
Receivables or interests therein hereby agrees that it will not institute
against, or join any other person in instituting against, the Issuer any
proceeding of the type referred to in paragraph (i) of Exhibit V so long as any
commercial paper issued by the Issuer shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any such
commercial paper shall have been outstanding.
SECTION 5.06. Confidentiality. Unless otherwise required by
---------------
applicable law, the Transferor agrees to maintain the confidentiality of this
Agreement (and all drafts thereof) in communications with third parties and
otherwise; provided, that this Agreement may be disclosed to (a) third parties
--------
to the extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to the Agent, and
(b) the Transferor's legal counsel and auditors if they agree to hold it
confidential.
SECTION 5.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT
THAT THE PERFECTION OF THE INTERESTS OF THE TRANSFEREES IN THE RECEIVABLES OR
REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
29
<PAGE>
SECTION 5.08. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 5.09. Termination. (a) Except as provided in subsection (b)
-----------
below, this Agreement shall terminate on the date on which each Transferee
receives an amount equal to its pro rata portion of the Capital plus accrued
Yield thereon plus all other amounts due to it under this Agreement and the
Agent receives all amounts due to it under this Agreement (the "Termination
-----------
Date"). Upon such termination, the Agent will, at the Transferor's cost and
expense, take such actions as are reasonably requested to terminate this
Agreement and the Transfer contemplated thereby (including, without limitation,
executing UCC termination statements).
(b) The provisions of Sections 1.06, 1.08, 1.09, 1.10, 1.11, 3.01, 4.07,
5.04, 5.05 and 5.06 shall survive any termination of this Agreement.
SECTION 5.10. Tax Treatment. It is the intention of the Transferor
-------------
and the Agent that for federal, state and local income and franchise tax
purposes, the Capital will be treated as evidence of indebtedness of the
Transferor secured by the Receivables, the Related Security and Collections and
other proceeds thereof. The Transferor, the Agent and the Issuer, by entering
into this Agreement, intend to treat the Capital as indebtedness.
The provisions of this Agreement and all related Transaction Documents
shall be construed to further such intentions of the parties hereto.
30
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
TRANSFEROR: IKON FUNDING INC.
By: /s/ Robert K. McLain
-------------------------------
Name: Robert K. McLain
Title: President
ORIGINATOR AND IKON CAPITAL INC.
COLLECTION AGENT:
By: /s/ Robert M. Kearns II
-------------------------------
Name: Robert M. Kearns II
Title: Vice President
ISSUER: OLD LINE FUNDING CORP.
By: Royal Bank of Canada,
as Attorney in Fact
By: /s/ Lynne M. Lowen
--------------------------------
Name: Lynne M. Lowen
Title: Senior Manager
By: [SIGNATURE APPEARS HERE]
--------------------------------
Name:
Title:
31
<PAGE>
AGENT: ROYAL BANK OF CANADA
By: /s/ Lynne M. Lowen
--------------------------------
Name: Lynne M. Lowen
Title: Senior Manager
By: [SIGNATURE APPEARS HERE]
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits), the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest or other charge or
-------------
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly or
---------
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person.
"Agent's Account" means the special account (account number 04-872-850; ABA
---------------
number 021001033) of the Agent in the name of Old Line Funding Corporation
maintained at the office of Bankers Trust Company at Four Albany Street, New
York, New York for the benefit of the Transferees.
"Aggregate Adjusted Outstanding Balance" means, with respect to any
--------------------------------------
Receivables to be transferred pursuant to Section 1.02, the aggregate
Outstanding Balance of the Contracts related to such Receivables less the
Discount with respect to such Receivables.
"Alternate Base Rate" means a fluctuating interest rate per annum as shall
-------------------
be in effect from time to time, which rate shall be at all times equal to the
highest of:
(a) the rate of interest announced publicly by Royal Bank of Canada
in New York, New York, from time to time as its base commercial lending
rate;
I-1
<PAGE>
(b) 1/2 of one percent above the latest three-week moving average of
secondary market morning offering rates in the United States for three-
month certificates of deposit of major United States money market banks,
such three-week moving average being determined weekly on each Monday (or,
if such day is not a Business Day, on the next succeeding Business Day) for
the three-week period ending on the previous Friday by Royal Bank of Canada
on the basis of such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of quotations
for such rates received by Royal Bank of Canada from three New York
certificate of deposit dealers of recognized standing selected by Royal
Bank of Canada, in either case adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of
one percent; and
(c) the Federal Funds Rate.
"Applicable Percentage" means, with respect to the Consideration payable
---------------------
with respect to Receivables, a percentage equal to the product of (a) four, (b)
the weighted average life of such Receivables expressed in years and fractions
thereof and as reported in the most recent Transferor Report and (c) the product
of (i) average of the Default Ratios for the twelve months preceding the related
Transfer Date and (ii) 12.
"Assignee Rate" for any Fixed Period for any Receivables Pool means an
-------------
interest rate per annum equal to 1 1/2% per annum above the Eurodollar Rate for
such Fixed Period; provided, however, that in the case of
-------- -------
(i) any Fixed Period on or prior to the first day of which any Transferee
shall have notified the Agent that the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Transferee to fund the Transfer or the maintenance of its interest in such
Receivables Pool at the Assignee Rate set forth above
I-2
<PAGE>
(and such Transferee shall not have subsequently notified the Agent that such
circumstances no longer exist),
(ii) any Fixed Period of one to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive notice,
by no later than 12:00 noon (New York City time) on the third Business Day
preceding the first day of such Fixed Period that the associated Receivables
Pool will not be funded by issuance of commercial paper, or
(iv) any Fixed Period for which any Transferee's interest in the Capital
allocated thereto is less than $250,000,
the "Assignee Rate" for each such Fixed Period shall be an interest rate per
-------------
annum equal to 1 1/2% per annum above the Alternate Base Rate in effect on the
first day of such Fixed Period.
"Business Day" means any day on which (i) banks are not authorized or
------------
required to close in New York City and (ii) if this definition of "Business Day"
is utilized in connection with the Eurodollar Rate, dealings are carried out on
the London interbank market.
"Capital" means the aggregate Consideration for all Transfers that have
-------
occurred on or prior to such date, reduced from time to time by Collections
distributed on account of Receivables and applied to reduce Capital pursuant to
Section 1.03(c)(iii) of the Agreement; provided, that if such Capital shall have
--------
been reduced by any distribution and thereafter all or a portion of such
distribution is rescinded or must otherwise be returned for any reason, such
Capital shall be increased by the amount of such rescinded or returned
distribution, as though it had not been made.
"Collection Agent" means at any time the Person then authorized pursuant to
----------------
Section 4.01 of the Agreement to administer and collect Receivables.
I-3
<PAGE>
"Collection Agent Fee" has the meaning specified in Section 1.04(c) of the
--------------------
Agreement.
"Collections" means, with respect to any Receivable, (i) all cash
-----------
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable (including, without limitation, payments under the related Contract
due upon or in connection with (a) Obligor's default under the Contract, (b)
loss, theft or damage to the related Equipment, or (c) renewal of the Contract),
provided, that Collections shall not include collections which represent the
- --------
payment of (x) maintenance charges or (y) insurance premiums, and (ii) any
Collection of such Receivable deemed to have been received pursuant to the
Agreement.
"Consideration" has the meaning set forth in Section 1.02(a) of the
-------------
Agreement.
"Contract" means a closed-end lease agreement between the Originator and an
--------
Obligor having an original lease/loan term not exceeding 60 months, in
substantially the form of one of the forms of written contract set forth in
Annex A hereto or otherwise approved by the Agent, which has been sold to
Transferor pursuant to the Transfer Agreement, pursuant to or under which such
Obligor shall be obligated to pay for the lease of Equipment.
"Credit and Collection Policy" means those receivables collection policies
----------------------------
and practices of the Originator in effect on the date of the Agreement and
described in Schedule I hereto, as modified in compliance with the Agreement.
"Dealer" means each of the Persons set forth on Exhibit VI hereto, as such
------
Exhibit may be amended from time to time by the Transferor with the consent of
the Agent.
"Debt" means (i) indebtedness for borrowed money, (ii) obligations
----
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
I-4
<PAGE>
accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default Ratio" means the ratio (expressed as a percentage) computed as of
-------------
the last day of each calendar month by dividing (i) the aggregate Outstanding
Balance of all Related Contracts having one or more Receivables that were
Defaulted Receivables on such day or that would have been Defaulted Receivables
on such day had they not been written off the books of the Transferor during
such month by (ii) the aggregate Outstanding Balance of all Related Contracts on
such day.
"Defaulted Receivable" means a Receivable:
--------------------
(i) as to which any payment, or part thereof, remains unpaid for 120
or more days from the original due date for such payment;
(ii) as to which the Obligor thereof or any other Person obligated
thereon or owning any Related Security in respect thereof has taken any
action, or suffered any event to occur, of the type described in paragraph
(i) of Exhibit V; or
(iii) which, consistent with the Credit and Collection Policy,
would be retransferred to the related Dealer as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage) computed as
-----------------
of the last day of each calendar month by dividing (i) the aggregate amount of
all Receivables that were Delinquent Receivables on such day by (ii) the
aggregate Outstanding Balance of all Related Contracts on such day.
I-5
<PAGE>
"Delinquent Receivable" means a Receivable that is not a Defaulted
---------------------
Receivable and:
(i) as to which any payment, or part thereof, remains unpaid for 30 or
more days from the original due date for such payment; or
(ii) which, consistent with the Credit and Collection Policy, would be
classified as delinquent by the Originator or the Transferor.
"Designated Account" means an account in the name of and owned by the
------------------
Agent, designated by the Agent in a writing delivered to the Transferor, for the
purpose of receiving Collections of Receivables.
"Designated States" means the states set forth on Exhibit VIII hereto, as
-----------------
such Exhibit may be amended from time to time by the Transferor with the consent
of the Agent.
"Discount" means, with respect to any group of Receivables, the product of
--------
(a) the aggregate Outstanding Balance of the Related Contracts relating to such
Receivables and (b) the Applicable Percentage in respect of such Receivables.
"Eligible Receivable" means, at the relevant time of determination, a
-------------------
Receivable:
(i) the Obligor of which is a United States resident, is not an
Affiliate of any of the parties hereto, and is not the federal government,
the government of a Designated State or a governmental subdivision or
agency of the federal government or the government of a Designated State;
(ii) the Obligor of which has not been disapproved by the Agent on or
prior to the date of the Transfer and which, at the time of the Transfer,
is not the Obligor of any Defaulted Receivables;
I-6
<PAGE>
(iii) which at the time of the Transfer is not a Defaulted
Receivable;
(iv) (a) which arises under a Contract with a remaining term of not
more than 60 months and (b) which, according to such Contract, consists of
substantially equal monthly Periodic Payments which are required to be paid
within 30 days of the billing date therefor;
(v) which arose pursuant to a Contract which is "chattel paper"
within the meaning of Section 9-105 of the UCC of the applicable
jurisdictions governing the perfection of the interest created in the
Receivables;
(vi) which is denominated and payable in United States dollars in the
United States;
(vii) which arises under a Contract (a) which has been duly authorized
and which, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms
and is not subject to any dispute, offset, counterclaim or defense
whatsoever (except as limited by applicable bankruptcy law), (b) in respect
of which, prior to the date it is transferred hereunder, the Equipment has
been delivered and accepted and (c) which pursuant to its terms is not
cancellable by the lessee before the end of its stated term;
(viii) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth in lending,
consumer leasing, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect
to which none of the Transferor, the Originator or the
I-7
<PAGE>
related Obligor is in violation of any such law, rule or regulation in any
material respect;
(ix) with regard to which there exists only one executed original
Contract, which is in the possession of Transferor on the Transfer Date of
such Receivable;
(x) which represents payments due to the Originator and does not
represent any payments payable for the account of any Person other than the
Originator under the Contract relating to such Receivable or any sales or
use tax payable under such Contact;
(xi) which satisfies all applicable requirements of the Credit and
Collection Policy;
(xii) which, after giving effect to the acquisition thereof, would not
result in the aggregate Outstanding Balance of Related Contracts of any
single Obligor exceeding 2% of the aggregate Outstanding Balance of all
Related Contracts;
(xiii) as to which, at or prior to the time of the Transfer, the
Agent has not notified the Transferor that such Receivable (or class of
Receivables) is not acceptable for transfer to the Issuer hereunder;
(xiv) the transfer or assignment of which does not contravene any
applicable law, rule or regulation; and
(xv) which was originated by a Dealer.
"Equipment" with respect to any Receivable means office, business or other
---------
equipment leased or sold to an Obligor by the Originator pursuant to a Contract
(including any modifications or substitutions of equipment pursuant to the
original Contract giving rise to such Receivable).
I-8
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Fixed Period for any Receivables Pool, an
---------------
interest rate per annum (expressed as a decimal and rounded upwards, if
necessary, to the nearest one hundredth of a percentage point) equal to the
offered rate per annum for deposits in U.S. dollars in a principal amount of not
less than $1,000,000 for such Fixed Period as of 11:00 A.M., London time, two
Business Days before the first day of such Fixed Period, which appears on the
display designated as "Page 3750" on the Telerate Service (or such other page as
may replace "Page 3750" on that service for the purpose of displaying London
interbank offered rates of major banks) (the "Telerate LIBO Page"); provided
------------------
that if on any Business Day on which the Eurodollar Rate is to be determined, no
offered rate appears on the Telerate LIBO Page, the Agent will request the
principal London office of Royal Bank of Canada (the "Eurodollar Reference
--------------------
Bank"), to provide the Agent with its quotation at approximately 11:00 A.M.,
London time, on such date of the rate per annum it offers to prime banks in the
London interbank market for deposits in U.S. dollars for the requested Fixed
Period in an amount substantially equal to the Capital associated with such
Fixed Period if the Eurodollar Reference Bank does not furnish timely
information to the Agent for determining the Eurodollar Rate, then the
Eurodollar Rate shall be considered to be the Alternate Base Rate for such Fixed
Period.
"Eurodollar Rate Reserve Percentage" of any Transferee for any Fixed Period
----------------------------------
in respect of which Yield is computed by reference to the Eurodollar Rate means
the reserve percentage applicable two Business Days before the first day of such
Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such
I-9
<PAGE>
percentage shall be so applicable) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Transferee with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Liabilities is determined) having a term equal
to such Fixed Period.
"Facility Termination Date" means the earlier of the Scheduled Termination
-------------------------
Date, or the Termination Date.
"Federal Funds Rate" means, with respect to any day, the rate set forth in
------------------
H.15(519) for that day opposite the caption "Federal Funds (Effective)."
If on any date of determination, such rate is not published in H.15(519),
such rate will be the rate set forth in Composite 3:30 P.M. Quotations for U.S.
Government Securities for that day under the caption "Federal Funds/Effective
Rate". If on any date of determination, the appropriate rate is not published
in either H.15(519) or Composite 3:30 P.M. Quotations for U.S. Government
Securities, such rate will be the arithmetic mean of the rates for the last
transaction in overnight federal funds arranged by three leading brokers of
federal funds transactions in New York City prior to 9:00 a.m., New York City
time, on that day.
"Fixed Period" means for any Receivables Pool:
------------
(a) initially the period commencing on the date of the Transfer of such
Receivables Pool and ending such number of days as the Transferor shall
select and the Agent shall approve, up to 270 days from such date; and
(b) thereafter each period commencing on the last day of the
immediately preceding Fixed Period for such Receivables Pool and ending
such number of days (not to exceed 270 days) as the Transferor shall select
and the Agent shall approve on notice by the
I-10
<PAGE>
Transferor selecting the Yield Rate and received by the Agent (including
notice by telephone, confirmed in writing) not later than 11:00 A.M. (New
York City time) on such last day, except that if the Agent shall not have
------
received such notice or approved such period on or before 11:00 A.M. (New
York City time) on such last day, such period shall be one day;
provided that
- --------
(i) any Fixed Period in respect of which Yield is computed by
reference to the Transferee Rate shall be a period from one to and
including 270 days, as the Transferor shall select and the Agent shall
approve on notice received by the Agent (including notice by telephone,
confirmed in writing) not later than 11:00 A.M. (New York City time) on the
last day of the immediately preceding Fixed Period;
(ii) any Fixed Period in respect of which Yield is computed by
reference to the Assignee Rate shall be a period from one to and including
29 days, or a period of one, two, three or six months, as the Transferor
shall select and the Agent shall approve on notice received by the Agent
(including notice by telephone, confirmed in writing) not later than 11:00
A.M. on (a) the third Business Day before the first day of such Fixed
Period (in the case of Fixed Periods of one, two, three or six months) or
(b) the first day of such Fixed Period (in the case of Fixed Periods of one
to 29 days);
(iii) any Fixed Period (other than one day) which would otherwise end
on a day which is not a Business Day shall be extended to the next
succeeding Business Day (provided, however, that if Yield in respect of
-------- -------
such Fixed Period is calculated by reference to the Eurodollar Rate, and
such Fixed Period would otherwise end on a day which is not a Business Day,
and there is no subsequent Business Day in the same calendar month as such
day, such Fixed Period shall end on the next preceding Business Day);
I-11
<PAGE>
(iv) in the case of any Fixed Period of one day, (a) if such Fixed
Period is the initial Fixed Period, such Fixed Period shall be the date of
the Transfer; (b) if the immediately preceding Fixed Period is more than
one day, such Fixed Period shall be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding Fixed Period is
one day, such Fixed Period shall be the day next following such immediately
preceding Fixed Period, or (c) if such Fixed Period occurs on a day
immediately preceding a day which is not a Business Day, such Fixed Period
shall be extended to the next succeeding Business Day; and
(v) in the case of any Fixed Period for any Receivables Pool which
commences before the Fixed Period Termination Date and would otherwise end
after the Fixed Period Termination Date, such Fixed Period shall end on the
Fixed Period Termination Date; provided, however, that the duration of each
-------- -------
Fixed Period which commences on or after the Fixed Period Termination Date
shall be of such duration as shall be selected by the Agent.
"Fixed Period Termination Date" means the earlier of the day specified
-----------------------------
pursuant to Section 2.02 of the Agreement and the Termination Date.
"IKON Group" means, collectively, the Transferor, the Originator and the
----------
Parent.
"Indemnified Amounts" has the meaning specified in Section 3.01 of the
-------------------
Agreement.
"Indemnified Party" has the meaning specified in Section 3.01 of the
-----------------
Agreement.
"Investment Grade" means, with respect to any entity's long-term public
----------------
senior debt securities, a rating of at least BBB- by Standard & Poor's Ratings
Group and, if rated by Fitch Investors Service, L.P., a rating of at least BBB-;
provided, that if such entity's long-term public senior debt securities are
- --------
I-12
<PAGE>
rated by more than one of the rating agencies set forth above, then each rating
agency which rates such securities shall have given them a rating at least equal
to the categories specified above.
"Issuer" means Old Line Funding Corp. and any successor or assign of the
------
Issuer that is a receivables investment company which in the ordinary course of
its business issues commercial paper or other securities to fund its acquisition
and maintenance of receivables.
"Obligor" means a Person obligated to make payments pursuant to a Contract;
-------
provided that in the event that any payments in respect of a Contract are made
- --------
by any other Person, such other Person shall be deemed to be an Obligor.
"Other Corporations" means the Parent, the Originator and all of its
------------------
Subsidiaries except the Transferor.
"Originator" means IKON Capital Inc., a Delaware corporation, in its
----------
capacity as originator under the Transfer Agreement.
"Outstanding Balance" of any Contract at any date means the net present
-------------------
value of the total Periodic Payments due to Transferor over the remaining term
of the Contract (net of any security deposits or advance rental payments
received by Transferor) and not yet paid by the Collection Agent pursuant to the
provisions of Section 1.03(b) determined by discounting on a monthly basis each
such Periodic Payment from the Settlement Date immediately following the
calendar month in which such Periodic Payment is due to the Settlement Date as
of which such present value calculation is made at a rate equal to the implied
interest rate used by the Originator or the applicable Dealer in originating
such Contract (assuming a calendar year consisting of twelve 30-day months).
"Parent" means Alco Standard Corporation, an Ohio corporation.
------
"Periodic Payments" means the aggregate base rental amounts coming due on a
-----------------
monthly basis pursuant to the Contracts giving rise to
I-13
<PAGE>
Receivables, excluding any maintenance charges or, with respect to Contracts
covering photocopiers, any per copy charges.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Receivable" means the obligations of any Obligor under a Related Contract,
----------
and includes monies received subsequent to the related Transfer Date with
respect to (i) all Periodic Payments, (ii) any amounts payable by the Obligor
under such Contract upon exercise of purchase options included in such Contract
or upon other disposition of the related Equipment and (iii) all obligations of
such Obligor to pay interest or finance charges and other obligations of such
Obligor (other than obligations in respect of taxes or insurance or similar
escrow arrangements of any kind) with respect thereto, and all other payments
(other than in respect of taxes or insurance or similar escrow arrangements of
any kind) received by the Transferor in respect of such Equipment pursuant to
such Contract. Each Periodic Payment with respect to each Related Contract
shall constitute a separate Receivable except as otherwise stated. A Receivable
arising under a Related Contract for which the Outstanding Balance has been
collected shall no longer constitute a "Receivable" outstanding hereunder.
"Receivables Pool" has the meaning set forth in Section 1.03(f), provided,
---------------- --------
that prior to the allocation of Receivables to Receivables Pools referred to
therein, all of the Receivables shall be deemed to constitute a single
Receivables Pool.
"Related Contract" means a Contract included in the List of Contracts
----------------
delivered to the Agent pursuant to paragraph (j) of Exhibit IV hereof; provided,
--------
that after the Outstanding Balance of such Contract has been collected, it shall
no longer constitute a "Related Contract" hereunder.
"Related Security" means with respect to any Receivable:
----------------
I-14
<PAGE>
(i) all other security interests or liens and property subject
thereto (other than Equipment) from time to time purporting to secure
payment of such Receivable, whether pursuant to the Contract related to
such Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(ii) all guaranties (other than the Support Agreement), insurance and
other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable (or insuring for loss or
liability with respect to the related Equipment), whether pursuant to the
Contract related to such Receivable or otherwise and all of the
Transferor's rights (if any) to recourse, repurchase or indemnity against
any dealer or other Person from which the Transferor purchased the Contract
related to such Receivable; and
(iii) the related Contract and all other books, records and other
information (including, without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and
rights) relating to such Receivable and the related Obligor.
"Required Balance" means, with respect to any Settlement Date, an amount
----------------
equal to the product of (a) the Capital on such Settlement Date and (b) one plus
the Applicable Percentage.
"Scheduled Termination Date" shall mean September 30, 1997; provided that
-------------------------- --------
unless the Agent notifies the Transferor in writing not less than 30 days prior
to the then-current Scheduled Termination Date, the Scheduled Termination Date
shall be automatically extended to the date that is 364 days following such
Scheduled Termination Date.
"Settlement Date" means, for each Receivables Pool, the fifteenth calendar
---------------
day of each month, commencing October 15, 1996; provided, that if
--------
I-15
<PAGE>
such fifteenth day of any calendar month shall not be a Business Day, then the
Settlement Date shall be the next succeeding Business Day; and provided,
--------
further, that on and after the Fixed Period Termination Date, the Settlement
- -------
Date shall mean the last day of each Fixed Period.
"Settlement Period" means the period beginning on the first day of each
-----------------
calendar month and ending on the last day of such calendar month; provided, that
--------
notwithstanding the foregoing, the first Settlement Period shall begin on the
initial Transfer Date and provided, further, that in the case of any Settlement
-------- -------
Period which commences before the Fixed Period Termination Date and would
otherwise end after the Fixed Period Termination Date, such Settlement Period
shall end on the Fixed Period Termination Date, and on and after the Fixed
Period Termination Date, "Settlement Period" shall mean each Fixed Period.
"Special Event" means a Trigger Event or an event that but for notice or
-------------
lapse of time or both would constitute a Trigger Event or the Agent's deeming
itself reasonably insecure.
"Special Indemnified Amounts" has the meaning specified in Section 5.07 of
---------------------------
the Agreement.
"Special Indemnified Party" has the meaning specified in Section 5.07 of
-------------------------
the Agreement.
"Subsidiary" means any corporation of which securities 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 the
Transferor, the Originator or the Parent, as the case may be, or one or more
Subsidiaries, or by the Transferor, the Originator or the Parent, as the case
may be, and one or more Subsidiaries.
"Support Agreement" means the operating agreement dated August 15, 1994
-----------------
between the Originator and the Parent, as such agreement may be amended or
supplemented from time to time.
I-16
<PAGE>
"Termination Date" has the meaning specified in Section 5.09(a) of the
----------------
Agreement.
"Transaction Document" means any of the Agreement, the Transfer Agreement
--------------------
and all other agreements and documents delivered and/or related hereto or
thereto.
"Transfer" has the meaning specified in Section 1.01 of the Agreement.
--------
"Transfer Agreement" means the Transfer Agreement dated as of the date
------------------
hereof between the Transferor and the Originator, as such agreement may be
amended from time to time.
"Transfer Date" has the meaning specified in Section 1.02(a) of the
-------------
Agreement.
"Transfer Limit" means $150,000,000.
--------------
"Transferee" means the Issuer and all other owners by assignment or
----------
otherwise of Receivables or any interest therein and, to the extent of the
undivided interests so purchased, shall include any participants.
"Transferee Rate" means, for any Fixed Period for any Receivables Pool, to
---------------
the extent the Issuer funds such Receivable Interest for such Fixed Period by
issuing commercial paper, the rate per annum (or if more than one rate, the
weighted average of the rates) at which commercial paper notes of the Issuer,
issued to fund the acquisition or maintenance of such Receivables Pool may be
sold by any placement agent or commercial paper dealer selected by the Agent on
behalf of the Issuer as agreed between each such agent or dealer and the Agent
and notice of which has been given by the Agent to the Collection Agent, which
rate shall reflect and give effect to the commissions of placement agents and
dealers in respect of such commercial paper notes, to the extent such
commissions are allocated, in whole or in part, to such commercial paper notes
by the Agent (on behalf of the Issuer); provided, that if the rate (or rates) as
--------
I-17
<PAGE>
agreed between any such agent or dealer and the Agent is a discount rate (or
rates), then such rate shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such discount rate (or rates) to
an interest-bearing equivalent rate per annum.
"Transferor Report" means a report, in substantially the form of Annex B
-----------------
hereto, furnished by the Collection Agent to the Agent pursuant to Section 5.02
of the Agreement.
"Trigger Event" has the meaning specified in Exhibit V.
-------------
"UCC" means the Uniform Commercial Code as from time to time in effect in
---
the specified jurisdiction.
"Yield" means:
-----
(i) for any Fixed Period for any Receivables Pool to the extent the
Issuer will be funding the Transfer or the maintenance of its interest in
the Receivables during such Fixed Period through the issuance of commercial
paper,
TR x C x ED
---
360
(ii) for any Fixed Period for any Receivables Pool to the extent a
Transferee will not be funding the Transfer or the maintenance of its
interest in the Receivables during such Fixed Period through the issuance
of commercial paper,
AR x C x ED
---
360
I-18
<PAGE>
where:
AR = the Assignee Rate for such Fixed Period for such
Receivables Pool;
C = the Capital of such Receivables Pool during such
Fixed Period;
TR = the Transferee Rate for the Issuer for such Fixed
Period for such Receivables Pool;
ED = the actual number of days elapsed during such
Fixed Period;
provided, that no provision of the Agreement shall require the payment or permit
- --------
the collection of Yield in excess of the maximum permitted by applicable law;
and provided, further, that Yield shall not be considered paid by any
-------- -------
distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"Yield Rate" for any Receivables Pool for any Fixed Period means the
----------
Transferee Rate or the Assignee Rate with regard to which Yield for such
Receivables Pool for such Fixed Period is calculated.
- - - - - -
Other Terms. All accounting terms not specifically defined herein shall be
-----------
construed in accordance with generally accepted accounting principles. All terms
used in Article 9 of the UCC in the State of New York, and not specifically
defined herein, are used herein as defined in such Article 9.
I-19
<PAGE>
EXHIBIT II
CONDITIONS OF TRANSFERS
1. Conditions Precedent to the Initial Transfer. The initial Transfer is
--------------------------------------------
subject to the conditions precedent that the Agent shall have received on or
before the date of such Transfer the following, each (unless otherwise
indicated) dated such date, in form and substance satisfactory to the Agent:
(a) Certified copies of the resolutions of the Board of Directors of the
Transferor approving the Transaction Documents and all related actions, and
certified copies of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Transaction Documents
and such actions.
(b) Certified copies of the resolutions of the Board of Directors of the
Originator approving the Transaction Documents and all related actions, and
certified copies of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Transaction Documents
and such actions.
(c) A certificate of the Secretary or Assistant Secretary of the Transferor
certifying the names and true signatures of the officers of the Transferor,
authorized to sign the Transaction Documents and the other documents to be
delivered by it thereunder.
(d) A certificate of the Secretary or Assistant Secretary of the Originator
certifying the names and true signatures of the officers of the Originator
authorized to sign the Transaction Documents and the other documents to be
delivered by it thereunder.
II-1
<PAGE>
(e) A copy of the certificate or articles of incorporation of the
Transferor, and a certificate as to the good standing of the Transferor from
such Secretary of State or other official, dated as of a recent date.
(f) Acknowledgment copies or time stamped receipt copies of proper
financing statements, duly filed on or before the of the Transfer under the UCC
of all jurisdictions that the Agent may deem necessary or desirable in order to
perfect the interests contemplated by the Agreement.
(g) Acknowledgment copies or time stamped receipt copies of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the (i) Receivables, Related Contracts or Related
Security previously granted by the Transferor and the Originator and (ii) the
collateral security referred to in Section 1.13.
(h) Completed requests for information, listing the financing statements
referred to in subsection (f) above and all other effective financing statements
filed in the jurisdictions referred to in subsection (f) above that name the
Transferor as debtor, together with copies of such other financing statements
(none of which shall cover any Receivables, Related Contracts, Related Security
or the collateral security referred to in Section 1.13).
(i) A favorable opinion of Karin M. Kinney, Esq., counsel for the
Transferor and the Originator, substantially in the form of Annex C hereto and
as to such other matters as the Agent may reasonably request.
(j) The fee agreement referred to in Section 1.04, duly executed by all
parties thereto.
(k) The Transfer Agreement, duly executed by all parties thereto.
(l) Satisfactory results of a review and audit by the Agent of the
Originator's collection, operating and reporting systems, Credit and Collection
Policy, historical receivables data and accounts.
II-2
<PAGE>
Payment of the Consideration for the initial Transfer hereunder shall
constitute acknowledgment by the Agent that all of the conditions set forth have
been fulfilled or waived.
2. Additional Conditions Precedent. Each Transfer shall be subject to
-------------------------------
the further conditions precedent that
(a) on or prior to the date of such Transfer, the Collection Agent shall
have delivered to the Agent, in form and substance satisfactory to the Agent, a
completed Transferor Report dated within 30 days prior to the date of the
Transfer together with a listing by Obligor of all Receivables and such
additional information as may reasonably be requested by the Agent;
(b) on the date of the Transfer the following statements shall be true (and
acceptance of the proceeds of the Transfer shall be deemed a representation and
warranty by the Transferor that such statements are then true):
(i) The representations and warranties of the Transferor contained in
Exhibit III are correct on and as of the date of the Transfer as though made on
and as of such date;
(ii) No event has occurred and is continuing, or would result from the
Transfer, that constitutes a Special Event;
(iii) The representations and warranties of the Originator contained
in the Transaction Documents are correct on and as of the date of the Transfer
as though made on and as of such date; and
(iv) All of the Originator's long-term public senior debt securities
are rated Investment Grade;
(c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request; and
II-3
<PAGE>
(d) the Transferor shall not have received written notice from the Agent at
least one Business Day prior to the proposed Transfer Date that the Agent shall
not accept any further Transfers.
II-4
<PAGE>
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
The Transferor represents and warrants as follows:
(a) The Transferor is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware, and is duly qualified to do
business, and is in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) The execution, delivery and performance by the Transferor of the
Transaction Documents (i) are within the Transferor's corporate powers,
(ii) have been duly authorized by all necessary corporate action, (iii) do not
contravene (1) the Transferor's charter or by-laws, (2) any law, rule or
regulation applicable to the Transferor, (3) any contractual restriction binding
on or affecting the Transferor or its property or (4) any order, writ, judgment,
award, injunction or decree binding on or affecting the Transferor or its
property, and (iv) do not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
its properties; and no transaction contemplated by the Agreement requires
compliance with any bulk sales act or similar law. Each of the Transaction
Documents has been duly executed and delivered by the Transferor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Transferor of the Transaction
Documents, except for the filing of the UCC financing statements which are
referred to therein.
(d) Each of the Transaction Documents constitutes the legal, valid and
binding obligation of the Transferor enforceable against the Transferor in
accordance with its terms.
III-1
<PAGE>
(e) The balance sheets of the Originator and its Subsidiaries as at
September 30, 1995 and June 30, 1996 and the related statements of income and
retained earnings of the Originator and its Subsidiaries for the fiscal year
then ended, copies of which have been furnished to the Agent, fairly present the
financial condition of the Originator and its Subsidiaries as at such date and
the results of the operations of Originator and its Subsidiaries for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since June 30, 1996 there has been no
material adverse change in the business, operations, property or financial or
other condition of the Originator. Since the date of its incorporation, there
has not been a material adverse change in the business, operations, property or
financial or other condition of the Transferor.
(f) There is no pending or threatened action or proceeding affecting the
Originator or any of its Subsidiaries before any court, governmental agency or
arbitrator which may materially adversely affect the financial condition or
operations of the Originator or any of its Subsidiaries or the ability of the
Transferor or the Originator to perform their respective obligations under the
Transaction Documents, or which purports to affect the legality, validity or
enforceability of the Transaction Documents; neither the Originator nor any
Subsidiary is in default with respect to any order of any court, arbitration or
governmental body.
(g) No proceeds of any Transfer will be used to acquire any equity security
of a class which is registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended.
(h) The Transferor has the right to transfer each Receivable and all
Related Security together with the Contract and the Equipment related thereto,
free and clear of any Adverse Claim except, in the case of Equipment only, the
interest therein of the Obligor created pursuant to the Related Contract or the
interest of contract originators or in the residual value of the Equipment other
than the effect of the Agreement and the transactions contemplated hereby. Upon
the Transfer, the Agent (for the benefit of the Transferees) will acquire a
valid and perfected first priority interest in each Receivable and in the
Related Security
III-2
<PAGE>
(except to the extent noted above) and Collections with respect thereto. No
effective financing statement or other instrument similar in effect covering any
Related Contract or any Receivable or the Related Security or Collections with
respect thereto is on file in any recording office except for those filed in
favor of the Agent relating to the Agreement, UCC Financing Statements, if any,
filed in favor of Transferor, as secured party, which cover only Equipment,
accessories, attachments and additions thereto, and substitutions and proceeds
thereof and those filed by the Transferor pursuant to the Transfer Agreement.
(i) Each Transferor Report (if prepared by the Originator or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Transferor, the Originator or any Affiliate thereof), information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished at any time by or on behalf of the Transferor or the Originator to the
Agent or any Transferee in connection with the Agreement is or will be accurate
in all material respects as of its date or (except as otherwise disclosed to the
Agent or the Transferees, as the case may be, at such time) as of the date so
furnished, and no such document contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(j) The principal place of business and chief executive office of the
Transferor and the office where the Transferor keeps its records concerning the
Receivables are located at the respective addresses identified on Exhibit VII.
(k) The Outstanding Balance with respect to each Receivable, as of the date
of Transfer of such Receivable, is correctly set forth on Schedule II.
(l) Schedule II sets forth accurately and completely in all material
respects, as of the date of Transfer of each Receivable, the information with
respect to each such Receivable transferred on such date.
(m) Each Contract giving rise to a Receivable provides for Periodic
Payments that will fully amortize such Receivable over the term of the
III-3
<PAGE>
Contract related thereto and, except in accordance with the Credit and
Collection Policy, the Transferor has not extended or amended, modified or
waived the terms of any Receivable or any Contract relating to any Receivable.
(n) The Transferor is not known by and does not use any tradename or doing-
business-as name.
(o) The Transferor was incorporated on September 12, 1996 and the
Transferor did not engage in any business activities prior to the date of the
Agreement. The Transferor has no Subsidiaries.
(p) (i) The fair value of the property of the Transferor is greater than
the total amount of liabilities, including contingent liabilities, of the
Transferor, (ii) the present fair salable value of the assets of the Transferor
is not less than the amount that will be required to pay all probable
liabilities of the Transferor on its debts as they become absolute and matured,
(iii) the Transferor does not intend to, and does not believe that it will,
incur debts or liabilities beyond the Transferor's abilities to pay such debts
and liabilities as they mature and (iv) the Transferor is not engaged in a
business or a transaction, and is not about to engage in a business or a
transaction, for which the Transferor's property would constitute unreasonably
small capital.
(q) With respect to each Receivable, the Transferor shall have received
such Receivable from the Originator in exchange for payment (made by the
Transferor to the Originator in accordance with the provisions of the Transfer
Agreement) of cash in an amount which constitutes fair consideration and
reasonably equivalent value. Each such transfer referred to in the preceding
sentence shall not have been made for or on account of an antecedent debt owed
by the Originator to the Transferor and no such transfer is or may be voidable
or subject to avoidance under any section of the Federal Bankruptcy Code.
(r) With respect to each Receivable transferred hereunder, such Receivable
is representative of all of the Receivables owned by the Transferor.
III-4
<PAGE>
EXHIBIT IV
COVENANTS
Until the Termination Date, unless the Agent shall otherwise consent in
writing:
(a) Compliance with Laws, Etc. The Transferor will comply in all material
-------------------------
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such existence,
rights, franchises, qualifications and privileges would not materially adversely
affect the collectibility of the Receivables or the ability of the Transferor to
perform its obligations under the Transaction Documents.
(b) Offices, Records and Books of Account. The Transferor will keep its
-------------------------------------
principal place of business and chief executive office and the office where it
keeps its records concerning the Receivables (and all original documents
relating thereto) at the respective addresses set forth on Exhibit VII of the
Agreement or, upon 30 days' prior written notice to the Agent, at any other
locations in jurisdictions where all actions reasonably requested by the Agent
to protect and perfect the interest in the Receivables have been taken and
completed. The Transferor also will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables and Related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each Receivable and all Collections of and
adjustments to each Receivable).
(c) Performance and Compliance with Related Contracts and Credit and
----------------------------------------------------------------
Collection Policy. The Transferor will, at its expense, timely and
- -----------------
IV-1
<PAGE>
fully perform and comply with all material provisions, covenants and other
promises required to be observed by it under the Related Contracts, and timely
and fully comply in all material respects with the Credit and Collection Policy
in regard to each Receivable and the Related Contract.
(d) Sales, Liens, Etc. The Transferor will not sell, assign (by operation
-----------------
of law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, its interest in any Receivable
transferred to the Agent or the Transferees under the Agreement or any Related
Security, Related Contract or Collections, or assign any right to receive income
in respect thereof.
(e) Extension or Amendment of the Receivables. Except as provided in
-----------------------------------------
Article IV of the Agreement, the Transferor will not, and will not permit the
Collection Agent to, extend the maturity or adjust the Outstanding Balance or
otherwise modify the terms of any Receivable, or amend, modify or waive any term
or condition of any Related Contract.
(f) Change in Business or Credit and Collection Policy. (i) The
--------------------------------------------------
Transferor will not make any change in the character of its business, and (ii)
the Transferor will not make, and will not permit the Originator to make, any
change in the Credit and Collection Policy that would, in either case,
materially adversely affect the collectibility of the Receivables or the ability
of the Transferor or the Originator to perform their respective obligations
under the Transaction Documents.
(g) Change in Payment Instructions to Obligors. The Transferor will not
------------------------------------------
make any change in its instructions to Obligors of Related Contracts regarding
payments to be made to the Transferor unless the Agent shall have received
notice of and agreed to such addition, termination or change.
(h) Further Action Evidencing the Transfer. The Transferor will from time
--------------------------------------
to time, execute and deliver all further instruments and documents and take all
further action that the Agent may reasonably request in order to perfect,
protect or more fully evidence the interest in the Receivables transferred to
the
IV-2
<PAGE>
Agent (for the benefit of the Transferees) under the Agreement or to enable the
Agent or any Transferee to exercise or enforce any of its rights under the
Transaction Documents. Without limiting the generality of the foregoing, the
Transferor will, or will cause the Collection Agent to, (i) execute and file
such financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate; and (ii) upon the occurrence of a Special Event, (x) mark
conspicuously each Related Contract with a legend, acceptable to the Agent,
evidencing that an interest in the Receivable has been transferred to the Agent
(for the benefit of the Transferees) under the Agreement; and (y) code the
Collection Agent's master data processing records evidencing Receivables and
Related Contracts to the foregoing effect. The Transferor hereby authorizes the
Agent to file one or more financing or continuation statements, and amendments
thereto and assignments thereof, relative to all or any of the Receivables and
the Related Security without the signature of the Transferor where permitted by
law. A photocopy or other reproduction of this Agreement shall be sufficient as
a financing statement where prohibited by law. If the Transferor fails after
notice to perform any of its agreements or obligations under the Transaction
Documents, the Agent may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Agent
incurred in connection therewith shall be payable as provided in the Agreement.
(i) Assembly of Documents. The Transferor will, or will cause the
---------------------
Collection Agent to, at the Agent's request following the occurrence of a
Special Event, (A) assemble all documents, instruments and other records
(including, without limitation, computer tapes and disks) which evidence or
relate to the Receivables, and the Related Contracts and Related Security, or
which are otherwise necessary or desirable to collect the Receivables, and make
the same available to the Agent at a place selected by the Agent or its
designee, and (B) segregate all cash, checks and other instruments received by
it or the Collection Agent from time to time constituting Collections of
Receivables in a manner acceptable to the Agent and shall, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Agent or its designee.
IV-3
<PAGE>
(j) Delivery of List of Related Contracts. The Transferor will on or prior
-------------------------------------
to the date of each Transfer, deliver to the Agent a complete and accurate list
of each Related Contract, together with the contract number, the name of the
Obligor and the Outstanding Balance thereof.
(k) Reporting Requirements. The Transferor will provide to the Agent (in
----------------------
multiple copies, if requested by the Agent) the following:
(i) as soon as available and in any event within 60 days after the
end of the first three quarters of each fiscal year of the Originator, balance
sheets of the Originator and its Subsidiaries as of the end of such quarter and
statements of income and retained earnings of the Originator and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, certified by the chief financial
officer of the Originator;
(ii) as soon as available and in any event within 120 days after the
end of the each fiscal year of the Originator, a copy of the annual report for
such year for the Parent and the Annual Report on Form 10-K for the Originator
and its Subsidiaries, containing financial statements for such year audited by
Ernst & Young, or other independent public accountants acceptable to the Agent;
(iii) as soon as possible and in any event within five days after the
occurrence of each Special Event, a statement of the chief financial officer of
the Transferor setting forth details of such Special Event and the action that
the Transferor has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports that the Originator sends to any of its securityholders, and copies of
all reports and registration statements that the Originator or any Subsidiary
files with the Securities and Exchange Commission or any national securities
exchange;
IV-4
<PAGE>
(v) promptly after the filing or receiving thereof, copies of all
reports and notices that the Originator, the Transferor or any Affiliate files
under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Originator, the
Transferor or any Affiliate receives from any of the foregoing or from any
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which
the Originator, the Transferor or any Affiliate is or was, within the preceding
five years, a contributing employer, in each case in respect of the assessment
of withdrawal liability or an event or condition which could, in the aggregate,
result in the imposition of liability on the Originator, the Transferor and/or
any such Affiliate in excess of $5,000,000;
(vi) at least ten Business Days prior to any change in the
Transferor's or Originator's name, a notice setting forth the new name and the
effective date thereof;
(vii) promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the condition or operations,
financial or otherwise, of the Originator, the Transferor or any of its
subsidiaries as the Agent may from time to time reasonably request;
(viii) promptly after the Transferor obtains knowledge thereof, notice
of any (a) litigation, investigation or proceeding which may exist at any time
between the Transferor or the Originator and any governmental authority which,
in either case, if not cured or if adversely determined, as the case may be,
would have a material adverse effect on the business, operations, property or
financial or other condition of the Transferor or the Originator; (b) litigation
or proceeding adversely affecting the Transferor's ability to perform its
obligations under the Transaction Documents or the Originator's ability to
perform their obligations under the Transaction Documents or (c) litigation or
proceeding adversely affecting the Transferor or the Originator in which the
amount involved is $10,000,000
IV-5
<PAGE>
or more and not covered by insurance or in which injunctive or similar relief is
sought;
(ix) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or other
condition of the Transferor or the Originator;
(x) promptly after the Transferor obtains knowledge thereof, notice
of any "Event of Termination", "Incipient Event of Termination" or "Facility
Termination Date" under the Transfer Agreement;
(xi) so long as any Capital shall be outstanding, as soon as possible
and in any event no later than the day of occurrence thereof, notice that the
Originator has stopped selling or contributing to the Transferor, pursuant to
the Transfer Agreement, newly arising Receivables;
(xii) at the time of the delivery of the financial statements provided
for in clauses (i) and (ii) of this paragraph, a certificate of the chief
financial officer or the treasurer of the Transferor to the effect that, to the
best of such officer's knowledge, no Special Event has occurred and is
continuing or, if any such Special Event has occurred and is continuing,
specifying the nature and extent thereof; and
(xiii) promptly after receipt thereof, copies of all notices received
by the Seller from the Originator under the Transfer Agreement.
(l) Corporate Separateness. (i) The Transferor shall at all times
----------------------
maintain at least one independent director who (x) is not currently and has not
been during the five years preceding the date of the Agreement an officer,
director or employee of an Affiliate of the Originator or any Other Corporation,
(y) is not a current or former officer or employee of the Originator and (z) is
not a stockholder of any Other Corporation or any of their respective
Affiliates.
IV-6
<PAGE>
(ii) The Transferor shall not direct or participate in the management
of any of the Other Corporations' operations.
(iii) The Transferor shall conduct its business from an office separate
from that of the Other Corporations (but which may be located in the same
facility as one or more of the Other Corporations). The Transferor shall have
stationery and other business forms and a mailing address and a telephone number
separate from that of the Other Corporations.
(iv) The Transferor shall at all times be adequately capitalized in
light of its contemplated business.
(v) The Transferor shall at all times provide for its own operating
expenses and liabilities from its own funds.
(vi) The Transferor shall maintain its assets and transactions
separately from those of the Other Corporations and reflect such assets and
transactions in financial statements separate and distinct from those of the
Other Corporations and evidence such assets and transactions by appropriate
entries in books and records separate and distinct from those of the Other
Corporations. The Transferor shall hold itself out to the public under the
Transferor's own name as a legal entity separate and distinct from the Other
Corporations. The Transferor shall not hold itself out as having agreed to pay,
or as being liable, primarily or secondarily, for, any obligations of the Other
Corporations.
(vii) The Transferor shall not become liable as a guarantor or
otherwise with respect to any Debt or contractual obligation of any Other
Corporation.
(viii) The Transferor shall not make any payment or distribution of
assets with respect to any obligation of any Other Corporation or grant an
Adverse Claim on any of its assets to secure any obligation of any Other
Corporation.
IV-7
<PAGE>
(ix) The Transferor shall not make loans, advances or otherwise extend
credit to any of the Other Corporations.
(x) The Transferor shall hold regular duly noticed meetings of its
Board of Directors and make and retain minutes of such meetings.
(xi) The Transferor shall have bills of sale (or similar instruments
of assignment) and, if appropriate, UCC-1 financing statements, with respect to
all assets purchased from any of the Other Corporations.
(xii) The Transferor shall not engage in any transaction with any of
the Other Corporations, except as permitted by its certificate of incorporation.
(m) Transfer Agreement. The Transferor will not amend, waive or modify any
------------------
provision of the Transfer Agreement or waive the occurrence of any "Event of
Termination" under the Transfer Agreement, without in each case the prior
written consent of the Agent. The Transferor will perform all of its
obligations under the Transfer Agreement in all material respects and will
enforce the Transfer Agreement in accordance with its terms in all material
respects.
(n) Nature of Business. The Transferor will not engage in any business
------------------
other than the purchase of Receivables, Related Security and Collections from
the Originator and the transactions contemplated by this Agreement. The
Transferor will not create or form any Subsidiary.
(o) Mergers, Etc. The Transferor will not merge with or into or
------------
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions), all or
substantially all of its assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets or capital stock or other
ownership interest of, or enter into any joint venture or partnership agreement
with, any Person, other than as contemplated by the Agreement and the Transfer
Agreement.
IV-8
<PAGE>
(p) Distributions, Etc. The Transferor will not declare or make any
------------------
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of capital stock
of the Transferor, or return any capital to its shareholders as such, or
purchase, retire, defease, redeem or otherwise acquire for value or make any
payment in respect of any shares of any class of capital stock of the Transferor
or any warrants, rights or options to acquire any such shares, now or hereafter
outstanding; provided, however, that the Transferor may declare and pay cash
-------- -------
dividends on its capital stock to its shareholders so long as (i) no Special
Event shall then exist or would occur as a result thereof, (ii) such dividends
are in compliance with all applicable law including the corporate law of the
state of Delaware, and (iii) such dividends have been approved by all necessary
and appropriate corporate action of the Transferor.
(q) Debt. The Transferor will not incur any Debt, other than any Debt
----
incurred pursuant to the Agreement and the Transfer Agreement.
(r) Certificate of Incorporation. The Transferor will not amend or delete
----------------------------
Articles III, X or XI of its certificate of incorporation.
(s) Covenant of the Transferor and the Originator. Until the latest of the
---------------------------------------------
Facility Termination Date, the date on which no Capital of or Yield on any
Receivable shall be outstanding or the date all other amounts owed by the
Transferor hereunder to the Transferees or the Agent are paid in full, each of
the Transferor and the Originator will, at their respective expense, from time
to time during regular business hours as requested by the Agent, permit the
Agent or its agents or representatives (including independent public
accountants, which may be the Transferor's or the Originator's independent
public accountants), (i) to conduct periodic audits of the Receivables, the
Related Security and the related books and records and collections systems of
the Transferor or the Originator, as the case may be, (ii) to examine and make
copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Transferor or the Originator, as the case may be, relating to
Receivables and the Related Security, including, without limitation, the
Contracts, and (iii) to visit the offices and properties of the
IV-9
<PAGE>
Transferor or the Originator, as the case may be, for the purpose of examining
such materials described in clause (ii) above, and to discuss matters relating
to the Receivables and the Related Security or the Transferor's or the
Originator's performance under the Transaction Documents or under the Contracts
with any of the officers or employees of the Transferor or the Originator, as
the case may be, having knowledge of such matters. In addition, upon the
Agent's request at least once per year, the Transferor will, at its expense,
appoint independent public accountants (which may, with the consent of the
Agent, be the Transferor's regular independent public accountants), or utilize
the Agent's representatives or auditors, to prepare and deliver to the Agent a
written report with respect to the Receivables and the Credit and Collection
Policy (including, in each case, the systems, procedures and records relating
thereto) on a scope and in a form reasonably requested by the Agent.
(t) Hedge Agreement. Within fifteen Business Days of the earlier of
---------------
(i) the date on which the rate set forth in the weekly statistical release
designated as "H-15(519)" or any successor publication, published by the Board
of Governors of the Federal Reserve System exceeds 9% or (ii) the occurrence of
a Special Event, the Transferor shall obtain an interest rate cap or other
hedging arrangement the payments due from the counterparty of which are for the
exclusive benefit of the Agent and which is satisfactory to the Agent in its
sole discretion with a notional amount at least equal to the aggregate
Outstanding Balance of the Related Contracts with a counterparty the short-term
debt obligations of which are rated at least "A-1" by S&P and "P-1" by Moody's.
(u) Opinion of Counsel. The Transferor shall deliver to the agent not more
------------------
than four Business Days following the date of the initial Transfer hereunder an
opinion of Karin M. Kinney, Esq., General Counsel of the Originator and counsel
to the Transferor, acceptable to the Agent to the effect that all required
financing statements have been filed resulting in the perfection and first
priority of each Undivided Interest (as such terms are defined in the opinion of
Karin M. Kinney delivered on or prior to the initial Transfer Date) and the
perfection and first priority of the security interest contemplated by Section
1.13 of the Agreement and by Section 5.02 of the Transfer Agreement.
IV-10
<PAGE>
(v) Collections. At all times following the designation by the Agent of
-----------
any Designated Account, the Transferor will deposit, or cause to be deposited,
all Collections to such Designated Account.
(w) Deposits to Designated Accounts. The Transferor will not deposit or
-------------------------------
otherwise credit, or cause or permit to be so deposited or credited, to any
Designated Account cash or cash proceeds other than Collections of Pool
Receivables.
(x) Changes in Implied Interest Rate. The Transferor shall notify the
--------------------------------
Agent promptly upon any change in the implied interest rate used by the
Originator or any Dealer in originating Contracts.
IV-11
<PAGE>
EXHIBIT V
TRIGGER EVENTS
Each of the following, unless waived in writing by the Agent (other than as
set forth in clause (i) which cannot be waived), shall be a "Trigger Event":
-------------
(a) The Collection Agent (if the Originator or any of its Affiliates)
(i) shall fail to perform or observe any term, covenant or agreement under the
Collection Agent Agreement (other than as referred to in clause (ii) of this
para graph (a)) and such failure shall remain unremedied for three Business Days
or (ii) shall fail to make when due any payment or deposit to be made by it
under the Collection Agent Agreement; or
(b) The Transferor or the Originator shall fail (i) to transfer to the
Agent when requested any rights pursuant to the Agreement which the Transferor
or the Originator then has as Collection Agent or otherwise or (ii) to make any
payment required under Section 1.03, 3.02, 3.03 or 3.04 of the Agreement; or
(c) Any representation or warranty made by the Transferor or the Originator
(or any of their respective officers) under or in connection with the
Transaction Documents, or any information or report delivered by the Transferor
or the Originator pursuant to the Transaction Documents shall prove to have been
incorrect or untrue in any material respect when made or delivered; or
(d) The Transferor shall fail to deliver to the Agent the opinion of
counsel referred to in paragraph (u) of Exhibit IV hereof within the time period
prescribed in such paragraph.
(e) The Transferor shall fail to perform or observe any other term,
covenant or agreement contained in the Transaction Documents on its part to be
performed or observed and any such failure shall remain unremedied for ten
V-1
<PAGE>
days after written notice thereof shall have been given to the Transferor by the
Agent; or
(f) The Originator shall fail to perform or observe any term, covenant or
agreement contained in the Transaction Documents on its part to be performed or
observed and any such failure shall remain unremedied for ten days after written
notice thereof shall have been given to the Originator by the Agent (or, with
respect to a failure to deliver the Transferor Report pursuant to Section 4.02
of the Agreement such failure shall remain unremedied for three days, without a
requirement for notice); or
(g) Any member of the IKON Group or any Subsidiary thereof shall fail to
pay any principal of or premium or interest on any of its Debt which is
outstanding in a principal amount of at least $10,000,000 in the aggregate when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to repay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof; or
(h) The Transfer shall for any reason cease to create, or the interest of
the Agent (for the benefit of the Transferees) in any Receivable shall for any
reason cease to be, a valid and perfected first priority interest in each
Receivable and the Related Security and Collections with respect thereto; or the
security interest created pursuant to Section 1.13 shall for any reason cease to
be a valid first priority security interest in the collateral security referred
to in such Section; or
V-2
<PAGE>
(i) Any member of the IKON Group or any Subsidiary thereof shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against any
such member or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
any member of the IKON Group or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this paragraph (i); or
(j) As of the last day of any calendar month: (i) the Default Ratio
averaged over the twelve-month period ending on such day exceeds 3.50%; (ii) the
Delinquency Ratio averaged over the three-month period ending on such day
exceeds 18% or (iii) the Delinquency Ratio averaged over the twelve-month period
ending on such day exceeds 15%; or
(k) There shall have occurred any material adverse change in the business,
operations, property or financial or other condition of the Originator since
June 30, 1996 or the Transferor since the date of its incorporation; or there
shall have occurred any event which may materially adversely affect the
collectibility of the Receivables, the ability of the Collection Agent or the
Transferor to collect the Receivables or the ability of the Originator or the
Transferor to perform its respective obligations under the Transaction
Documents; or
V-3
<PAGE>
(l) Any rating of the long-term debt obligations of the Originator are
withdrawn or reduced below Investment Grade; or
(m) An "Event of Termination" or "Facility Termination Date" shall occur
under the Transfer Agreement, or the Transfer Agreement shall cease to be in
full force and effect; or
(n) All of the outstanding capital stock of the Transferor shall cease to
be owned, directly or indirectly, by the Originator; or
(o) On any Settlement Date, the aggregate Outstanding Balance of the
Related Contracts is less than the Required Balance.
V-4
<PAGE>
EXHIBIT VI
DEALERS
Allegheny Business Machines Mirex 5317 Mirex Drive
Foster Plaza Three 5317 Mirex Drive
601 Holiday Drive St. Louis, MO 63119
Pittsburgh, PA 15220
Redden-Miller Office
Machines
American Business Machines P.O. Box 910
5701 Mayfair Road 107 South 3rd Avenue
North Canton, OH Marshalltown, IA 50158
Kex Copysource Decoursey Business Systems
350 South Avenue P.O. Box 15329
Rochester, NY 14620 Lenexa, KS 66215-5329
Street Address
--------------
Copier Consultants 9120 Barton
7009 Albert Pick Road Overland Park, KS 66214
Greensboro, NC 27409
Colorado Copier
Omni Business Systems 637 South Pierce
2725 Center Place Louisville, CO 80027
Melbourne, FL 32940
American Business Machines-
Portland
Unitech of Mississippi 2720 S.W. Corbett
P.O. Box 20639 Portland, OR 97201
5345 Highway 18S
Jackson, MS 39289-1639 Xtec Office Systems
901 Jefferson Avenue
Paul B. Williams Valley Forge Corporate Center
1035 Winston Street Norristown, PA 19403
Greensboro, NC 27405
VI-1
<PAGE>
EXHIBIT VII
The principal place of business and chief executive offices of the
Transferor are located at:
IKON FUNDING, INC.
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
The Origin records concerning the Receivables (and all original documents
related thereto) are located at the offices of the Collection Agent at:
IKON CAPITAL INC.
1738 Bass Road
Macon, Georgia 31210
VII-1
<PAGE>
EXHIBIT VIII
DESIGNATED STATES
Delaware
Hawaii
Kansas
Maryland
Minnesota
Montana
New Mexico
New York
North Carolina
VIII-1
<PAGE>
EXHIBIT 10.6
TRANSFER AGREEMENT
Dated as of September 30, 1996
IKON CAPITAL, INC., a Delaware corporation (the "Originator"), and IKON
----------
FUNDING INC., a Delaware corporation (the "Transferee"), agree as follows:
----------
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and
used throughout this Agreement (in addition to those defined above) are defined
in Article I of this Agreement.
(2) The Originator has Receivables that it wishes to transfer to the
Transferee, and the Transferee is prepared to accept such Receivables on the
terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest, or other charge or
-------------
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person.
"Aggregate Adjusted Outstanding Balance" means, with respect to any
--------------------------------------
Receivables to be transferred pursuant to Section 2.02, the aggregate
Outstanding Balance of the Contracts related to such Receivables less the
<PAGE>
Discount with respect to such Receivables as set forth in the Originator's
General Trial Balance.
"Alternate Base Rate" means a fluctuating interest rate per annum as
-------------------
shall be in effect from time to time, which rate shall be at all times equal to
the highest of:
(a) the rate of interest announced publicly by Royal Bank of Canada
in New York, New York, from time to time as its base commercial lending
rate;
(b) 1/2 of one percent above the latest three-week moving average of
secondary market morning offering rates in the United States for three-month
certificates of deposit of major United States money market banks, such
three-week moving average being determined weekly on each Monday (or, if
such day is not a Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Royal Bank of Canada on
the basis of such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations for such rates
received by Royal Bank of Canada from three New York certificate of deposit
dealers of recognized standing selected by Royal Bank of Canada, in either
case adjusted to the nearest 1/4 of one percent or, if there is no nearest
1/4 of one percent, to the next higher 1/4 of one percent; and
(c) the Federal Funds Rate.
"Applicable Percentage" means, with respect to any Transfer Amount
---------------------
payable with respect to Receivables, a percentage equal to the product of (a)
four, (b) the weighted average life of such Receivables expressed in years and
fractions thereof and as reported in the most recent Originator Report and (c)
the product of (i) average of the Default Ratios for the twelve months preceding
the related Transfer Date and (ii) 12.
2
<PAGE>
"Business Day" means any day on which banks are not authorized or
------------
required to close in New York City.
"Collection Agent" means at any time the Person then authorized
----------------
pursuant to Section 6.01 to service, administer and collect Transferred
Receivables.
"Collection Agent Fee" has the meaning specified in Section 6.03.
--------------------
"Collections" means, with respect to any Receivable, (a) all cash
-----------
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of Related Security with respect to such
Receivable (including, without limitation, payments under the related Contract
due upon or in connection with (i) Obligor's default under the Contract, (ii)
loss, theft or damage to the related Equipment, or (iii) renewal of the
Contract); provided, that Collections shall not include collections which
--------
represent the payment of (x) maintenance charges or (y) insurance premiums, (b)
all Collections deemed to have been received pursuant to Section 2.04 and (c)
all other proceeds of such Receivable.
"Contract" means a closed-end lease agreement between the Originator
--------
and an Obligor having an original lease term not exceeding 60 months,
substantially in the form of one of the written contracts or (in the case of any
open account agreement) one of the written contracts approved by the Transferee,
pursuant to or under which such Obligor shall be obligated to pay for the lease
of equipment from time to time.
"Credit and Collection Policy" means those receivables credit and
----------------------------
collection policies and practices of the Originator in effect on the date of
this Agreement applicable to the Receivables and described in Exhibit A hereto,
as modified in compliance with this Agreement.
"Dealer" means each of the Persons set forth on Exhibit B hereto, as
------
such Exhibit may be amended from time to time by the Originator with the consent
of the Transferee.
3
<PAGE>
"Debt" means (i) indebtedness for borrowed money, (ii) obligations
----
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Default Ratio" means the ratio (expressed as a percentage) computed
-------------
as of the last day of each calendar month by dividing (i) the aggregate
Outstanding Balance of all Related Contracts having one or more Receivables that
were Defaulted Receivables on such day or that would have been Defaulted
Receivables on such day had they not been written off the books of the
Transferor during such month by (ii) the aggregate Outstanding Balance of all
Related Contracts on such day.
"Defaulted Receivable" means a Receivable:
--------------------
(i) as to which any payment, or part thereof, remains unpaid for 120 more
days from the original due date for such payment; or
(ii) as to which the Obligor thereof or any other Person obligated thereon or
owning any Related Security in respect thereof has taken any action, or
suffered any event to occur, of the type described in Section 7.01(g); or
(iii) which, consistent with the Credit and Collection Policy, would be
retransferred to the related Dealer as uncollectible.
"Designated Obligor" means, at any time, each Obligor: provided,
------------------ --------
however, that any Obligor shall cease to be a Designated Obligor upon notice by
- -------
the Transferee to the Originator.
4
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"Designated States" means the states set forth on Exhibit C hereto,
-----------------
as such Exhibit may be amended from time to time by the Originator with the
consent of the Transferee.
"Dilution" means, with respect to any Receivable, the aggregate
--------
amount of any reductions or adjustments in the Outstanding Balance of such
Receivable as a result of any defective, rejected, returned or repossessed
Equipment or services or any cash discount or other adjustment or setoff.
"Discount" means, with respect to any group of Receivables, the product
--------
of (a) the aggregate Outstanding Balance of the Related Contracts relating to
such Receivables and (b) the Applicable Percentage in respect of such
Receivables.
"Eligible Receivable" means, at the relevant time of determination, a
-------------------
Receivable:
(i) the Obligor of which is a United States resident, is not an Affiliate of
any of the parties hereto, and is not the federal government, the
government of a Designated State or a governmental subdivision or agency
of the federal government or the government of a Designated State;
(ii) the Obligor of which has not been disapproved by the Transferee on or
prior to the date of the Transfer and which, at the time of the Transfer,
is not the Obligor of any Defaulted Receivables;
(iii) which at the time of the Transfer is not a Defaulted Receivable;
(iv) (a) which arises under a Contract with a remaining term of not more than
60 months and (b) which, according to such Contract, consists of
substantially equal monthly Periodic Payments which are required to be
paid within 30 days of the billing date therefor;
5
<PAGE>
(v) which arose pursuant to a Contract which is "chattel paper" within the
meaning of Section 9-105 of the UCC of the applicable jurisdictions
governing the perfection of the interest created in the Receivables;
(vi) which is denominated and payable in United States dollars in the United
States;
(vii) which arises under a Contract (a) which has been duly authorized and
which, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of
such Receivable enforceable against such Obligor in accordance with its
terms and is not subject to any dispute, offset, counterclaim or defense
whatsoever (except as limited by applicable bankruptcy law), (b) in
respect of which, prior to the date it is transferred hereunder, the
Equipment has been delivered and accepted and (c) which pursuant to its
terms is not cancellable by the lessee before the end of its stated
term;
(viii) which, together with the Contract related thereto, does not contravene
in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations
relating to usury, consumer protection, truth in lending, consumer
leasing, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with
respect to which none of the Transferor, the Originator or the related
Obligor is in violation of any such law, rule or regulation in any
material respect;
(ix) with regard to which there exists only one executed original Contract,
which is in the possession of the Originator on the Transfer Date of
such Receivable;
(x) which represents payments due to the Originator and does not represent
any payments payable for the account of any Person other than the
Originator under the Contract relating to such Receivable or any sales
or use tax payable under such Contract;
6
<PAGE>
(xi) which satisfies all applicable requirements of the Credit and Collection
Policy;
(xii) which, after giving effect to the acquisition thereof, would not result
in the aggregate Outstanding Balance of Related Contracts of any single
Obligor exceeding 2% of the aggregate Outstanding Balance of all Related
Contracts;
(xiii) as to which, at or prior to the time of the Transfer, the Transferee has
not notified the Originator that such Receivable (or class of
Receivables) is not acceptable for transfer to the Transferee;
(xiv) the transfer or assignment of which does not contravene any applicable
law, rule or regulation; and
(xv) which was originated by a Dealer.
"Equipment" means, with respect to any Receivable, office, business
---------
or other equipment leased or sold to an Obligor by the Originator pursuant to a
Contract (including any modifications or substitutions of equipment pursuant to
the Original Contract giving rise to such Receivable).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Event of Termination" has the meaning specified in Section 7.01.
--------------------
"Facility" means the willingness of the Transferee to consider
--------
accepting Transfers of Receivables from the Originator from time to time
pursuant to the terms of this Agreement.
"Facility Termination Date" means the earliest of (i) the Scheduled
-------------------------
Termination Date, (ii) the date of termination of the Facility pursuant to
Section 7.01 and (iii) the date which the Originator designates by at least two
Business Days' notice to the Transferee.
7
<PAGE>
"Federal Funds Rate" means, with respect to any day, the rate set
------------------
forth in H.15(519) for that day opposite the caption "Federal Funds
-------------
(Effective)." If on any date of determination, such rate is not published in
- ----------
H.15(519), such rate will be the rate set forth in Composite 3:30 P.M.
Quotations for U.S. Government Securities for that day under the caption
"Federal Funds/Effective Rate." If on any date of determination, the appropriate
----------------------------
rate is not published in either H.15(519) or Composite 3:30 P.M. Quotations for
U.S. Government Securities, such rate will be the arithmetic mean of the rates
for the last transaction in overnight federal funds arranged by three leading
brokers of federal funds transactions in New York City prior to 9:00 a.m., New
York City time, on that day.
"General Trial Balance" of the Originator on any date means the
---------------------
Originator's accounts receivable trial balance (whether in the form of a
computer printout, magnetic tape or diskette) on such date, listing Obligors and
the Receivables respectively owed by such Obligors on such date together with
the aged Outstanding Balances of such Receivables, in form and substance
satisfactory to the Transferee.
"Incipient Event of Termination" means an event that but for notice
------------------------------
or lapse of time or both would constitute an Event of Termination.
"Indemnified Amounts" has the meaning specified in Section 8.01.
-------------------
"Obligor" means a Person obligated to make payments to the Originator
-------
pursuant to a Contract; provided that in the event that any payments in respect
of a Contract are made by any other person, such other Person shall be deemed to
be an Obligor.
"Originator Report" means a report, in form and substance satisfactory
-----------------
to the Transferee, furnished by the Collection Agent to the Transferee pursuant
to Section 6.02(b).
"Outstanding Balance" of any Contract at any date means the net
-------------------
present value of the total Periodic Payments due to Transferor over the
remaining
8
<PAGE>
term of the Contract(net of any security deposits or advance rental payments
received by Transferor) and not yet paid by the Obligor determined by
discounting on a monthly basis each such Periodic Payment from the Settlement
Date immediately following the calendar month in which such Periodic Payment is
due to the Settlement Date as of which such present value calculation is made at
a rate equal to the implied interest rate used by the Originator or the
applicable Dealer in originating such Contract (assuming a calendar year
consisting of twelve 30-day months).
"Parent" means Alco Standard Corporation, an Ohio corporation.
------
"Periodic Payments" means the aggregate base rental amounts coming
-----------------
due on a monthly basis pursuant to the Contracts giving rise to Receivables,
excluding any maintenance charges or, with respect to Contracts covering
photocopiers, any per copy charges.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Receivable" means the indebtedness of any Obligor under a Contract,
----------
and includes the right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto.
"Receivables Transfer Agreement" means that certain Receivables
------------------------------
Transfer Agreement, dated as of the date hereof, among the Transferee, as
Originator, Old Line Funding Corp., as issuer, Royal Bank of Canada, as agent,
and the Originator, as originator and collection agent, as amended or restated
from time to time.
"Receivables Transfer Request" has the meaning specified in Section
----------------------------
2.02(a).
9
<PAGE>
"Related Contract" means, with respect to a Transfer Date, any
----------------
Contract included in the Contracts transferred to the Transferee pursuant to
Section 2.02 on such Transfer Date; provided, that after the Outstanding Balance
--------
of such Contract has been collected, it shall no longer constitute a
"Related Contract" hereunder.
"Related Security" means with respect to any Receivable:
----------------
(i) all other security interests or liens and property subject thereto
(other than Equipment) from time to time purporting to secure payment of
such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(ii) all guaranties (other than the Support Agreement) insurance and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable (or insuring for loss
or liability with respect to the related Equipment), whether pursuant to
the Contract related to such Receivable or otherwise and all of the
Transferor's rights (if any) to recourse, repurchase or indemnity
against any dealer or other Person from which the Transferor purchased
the Contract related to such Receivable; and
(iii) the related Contract and all other books, records and other information
(including, without limitation, computer programs, tapes, discs, punch
cards, data processing software and related property and rights)
relating to such Receivable and the related Obligor.
"Scheduled Termination Date" shall mean September 30, 1997; provided
-------------------------- --------
that unless the Transferee notifies the Originator in writing not less than 30
days prior to the then-current Scheduled Termination Date, the Scheduled
Termination Date shall be automatically extended to the date that is 364 days
following such Scheduled Termination Date.
10
<PAGE>
"Settlement Date" means the fifteenth calendar day of each month (or
---------------
if such day is not a Business Day, the immediately succeeding Business Day);
provided, however, that following the occurrence of an Event of Termination,
- -------- -------
Settlement Dates shall occur on such days as are selected from time to time by
the Transferee or its designee in a written notice to the Collection Agent.
"Support Agreement" means the operating agreement, dated August 15,
-----------------
1994 between the Originator and the Parent.
"Transfer" means a transfer by the Originator of Receivables to the
--------
Transferee pursuant to Article II.
"Transfer Date" has the meaning specified in Section 2.02(a).
-------------
"Transferee's Interest" means the sum of amounts paid by the
---------------------
Transferee to the Originator for each Transfer of Receivables from the
Originator pursuant to Section 2.02, reduced from time to time by Collections of
such Receivables actually received by the Transferee in excess of the applicable
portion of the Collections representing yield (assumed to be 10.75% unless
otherwise mutually agreed); provided, however, that such Transferee's Interest
-------- -------
shall not be reduced by any Collections to the extent that at any time such
Collections are rescinded or must otherwise be returned for any reason.
"Transferred Receivable" means any Receivable which, pursuant to the
----------------------
procedure described in Section 2.02(c), has been identified as a Transferred
Receivable.
"UCC" means the Uniform Commercial Code as from time to time in
---
effect in the specified jurisdiction.
SECTION 1.02. Other Terms. All accounting terms not specifically
-----------
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
11
<PAGE>
ARTICLE II
AMOUNTS AND TERMS OF TRANSFERS AND CONTRIBUTIONS
SECTION 2.01. Facility. On the terms and conditions hereinafter set
--------
forth and without recourse (except to the extent as is specifically provided
herein), the Transferee may accept from the Originator Eligible Receivables of
the Originator from time to time during the period from the date hereof to the
Facility Termination Date. Each Transfer of Receivables shall include the
transfer to the Transferee of the Related Security and Collections with respect
thereto.
SECTION 2.02. Making Transfers.
----------------
(a) Transfers. Each Transfer from the Originator shall be made on
---------
notice from the Originator to the Transferee given no later than 10:00 A.M. (New
York City time) on the date of such Transfer. Each such request for a Transfer
(each a "Receivables Transfer Request") shall specify the date of such Transfer
----------------------------
(which shall be a Business Day) and the proposed transfer amount (as determined
pursuant to Section 2.02(b)) for such Transfer. The Transferee shall promptly
notify the Originator whether it has determined to accept such Transfer. On the
date of each Transfer (each a "Transfer Date"), the Transferee shall, upon
-------------
satisfaction of the applicable conditions set forth in Article III, make
available to the Originator the Transfer Amount for such Transfer by deposit of
such amount in same day funds to the Originator's account designated by the
Originator.
(b) Determination of Transfer Amount. The Transfer Amount for the
--------------------------------
Receivables that are the subject of any Transfer hereunder shall be determined
on or prior to the date of such Transfer, and shall be equal to the Aggregated
Adjusted Outstanding Balance of such Receivables.
(c) Identification of Transferred Receivables. On each Transfer Date,
-----------------------------------------
a sufficient number of Eligible Receivables (that do not already constitute
Transferred Receivables hereunder) of the Originator shall be identified as
12
<PAGE>
Transferred Receivables so that the Outstanding Balance of such Transferred
Receivables so identified shall result in the Transfer Amount determined in
accordance with Section 2.02(b). The Transferred Receivables will be identified
by reference to the General Trial Balance of the Originator. Starting with the
first Obligor listed on the General Trial Balance, each Eligible Receivable owed
by such Obligor (that does not already constitute a Transferred Receivable
hereunder) shall constitute a Transferred Receivable. Additional Transferred
Receivables shall be identified in a similar manner by proceeding down the
General Trial Balance of the Originator, in alphabetical or numerical sequence
for subsequent Obligors.
(d) Reconstruction of General Trial Balance. If at any time the
---------------------------------------
Originator fails to generate its General Trial Balance, the Transferee shall
have the right to reconstruct such General Trial Balance so that a determination
of the Transferred Receivables can be made pursuant to Section 2.02(c). The
Originator agrees to cooperate with such reconstruction of the General Trial
Balance, including, without limitation, the delivery to the Transferee, upon the
Transferee's request, of copies of all Contracts and all records relating to the
Contracts and the Receivables.
SECTION 2.03. Collections. (a) Unless otherwise agreed, the
-----------
Collection Agent shall, on each Settlement Date, deposit into an account of the
Transferee or the Transferee's assignee all Collections of Transferred
Receivables then held by the Collection Agent.
(b) In the event that the Originator believes that Collections which
are not Collections of Transferred Receivables have been deposited into an
account of the Transferee or the Transferee's assignee, the Originator shall so
advise the Transferee and, on the Business Day following such identification,
the Transferee shall remit, or shall cause to be remitted, all Collections so
deposited which are identified, to the Transferee's satisfaction, to be
Collections of Receivables which are not Transferred Receivables to the
Originator.
SECTION 2.04. Settlement Procedures. (a) If on any day the Outstanding
---------------------
Balance of any Transferred Receivable is reduced or adjusted as a
13
<PAGE>
result of any defective, rejected, returned or repossessed Equipment or services
or any cash discount or other adjustment made by the Originator, or any setoff
or dispute between the Originator and an Obligor due to a claim arising out of
the same or any other transaction, the Originator shall be deemed to have
received on such day a Collection of such Transferred Receivable in the amount
of such reduction or adjustment. If the Originator is not the Collection Agent,
the Originator shall pay to the Collection Agent on or prior to the next
Settlement Date all amounts deemed to have been received pursuant to this
subsection.
(b) Upon discovery by the Originator or the Transferee of a breach of
any of the representations and warranties made by the Originator in Section
4.01(i) with respect to any Transferred Receivable, such party shall give prompt
written notice thereof to the other party, as soon as practicable and in any
event within three Business Days following such discovery. The Originator shall
be deemed to have received a Collection in full of such Transferred Receivable,
and all other Receivables relating to the same Contract, and make available to
the Transferee on the next succeeding Settlement Date an amount equal to the
Outstanding Balance of such Transferred Receivable. Upon such amount being made
available, the Transferee shall retransfer such Transferred Receivables to the
Originator. Each retransfer of a Transferred Receivable shall include the
Related Security with respect to such Transferred Receivable. If the Originator
is not the Collection Agent, the Originator shall pay to the Collection Agent on
or prior to the next Settlement Date the amount required to be paid pursuant to
this subsection.
(c) Except as stated in subsection (a) or (b) of this Section 2.04 or
as otherwise required by law or the underlying Contract, all Collections from an
Obligor of any Transferred Receivable shall be applied to the Receivables of
such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, unless such Obligor designates its payment for
application to specific Receivables.
SECTION 2.05. Fees. The Originator agrees to pay to the Transferee a
----
fee on the date of the initial Transfer of $100,000.
14
<PAGE>
SECTION 2.06. Payments and Computations, Etc. (a) All amounts to be
------------------------------
paid or deposited by the Originator or the Collection Agent hereunder shall be
paid or deposited no later than 11:00 A.M. (New York City time) on the day when
due in same day funds to an account designated in writing by the Transferee to
the Originator on or prior to the initial Transfer hereunder.
(b) The Originator shall, to the extent permitted by law, pay to the
Transferee interest on any amount not paid or deposited by the Originator
(whether as Collection Agent or otherwise) when due hereunder at an interest
rate per annum equal to 2% per annum above the Alternate Base Rate, payable on
demand.
(c) All computations of interest and all computations of fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days elapsed. Whenever any payment or deposit to be made hereunder shall be
due on a day other than a Business Day, such payment or deposit shall be made on
the next succeeding Business Day and such extension of time shall be included in
the computation of such payment or deposit.
ARTICLE III
CONDITIONS OF TRANSFERS
SECTION 3.01. Conditions Precedent to Initial Transfer from the
-------------------------------------------------
Originator. The initial Transfer of Receivables from the Originator hereunder
- ----------
is subject to the conditions precedent that the Transferee shall have received
on or before the date of such Transfer the following, each (unless otherwise
indicated) dated such date, in form and substance satisfactory to the
Transferee:
(a) Certified copies of the resolutions of the Board of Directors of
the Originator approving this Agreement and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement.
15
<PAGE>
(b) A certificate of the Secretary or Assistant Secretary of the
Originator certifying the names and true signatures of the officers of the
Originator authorized to sign this Agreement and the other documents to be
delivered by it hereunder.
(c) Acknowledgment copies or time stamped receipt copies of proper
financing statements, duly filed on or before the date of the initial Transfer,
naming the Originator as the debtor and the Transferee as the secured party, or
other similar instruments or documents, as the Transferee may deem necessary or
desirable under the UCC of all appropriate jurisdictions or other applicable law
to perfect the Transferee's security interest in the Transferred Receivables and
Related Security and Collections with respect thereto.
(d) Acknowledgment copies or time stamped receipt copies of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Transferred Receivables, Contracts or Related
Security previously granted by the Originator.
(e) Completed requests for information, dated on or before the date of
such initial Transfer, listing the financing statements referred to in
subsection (c) above and all other effective financing statements filed in the
jurisdictions referred to in subsection (c) above that name the Originator as
debtor, together with copies of such other financing statements (none of which
shall cover any Transferred Receivables, Contracts or Related Security).
(f) Payment by the Transferee to the Originator for the initial
Transfer hereunder will constitute acknowledgment that the conditions set forth
above have been satisfied or waived.
SECTION 3.02. Conditions Precedent to All Transfers. Each Transfer
-------------------------------------
(including the initial Transfer) hereunder shall be subject to the further
conditions precedent that:
(a) With respect to any such Transfer, on or prior to the date of such
Transfer, the Originator shall have delivered to the Transferee, (i) if
16
<PAGE>
requested by the Transferee, the Originator's General Trial Balance (which if in
magnetic tape or diskette format shall be compatible with the Transferee's
computer equipment) as of a date not more than 31 days prior to the date of such
Transfer, and (ii) a written report identifying, among other things, the
Receivables to be included in such Transfer and the then outstanding Transferred
Receivables and the aged balance thereof, in each case correlated to Transfers;
(b) With respect to any such Transfer, on or prior to the date of such
Transfer, the Collection Agent shall have delivered to the Transferee, in form
and substance satisfactory to the Transferee, a completed Originator Report for
the most recently ended reporting period for which information is required
pursuant to Section 6.02(b) and containing such additional information as may
reasonably be requested by the Transferee;
(c) At the request of the Transferee or its assignee, the Originator
shall have marked its master data processing records and each Contract giving
rise to Transferred Receivables and all other relevant records evidencing the
Receivables which are the subject of such Transfer with a legend, acceptable to
the Transferee, stating that such Receivables, the Related Security and
Collections with respect thereto, have been transferred in accordance with this
Agreement; and
(d) On the date of such Transfer the following statements shall be
true (and the Originator, by accepting the amount of such Transfer, shall be
deemed to have certified that):
(i) The representations and warranties contained in Section 4.01 are correct
on and as of the date of such Transfer as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result from such
Transfer, that constitutes an Event of Termination or would constitute
an Incipient Event of Termination; and
(iii) The Transferee shall not have delivered to the Originator a notice that
the Originator shall not make any further Transfers hereunder; and
17
<PAGE>
(e) The Transferee shall have received such other approvals, opinions
or documents as the Transferee may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Originator. The
------------------------------------------------
Originator represents and warrants as follows:
(a) The Originator is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and is duly qualified
to do business, and is in good standing, in every jurisdiction where the nature
of its business requires it to be so qualified, unless the failure to so qualify
would not have a material adverse effect on (i) the interests of the Transferee
hereunder, (ii) the collectibility of the Transferred Receivables, or (iii) the
ability of the Originator or the Collection Agent to perform their respective
obligations hereunder.
(b) The execution, delivery and performance by the Originator of this
Agreement and the other documents to be delivered by it hereunder, including the
Originator's transfer of Receivables hereunder, (i) are within the Originator's
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) do not contravene (1) the Originator's charter or by-laws, (2) any
law, rule or regulation applicable to the Originator, (3) any contractual
restriction binding on or affecting the Originator or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting the
Originator or its property, and (iv) do not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties (except for the transfer of the Originator's interest
in the Transferred Receivables pursuant to this Agreement). This Agreement has
been duly executed and delivered by the Originator.
18
<PAGE>
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Originator of this Agreement
or any other document to be delivered thereunder.
(d) This Agreement constitutes the legal, valid and binding obligation
of the Originator enforceable against the Originator in accordance with its
terms.
(e) The balance sheets of the Originator and its subsidiaries as at
September 30, 1995 and June 30, 1996, and the related statements of income and
retained earnings of the Originator and its subsidiaries for the fiscal year
then ended, copies of which have been furnished to the Transferee, fairly
present the financial condition of the Originator and its subsidiaries as at
such date and the results of the operations of the Originator and its
subsidiaries for the period ended on such date, all in accordance with generally
accepted accounting principles consistently applied, and since June 30, 1996
there has been no material adverse change in the business, operations, property
or financial or other condition of the Originator.
(f) There is no pending or threatened action or proceeding affecting
the Originator or any of its subsidiaries before any court, governmental agency
or arbitrator which may materially adversely affect the financial condition or
operations of the Originator or any of its subsidiaries or the ability of the
Originator to perform its obligations under this Agreement, or which purports to
affect the legality, validity or enforceability of this Agreement.
(g) No proceeds of any Transfer will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended.
(h) No transaction contemplated hereby requires compliance with any
bulk sales act or similar law.
19
<PAGE>
(i) Each Receivable purported to be transferred by the Originator
hereunder is an Eligible Receivable, the Originator has the right to transfer
each Transferred Receivable, together with the Related Security, free and clear
of any Adverse Claim (other than any Adverse Claim arising solely as the result
of any action taken by the Transferee). When the Transferee accepts a Transfer,
it shall acquire a valid and perfected first priority security interest in each
Transferred Receivable and the Related Security and Collections with respect
thereto free and clear of any Adverse Claim (other than any Adverse Claim
arising solely as the result of any action taken by the Transferee), and no
effective financing statement or other instrument similar in effect covering any
Transferred Receivable, any interest therein, the Related Security or
Collections with respect thereto is on file in any recording office except for
those filed in favor of the Originator, as secured party, which cover only
Equipment, accessories, attachments and additions thereto (and substitutions and
proceeds thereof) and such as may be filed in favor of Transferee in accordance
with this Agreement or in connection with any Adverse Claim arising solely as
the result of any action taken by the Transferee.
(j) Each Originator Report (if prepared by the Originator, or to the
extent that information contained therein is supplied by the Originator),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished at any time by the Originator to the Transferee in
connection with this Agreement is or will be accurate in all material respects
as of its date or (except as otherwise disclosed to the Transferee at such time)
as of the date so furnished, and no such document contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
(k) The principal place of business and chief executive office of the
Originator and the office where the Originator keeps its records concerning the
Transferred Receivables are located at the respective addresses set forth on
Exhibit D hereof.
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(m) The Originator is not known by and does not use any trade name or
doing-business-as name.
(n) With respect to any programs used by the Originator in the
servicing of the Receivables, no sublicensing agreements are necessary in
connection with the designation of a new Collection Agent pursuant to Section
6.01(b) so that such new Collection Agent shall have the benefit of such
programs (it being understood that, however, the Collection Agent, if other than
-- ----- ---------- ----
the Originator, shall be required to be bound by a confidentiality agreement
reasonably acceptable to the Originator).
(o) The transfers of Receivables by the Originator to the Transferee
pursuant to this Agreement, and all other transactions between the Originator
and the Transferee, have been and will be made in good faith and without intent
to hinder, delay or defraud creditors of the Originator.
(p) If less than all of the Receivables of the Originator have been
transferred to the Transferee pursuant to this Agreement, no selection procedure
was utilized by the Originator in selecting the Transferred Receivables to be
transferred to the Transferee hereunder which is adverse to the interests of the
Transferee or would reasonably be expected to result in the Transferred
Receivables containing a higher percentage of Defaulted Receivables than the
percentage of Defaulted Receivables in the Receivables retained by the
Originator. With respect to each Transferred Receivable, such Receivable is
representative of all of the Receivables owned by the Originator.
(q) Each Contract giving rise to a Receivable provides for Periodic
Payments that will fully amortize such Receivable over the term of the Contract
related thereto and, except in accordance with the Credit and Collection Policy,
the Originator has not extended or amended, modified or waived the terms of any
Receivable or any Contract relating to any Receivable.
(r) The principal place of business and chief executive office of the
Transferor and the office where the Transferor keeps its records concerning
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the Receivables are located at the respective addresses set forth on Exhibit D
hereof.
ARTICLE V
COVENANTS
SECTION 5.01. A. Covenants of the Originator. From the date hereof
---------------------------
until the first day following the Facility Termination Date on which all of the
Transferred Receivables are either collected in full or become Defaulted
Receivables:
(a) Compliance with Laws, Etc. The Originator will comply in all material
-------------------------
respects with all applicable laws, rules, regulations and orders and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such existence,
rights, franchises, qualifications, and privileges would not materially
adversely affect the collectibility of the Transferred Receivables or the
ability of the Originator to perform its obligations under this Agreement.
(b) Offices, Records and Books of Account. The Originator will keep its
-------------------------------------
principal place of business and chief executive office and the office where it
keeps its records concerning the Transferred Receivables at the respective
addresses set forth on Exhibit D hereof or, upon 30 days' prior written notice
to the Transferee, at any other locations in jurisdictions where all actions
required by Section 5.01(i) shall have been taken and completed. The Originator
also will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Transferred Receivables and related Contracts in the event of the destruction of
the originals thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Transferred Receivables (including, without limitation, records adequate to
permit the daily identification of each new Transferred Receivable and all
22
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Collections of and adjustments to each existing Transferred Receivable). The
Originator shall make a notation in its books and records, including its
computer files, to indicate which Receivables have been transferred to the
Transferee hereunder.
(c) Performance and Compliance with Contracts and Credit and Collection
-------------------------------------------------------------------
Policy. The Originator will, at its expense, timely and fully perform and
- ------
comply with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Transferred Receivables, and
timely and fully comply in all material respects with the Credit and Collection
Policy in regard to each Transferred Receivable and the related Contract.
(d) Sales, Liens, Etc. Except for the transfers contemplated herein, the
-----------------
Originator will not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to, any Transferred Receivable, Related Security, related Contract or
Collections, or upon or with respect to any account to which any Collections of
any Transferred Receivables are sent, or assign any right to receive income in
respect thereof.
(e) Extension or Amendment of Transferred Receivables. Except as provided
-------------------------------------------------
in Section 6.02(c), the Originator will not extend, amend or otherwise modify
the terms of any Transferred Receivable, or amend, modify or waive any term or
condition of any Contract related thereto. The Originator shall notify the
Transferee promptly upon any change in the implied interest rate used by the
Originator or any Dealer in originating Contracts.
(f) Change in Business or Credit and Collection Policy. The Originator
--------------------------------------------------
will not make any change in the character of its business or in the Credit and
Collection Policy that would, in either case, materially adversely affect the
collectibility of the Transferred Receivables or the ability of the Originator
to perform its obligations under this Agreement.
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(g) Audits. The Originator will, from time to time during regular
------
business hours as requested by the Transferee or its assigns, permit the
Transferee, or its agents, representatives or assigns, (i) to examine and make
copies of and abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the possession or under the
control of the Originator relating to Transferred Receivables and the Related
Security, including, without limitation, the related Contracts, and (ii) to
visit the offices and properties of the Originator for the purpose of examining
such materials described in clause (i) above, and to discuss matters relating to
Transferred Receivables and the Related Security or the Originator's performance
hereunder or under the Contracts with any of the officers or employees of the
Originator having knowledge of such matters.
(h) Change in Payment Instructions to Obligors. The Originator will
------------------------------------------
not make any change in its instructions to Obligors regarding payments to be
made by it unless the Transferee shall have received notice of such change.
(i) Further Assurances.
------------------
(i) The Originator agrees from time to time, at its expense,
promptly to execute and deliver all further instruments and documents, and
to take all further actions, that may be necessary or desirable, or that
the Transferee or its assignee may reasonably request, to perfect, protect
or more fully evidence the transfer of Receivables under this Agreement, or
to enable the Transferee or its assignee to exercise and enforce its
respective rights and remedies under this Agreement. Without limiting the
foregoing, the Originator will, upon the request of the Transferee or its
assignee, (A) execute and file such financing or continuation statements,
or amendments thereto, and such other instruments and documents, that may
be necessary or desirable to perfect, protect or evidence such Transferred
Receivables; and (B) deliver to the Transferee copies of all Contracts
relating to the Transferred Receivables and all records relating to such
Contracts and the Transferred Receivables, whether in hard copy or in
magnetic tape or diskette format (which if in magnetic tape or diskette
format shall be compatible with the Transferee's computer equipment).
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(ii) The Originator authorizes the Transferee or its assignee
to file financing or continuation statements, and amendments thereto and
assignments thereof, relating to the Transferred Receivables and the
Related Security, the related Contracts and the Collections with respect
thereto without the signature of the Originator where permitted by law. A
photocopy or other reproduction of this Agreement shall be sufficient as a
financing statement where permitted by law.
(iii) The Originator shall perform its obligations under the
Contracts related to the Transferred Receivables to the same extent as if
the Transferred Receivables had not been transferred.
(j) Reporting Requirements. The Originator will provide to the
----------------------
Transferee the following:
(i) as soon as available and in any event within 60 days after the end of the
first three quarters of each fiscal year of the Originator, balance sheets
of the Originator and its subsidiaries as of the end of such quarter and
statements of income and retained earnings of the Originator and its
subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, certified by the chief
financial officer of the Originator;
(ii) as soon as available and in any event within 120 days after the end of
each fiscal year of the Originator, a copy of the annual report for such
year for Alco Standard Corporation and the Annual Report on Form 10-K for
the Originator and its subsidiaries, containing financial statements for
such year audited by Ernst & Young or other independent public accountants
acceptable to the Agent;
(iii) as soon as possible and in any event within five days after the occurrence
of each Event of Termination or Incipient Event of Termination, a
statement of the chief financial officer of the Originator setting forth
details of such Event of Termination or Incipient Event of Termination and
the
25
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action that the Originator has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all reports that
the Originator sends to any of its securityholders, and copies of all
reports and registration statements that the Originator or any subsidiary
files with the Securities and Exchange Commission or any national
securities exchange;
(v) promptly after the filing or receiving thereof, copies of all reports and
notices that the Originator or any Affiliate files under ERISA with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or that the Originator or any Affiliate
receives from any of the foregoing or from any multiemployer plan (within
the meaning of Section 4001(a)(3) of ERISA) to which the Originator or
any Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal
liability or an event or condition which could, in the aggregate, result
in the imposition of liability on the Originator and/or any such
Affiliate in excess of $5,000,000;
(vi) at least ten Business Days prior to any change in the Originator's name,
a notice setting forth the new name and the effective date thereof;
(vii) concurrently with the delivery of each Originator Report by the
Collection Agent, a statement as to whether or not all of the Receivables
under all Contracts arising during the immediately preceding month have
been transferred by the Originator to the Transferee and, if less than
all of such Receivables have been transferred, a summary of those
Receivables not transferred; and
(viii) such other information respecting the Transferred Receivables or the
condition or operations, financial or otherwise, of the Originator as the
Transferee may from time to time reasonably request.
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(k) Separate Conduct of Business. The Originator will:
----------------------------
(i) maintain separate corporate records and books of account from those of
the Transferee;
(ii) conduct its business from an office separate from that of the Transferee;
(iii) ensure that all oral and written communications, including without
limitation, letters, invoices, purchase orders, contracts, statements and
applications, will be made solely in its own name;
(iv) have stationery and other business forms and a mailing address and a
telephone number separate from those of the Transferee;
(v) not hold itself out as having agreed to pay, or as being liable for, the
obligations of the Transferee;
(vi) not engage in any transaction with the Transferee except as contemplated
by this Agreement or as permitted by the Receivables Transfer Agreement;
(vii) continuously maintain as official records the resolutions, agreements and
other instruments underlying the transactions contemplated by this
Agreement; and
(viii) disclose on its annual financial statements the effects of the
transactions contemplated by this Agreement in accordance with generally
accepted accounting principles.
B. Covenants of the Transferee. From the date hereof until the
---------------------------
termination of this Agreement, the Transferee will:
(a) maintain separate corporate records and books of account from those of
the Originator;
(b) conduct its business from an office separate from that of the Originator;
27
<PAGE>
(c) ensure that all oral and written communications, including without
limitation, letters, invoices, purchase orders, contracts, statements and
applications, will be made solely in its own name;
(d) have stationery and other business forms and a mailing address and a
telephone number separate from those of the Originator;
(e) not hold itself out as having agreed to pay, or as being liable for, the
obligations of the Originator; and
(f) continuously maintain as official records the resolutions, agreements and
other instruments underlying the transactions contemplated by this
Agreement.
SECTION 5.02. Grant of Security Interest. To secure all obligations
--------------------------
of the Originator arising in connection with this Agreement, and each other
agreement entered into in connection with this Agreement, including, without
limitation, Indemnified Amounts, payments on account of Collections received or
deemed to be received, and any other amounts due the Transferee hereunder, the
Originator hereby assigns and grants to Transferee, a security interest in all
of the Originator's right, title and interest now or hereafter existing in, to
and under all Receivables originated by Dealers, the Related Security and all
Collections with respect thereto which do not constitute Transferred
Receivables.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The servicing,
-------------------------------
administration and collection of the Transferred Receivables shall be conducted
by such Person (the "Collection Agent") so designated hereunder from time to
----------------
time. Until the Transferee or its assignee gives notice to the Originator of
the designation of a new Collection Agent, the Originator is hereby designated
as,
28
<PAGE>
and hereby agrees to perform the duties and obligations of, the Collection Agent
pursuant to the terms hereof. The Originator agrees that such notice may be
given at any time in the Transferee's or assignee's discretion. Upon the
Originator's receipt of such notice, the Originator agrees that it will
terminate its activities as Collection Agent hereunder in a manner which the
Transferee (or its designee) believes will facilitate the transition of the
performance of such activities to the new Collection Agent, and the Originator
shall use its best efforts to assist the Transferee (or its designee) to take
over the servicing, administration and collection of the Transferred
Receivables, including, without limitation, providing access to and copies of
all computer tapes or disks and other documents or instruments that evidence or
relate to Transferred Receivables maintained in its capacity as Collection Agent
and access to all employees and officers of the Originator responsible with
respect thereto. The Transferee at any time after giving such notice may
designate as Collection Agent any Person (including itself) to succeed the
Originator or any successor Collection Agent, if such Person shall consent and
agree to the terms hereof. The Collection Agent may, with the prior consent of
the Transferee, subcontract with any other Person for the servicing,
administration or collection of Transferred Receivables. Any such subcontract
shall not affect the Collection Agent's liability for performance of its duties
and obligations pursuant to the terms hereof.
SECTION 6.02. Duties of Collection Agent. (a) The Collection Agent
--------------------------
shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Transferred Receivable from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit and Collection Policy. The
Transferee hereby appoints the Collection Agent, from time to time designated
pursuant to Section 6.01, as agent to enforce its rights in the Transferred
Receivables, the Related Security and the Collections with respect thereto. In
performing its duties as Collection Agent, the Collection Agent shall exercise
the same care and apply the same policies as it would exercise and apply if it
owned the Transferred Receivables and shall act in the best interests of the
Transferee and its assignees.
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(b) Prior to the 15th calendar day of each month, the Collection
Agent shall prepare and forward to the Transferee (i) an Originator Report,
relating to all then outstanding Transferred Receivables, and the Related
Security and Collections with respect thereto, in each case, as of the close of
business of the Collection Agent on the last day of the immediately preceding
month, and (ii) if requested by the Transferee, a listing by Obligor of all
Transferred Receivables correlating Transferred Receivables and Transfers,
together with an aging report of such Transferred Receivables.
(c) If no Event of Termination or Incipient Event of Termination
shall have occurred and be continuing, the Originator, while it is the
Collection Agent, may, in accordance with the Credit and Collection Policy,
extend the maturity or adjust the Outstanding Balance of any Transferred
Receivable as the Originator deems appropriate to maximize Collections thereof.
(d) The Originator shall deliver to the Collection Agent, and the
Collection Agent shall hold in trust for the Originator and the Transferee in
accordance with their respective interests, all documents, instruments and
records (including, without limitation, computer tapes or disks) which evidence
or relate to Transferred Receivables.
(e) The Collection Agent shall as soon as practicable following
receipt turn over to the Originator any cash collections or other cash proceeds
received with respect to Receivables not constituting Transferred Receivables
less all reasonable and appropriate out-of-pocket costs and expenses of the
Collection Agent of servicing, collecting and administering the Receivables to
the extent not covered by the Collection Agent Fee received by it.
(f) The Collection Agent also shall perform the other obligations of
the "Collection Agent" set forth in this Agreement with respect to the
Transferred Receivables.
SECTION 6.03. Collection Agent Fee. The Transferee shall pay to the
--------------------
Collection Agent, so long as it is acting as the Collection Agent hereunder, a
periodic collection fee (the "Collection Agent Fee") of 1.50% per annum on the
--------------------
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average daily outstanding Transferee's Interest with respect to the Transferred
Receivables, payable on the fifteenth calendar day of each month (or, if such
day is not a Business Day, the immediately succeeding Business Day) or such
other day during each calendar month as the Transferee and the Collection Agent
shall agree. The Collection Agent Fee shall be payable from Collections. So
long as the Originator is acting as the Collection Agent hereunder, amounts paid
as the Collection Agent Fee pursuant to this Section 6.03 shall reduce, on a
dollar-for-dollar basis, the obligation of the Transferee to pay the "Collection
----------
Agent Fee" pursuant to Section 1.04(c) of the Receivables Transfer Agreement,
- ---------
provided that such obligation of the Transferor shall in no event be reduced
below zero.
SECTION 6.04. Certain Rights of the Transferee. (a) The Transferee
--------------------------------
may, at any time, give notice of the transfer of Transferred Receivables and/or
direct the Obligors of Transferred Receivables and any Person obligated on any
Related Security, or any of them, that payment of all amounts payable under any
Transferred Receivable shall be made directly to the Transferee or its designee.
(b) The Originator shall, at any time upon the Transferee's request
and at the Originator's expense, give notice of the transfer of Transferred
Receivables to each Obligor of Transferred Receivables and direct that payments
of all amounts payable under such Transferred Receivables be made directly to
the Transferee or its designee.
(c) At the Transferee's request and at the Originator's expense, the
Originator and the Collection Agent shall (i) assemble all of the documents,
instruments and other records (including, without limitation, computer tapes and
disks) that evidence or relate to the Transferred Receivables, and the related
Contracts and Related Security, or that are otherwise necessary or desirable to
collect the Transferred Receivables, and shall make the same available to the
Transferee at a place selected by the Transferee or its designee, and (ii)
segregate all cash, checks and other instruments received by it from time to
time constituting Collections of Transferred Receivables in a manner acceptable
to the Transferee and, promptly upon receipt, remit all such cash, checks and
instruments, duly indorsed or with duly executed instruments of transfer, to the
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Transferee or its designee. The Transferee shall also have the right to make
copies of all such documents, instruments and other records at any time.
(d) The Originator authorizes the Transferee to take any and all
steps in the Originator's name and on behalf of the Originator that are
necessary or desirable, in the determination of the Transferee, to collect
amounts due under the Transferred Receivables.
SECTION 6.05. Rights and Remedies. (a) If the Originator or the
-------------------
Collection Agent fails to perform any of its obligations under this Agreement,
the Transferee may (but shall not be required to) itself perform, or cause
performance of, such obligation, and, if the Originator (as Collection Agent or
otherwise) fails to so perform, the costs and expenses of the Transferee
incurred in connection therewith shall be payable by the Originator as provided
in Section 8.01 or Section 9.04 as applicable.
(b) The Originator shall perform all of its obligations under the
Contracts related to the Transferred Receivables to the same extent as if the
Originator had not transferred Receivables hereunder and the exercise by the
Transferee of its rights hereunder shall not relieve the Originator from such
obligations or its obligations with respect to the Transferred Receivables. The
Transferee shall not have any obligation or liability with respect to any
Transferred Receivables or related Contracts, nor shall the Transferee be
obligated to perform any of the obligations of the Originator thereunder.
(c) The Originator shall cooperate with the Collection Agent in
collecting amounts due from Obligors in respect of the Transferred Receivables.
SECTION 6.06. Transfer of Records to Transferee. Each Transfer and
---------------------------------
contribution of Receivables hereunder shall include the transfer to the
Transferee of all of the Originator's right and title to and interest in the
records relating to such Receivables and shall include an irrevocable non-
exclusive license to the use of the Originator's computer software system to
access and create such records. Such license shall be without royalty or
payment of any kind, is coupled with an interest, and shall be irrevocable until
all of the
32
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Transferred Receivables are either collected in full or become Defaulted
Receivables.
The Originator shall take such action requested by the Transferee,
from time to time hereafter, that may be necessary or appropriate to ensure that
the Transferee has an enforceable interest in the records relating to the
Transferred Receivables and rights to the use of the Originator's computer
software system to access and create such records.
In recognition of the Originator's need to have access to the records
transferred to the Transferee hereunder, the Transferee hereby grants to the
Originator an irrevocable license to access such records in connection with any
activity arising in the ordinary course of the Originator's business or in
performance of its duties as Collection Agent, provided that (i) the Originator
shall not disrupt or otherwise interfere with the Transferee's use of and access
to such records during such license period and (ii) the Originator consents to
the assignment and delivery of the records (including any information contained
therein relating to the Originator or its operations) to any assignees or
transferees of the Transferee provided they agree to hold such records
confidential.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following events
---------------------
("Events of Termination") shall occur and be continuing:
- -----------------------
(a) The Collection Agent (if the Originator or any of its Affiliates)
(i) shall fail to perform or observe any term, covenant or agreement under this
Agreement (other than as referred to in clause (ii) of this subsection (a)) and
such failure shall remain unremedied for three Business Days of the receipt of
notice or actual knowledge thereof or (ii) shall fail to make when due any
payment or deposit to be made by it under this Agreement; or
33
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(b) The Originator shall fail (i) to transfer to the Transferee when
requested any rights, pursuant to this Agreement, which the Originator then has
as Collection Agent, or (ii) to make any payment required under Section 2.04(a)
or 2.04(b); or
(c) Any representation or warranty made or deemed made by the
Originator (or any of its officers) under or in connection with this Agreement
or any information or report delivered by the Originator pursuant to this
Agreement shall prove to have been incorrect or untrue in any material respect
when made or deemed made or delivered; or
(d) The Originator shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to the Originator by the Transferee; or
(e) The Originator or any of its subsidiaries shall fail to pay any
principal of or premium or interest on any of its Debt which is outstanding in a
principal amount of at least $10,000,000 in the aggregate when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to repay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; or
(f) [Reserved]
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(g) The Originator or any of its subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Originator or
any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Originator or
any of its subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (g); or
(h) An Event of Termination shall have occurred under the Receivables
Transfer Agreement; or
(i) There shall have occurred any material adverse change in the
financial condition or operations of the Originator since June 30, 1996; or
there shall have occurred any event which may materially adversely affect the
collectibility of the Transferred Receivables or the ability of the Originator
to collect Transferred Receivables or otherwise perform its obligations under
this Agreement;
then, and in any such event, the Transferee may, by notice to the Originator,
take either or both of the following actions: (x) declare the Facility
Termination Date to have occurred (in which case the Facility Termination Date
shall be deemed to have occurred) and (y) without limiting any right under this
Agreement to replace the Collection Agent, designate another Person to succeed
the Originator as Collection Agent; provided, that, automatically upon the
--------
occurrence of any event (without any requirement for the passage of time or the
giving of notice)
35
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described in paragraph (g) of this Section 7.01, the Facility Termination Date
shall occur, the Originator (if it is then serving as the Collection Agent)
shall cease to be the Collection Agent, and the Transferee (or its assigns or
designees) shall become the Collection Agent. Upon any such declaration or
designation or upon such automatic termination, the Transferee shall have, in
addition to the rights and remedies under this Agreement, all other rights and
remedies with respect to the Receivables provided after default under the UCC
and under other applicable law, which rights and remedies shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Originator. Without limiting any
-----------------------------
other rights which the Transferee may have hereunder or under applicable law,
the Originator hereby agrees to indemnify the Transferee and its assigns and
transferees (each, an "Indemnified Party") from and against any and all damages,
-----------------
claims, losses, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts"), awarded against or incurred by any
-------------------
Indemnified Party in connection with the transactions contemplated by this
Agreement. It is expressly agreed and understood by the parties hereto (i) that
the foregoing indemnification is not intended to, and shall not, constitute a
guarantee of the collectibility or payment of the Transferred Receivables and
(ii) that nothing in this Section 8.01 shall require the Originator to indemnify
any Person (a) for Receivables which are not collected, not paid or
uncollectible on account of the insolvency, bankruptcy, or financial inability
to pay of the applicable Obligor, (b) for damages, losses, claims or liabilities
or related costs or expenses resulting from such Person's gross negligence or
willful misconduct, or (c) for any income taxes or franchise taxes incurred by
such Person arising out of or as a result of this Agreement or in respect of any
Transferred Receivable or any Contract.
36
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement or consent to any departure by the Originator
therefrom shall be effective unless in a writing signed by the Transferee and,
in the case of any amendment, also signed by the Originator, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Transferee to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.
SECTION 9.02. Notices, Etc. All notices and other communications
------------
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be faxed or delivered, to each party
hereto, at its address set forth under its name on the signature pages hereof or
at such other address as shall be designated by such party in a written notice
to the other parties hereto. Notices and communications by facsimile shall be
effective when sent (and shall be followed by hard copy sent by regular mail),
and notices and communications sent by other means shall be effective when
received.
SECTION 9.03. Binding Effect; Assignability. (a) This Agreement shall
-----------------------------
be binding upon and inure to the benefit of the Originator, the Transferee and
their respective successors and assigns; provided, however, that the Originator
-------- -------
may not assign its rights or obligations hereunder or any interest herein
without the prior written consent of the Transferee. In connection with any
assignment by the Transferee of all or a portion of the Transferred Receivables,
the assignee shall, to the extent of its assignment, have all rights of the
Transferee under this Agreement (as if such buyer or assignee, as the case may
be, were the Transferee hereunder) except to the extent specifically provided in
the agreement between the Transferee and such assignee.
37
<PAGE>
(b) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until such time, after the Facility Termination Date,
when all of the Transferred Receivables are either collected in full or become
Defaulted Receivables; provided, however, that rights and remedies with respect
-------- -------
to any breach of any representation and warranty made by the Originator pursuant
to Article IV and the provisions of Article VIII and Sections 9.04, 9.05 and
9.06 shall be continuing and shall survive any termination of this Agreement.
SECTION 9.04. Costs, Expenses and Taxes. (a) In addition to the
-------------------------
rights of indemnification granted to the Transferee pursuant to Article VIII
hereof, the Originator agrees to pay on demand all costs and expenses in
connection with the preparation, execution and delivery of this Agreement and
the other documents and agreements to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Transferee (including the reasonable allocable fees of the Transferee's in-house
counsel) with respect thereto and with respect to advising the Transferee as to
its rights and remedies under this Agreement, and the Originator agrees to pay
all costs and expenses, if any (including reasonable counsel fees and expenses),
in connection with the enforcement of this Agreement and the other documents to
be delivered hereunder excluding, however, any costs of enforcement or
--------- -------
collection of Transferred Receivables.
(b) In addition, the Originator agrees to pay any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and the Originator agrees to save each Indemnified Party
harmless from and against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 9.05. No Proceedings. The Originator hereby agrees that it
--------------
will not institute against the Transferee any proceeding of the type referred to
in Section 7.01(g) so long as there shall not have elapsed one year plus one day
since the later of (i) the Facility Termination Date and (ii) the date on which
all
38
<PAGE>
of the Transferred Receivables are either collected in full or become Defaulted
Receivables.
SECTION 9.06. Confidentiality. Unless otherwise required by
---------------
applicable law, each party hereto agrees to maintain the confidentiality of this
Agreement in communications with third parties and otherwise; provided that this
Agreement may be disclosed to (i) third parties to the extent such disclosure is
made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the other party hereto, and (ii) such party's legal
counsel and auditors and the Transferee's assignees, if they agree in each case
to hold it confidential.
SECTION 9.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE TRANSFEREE'S INTEREST IN THE RECEIVABLES OR REMEDIES
HEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
SECTION 9.08. Third Party Beneficiary. Each of the parties hereto
-----------------------
hereby acknowledges that the Transferee may assign all or any portion of its
rights under this Agreement and that such assignees may (except as otherwise
agreed to by such assignees) further assign their rights under this Agreement,
and the Originator hereby consents to any such assignments. All such assignees,
including parties to the Receivables Transfer Agreement in the case of
assignment to such parties, shall be third party beneficiaries of, and shall be
entitled to enforce the Transferee's rights and remedies under, this Agreement
to the same extent as if they were parties thereto, except to the extent
specifically limited under the terms of their assignment.
SECTION 9.09. Tax Treatment. It is the intention of the Originator
-------------
and the Transferee that for federal, state and local income and
39
<PAGE>
franchise tax purposes, the Transferee's Interest will be treated as evidence of
indebtedness of the Originator secured by the Receivables, the Related Security
and Collections and other proceeds thereof. The Originator and the Transferee,
by entering into this Agreement, intend to treat the Transferee's Interest as
indebtedness. The provisions of this Agreement and all related Transaction
Documents shall be construed to further such intentions of the parties hereto.
SECTION 9.10. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
40
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
ORIGINATOR: IKON CAPITAL, INC.
By:
---------------------------
Name:
Title:
Address:
1738 Bass Road
Macon, Georgia 31210
Attn: Harry G. Kozee
Tel. No.: (912) 471-2306
Facsimile No.: (912) 471-2376
for purposes of notices, with a copy to:
Alco Standard Corporation
925 Duportail Road
Wayne, Pennsylvania 19087
Attention: Jack Quinn
Facsimile No.: (610) 296-3248
41
<PAGE>
TRANSFEREE: IKON FUNDING INC.
By:
---------------------------
Name:
Title:
Address:
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
Attention: Robert McLain
Facsimile No.: (302) 798-2779
42
<PAGE>
EXHIBIT A
CREDIT AND COLLECTION POLICY
A-1
<PAGE>
EXHIBIT B
DEALERS
Allegheny Business Machines Mirex 5317 Mirex Drive
Foster Plaza Three 5317 Mirex Drive
601 Holiday Drive St. Louis, MO 63119
Pittsburgh, PA 15220
Redden-Miller Office Machines
American Business Machines P.O. Box 910
5701 Mayfair Road 107 South 3rd Avenue
North Canton, OH Marshalltown, IA 50158
Kex Copysource Decoursey Business Systems
350 South Avenue P.O. Box 15329
Rochester, NY 14620 Lenexa, KS 66215-5329
Street Address
--------------
Copier Consultants 9120 Barton
7009 Albert Pick Road Overland Park, KS 66214
Greensboro, NC 27409
Colorado Copier
Omni Business Systems 637 South Pierce
2725 Center Place Louisville, CO 80027
Melbourne, FL 32940
American Business Machines-
Portland
Unitech of Mississippi 2720 S.W. Corbett
P.O. Box 20639 Portland, OR 97201
5345 Highway 18S
Jackson, MS 39289-1639 Xtec Office Systems
901 Jefferson Avenue
Paul B. Williams Valley Forge Corporate Center
1035 Winston Street Norristown, PA 19403
Greensboro, NC 27405
B-1
<PAGE>
EXHIBIT C
DESIGNATED STATES
Delaware
Hawaii
Kansas
Maryland
Minnesota
Montana
New Mexico
New York
North Carolina
C-1
<PAGE>
EXHIBIT D
The principal place of business and chief executive offices of the
Transferor are located at:
IKON FUNDING INC.
501 Silverside Road, Suite 28
Wilmington, Delaware 19809
The original records concerning the Receivables (and all original documents
related thereto) are located at the offices of the Collection Agent at:
IKON CAPITAL, INC.
1738 Bass Road
Macon, Georgia 31210
D-1
<PAGE>
TRANSFER AGREEMENT
Dated as of September 30, 1996
Between
IKON CAPITAL, INC.
as Originator
-------------
and
IKON FUNDING INC.
as Transferee
-------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENTS..................................................................................... 1
ARTICLE I DEFINITIONS.............................................................................. 1
SECTION 1.01. Certain Defined Terms............................................................. 1
Adverse Claim.................................................................................. 1
Affiliate...................................................................................... 1
Aggregate Adjusted Outstanding Balance......................................................... 1
Alternate Base Rate............................................................................ 2
Applicable Percentage.......................................................................... 2
Business Day................................................................................... 3
Collection Agent............................................................................... 3
Collection Agent Fee........................................................................... 3
Collections.................................................................................... 3
Contract....................................................................................... 3
Credit and Collection Policy................................................................... 3
Dealer......................................................................................... 3
Debt........................................................................................... 4
Default Ratio.................................................................................. 4
Defaulted Receivable........................................................................... 4
Designated Obligor............................................................................. 4
Designated States.............................................................................. 5
Dilution....................................................................................... 5
Discount....................................................................................... 5
Eligible Receivable............................................................................ 5
Equipment...................................................................................... 7
ERISA.......................................................................................... 7
Event of Termination........................................................................... 7
Facility....................................................................................... 7
Facility Termination Date...................................................................... 7
Federal Funds Rate............................................................................. 8
General Trial Balance.......................................................................... 8
Incipient Event of Termination................................................................. 8
Indemnified Amounts............................................................................ 8
Obligor........................................................................................ 8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Originator Report............................................................................... 8
Outstanding Balance............................................................................. 8
Parent.......................................................................................... 9
Periodic Payments............................................................................... 9
Person.......................................................................................... 9
Receivable...................................................................................... 9
Receivables Transfer Agreement.................................................................. 9
Receivables Transfer Request.................................................................... 9
Related Contract............................................................................... 10
Related Security............................................................................... 10
Scheduled Termination Date..................................................................... 10
Settlement Date................................................................................ 10
Support Agreement.............................................................................. 11
Transfer....................................................................................... 11
Transfer Date.................................................................................. 11
Transferee's Interest.......................................................................... 11
Transferred Receivable......................................................................... 11
UCC............................................................................................ 11
SECTION 1.02. Other Terms......................................................................... 11
ARTICLE II AMOUNTS AND TERMS OF TRANSFERS AND CONTRIBUTIONS......................................... 12
SECTION 2.01. Facility............................................................................ 12
SECTION 2.02. Making Transfers.................................................................... 12
SECTION 2.03. Collections......................................................................... 13
SECTION 2.04. Settlement Procedures............................................................... 13
SECTION 2.05. Fees................................................................................ 14
SECTION 2.06. Payments and Computations, Etc...................................................... 15
ARTICLE III CONDITIONS OF TRANSFERS.................................................................. 15
SECTION 3.01. Conditions Precedent to Initial Transfer from the Originator........................ 15
SECTION 3.02. Conditions Precedent to All Transfers............................................... 16
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................... 18
SECTION 4.01. Representations and Warranties of the Originator.................................... 18
ARTICLE V COVENANTS ............................................................................... 22
SECTION 5.01. A. Covenants of the Originator.................................................... 22
B. Covenants of the Transferee.................................................... 27
SECTION 5.02. Grant of Security Interest.......................................................... 28
ARTICLE VI ADMINISTRATION AND COLLECTION............................................................ 28
SECTION 6.01. Designation of Collection Agent..................................................... 28
SECTION 6.02. Duties of Collection Agent.......................................................... 29
SECTION 6.03. Collection Agent Fee................................................................ 30
SECTION 6.04. Certain Rights of the Transferee.................................................... 31
SECTION 6.05. Rights and Remedies................................................................. 32
SECTION 6.06. Transfer of Records to Transferee................................................... 32
ARTICLE VII EVENTS OF TERMINATION.................................................................... 33
SECTION 7.01. Events of Termination............................................................... 33
ARTICLE VIII INDEMNIFICATION.......................................................................... 36
SECTION 8.01. Indemnities by the Originator....................................................... 36
ARTICLE IX MISCELLANEOUS............................................................................ 37
SECTION 9.01. Amendments, Etc..................................................................... 37
SECTION 9.02. Notices, Etc........................................................................ 37
SECTION 9.03. Binding Effect; Assignability....................................................... 37
SECTION 9.04. Costs, Expenses and Taxes........................................................... 38
SECTION 9.05. No Proceedings...................................................................... 38
SECTION 9.06. Confidentiality..................................................................... 39
</TABLE>
iii
<PAGE>
<TABLE>
Page
----
<S> <C>
SECTION 9.07. GOVERNING LAW....................................................................... 39
SECTION 9.08. Third Party Beneficiary............................................................. 39
SECTION 9.09. Tax Treatment....................................................................... 39
SECTION 9.10. Execution in Counterparts........................................................... 40
EXHIBITS
EXHIBIT A Credit and Collection Policy
EXHIBIT B List of Dealers
EXHIBIT C List of Designated States
EXHIBIT D Principal Place of Business and Location of Records
</TABLE>
iv
<PAGE>
Exhibit 10.28
ALCO STANDARD CORPORATION
1994 DEFERRED COMPENSATION PLAN
(as amended and restated effective January 1, 1997)
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, bonuses, commissions and
incentive compensation from Alco or an Affiliated 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 January 1, 1997, 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 or Unisource
Worldwide, Inc.
(g) "Participant" shall mean any person employed by an Employer who is
eligible, and who has elected, to participate in the Plan.
<PAGE>
(h) "Participation Agreement" shall mean the agreement executed by each
Participant and Alco or an Affiliated Employer, as the case may be, 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 Alco or an Affiliated
Employer on a full-time basis, (b) is "highly compensated" (employees who
received Compensation from Alco or an Affiliated Employer in the 1995 calendar
year, or who expect to receive Compensation from Alco or an Affiliated Employer
in the 1996 calendar year, in excess of $110,000 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, 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 and prior to the
beginning of each Plan Year during the term of the Plan, an employee of Alco or
an Affiliated Employer who meets the eligibility requirements of Paragraph 3 may
irrevocably elect to defer or forgo a portion of his Compensation for each of
the next five Plan Years (or, if less, for each of the Plan Years while he is an
active employee of Alco or an Affiliated Employer). The amount of the deferral
for each Plan Year may vary, subject to the minimum and maximum limitations set
forth below.
The amount of salary and/or bonus (stated as a dollar amount or as a
percentage in the case of deferrals from a Participant's bonus) to be deferred
for the first Plan Year shall be designated on the Participant's Participation
Agreement, subject to the minimum and maximum limitations set forth below. For
each of the next four Plan Years after a Participant's initial deferral election
(or, if less, for each Plan Year while he is an active employee of Alco or an
Affiliated Employer), the Participant will be given the opportunity, prior to
the beginning
2
<PAGE>
of each Plan Year, to elect the amount of Compensation to be deferred, subject
to the minimum and maximum limitations set forth below. For each Plan Year, the
amount of a Participant's deferrals from salary may be no less than $3,000 and
the aggregate amount of a Participant's deferrals from salary and bonus may be
no more than $100,000. 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 of salary 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 Alco or an Affiliated Employer,
in substantially equal installments during the applicable deferral period in the
case of deferrals from salary, and in a lump sum in the case of deferrals from
bonuses.
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 month. Any such changes
requested by the 25th day of the month will become effective as of the first day
of the next calendar month.
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 with an Employer 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
3
<PAGE>
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.
7. Death Benefits. If a Participant dies (whether before or after he
begins to receive benefit payments), 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 be paid in ten
annual payments and 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, by December 31 of the second year prior to such date, of his election
to defer commencement of such benefits until a later date or his election to
receive benefits in five or fifteen annual payments.
A. Ten Payments. If the Participant's benefits are to be paid to him
------------
in ten annual payments, such payments shall be made 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.
4
<PAGE>
(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.
(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.
B. Five Payments. If the Participant elects (in accordance with the
-------------
procedure specified herein) to have his benefits paid in five annual payments,
such payments shall be made as follows:
(a) 1/5 of the value of his account as of the preceding December 31 in the
first year.
(b) 1/4 of the value of his account as of the preceding December 31 in the
second year.
(c) 1/3 of the value of his account as of the preceding December 31 in the
third year.
(d) 1/2 of the value of his account as of the preceding December 31 in the
fourth year.
(e) All amounts remaining in his account in the fifth year.
C. Fifteen Payments. If the Participant elects (in accordance with the
----------------
procedure specified herein) to have his benefits paid in fifteen annual
payments, such payments shall be made as follows:
(a) 1/15 of the value of his account as of the preceding December 31 in the
first year.
(b) 1/14 of the value of his account as of the preceding December 31 in the
second year.
(c) 1/13 of the value of his account as of the preceding December 31 in the
third year.
(d) 1/12 of the value of his account as of the preceding December 31 in the
fourth year.
5
<PAGE>
(e) 1/11 of the value of his account as of the preceding December 31
in the fifth year.
(f) 1/10 of the value of his account as of the preceding December 31
in the sixth year.
(g) 1/9 of the value of his account as of the preceding December 31 in
the seventh year.
(h) 1/8 of the value of his account as of the preceding December 31 in
the eighth year.
(i) 1/7 of the value of his account as of the preceding December 31 in
the ninth year.
(j) 1/6 of the value of his account as of the preceding December 31 in
the tenth year.
(k) 1/5 of the value of his account as of the preceding December 31 in
the eleventh year.
(l) 1/4 of the value of his account as of the preceding December 31 in
the twelfth year.
(m) 1/3 of the value of his account as of the preceding December 31 in
the thirteenth year.
(n) 1/2 of the value of his account as of the preceding December 31 in
the fourteenth year.
(o) All amounts remaining in his account in the fifteenth year.
10. Beneficiary Designation. A Participant shall designate in his
Participation Agreement the beneficiary or beneficiaries who shall, in the event
of his death, receive the benefits payable in accordance with Paragraph 7. 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 such benefits are payable, payments shall be made 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
6
<PAGE>
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, 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 Affiliated Employer.
15. Ownership of Life Insurance Policies. Alco may, but is not obligated
to, purchase life insurance policies to assist it
7
<PAGE>
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 Affiliated 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.
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
8
<PAGE>
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 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
9
<PAGE>
(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.
(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.
10
<PAGE>
Exhibit 10.29
ALCO STANDARD CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
1. Purpose. The purpose of the Alco Standard Corporation Executive
Deferred Compensation Plan is to permit certain eligible employees of Alco
Standard Corporation to defer a portion of their compensation and to participate
in a program under which they are provided income at a specified time in the
future. 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) "Alco" shall mean Alco Standard Corporation, an Ohio corporation.
(c) "Compensation" shall mean all salaries and bonuses payable by Alco
and all shares of Alco common stock or cash payable pursuant to awards under the
LTIP, but shall not include company contributions under Alco's Partners' Stock
Purchase Plan or the Alco Retirement Savings Plan or any fringe benefits.
(d) "Effective Date" shall mean January 1, 1996.
(e) "Election Form" shall mean the election form executed by each
Participant and Alco setting forth certain information relating to the
Participant's participation in the Plan.
(f) "LTIP" shall mean Alco's Long Term Incentive Compensation Plan, as
amended from time to time.
(g) "Participant" shall mean any person employed by Alco who is
eligible, and who has elected, to participate in the Plan.
(h) "Plan" shall mean the Alco Standard Corporation Executive Deferred
Compensation Plan, as amended from time to time.
(i) "Plan Year" shall mean the period beginning on January 1 and ending
on December 31 of each year.
<PAGE>
3. Participation. Any person who (a) is employed by Alco, (b) is holding
an unvested award under the LTIP and (c) is a United States taxpayer shall be
eligible to participate herein. A person eligible under this Paragraph 3 shall
become a Participant by executing an Election Form and such other forms as may
be required by the Administrator.
4. Deferral of Compensation. Prior to the Effective Date and prior to the
beginning of each Plan Year during the term of the Plan, an employee who meets
the eligibility requirements of Paragraph 3 may irrevocably elect to defer or
forgo a portion of his Compensation for the following Plan Year.
The amount of the deferral for each Plan Year may vary, but cash deferrals
may be no less than $5,000 for any Plan Year. The amount to be deferred for a
Plan Year will be deducted from the Participant's Compensation otherwise payable
by Alco. In the case of deferrals from salary, such deferrals will be made in
substantially equal installments.
A Participant may specify the length of time for which receipt of cash
and/or shares of Alco common stock may be deferred, provided that (i) the
deferral period must extend at least until the January following the end of the
calendar year in which the Compensation would otherwise have been paid (but for
the election to defer) and (ii) distributions must commence no later than the
January following the year in which the Participant attains age 60 or the
January following the year in which the Participant retires or otherwise
terminates employment with Alco, whichever is later. A Participant may elect to
defer the distribution of benefits to a later date by providing written notice
of such election to the Administrator by December 31 of the second year prior to
the date on which benefits would otherwise have been paid; provided, however,
that such election may be made only once with respect to the deferral pursuant
to any Election Form.
5. Investment Accounts. Amounts deferred by a Participant pursuant to
Paragraph 4 will be credited to a cash deferral account and/or a stock deferral
account established by Alco in the name of the Participant. A Participant's
cash deferral account will be denominated in dollars and 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's stock deferral account will be denominated in share units
(representing the right to receive an equivalent number of shares of Alco common
stock) and will be credited with additional share units to reflect cash
dividends paid by Alco in respect of its common stock.
2
<PAGE>
A Participant may request a change in the allocation of his cash deferral
account among the various alternatives once during any calendar month. Any such
change requested by the 25th day of a month will become effective as of the
first day of the next calendar month.
A Participant may request that amounts deferred into in his stock deferral
account prior to January 1, 1997 (valued as of the end of the calendar month in
which the request is made) be transferred into his cash deferral account. Any
such change will become effective as of the first day of the next calendar
month. Any portion of a Participant's stock deferral account that is
transferred to a cash deferral account may not thereafter be transferred back
into a stock deferral account. Amounts deferred into a Participant's stock
deferral account on or after January 1, 1997 must remain in his stock deferral
account and may not be transferred into his cash deferral account.
6. Rabbi Trust. Alco intends to contribute all Participant deferrals of
Alco common stock to a "rabbi trust" (the "Trust") to be established for this
purpose. Assets held in the Trust will be subject to the claims of creditors of
Alco.
The Trust shall be deemed to be the owner of all shares held in the
Trust for tax purposes. The trustee of the Trust (the "Trustee") shall retain
all incidents of ownership in any shares held in the Trust, including the right
to vote such shares and to receive dividends paid in respect of such shares. The
Trustee may, but is not obligated to, reinvest any cash dividends received in
respect of shares of Alco common stock held in the Trust to purchase additional
shares of Alco common stock.
7. Vesting. A Participant shall be immediately vested in all amounts
deferred hereunder.
8. Amount and Timing of Payments. Except as otherwise provided in
Paragraphs 9 and 10, amounts to which a Participant is entitled under the Plan
shall be paid to him in a lump sum in January of the year specified in his
Election Form, valued as of the end of the preceding Plan Year. Alternatively,
if the Participant so elects, distributions may be made in substantially equal
annual installments over a period not to exceed ten years, beginning in January
of the year specified in the Participant's Election Form. All distributions
from the Trust shall be made in shares of Alco common stock, unless the
Participant elects, subject to the approval of the Plan Administrator, to
receive such distribution(s) in cash.
9. Death. Notwithstanding any contrary election in a Participant's
Election Form, if a Participant dies before receiving full payment of all
amounts to which he is entitled under the Plan, the beneficiary or beneficiaries
designated by
3
<PAGE>
the Participant in his Election Form shall receive the balance in the
Participant's cash deferral account and stock deferral account (valued as of the
end of the calendar month in which the Participant dies), in a lump sum payment,
as soon as administratively practicable following the Participant's date of
death. Distributions from a Participant's stock deferral account will be made
in shares of Alco common stock (and cash in lieu of fractional shares) unless
the beneficiary elects, subject to the approval of the Administrator, to have
the distribution paid in cash.
10. Termination of Employment. Notwithstanding any contrary election in a
Participant's Election Form, if a Participant terminates employment with Alco,
he shall receive the balance in his cash deferral account and stock deferral
account (valued as of the end of the Plan Year in which the Participant's
employment terminates), in a lump sum payment, in January of the year following
his employment termination date. Distributions from a participant's stock
deferral account will be made in shares of Alco common stock (and cash in lieu
of fractional shares) unless the Participant elects, subject to the approval of
the Administrator, to have the distribution paid in cash. For purposes of this
Paragraph 10, a Participant will not be treated as having terminated employment
with Alco if he continues to be an employee of Unisource Worldwide, Inc.
11. Beneficiary Designation. A Participant shall designate in his
Election Form the beneficiary or beneficiaries, who shall, in the event of his
death, receive the payments to which the Participant would otherwise have been
entitled. 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 such amounts are payable, payment
shall be made 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.
12. 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;
4
<PAGE>
(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 12.
13. Responsibility for Payment. All amounts payable 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 amounts.
14. 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, 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 Alco 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.
15. Unsecured Obligation. Other than the assets contributed to the Trust
pursuant to Paragraph 6, 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 any specific asset in the Trust. To the extent that any person acquires any
right to receive payments under this Plan or an Election Form, 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.
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;
5
<PAGE>
(b) making calculations under the Plan;
(c) interpreting the provisions of the Plan; and
(d) otherwise administering the Plan in accordance with its terms.
17. Claims Procedures. At any time the Administrator makes a
determination adverse to a Participant or beneficiary with respect to a claim
for payment 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
Alco, 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.
6
<PAGE>
19. Amendment. The Board of Directors shall have the power to amend this
Plan at any time; provided, however, that, except as set forth in Paragraphs 20,
21 and 22, no amendment or termination of the Plan shall have a material adverse
effect upon a Participant unless he consents to such amendment or termination in
writing.
20. Termination. This Plan shall remain in effect until terminated by the
Board of Directors of Alco. The Board of Directors of Alco shall have the right
to terminate the Plan in whole or in part, for any reason, including pursuant to
a determination 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 Election Form (or any other document),
provided that Alco distributes to each Participant, in a lump sum payment, the
balance in his cash deferral account and stock deferral account, valued as of
the end of the month in which such termination occurs. Distributions from a
Participant's stock deferral account will be made in shares of Alco common stock
(and cash in lieu of fractional shares) unless the Participant elects, subject
to the approval of the Plan Administrator, to receive such distribution in cash.
21. Acceleration. Alco shall have the right at any time to 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 cash
deferral account and stock deferral account, valued as of the end of the month
following Alco's determination to accelerate payments. If Alco accelerates
payment to more than 70% of all Participants pursuant to this provision, it must
accelerate payment 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 balance in his cash deferral account and stock deferral account,
valued as of the end of the month in which such transaction or event occurs.
Distributions from a Participant's stock deferral account will be made in shares
of Alco common stock (and cash in lieu of fractional shares) unless the
Participant elects, subject to the approval of the Plan Administrator, to
receive such distribution in cash.
7
<PAGE>
23. Miscellaneous.
(a) The existence of this Plan and the Elections Forms hereunder, and
any actions undertaken pursuant hereto, shall not confer upon the Participant
any right to continued employment by Alco.
(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 Election Forms and other documents
executed in accordance herewith shall be binding upon Alco, its successors and
assigns, and each Participant, his heirs and legal representatives.
(d) Any taxes imposed on a Participant shall be the sole
responsibility of the Participant. Alco shall have the right to deduct from any
amounts payable under the Plan any federal, state or local taxes required to be
deducted or withheld from such payments.
(e) No expenses of administering the Plan shall be charged against the
Participants or any payments made hereunder, except that Alco may, in its
discretion, allocate certain taxes to the accounts of Participants.
(f) As used herein, the singular shall include the plural, the
masculine shall include the feminine, and vice versa.
8
<PAGE>
EXHIBIT 11
ALCO STANDARD CORPORATION
COMPUTATIONS OF EARNINGS PER SHARE
(In thousands, except earnings (loss) per share)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- ------------------------ ----------------------
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 125,856 125,856 114,296 114,296 109,336 109,336
Preferred stock
Considered common equivalents 10 10
Senior securities 2,396 9,016 2,066 2,372
Convertible loan notes 374
Options 1,793 1,912 2,178 2,472
---------- ------------ --------- ---------- --------- -----------
Total shares 127,649 130,538 116,474 125,784 111,412 111,718
========== ============ ========= ========== ========= ===========
Income
- ------
Continuing operations $ 164,893 $ 164,893 $ 115,011 $ 115,011 $ 1,996 $ 1,996
Discontinued operations 45,848 45,848 88,661 88,661 74,476 74,476
---------- ---------- ---------- ---------- --------- ----------
Net Income 210,741 210,741 203,672 203,672 76,472 76,472
Less: Preferred dividends 22,319 19,540 15,209 3,637 11,572 11,572
---------- ---------- ---------- ---------- --------- ----------
Net Income available to
common shareholders 188,422 $ 191,201 188,463 $ 200,035 $ 64,900 $ 64,900
========== ========== ========== ========== ========= ==========
Earnings (Loss) per share $1.12 $1.11 $0.86 $0.89 ($0.09) ($0.09)
Continuing operations 0.36 0.35 0.76 0.70 0.67 0.67
---------- ---------- ---------- ---------- --------- ----------
Discontinued operations $1.48 $1.46 $1.62 $1.59 $0.58 $0.58
========== ========== ========== ========== ========= ==========
</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%.
<PAGE>
EXHIBIT 12.1
ALCO STANDARD CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 164,893 $ 115,011 $ 1,996 $ 61,276 $ 51,612
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 107,984 75,501 41,315 40,093 33,488
Fixed charges 127,557 82,354 60,367 49,418 39,761
------------ ------------ ------------ ------------ ------------
Earnings, as adjusted (A) $ 400,434 $ 272,866 $ 220,836 $ 153,325 $ 124,861
============ ============ ============ ============ ============
Fixed Charges
Other interest expense, including interest
on capital leases $ 105,222 $ 61,888 $ 44,096 $ 39,044 $ 30,923
Estimated interest component of
rental expense 22,335 20,466 16,271 10,374 8,838
------------ ------------ ------------ ------------ ------------
Total fixed charges (B) $ 127,557 $ 82,364 $ 60,367 $ 49,418 $ 39,761
============ ============ ============ ============ ============
Ratio of earnings to fixed charges
(A)/(B) 3.1 3.3 3.7 3.1 3.1
=== === === === ===
</TABLE>
<PAGE>
EXHIBIT 12.2
ALCO STANDARD CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(EXCLUDING CAPTIVE FINANCE SUBSIDIARIES)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 140,656 $ 100,539 $ (11,351) $ 53,174 $ 45,557
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 85,512 63,938 32,904 34,621 29,777
Fixed charges 59,514 42,138 32,389 25,707 20,188
-------- -------- --------- -------- --------
Earnings, as adjusted (A) $ 285,682 $ 206,615 $ 171,100 $116,040 $ 95,522
======== ======== ========= ======== ========
Fixed Charges
Other interest expense, including interest
on capital leases $ 37,179 $ 21,672 $ 16,118 $ 15,382 $ 11,400
Estimated interest component of
rental expense 22,335 20,466 16,271 10,325 8,788
-------- -------- -------- -------- --------
(B) $ 59,514 $ 42,138 $ 32,389 $ 25,707 $ 20,188
Total fixed charges ======== ======== ======== ======== ========
Ratio of earnings to fixed charges
(A)/(B) 4.8 4.9 5.3 4.5 4.7
=== === === === ===
</TABLE>
<PAGE>
EXHIBIT 12.3
ALCO STANDARD CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 164,893 $ 115,011 $ 1,996 $ 61,276 $ 51,612
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for income taxes 107,984 75,501 41,315 40,093 33,488
Fixed charges 127,557 82,354 60,367 49,418 39,761
---------- ---------- ---------- ---------- ----------
Earnings, as adjusted (A) $ 400,434 $ 272,866 $ 220,836 $ 153,325 $ 124,861
========== ========== ========== ========== ==========
Fixed Charges
Other interest expense, including interest
on capital lesses $ 105,222 $ 61,888 $ 44,096 $ 39,044 $ 30,923
Estimated interest component of
rental expense 22,335 20,466 16,271 10,374 8,838
---------- ---------- ---------- ---------- ----------
Total fixed charges 127,557 82,354 60,367 49,418 39,761
Preferred stock dividends, as adjusted 36,952 25,180 18,908 15,846 129
---------- ---------- ---------- ---------- ----------
Total fixed charges and preferred
stock dividends (B) $ 164,509 $ 107,534 $ 79,275 $ 65,264 $ 39,890
========== ========== ========== ========== ==========
Ratio of earnings to fixed charges and
(A)/(B) preferred stock dividends 2.4 2.5 2.8 2.3 3.1
=== === === === ===
</TABLE>
<PAGE>
EXHIBIT 12.4
ALCO STANDARD CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(EXCLUDING CAPTIVE FINANCE SUBSIDIARIES)
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings
Income from continuing operations $ 140,656 $ 100,539 $ (11,351) $ 53,174 $ 45,557
Add:
Loss from unconsolidated affiliate 117,158 2,538
Provision for Income taxes 85,512 63,938 32,904 34,621 29,777
Fixed charges 59,514 42,138 32,389 25,707 20,188
-------- -------- -------- -------- --------
Earnings, as adjusted (A) $ 285,682 $ 206,615 $ 171,100 $ 116,040 $ 95,522
======== ======== ======== ======== ========
Fixed Charges
Other interest expense, including interest
on capital leases $ 37,179 $ 21,672 $ 16,118 $ 15,382 $ 11,400
Estimated interest component of
rental expense 22,335 20,466 16,271 10,325 8,788
-------- -------- -------- -------- --------
Total fixed charges 59,514 42,138 32,389 25,707 20,188
Preferred stock dividends, as adjusted 35,883 24,892 18,908 15,794 129
-------- -------- -------- -------- --------
Total fixed charges and preferred
stock dividends (B) $ 95,397 $ 67,030 $ 51,297 $ 41,501 $ 20,317
======== ======== ======== ======== ========
Ratio of earnings to fixed charges
and preferred Stock dividends
(A)/(B) 3.0 3.1 3.3 2.8 4.7
=== === === === ===
</TABLE>
<PAGE>
Financial Contents
22 Management's Responsibility for Financial Reporting
22 Report of Ernst & Young LLP, Independent Auditors
23 Consolidated Financial Statements
38 Financial Review
40 Corporate Financial Summary
42 Quarterly Financial Summary (Unaudited)
IKON OFFICE SOLUTIONS 21
<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 Alco, 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 three directors who
are not employees of the Company. The Audit Committee meets periodically with
Ernst & Young LLP, Alco and management to review audit scope, timing and
results.
/s/ John E. Stuart
John E. Stuart
Chairman and Chief Executive Officer
/s/ Kurt E. Dinkelacker
Kurt E. Dinkelacker
President and Chief Operating Officer
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, 1996 and 1995, 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, 1996. 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, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 16, 1996,
except for note 2,
as to which the date is
November 20, 1996
IKON OFFICE SOLUTIONS 22
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands, except per share data) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Net sales $2,381,151 $1,807,408 $1,397,271
Service and rentals 1,560,915 1,191,175 927,065
Finance income 157,707 93,019 66,731
- --------------------------------------------------------------------------------------------------------------------
4,099,773 3,091,602 2,391,067
- --------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,552,183 1,189,533 905,933
Service and rental costs 794,686 603,664 457,983
Finance interest expense 68,043 40,216 27,978
Selling and administrative 1,374,805 1,046,005 822,586
Loss from unconsolidated affiliate 117,158
- --------------------------------------------------------------------------------------------------------------------
3,789,717 2,879,418 2,331,638
- --------------------------------------------------------------------------------------------------------------------
Operating Income 310,056 212,184 59,429
Interest Expense 37,179 21,672 16,118
- --------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before Taxes 272,877 190,512 43,311
Taxes on Income 107,984 75,501 41,315
- --------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 164,893 115,011 1,996
Discontinued Operations 45,848 88,661 74,476
- --------------------------------------------------------------------------------------------------------------------
Net Income 210,741 203,672 76,472
Less Preferred Dividends 22,319 15,209 11,572
- --------------------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholders $ 188,422 $ 188,463 $ 64,900
- --------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share
Continuing operations $ 1.12 $ .86 $ (.09)
Discontinued operations .36 .76 .67
====================================================================================================================
$ 1.48 $ 1.62 $ .58
====================================================================================================================
Cash Dividends Per Share of Common Stock $ .56 $ .52 $ .50
</TABLE>
See notes to consolidated financial statements.
IKON OFFICE SOLUTIONS 23
<PAGE>
CONSOLIDATED BALANCE SHEETS
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
September 30 (dollars in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash $ 46,056 $ 66,413
Accounts receivable, less allowances of:
1996 - $35,308; 1995 - $32,856 513,378 368,518
Finance receivables, net 435,434 326,315
Inventories 350,774 267,756
Prepaid expenses 80,352 46,626
Deferred taxes 83,161 56,323
- ----------------------------------------------------------------------------------------------
Total current assets 1,509,155 1,131,951
- ----------------------------------------------------------------------------------------------
Investments and Long-Term Receivables 48,165 47,185
Long-Term Finance Receivables, net 878,324 587,789
Equipment on Operating Leases, net
of accumulated amortization of:
1996 - $153,909; 1995 - $134,848 95,043 68,488
Property and Equipment, at cost
Land 9,412 4,966
Buildings and improvements 72,709 58,101
Machinery and equipment 276,113 187,350
- ----------------------------------------------------------------------------------------------
358,234 250,417
Less accumulated depreciation 169,416 126,155
- ----------------------------------------------------------------------------------------------
188,818 124,262
- ----------------------------------------------------------------------------------------------
Other Assets
Goodwill 1,087,210 792,850
Miscellaneous 88,679 22,829
- ----------------------------------------------------------------------------------------------
1,175,889 815,679
- ----------------------------------------------------------------------------------------------
Net Assets of Discontinued Operations 1,489,201 1,334,976
- ----------------------------------------------------------------------------------------------
$ 5,384,595 $ 4,110,330
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
IKON OFFICE SOLUTIONS 24
<PAGE>
<TABLE>
<CAPTION>
September 30 (dollars in thousands) 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt $ 62,697 $ 37,457
Current portion of long-term debt, finance subsidiaries 314,000 171,232
Notes payable 186,462 256,601
Trade accounts payable 123,571 68,827
Accrued salaries, wages and commissions 101,632 82,382
Deferred revenues 200,225 182,172
Other accrued expenses 269,400 188,593
- ----------------------------------------------------------------------------------------------
Total current liabilities 1,257,987 987,264
- ----------------------------------------------------------------------------------------------
Long-Term Debt 721,923 316,688
Long-Term Debt, Finance Subsidiaries 813,026 646,353
Deferred Taxes 191,272 108,706
Other Long-Term Liabilities 144,883 159,957
Shareholders' Equity
Series AA convertible preferred stock, no par value:
1995 - 4,025,000 depositary shares issued and outstanding 201,924
Series BB conversion preferred stock, no par value:
3,877,200 depositary shares issued and outstanding 290,170 290,170
Common stock, no par value: authorized 300,000,000 shares;
issued 1996 - 131,930,000 shares; 1995 - 116,136,000 shares 1,305,413 643,998
Retained earnings 701,771 781,536
Foreign currency translation adjustment (25,187) (21,540)
Cost of common shares in treasury: 1996 - 374,000 shares;
1995 - 118,000 shares (16,663) (4,726)
- ----------------------------------------------------------------------------------------------
2,255,504 1,891,362
- ----------------------------------------------------------------------------------------------
$5,384,595 $4,110,330
==============================================================================================
See notes to consolidated financial statements.
</TABLE>
IKON OFFICE SOLUTIONS 25
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands, except per share data) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares Amounts Shares Amounts Shares Amounts
- ---------------------------------------------------------------------------------------------------------------------------------
Series AA Convertible Preferred Stock
Balance, beginning of year 4,025 $ 201,924 4,025 $ 199,912 4,025 $197,900
Dividend accretion 503 2,012 2,012
Preferred stock conversion (4,025) (202,427)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 4,025 $ 201,924 4,025 $199,912
=================================================================================================================================
Series BB Conversion Preferred Stock
Balance, beginning of year 3,877 $ 290,170
Issued in public offering 3,877 $ 290,170
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 3,877 $ 290,170 3,877 $ 290,170
=================================================================================================================================
Common Stock
Balance, beginning of year 116,136 $ 643,998 112,998 $ 551,711 101,498 $ 259,527
Issued in public offering 11,500 293,500
Series AA preferred stock conversion 8,198 368,382
Mergers, acquisitions and other 7,596 285,836 3,138 87,566 (4,104)
Tax benefit relating to stock plans 7,197 4,721 2,788
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 131,930 $1,305,413 116,136 $ 643,998 112,998 $ 551,711
=================================================================================================================================
Retained Earnings
Balance, beginning of year $ 781,536 $ 659,526 $ 664,910
Net income 210,741 203,672 76,472
Cash dividends declared:
Series AA preferred stock, per share: 1996 - $.719;
1995 - $2.875; 1994 - $2.875 (2,779) (11,572) (11,572)
Series BB preferred stock, per share: 1996 - $5.04;
1995 - $.938 (19,540) (3,637)
Common stock, per share: 1996-$.56;
1995 - $.52; 1994 - $.50 (70,010) (57,267) (52,222)
Pooled companies, prior to merger (177) (2,159) (4,916)
Series AA preferred stock conversion (199,108)
Credits (charges) from issuance of
treasury shares and other 1,108 (7,027) (13,146)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 701,771 $ 781,536 $ 659,526
=================================================================================================================================
Foreign Currency Translation Adjustment
Balance, beginning of year $ (21,540) $ (22,609) $ (23,602)
Translation adjustment (3,647) 1,069 (1,444)
Sale of investment in unconsolidated affiliate 2,437
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ (25,187) $ (21,540) $ (22,609)
=================================================================================================================================
Cost of Common Shares in Treasury
Balance, beginning of year 118 $ (4,726) 148 $ (4,067) 3,616 $ (64,048)
Purchases 2,004 (86,084) 2,783 (91,430) 1,774 (47,733)
Reissued for:
Exercise of options (395) 17,287 (544) 16,652 (908) 18,027
Sales to employee stock plans (534) 23,710 (2,267) 74,067 (2,344) 47,799
Mergers, acquisitions and other (2) 52 (1,990) 41,888
Series AA preferred stock conversion (819) 33,150
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 374 $ (16,663) 118 $ (4,726) 148 $ (4,067)
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
26 IKON OFFICE SOLUTIONS
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Income from continuing operations $ 164,893 $ 115,011 $ 1,996
Additions (deductions) to reconcile net income from continuing
operations to net cash provided by operating activities
of continuing operations
Depreciation 84,447 62,064 48,881
Amortization 34,107 25,309 18,548
Provisions for losses on accounts receivable 18,296 10,051 7,133
Provision for deferred income taxes 62,174 42,106 6,106
Loss on sale of investment in unconsolidated affiliate 115,265
Changes in operating assets and liabilities, net of
effects from acquisitions and divestitures:
Increase in accounts receivable (83,783) (66,184) (35,003)
(Increase) decrease in inventories (41,445) (41,698) 13,840
Increase in prepaid expenses (52,733) (18,508) (2,154)
Increase in accounts payable, deferred revenues
and accrued expenses 77,430 73,552 32,700
Miscellaneous 4,475 5,166 7,052
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities of continuing operations 267,861 206,869 214,364
Net cash provided by (used in) operating activities of
discontinued operations 205,914 (66,618) 94,538
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 473,775 140,251 308,902
- --------------------------------------------------------------------------------------------------------------------------
Investing Activities
Cost of companies acquired, net of cash acquired (171,804) (260,975) (46,112)
Expenditures for property and equipment (146,634) (91,112) (79,026)
Proceeds from sale of property and equipment 34,482 18,427 20,098
Purchase of miscellaneous assets (19,054) (8,729) (3,360)
Finance receivables - additions (1,005,270) (665,058) (408,412)
Finance receivables - collections 389,384 241,886 210,969
Proceeds from sale (net of cash retained) of investment
in unconsolidated affiliate 8,226
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities of continuing operations (918,896) (765,561) (297,617)
Net cash used in investing activities of
discontinued operations (201,356) (131,628) (59,554)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,120,252) (897,189) (357,171)
- --------------------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from:
Issuance of long-term debt 436,800 30,035 11,150
Issuance of Series BB conversion preferred stock, net 290,170
Issuance of common stock, net 293,500
Option exercises and sale of treasury shares 55,084 91,848 69,914
Sale of finance subsidiaries' lease receivables 202,713 66,677 125,000
Life insurance borrowings 2,349 3,342 31,055
Issuance (repayment) of short-term borrowings, net (69,883) 158,569 (68,278)
Long-term debt repayments (74,546) (40,394) (344,511)
Finance subsidiaries' debt - issuance 515,673 534,717 248,098
Finance subsidiaries' debt - repayments (206,232) (182,014) (196,308)
Dividends paid (91,826) (70,464) (61,900)
Purchase of treasury shares (86,084) (91,430) (47,733)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities of continuing operations 684,048 791,056 59,987
Net cash used in financing activities of
discontinued operations (57,928) (4,706) (7,257)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 626,120 786,350 52,730
- --------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (20,357) 29,412 4,461
Cash at beginning of year 66,413 37,001 32,540
- --------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 46,056 $ 66,413 $ 37,001
==========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
IKON OFFICE SOLUTIONS 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
Alco Standard Corporation (Alco or the Company), through its IKON Office
Solutions business (IKON), sells, rents and leases photocopiers, fax machines
and other automated office equipment for use in both traditional and integrated
office environments. IKON, which operates as one business segment, also provides
equipment service and supplies, equipment financing and facilities management
and specialized document copying services. IKON has locations throughout the
United States and Canada and in Europe (primarily in the United Kingdom), which
comprise the largest network of independent copier and office equipment dealers
in North America and in the United Kingdom. IKON has built upon these strengths
in recent years to expand into outsourcing and networking services to provide
one-stop shopping to customers who seek quality, accessible office productivity
solutions.
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Alco and its
wholly owned subsidiaries. Significant intercompany accounts and transactions
have been eliminated in consolidation. As a result of the decision to spin off
Unisource Worldwide, Inc. (Unisource), the Company's printing and imaging and
supply systems distribution business, as discussed in note 2, and the mergers
with two companies that have been accounted for as poolings of interests, as
discussed in note 3, prior-period amounts have been restated. All of the
following notes, unless otherwise stated, reflect data on a continuing
operations basis.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and notes. Actual results
could differ from those estimates and assumptions.
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 using the first-in,
first-out method and consist of finished goods available for sale.
Goodwill
Substantially all goodwill (excess of purchase price over net assets acquired)
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 127,649,000 weighted average shares in
1996, 116,474,000 shares in 1995 and 111,412,000 shares in 1994, and include the
dilutive effect of common stock equivalents, principally stock options. 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.
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 U.S.
dollars at fiscal year-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the fiscal year. The
resulting translation adjustments are recorded as a component of shareholders'
equity.
Accounting Changes
During fiscal 1994, 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 Changes
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (FAS 121), 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. FAS 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt FAS 121 in the first quarter of fiscal 1997 and, based on
current circumstances, does not believe the effect of adoption will be material.
28 IKON OFFICE SOLUTIONS
<PAGE>
1 SIGNIFICANT ACCOUNTING POLICIES (cont)
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). This statement establishes a fair value method of
accounting for stock-based compensation plans. Adoption of the fair value method
is encouraged; however, entities may elect to continue to account for
stock-based compensation plans according to the provisions of Accounting
Principles Board Statement No. 25, "Accounting for Stock Issued to Employees"
(APB 25), while providing additional disclosures required by FAS 123. The
Company is required to adopt FAS 123 in the first quarter of fiscal 1997, and
intends to account for stock-based compensation according to APB 25 and provide
FAS 123 disclosures as required.
In June 1996, the FASB issued Statement No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (FAS 125),
which establishes accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on consistent
application of a financial components approach that focuses on control. FAS 125
is effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996. The Company 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.
2 DISCONTINUED OPERATIONS
On June 19, 1996, the Company announced that it would separate Unisource, its
printing and imaging and supply systems distribution business from IKON, its
office solutions business, with each business operating as a stand-alone,
publicly traded company. In order to effect the separation of these businesses,
Alco has declared a dividend payable to holders of record of Alco common stock
at the close of business on December 13, 1996 (the Record Date) of one share of
common stock, no par value, of Unisource Worldwide, Inc. (Unisource Common
Stock), for every two shares of Alco stock owned on the Record Date. The actual
number of shares of Unisource Common Stock to be distributed will be determined
as of the Record Date. As a result of the distribution, 100% of the outstanding
shares of Unisource Common Stock will be distributed to Alco shareholders. The
Internal Revenue Service has issued a ruling letter which provides that, except
for any cash received in lieu of fractional shares, the spin-off of Unisource
will be tax-free to Alco and to Alco's U.S. shareholders. Alco expects to
complete the spin-off by December 31, 1996 (the Distribution Date) and to mail
the Unisource shares during the last week of December 1996.
In conjunction with the separation of their businesses, Unisource and Alco
entered into various agreements that address the allocation of assets and
liabilities between them and define their relationship after the separation,
including a Distribution Agreement (Distribution Agreement), a Benefits
Agreement (Benefits Agreement) and a Tax Sharing and Indemnification Agreement
(Tax Sharing Agreement).
The Distribution Agreement provides for, among other things, the principal
transactions required to effect the Distribution, the conditions to the
Distribution, the allocation between Alco and Unisource of certain assets and
liabilities, and cooperation by Alco and Unisource in the provision of
information and certain facilities necessary to perform the administrative
functions incident to their respective businesses. The Distribution Agreement
includes cross indemnification provisions pursuant to which Unisource and Alco
indemnify each other for damages that may arise out a breach of their respective
obligations under the agreement.
Under the Benefits Agreement, the wages, salaries and employee benefits of all
employees of Unisource will be the responsibility of Unisource. Generally,
Unisource's obligation to provide benefits will include all obligations with
respect to Unisource employees under pension plans, savings plans and
multiemployer plans, welfare plans (retiree medical plans), supplemental benefit
plans, certain deferred compensation plans, incentive plans, stock-based plans
and other plans covering Unisource employees and will include liabilities that
arose while the individuals were employed by Alco. The Benefits Agreement
requires Alco to reimburse Unisource for a portion of any payments made by
Unisource to former Unisource employees under Alco's 1985, 1991 and 1994
deferred compensation plans. Unisource will assume certain Alco pension plans
covering Unisource employees, and assets and liabilities attributable to
Unisource employees under Alco's participating companies pension plan and Alco's
401(k) plan will be transferred to a new Unisource pension plan and 401(k) plan,
respectively.
Under the Tax Sharing Agreement, Unisource will bear its respective share of (i)
Alco's Federal consolidated income tax liability (or benefit), (ii) any unitary
state income tax liability, and (iii) Alco's consolidated personal property tax
liability for all tax periods that end before or that include the Distribution
Date. For the taxable year ended September 30, 1996, Unisource's share of Alco's
Federal consolidated tax liability (or benefit) will be 40% of such liability
(or benefit) and Alco's share of such liability (or benefit) will be 60%.
Unisource is responsible for paying any tax liabilities arising for any tax
returns that it files separately. If any tax year ending before or including the
Distribution Date is subsequently examined by the IRS, and an adjustment results
from such examination, then Unisource's share of Alco's additional Federal
consolidated income tax liability (or benefit for that tax year) shall be
computed and agreed to by the parties. The Tax Sharing Agreement generally
provides that in the event
IKON OFFICE SOLUTIONS 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
2 DISCONTINUED OPERATIONS (CONT)
either Alco or Unisource takes any action inconsistent with, or fails to take
any action required by, or in accordance with the qualification of the
Distribution as tax-free, then Alco or Unisource, as the case may be, will be
liable for and indemnify and hold the other harmless from any tax liability
resulting from such action.
The Company has accounted for Unisource as a discontinued operation for all
periods presented in these financial statements. Prior-year amounts for
Unisource have been restated to reflect interest and other expenses allocated by
Alco. Unisource has been charged corporate interest expense based on the
relationship of its net assets to total Alco net assets, excluding corporate
debt, in amounts of $29,572,000 in 1996, $26,586,000 in 1995 and $19,813,000 in
1994. The Company recorded a charge against earnings of $50,000,000 in the third
quarter of fiscal 1996 for new restructuring activities at Unisource. The charge
includes facility closures costs of $33,000,000 and severance costs for
approximately 900 employees of $17,000,000 associated with the announced
regional realignment from ten to five regions in the United States and
facilities mergers in the U.S. and Canada. An $18,000,000 charge against
earnings was recorded in the third quarter of fiscal 1996 for costs associated
with the spin-off of Unisource consisting primarily of investment banking fees,
legal and accounting fees, filing fees and employee termination costs directly
related to the spin-off.
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 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.
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 was primarily charged against existing reserves for
discontinued operations. The Company paid $5,000,000 during 1995 and $2,000,000
in 1996, with the remaining $3,000,000 to be paid over the next three years.
The results of discontinued operations were:
Fiscal year ended September 30 (in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues (Unisource) $7,022,808 $6,987,274 $5,756,519
- --------------------------------------------------------------------------------
Income (loss) before taxes
Unisource
(including $50,000
restructuring charge
in 1996) $ 103,003 $ 172,745 $ 122,293
Spin-off costs (18,000)
Environmental charge (23,630)
- --------------------------------------------------------------------------------
85,003 149,115 122,293
Tax expense (benefit)
Unisource 43,005 67,543 47,817
Spin-off costs (3,850)
Environmental charge (7,089)
- --------------------------------------------------------------------------------
39,155 60,454 47,817
Net income (loss)
Unisource 59,998 105,202 74,476/(1)/
Spin-off costs (14,150)
Environmental charge (16,541)
- --------------------------------------------------------------------------------
$ 45,848 $ 88,661 $ 74,476
================================================================================
</TABLE>
/(1)/ Before cumulative effect of accounting change.
The net assets of discontinued operations consist of:
<TABLE>
<CAPTION>
September 30 (in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Working capital $ 750,792 $ 815,102
Net property and equipment 224,168 227,137
Other assets 637,062 367,694
Long-term debt and
other liabilities (122,821) (74,957)
- --------------------------------------------------------------------------------
Unisource equity and
intercompany debt $1,489,201 $1,334,976
================================================================================
</TABLE>
In the first quarter of fiscal 1997, Unisource is expected to borrow under a
credit facility amounts sufficient to repay $553,700,000 of intercompany notes
and advances due to Alco as of September 30, 1996 and additional advances that
may be made subsequent to that date. Intercompany notes and advances of
$456,420,000 were contributed to Unisource's equity as of September 30, 1996.
30 IKON OFFICE SOLUTIONS
<PAGE>
3 MERGERS
During the second quarter of fiscal 1996, the Company completed two mergers
accounted for as poolings-of-interests by issuing common stock for all the
shares of Legal Copies International, Inc. and JMM Enterprises, Inc. Total
common shares issued in connection with these mergers were 3,953,990.
Components of the operating results from continuing operations for periods prior
to the mergers were:
<TABLE>
<CAPTION>
Three Months Ended Fiscal Year Ended
12/31/95 9/30/95 9/30/94
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Revenues
Alco Standard
Corporation $852,396 $2,911,626 $2,240,398
Pooled companies 48,183 179,976 150,669
- --------------------------------------------------------------------------------
$900,579 $3,091,602 $2,391,067
================================================================================
Income (loss) from continuing operations
Alco Standard
Corporation $ 35,186 $ 114,071 $ (3,867)
Pooled companies 1,751 940 5,863
- --------------------------------------------------------------------------------
$ 36,937 $ 115,011 $ 1,996
================================================================================
</TABLE>
The mergers reduced fiscal 1995 earnings per share by $.02 and increased fiscal
1994 earnings per share by $.05.
4 ACQUISITIONS
In addition to the mergers described in note 3, 97 acquisitions were made in
fiscal 1996 for an aggregate purchase price of $358,568,000 in cash, notes and
stock. Total assets related to these 97 acquisitions were $499,729,000,
including goodwill of $313,495,000. The Company also issued 486,304 common
shares for an acquisition accounted for as a pooling-of-interests whose results
of operations were included from the beginning of the fiscal year. An additional
$4,086,000 was paid and capitalized in fiscal 1996 relating to prior years'
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, 99 other acquisitions were made in fiscal
1995 for an aggregate purchase price of $228,258,000 in cash, notes and stock.
Total assets related to these 99 acquisitions were $313,966,000, including
goodwill of $218,549,000. 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. $4,648,000 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, 46 other acquisitions were made for an aggregate purchase price of
$58,466,000 in cash, notes and stock. Total assets related to these 46
acquisitions were $105,643,000, including goodwill of $53,045,000. An additional
$4,300,000 was paid and capitalized in fiscal 1994 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, pro forma results from continuing operations would
have been:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands, except per share data)
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $4,438,191 $3,847,045 $2,997,171
Income from
continuing operations 175,359 146,589 25,494
Earnings per share from
continuing operations 1.19 .95 .05
- --------------------------------------------------------------------------------
</TABLE>
The pro forma results assume that $261,000,000 of the purchase price of 1995
acquisitions was funded by the proceeds from issuance of Series BB conversion
preferred stock, while $46,000,000 of the total purchase price of 1994
acquisitions was funded by the proceeds from issuance of common stock in
December 1993.
5 LOSS FROM UNCONSOLIDATED AFFILIATE
In September 1994, the Company completed the sale of its 49.9% interest in IMM
Office Systems GmbH (IMMOS) for cash plus a passive interest in any subsequent
sale of IMMOS for five years. The Company retains no ongoing liability relating
to the joint venture and the parties exchanged complete mutual releases for past
actions. As part of the transaction, the Company acquired operations in Denmark
and France and retained limited operations in Germany. The Company recognized a
loss on the sale of its investment in IMMOS of $115,300,000 ($95,100,000, net of
tax) or $.85 per share in fiscal year 1994.
6 NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consisted of:
<TABLE>
<CAPTION>
September 30 (in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes payable to banks at
average interest rate:
1996- 6.0%; 1995- 6.9% $184,358 $252,852
Other notes payable at
average interest rate:
1996- 8.2%; 1995- 8.3% 2,104 3,749
- --------------------------------------------------------------------------------
$186,462 $256,601
================================================================================
</TABLE>
IKON OFFICE SOLUTIONS 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
6 NOTES PAYABLE AND LONG-TERM DEBT (cont)
<TABLE>
<CAPTION>
Long-term debt consisted of:
September 30 (in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Bond issue at stated interest rate
of 6.75%, net of $4,519
premium, due 2025,
effective interest rate of 6.87% $ 295,481
Bond issue at interest rate
of 8 7/8% due 2001 150,000 $150,000
Private placement debt at
average interest rate:
1996- 7.7%; 1995- 8.3%,
due 1998 and 2005 105,000 50,000
Bank debt at average interest
rate of 7.6% due 2000 72,721
Notes payable to insurance
company at average interest
rate of 9.7% due 1997-2005 60,000 60,000
Sundry notes, bonds and mortgages
at average interest rate: 1996- 6.9%
1995- 8.0% due 1997-2005 74,929 73,899
Present value of capital lease
obligations (gross amount:
1996-$30,201; 1995-$22,752) 26,489 20,246
- --------------------------------------------------------------------------------
784,620 354,145
Less current maturities 62,697 37,457
- --------------------------------------------------------------------------------
$ 721,923 $316,688
================================================================================
Long-term debt, finance subsidiaries consisted of:
September 30 (in thousands) 1996 1995
- --------------------------------------------------------------------------------
Medium term notes at
average interest rate:
1996- 6.8%; 1995-7.0% $969,900 $602,000
Notes payable to banks at
average interest rate:
1996- 6.4%; 1995-5.6% 157,126 215,585
- --------------------------------------------------------------------------------
1,127,026 817,585
Less current maturities 314,000 171,232
- --------------------------------------------------------------------------------
$ 813,026 $646,353
================================================================================
Long-term debt and long-term debt, finance subsidiaries mature as follows:
</TABLE>
<TABLE>
<CAPTION>
Long-Term Debt,
Finance
(in thousands) Long-Term Debt Subsidiaries
- --------------------------------------------------------------------------------
<S> <C> <C>
(fiscal year)
1997 $ 62,697 $314,000
1998 63,717 278,780
1999 10,968 311,842
2000 80,106 160,295
2001 189,048 58,978
2002 - 2025 378,084 3,131
</TABLE>
On December 1, 1994, the Company entered into a credit agreement with several
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 November 26, 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 a credit agreement with four banks expiring in April 1997. Facility fees
of 9 basis points per annum are charged for this commitment. 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. This credit agreement will be cancelled and amounts outstanding
thereunder will be repaid after Unisource enters into its credit agreement.
At September 30, 1996, short-term borrowings supported by the combined lines of
credit totaled $187,345,000, including $7,345,000 borrowed by discontinued
operations, leaving $412,655,000 unused and available.
IKON Capital, Inc. (IKON Capital), a wholly owned finance subsidiary of the
Company, may offer to the public from time to time up to $1,500,000,000 or the
equivalent thereof in foreign currency under its medium term notes program.
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 IKON 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. At September
30, 1996, $500,100,000 is available for issuance under this program.
The Company is in compliance with all covenants, including financial, for all
loan agreements. Capital lease obligations and mortgages are secured by property
and equipment that had a net book value of $21,650,000 at September 30, 1996.
Interest paid, including finance subsidiaries and corporate interest allocated
to discontinued operations, approximated $119,000,000, $84,000,000 and
$68,000,000 for fiscal years 1996, 1995 and 1994, respectively.
The Company expects to receive $553,700,000 from Unisource as repayment of
intercompany notes. The proceeds are expected to be used to repay notes payable
to banks and certain long-term debt obligations.
32 IKON OFFICE SOLUTIONS
<PAGE>
7 SHAREHOLDERS' EQUITY
The Series AA Preferred Stock was issued in December 1992. Prior to October
1995, all of the 4,025,000 depositary shares issued, each representing 1/100th
of a share of Series AA convertible preferred stock, were outstanding. The
Series AA Preferred Stock was eligible for redemption by the Company anytime on
or after January 9, 1996. The Series AA Preferred Stock had one vote per share
(equivalent to 1/100th vote per depositary share) and was convertible at the
option of the holder at any time prior to the Company's redemption at the
exchange rate of 2.2402 shares of common stock for each depositary share. During
the first quarter of fiscal 1996, 432,130 common shares were issued for Series
AA Preferred Stock conversions by holders. On February 9, 1996, the Company
redeemed the balance of its Series AA Preferred Stock for common stock at the
conversion rate of 2.2402 shares of common stock for each depositary share.
Common shares totaling 8,584,423 were issued in connection with this redemption.
Dividends were cumulative at $2.375 per year per depositary share through
January 2, 1996 and $3.25 per depositary share per year thereafter. The dividend
was accrued on a straight-line basis ($2.875 per depositary share) and accretion
for the difference between the accrued and cash dividend, which amounted to
$6,092,000 at December 31, 1995, the last period before the redemption, was
credited to Series AA convertible preferred stock.
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 1/100th
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. As a result of the spin-off of Unisource, there will be an adjustment in
the number of common shares to be received upon conversion and the prices of the
common stock used to determine the number of common shares received. Such
adjustments will be effective on December 16, 1996. At September 30, 1996,
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 from continuing operations for fiscal 1994 would
have been $3,283,000 and loss per share would have been ($.07) if the offering
had occurred on October 1, 1993.
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.
<TABLE>
<CAPTION>
Changes in common shares under option were:
Directors Employees
- ----------------------------------------------------------------------------------------------------
Shares Option Price Range Shares Option Price Range
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 30, 1993 188,256 $9.77 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) 9.77 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 9.77 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) 9.77 to 15.09 (814,398) 9.09 to 28.19
Cancelled (46,214) 14.31 to 32.81
- ----------------------------------------------------------------------------------------------------
September 30, 1995 171,690 9.77 to 32.75 4,414,668 9.09 to 40.31
Granted 24,962 29.16 to 38.88 1,557,805 14.31 to 58.12
Exercised (48,024) 9.77 to 32.75 (765,384) 9.09 to 32.81
Cancelled (72,077) 15.38 to 58.12
- ----------------------------------------------------------------------------------------------------
September 30, 1996 148,628 $9.77 to $38.88 5,135,012 $9.69 to $58.12
====================================================================================================
</TABLE>
IKON OFFICE SOLUTIONS 33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
7 SHAREHOLDERS' EQUITY (CONT)
At September 30, 1996, options to purchase 2,410,210 shares were exercisable
(1996: employees-2,280,144, directors- 130,066; 1995: employees-2,144,162,
directors-147,086) and 4,365,980 shares were available for grant (1996:
employees- 3,493,816, directors-872,164; 1995: employees-5,131,744,
directors-897,126).
In connection with the separation of Unisource from Alco, stock options which
are not exercised prior to the effective date of the Distribution will be
adjusted. Optionholders who remain employees of Alco will retain their options
to purchase Alco shares, while optionholders who become employees of Unisource
after the Distribution will be given the opportunity to receive options to
purchase shares of Unisource Common Stock in lieu of their Alco options. The
number of shares subject to, and the exercise price of, each Alco option that is
not converted to a Unisource option will be adjusted based upon a formula that
preserves the inherent intrinsic value and vesting and term provisions of such
Alco options. The Alco stock options held by optionholders expected to become
Unisource employees at September 30, 1996 were 1,287,683, with a range of
exercise price from $9.69 to $57.50. The ultimate number of remaining Alco stock
options as of the Distribution date and the number and exercise prices of the
Alco stock options to be outstanding after the Distribution cannot yet be
determined.
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. Under the plan, key management employees are granted
stock or cash awards, 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, 1996, 207,446 of these awards
had been earned. In 1996, the Company changed the form of the LTIP award granted
from a stock award to a fixed cash award. In fiscal 1996, cash awards totaling
$6,123,000 were granted to LTIP participants, none of which have been earned as
of September 30, 1996.
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.
8 TAXES ON INCOME
Effective October 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes"(FAS 109). FAS 109 permitted the Company to
recognize the benefit of certain deferred tax assets that could not be
recognized under the previous standard, FAS 96. The cumulative effect of
adopting FAS 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 FAS 109, prior years'
financial statements were not restated.
Provision for income taxes:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Current Deferred Current Deferred Current Deferred
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal $21,144 $58,540 $8,832 $41,723 $21,365 $7,543
Foreign 13,496 528 8,923 1,653 8,585 (2,463)
State 11,170 3,106 15,640 (1,270) 5,259 1,026
- ----------------------------------------------------------------------------------------------------------------------
Taxes on income $45,810 $62,174 $33,395 $42,106 $35,209 $6,106
======================================================================================================================
</TABLE>
34 IKON OFFICE SOLUTIONS
<PAGE>
8 TAXES ON INCOME (CONT)
The components of deferred income tax assets and liabilities, including finance
subsidiaries, were as follows:
<TABLE>
<CAPTION>
September 30 (in thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ 32,284 $ 43,759
Lease income recognition 227,003 119,228
- -------------------------------------------------------------------------------
Total deferred tax liabilities 259,287 162,987
Deferred tax assets:
Nondeductible reserves 137,982 112,857
Net operating loss carryforwards 17,939 8,561
Other-net 21,902 8,814
- -------------------------------------------------------------------------------
Total deferred tax assets 177,823 130,232
Valuation allowance 26,647 19,628
- -------------------------------------------------------------------------------
Net deferred tax assets 151,176 110,604
- -------------------------------------------------------------------------------
Net deferred tax liabilities $108,111 $ 52,383
================================================================================
</TABLE>
Net operating loss carryforwards, including discontinued operations, consist
primarily of foreign carryforwards of $42,543,000 principally expiring in years
1997 through 2000. Credit carryforwards consist principally of federal and state
alternative minimum tax credits of approximately $7,600,000 (with no expiration
date) and affordable housing credits of approximately $1,017,000 (expiring in
2010 and 2011).
Components of the effective income tax rate:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal 35.0% 35.0% 35.0%
State 3.4 4.9 9.4
Goodwill 2.1 2.5 9.1
Foreign including credits (.3) 1.2 3.8
Effect of sale of IMMOS 46.6
Other (.6) (4.0) (8.5)
- --------------------------------------------------------------------------------
Effective income tax rate 39.6% 39.6% 95.4%
================================================================================
</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 38.8%.
Income tax payments for all operations, including discontinued, amounted to
$46,231,000 in 1996, $30,436,000, net of $30,000,000 refund, in 1995, and
$62,270,000 in 1994.
Undistributed earnings of the Company's foreign subsidiaries, including
discontinued operations, were approximately $59,102,000 at September 30, 1996.
Those earnings are considered to be indefinitely reinvested and, therefore, no
provision has been recorded for US federal and state income taxes.
9 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 ($1,338,000 in 1996,
$1,346,000 in 1995 and $2,074,000 in 1994) charged to continuing operations
amounted to $20,215,000 for 1996, $12,846,000 for 1995 and $6,248,000 for 1994.
The components of net periodic pension cost for the Company-sponsored defined
benefit pension plans are:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30 (in thousands)
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 15,734 $ 10,610 $ 5,330
Interest cost on
projected benefit
obligation 7,448 7,429 5,533
Actual return on plan
assets (15,663) (18,409) (3,345)
Net amortization and
deferral 11,358 11,870 (3,344)
- --------------------------------------------------------------------------------
Net pension cost $ 18,877 $ 11,500 $ 4,174
================================================================================
</TABLE>
Assumptions used in accounting for the Company-sponsored defined benefit pension
plans were:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average
discount rates 7.75% 7.50% 7.75%
Rates of increase in
compensation levels 6.25% 6.00% 6.25%
Expected long-term
rate of return on assets 10.00% 10.00% 10.00%
- --------------------------------------------------------------------------------
</TABLE>
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) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value
of benefit obligations
Vested $170,642 $ 77,823
================================================================================
Accumulated $174,731 $80,184
================================================================================
Projected $222,215 $100,352
Plan assets at fair value 214,077 83,212
- --------------------------------------------------------------------------------
Plan assets less than
projected benefits (8,138) (17,140)
Items not yet recognized
Net gain (28,362) (6,487)
Prior service cost 10,907 14,646
Net asset existing at
transition date (8,096) (4,469)
Adjustment required to
recognize minimum liability (3,237) (7,120)
- --------------------------------------------------------------------------------
Net pension liability $(36,926) $(20,570)
================================================================================
</TABLE>
Under the Benefits Agreement with Unisource, Alco will assume certain benefit
obligations and related assets for retirees and terminated vested employees of
Unisource, which are estimated to be $101,000,000 and have been included in the
September 30, 1996 balances reflected in the table above. Substantially all of
the Alco and Unisource plan assets, totaling $346,721,000 at September 30, 1996,
are invested in listed stocks, bonds and government securities, including common
stock of the Company having a fair value of $59,850,000.
IKON OFFICE SOLUTIONS 35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
9 PENSION AND STOCK PURCHASE PLANS (CONT)
The majority of the Company's employees were eligible to participate in the
Company's Stock Participation Plan through fiscal 1995, 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 allows employees to invest 1% to 16% of regular compensation before
taxes in six different investment funds. The Company contributes an amount equal
to two-thirds of the employees' investments, up to 6% of regular compensation,
for a maximum company match of 4%. 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 plans charged to continuing operations amounted to
$23,596,000 in 1996, $16,983,000 in 1995 and $14,125,000 in 1994.
10 GEOGRAPHIC INFORMATION
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) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Domestic $3,559.7 $2,802.2 $2,196.9
Europe 360.6 178.4 100.7
Canada 177.7 111.0 93.5
Other 1.8 -- --
- --------------------------------------------------------------------------------
Total $4,099.8 $3,091.6 $2,391.1
================================================================================
Income Before Taxes
Domestic $ 251.1 $ 186.7 $ 161.0
Europe 38.3 9.0 2.0
Canada 20.6 16.5 13.6
Other .1 -- --
- --------------------------------------------------------------------------------
Operating $ 310.1 212.2 176.6
Unconsolidated affiliate (117.2)
Interest expense (37.2) (21.7) (16.1)
- --------------------------------------------------------------------------------
Total $ 272.9 $ 190.5 $ 43.3
================================================================================
Assets
Domestic $3,096.2 $2,313.4 $ 1,610.4
Europe 560.2 300.5 123.6
Canada 227.5 161.5 154.9
Other 11.5 -- --
- --------------------------------------------------------------------------------
Total $3,895.4 $2,775.4 $ 1,888.9
================================================================================
</TABLE>
11 LEASES
Equipment acquired under capital leases is included in property and equipment in
the amount of $33,141,000 in 1996 and $22,404,000 in 1995 and the related
amounts of accumulated amortization are $11,491,000 in 1996 and $6,925,000 in
1995. Related obligations are in long-term debt and related amortization is
included in depreciation.
At September 30, 1996, future minimum payments under noncancelable operating
leases with initial or remaining terms of more than one year were:
1997-$65,763,000; 1998-$50,977,000; 1999-$36,662,000; 2000-$22,125,000;
2001-$15,664,000; thereafter-$37,181,000.
Total rental expense was $67,006,000 in 1996, $61,398,000 in 1995 and
$48,812,000 in 1994.
12 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.
13 FINANCE RECEIVABLES
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.
Components of finance receivables, net, are as follows:
<TABLE>
<CAPTION>
September 30 (in thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross receivables $1,538,183 $1,068,117
Unearned income (272,279) (165,793)
Unguaranteed residuals 108,338 58,774
Allowance for doubtful accounts (60,484) (46,994)
- --------------------------------------------------------------------------------
Lease receivables 1,313,758 914,104
Less: Current portion 435,434 326,315
- --------------------------------------------------------------------------------
Long-term lease receivables $ 878,324 $ 587,789
================================================================================
</TABLE>
At September 30, 1996, future minimum payments to be received under direct
financing leases were: 1997-$540,732,000; 1998-$473,645,000; 1999-$300,166,000;
2000-$160,035,000; 2001-$63,605,000.
36 IKON OFFICE SOLUTIONS
<PAGE>
13 FINANCE RECEIVABLES (cont)
In September 1996, IKON Capital entered into a new agreement, which expires in
September 1997, to sell, under an asset securitization program, an undivided
ownership interest in $150,000,000 of eligible direct financing lease
receivables. The September 1994 agreement for $125,000,000 expires in March
1997. Both agreements contain limited recourse provisions that require IKON
Capital to assign an additional amount of undivided interest in leases as a
reserve 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 the agreement amount. The weighted average interest rate on the 1994
agreement, which is partially fixed by two interest rate swap agreements
totaling a principal/notional amount of $60,000,000, is 6.7% at September 30,
1996. In fiscal year 1996, IKON Capital sold an additional $52,712,000 in
leases, replacing leases liquidated during the year under the 1994 agreement and
$150,000,000 in leases under the 1996 agreement.
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 and currency 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 and Currency Swap Agreements
In addition to the interest rate swap agreements related to finance subsidiaries
financial instruments, the Company has several other interest rate swap
agreements. U.S. dollar denominated agreements have a total principal/notional
amount of $47,000,000 and have fixed rates from 6.99% to 7.74%. Canadian dollar
denominated agreements have a total principal/notional amount of $72,163,000
(CN$98,248,000) and have fixed rates from 7.43% to 7.74%. 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.
The Company has also entered into five cross currency swap agreements. These
agreements have a total principal/notional amount of $72,163,000 (CN$98,248,000)
and have fixed rates from 9.53% to 9.90%. The Company is required to make
payments to counterparties at the fixed rate stated in the agreements and in
return the Company receives payments at fixed rates from 9.02% to 9.375%.
The Company is exposed to credit loss in the event of nonperformance by the
counterparties to the 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 6.
Off-Balance-Sheet Instruments
Fair values for the Company's off-balance-sheet instruments (interest rate and
currency 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>
1996 1995
September 30 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt:
Bond issues $ 445,481 $ 423,667 $150,000 $165,311
Private placement debt 105,000 103,538 50,000 52,043
Bank debt 72,721 73,406
Notes payable to insurance company 60,000 61,813 60,000 65,286
Sundry notes, bonds and mortgages 74,929 75,900 73,899 76,401
Finance subsidiaries debt 1,127,026 1,124,395 817,585 824,989
Interest rate and currency swaps (5,074) (3,671)
</TABLE>
IKON OFFICE SOLUTIONS 37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Alco Standard Corporation and Subsidiaries
On June 19, 1996, the Company announced that it would split its two operating
units into independent companies by spinning off its paper and supply systems
distribution group, Unisource Worldwide, Inc. (Unisource), as a separate
publicly owned company. The Company will accomplish the transaction through a
tax-free distribution of Unisource stock to Company shareholders, and expects to
complete the separation by the end of calendar year 1996. As a result of the
decision to spin off Unisource, the Company has accounted for Unisource as a
discontinued operation. Continuing operations of the Company consist of IKON
Office Solutions (IKON), formerly Alco Office Products, the Company's office
technology solutions group.
RESULTS OF OPERATIONS
Revenues and income before taxes for continuing operations for fiscal years
ended September 30, 1996, 1995 and 1994 and the percentage change for 1996
versus 1995 and 1995 versus 1994 were:
<TABLE>
<CAPTION>
(in millions) 1996 1995 % Change 1995 1994 % Change
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $4,100 $3,092 32.6% $3,092 $2,391 29.3%
=====================================================================================================
Income before taxes:
Operating income $310.1 $212.2 46.1% $212.2 $ 59.4
Interest expense (37.2) (21.7) (21.7) (16.1)
- -----------------------------------------------------------------------------------------------------
$272.9 $190.5 43.3% $190.5 $ 43.3
=====================================================================================================
</TABLE>
Fiscal 1996 Compared to Fiscal 1995
IKON's revenues increased $1 billion, or 32.6% in fiscal 1996 compared to fiscal
1995, of which $675 million relates to current and prior-year acquisitions and
$333 million is internal growth. In fiscal 1996, IKON completed 100 acquisitions
with annualized revenues of $878 million. Revenues from the Company's operations
outside the U.S. were $540 million in fiscal 1996 compared to $289 million in
fiscal 1995. IKON's European operations accounted for $182 million of the
increase, primarily the result of the acquisitions of A:Copy (UK) PLC and
Copymore PLC in the latter half of fiscal 1995, while IKON's Canadian revenues
increased $67 million as a result of acquisitions and internal growth.
IKON's operating income increased by $97.9 million, or 46.1% over the prior
year. Current and prior-year acquisitions accounted for $55.8 million, while the
remaining $42.1 was the result of internal growth. Finance subsidiaries
contributed 15.1% of IKON's operating income in fiscal 1996 compared to 12.3% in
fiscal 1995. IKON's operating margins were 7.6% in fiscal 1996 compared to 6.9%
in fiscal 1995. Operating income from foreign operations was $59 million in
fiscal 1996, up $33.5 million from the prior year of which $29.3 million is
attributable to European operations and $4.1 million is attributable to Canadian
operations.
Interest expense, net of corporate interest allocated to discontinued
operations, increased $15.5 million in fiscal 1996, primarily the result of
increased borrowing levels. Income from continuing operations before taxes
increased by $82.4 million, or 43.3% over the prior year, primarily reflecting
the combined result of internal growth along with earnings contributed by
acquisitions, net of increased interest costs. The effective income tax rate is
39.6% in both fiscal 1996 and fiscal 1995. Earnings per share from continuing
operations increased 30.2% from $.86 per share in fiscal 1995 to $1.12 per share
in fiscal 1996. Weighted average shares of 127.6 million in fiscal 1996 were
11.1 million shares greater than the 116.5 million weighted average shares in
fiscal 1995, primarily the result of acquisitions for stock (4.7 million
weighted shares) and conversion of the Series AA Preferred Stock effective
February 9, 1996 (6.6 million weighted shares).
Fiscal 1995 Compared to Fiscal 1994
IKON's revenues increased $701 million, or 29.3% in fiscal 1995 compared to
fiscal 1994, of which $416 million is related to internal growth, while $68
million relates to fiscal 1994 acquisitions and $217 million relates to fiscal
1995 acquisitions. In fiscal 1995, IKON completed 102 acquisitions with
annualized revenues of $578 million. Revenues from the Company's operations
outside the U.S. were $289 million in fiscal 1995 compared to $194 million in
the prior year. IKON's European operations accounted for $78 million of the
increase, primarily the result of the acquisitions of A:Copy (UK) PLC and
Copymore PLC in the third and fourth quarters of fiscal 1995, while IKON's
Canadian revenues increased $17 million as a result of internal growth.
IKON's operating income increase of $152.8 million relates primarily to the
$117.2 million loss recorded in fiscal 1994 on the investment in IMMOS.
Excluding the IMMOS loss, operating income increased $35.6 million, or 20.2%
which includes $6.1 million from fiscal 1994 acquisitions and $20.2 million from
fiscal 1995 acquisitions. The remaining $9.3 million increase is from internal
growth. Finance subsidiaries contributed 12.3% of operating income in fiscal
1995 compared to 10.2% in fiscal 1994, excluding the IMMOS loss. Operating
margins were 6.9% in 1995 compared to 7.4% in 1994, excluding the loss on IMMOS.
Excluding costs related to IKON's transformation program discussed below, the
operating margin for 1995 was 7.2%.
Operating income from foreign operations was $25.5 million for 1995, up $9.9
million from the prior year of which $7 million is attributable to European
operations and $2.9 million is attributable to Canadian operations.
Interest expense, net of corporate interest allocated to discontinued
operations, increased $5.6 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
$147.2 million consists of $30 million relating to the combined effect of
internal growth 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 fiscal
1995 was 39.6%. The effective tax rate for 1994 was 95.4%; however, excluding
the IMMOS loss, the effective rate was 38.8%. Fiscal 1995 weighted average
shares were 5.1 million shares greater
38 IKON OFFICE SOLUTIONS
<PAGE>
than the 111.4 million shares for fiscal 1994, primarily the result of issuance
of shares for acquisitions.
In fiscal 1995, IKON initiated a 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 IKON companies. The
initiative includes the exploration of new vendor alliances, the establishment
of a national identity for the group (IKON) and a targeted national accounts
program.
Discontinued Operations
Revenues of Unisource, the Company's discontinued operation, were flat at $7
billion in both fiscal 1996 and 1995 as a result of price and volume declines,
net of $528 million contributed by acquisitions. Income before income taxes
decreased $69.7 million to $103 million in fiscal 1996 compared to $172.7
million in fiscal 1995. This decrease consists of a $50 million restructuring
charge recorded in the third quarter of fiscal 1996 and an operating income
decrease of $21.8 million, primarily related to the price and volume decreases
experienced during the year, net of operating income contributed by
acquisitions, while a reduction in interest expense of $2.1 million in fiscal
1996 slightly offset the operating income decline.
Fiscal 1995 revenues of Unisource increased $1.2 billion to $7 billion from $5.8
billion in fiscal 1994. The revenue increase primarily relates to substantial
price increases experienced in the paper industry during 1995 as well as volume
increases. Income before income taxes increased $50.5 million, or 41.3% in
fiscal 1995 compared to fiscal 1994, as a result of an operating income increase
of $57.8 million, which primarily reflects the impact of price and volume
increases along with net benefits realized from the restructuring program
initiated in 1993, net of an increase in interest expense of $7.3 million.
An $18 million charge against earnings was recorded in the third quarter of
fiscal 1996 for costs associated with the spin-off of Unisource consisting
primarily of investment banking fees, legal and accounting fees, filing fees and
employee termination costs directly related to the spin-off.
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 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.
During 1995, the Company agreed to pay $10 million to settle a claim by a former
subsidiary, which had asserted that the Company was liable for certain employee
liabilities. This amount was primarily charged against existing reserves for
discontinued operations. The Company paid $5 million during 1995 and $2 million
in 1996, with the remaining $3 million to be paid over the next three years.
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities of continuing operations in fiscal
1996 was $268 million. This cash, plus operating cash provided by discontinued
operations and increased debt levels, funded the Company's cash usage for fiscal
1996, primarily acquisitions, capital expenditures, dividends and investing and
financing activities of discontinued operations.
Debt of continuing operations, excluding finance subsidiaries, was $971 million
at September 30, 1996, an increase of $360 million from continuing operations
debt balance at September 30, 1995 of $611 million. On August 6, 1996, the Board
of Directors approved the capitalization of Unisource in connection with the
spin-off, which will include intercompany notes repayment by Unisource to the
Company in the first quarter of fiscal 1997 of $554 million, the proceeds which
will be used to retire debt of the continuing operation. Unisource intends to
borrow funds to finance the intercompany debt repayment. The Company will also
incur additional costs to retire its debt early, which will be recorded as an
extraordinary charge when incurred.
On December 11, 1995, the Company issued to the public $300 million of 30-year
bonds with a stated interest rate of 6.75% and a discount of 98.48%. The
proceeds were used to repay short- term borrowings. The Company had a total of
$600 million in bank credit commitments as of September 30, 1996. Short-term
borrowings supported by these facilities totaled $187.3 million leaving $412.7
million unused and available. At September 30, 1996, debt as a percentage of
capitalization was 31.4%, while the current ratio was 1.2 to 1. At the end of
fiscal 1996, the Company's commitments for capital expenditures were
approximately $7.6 million, all of which are expected to be expended during
fiscal 1997.
The Company filed shelf registrations for 10 million shares of common stock in
January 1996 and 5 million shares of common stock in March 1996. Shares issued
under these registration statements are being used primarily for acquisitions.
Approximately 9.4 million shares have been issued under these shelf
registrations through September 30, 1996.
Finance subsidiaries' debt grew by $309.4 million from September 30, 1995, a
result of increased leasing activity. During the fiscal year ended September 30,
1996, IKON Capital issued an additional $397.9 million under its medium term
notes program that began in July 1994. At September 30, 1996, $969.9 million of
medium term notes were outstanding with a weighted interest rate of 6.8%,
leaving $500.1 million available under this program.
In September 1996, IKON Capital entered into a new asset securitization
agreement for $150 million and completed the sale of $150 million in direct
financing leases by September 30, 1996. Under its $125 million asset
securitization agreement commenced in September 1994, IKON Capital sold $52.7
million in direct financing leases during fiscal 1996, replacing those leases
liquidated and leaving the amount of contracts sold unchanged.
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
discontinued operations through the end of calendar 1996.
IKON OFFICE SOLUTIONS 39
<PAGE>
CORPORATE FINANCIAL SUMMARY
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
Nine-Year
(in millions, except per share data, Compound
shareholders of record, employees) Growth 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Continuing Operations
Revenues 18.1% $4,099.8 $3,091.6 $2,391.1
Gross profit 23.2 1,684.9 1,258.2 999.2
% of revenues 41.1 40.7 41.8
Selling and administrative 21.7 1,374.8 1,046.0 822.6
% of gross profit 81.6 83.1 82.3
Operating income 25.4 310.1 212.2 59.4
% of revenues 7.6 6.9 2.5
Income before taxes 29.9 272.9 190.5 43.3
% of revenues 6.7 6.2 1.8
Effective income tax rate (%) 39.6 39.6 95.4
Income 30.6 164.9 115.0 2.0
% of revenues 4.0 3.7 0.1
Earnings (loss) per share
Primary 1.12 0.86 (0.09)
Fully diluted (e) (e) (e)
Capital expenditures 19.7 146.6 91.1 79.0
Depreciation and amortization 17.9 118.6 87.4 67.4
- -------------------------------------------------------------------------------------------------------------------------
Discontinued Operations
Income (loss) $45.8 $88.7 $74.5
Earnings (loss) per share
Primary .36 0.76 0.67
Fully diluted (e) (e) (e)
- -------------------------------------------------------------------------------------------------------------------------
Total Operations
Net income 11.0% $210.7 $203.7 $76.5
Earnings (loss) per share
Primary 1.48 1.62 0.58
Fully diluted (e) (e) (e)
- -------------------------------------------------------------------------------------------------------------------------
Share Activity
Dividends per share 6.3% $0.56 $0.52 $0.50
Per share book value 10.4 14.94 12.06 10.50
Return on shareholders' equity 13.8 15.8 15.1
Average common and common equivalent shares 127.6 116.5 111.4
Shareholders of record 15,033 15,099 14,348
- -------------------------------------------------------------------------------------------------------------------------
Supplementary Information
Days sales outstanding (g) 34.2 33.6 30.2
Inventory turns (g) 5.7 6.3 5.7
Current ratio 1.2 1.1 1.3
Pretax return on capital employed 14.8 17.1 15.9 (b)
Pretax return on capital employed with
finance subsidiaries on equity method 19.0 21.1 18.6 (b)
Working capital (1.4)% $251.2 $144.7 $171.5
Total assets 19.3 5,384.6 4,110.3 2,897.7
Total debt 27.8 2,158.4 1,499.3 949.2
% of capitalization 48.9 44.2 40.7
Total debt, excluding finance subsidiaries 19.1 1,031.4 681.7 484.3
% of capitalization 31.4 26.5 25.9
Serial preferred stock
Employees (h) 43,100 39,200 33,100
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Continuing operations include unrelated businesses sold in 1988.
(b) Excludes the effect of the sale of IMMOS (note 5) in fiscal 1994 and
Unisource restructuring costs 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.
(g) Continuing operations only.
(h) Includes discontinued operations.
Note: Unless otherwise noted, ratios and operating results include the effect
of: fiscal 1994 - loss on sale of investment in IMMOS (note 5), pretax income
($115,265,000), net income ($95,086,000), earnings per share ($.85); fiscal 1993
- - Unisource restructuring costs, operating income ($175,000,000), net income
($112,875,000), earnings per share ($1.14).
40 IKON OFFICE SOLUTIONS
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,723.1 $1,354.2 $1,127.4 $1,018.6 $789.3 $667.0 (a) $917.9 (a)
732.7 594.4 489.2 445.4 324.8 245.8 (a) 256.8 (a)
42.5 43.9 43.4 43.7 41.2 36.9 28.0
613.4 504.6 431.4 411.9 300.9 231.2 (a) 234.1 (a)
83.7 84.9 88.2 92.5 92.6 94.1 91.2
116.8 96.5 57.8 28.8 23.9 22.5 (a) 40.3 (a)
6.8 7.1 5.1 2.8 3.0 3.4 4.4
101.4 85.1 40.4 8.3 (d) 9.1 10.7 (a) 26.0 (a)(c)
5.9 6.3 3.6 0.8 1.2 1.6 2.8
39.6 39.4 39.0 40.7 20.0 25.5 42.5
61.3 51.6 24.6 4.9 (d) 7.3 8.0 (a) 14.9 (a)(c)
3.6 3.8 2.2 0.5 0.9 1.2 1.6
0.52 0.53 0.26 0.06 (d) 0.08 0.08 (a) 0.16 (a)(c)
(e) (e) (e) (e) (e) (e) 0.16 (a)(c)
64.3 36.9 33.4 40.5 35.1 26.3 (a) 29.1 (a)
51.3 42.3 43.1 38.0 32.1 25.3 (a) 27.0 (a)
- ----------------------------------------------------------------------------------------------------------
($58.6) $47.5 $94.1 $88.6 $160.2 $103.4 $67.4
(0.59) 0.49 1.00 0.95 1.70 1.04 0.73
(e) (e) (e) (e) (e) (e) 0.68
- ----------------------------------------------------------------------------------------------------------
$2.6 $99.1 $118.7 $93.5 (d) $167.5 $111.4 $82.3 (c)
(0.07) 1.01 1.26 1.01 1.78 1.12 0.89 (c)
(e) (e) (e) (e) (e) (e) 0.84 (c)
- ----------------------------------------------------------------------------------------------------------
$0.48 $0.46 $0.44 $0.42 $0.38 $0.34 $0.32
8.55 9.11 8.91 8.20 7.25 6.98 6.15
11.6 11.6 15.0 13.4 16.6 (f) 17.1 16.2
98.7 97.7 94.1 93.1 94.3 99.5 92.3
13,999 13,726 14,096 14,152 13,410 14,103 12,875
- ----------------------------------------------------------------------------------------------------------
32.9 32.3 33.8 34.8 37.6 37.9 45.0
5.1 5.2 4.8 4.7 4.3 4.1 3.6
1.1 1.3 1.9 1.7 1.5 2.2 2.4
13.5 (b) 15.1 15.3 18.5 19.4 (f) 19.2 21.6
15.8 (b) 17.5 17.6 20.9 21.1 (f) 20.0 22.2
$87.2 $140.4 $299.9 $216.9 $161.9 $209.8 $284.5
2,734.2 1,944.0 1,703.0 1,544.0 1,295.8 1,182.1 1,099.8
1,240.0 805.4 548.1 469.2 391.2 261.5 237.1
54.5 48.0 39.8 38.3 37.8 27.4 27.9
825.7 504.9 327.4 309.6 296.7 209.3 213.4
44.4 36.6 28.3 29.0 31.5 23.2 25.9
0.3 1.6 2.9 4.9 7.4 9.9 11.4
30,200 24,800 19,800 21,700 20,500 17,900 17,800
- ----------------------------------------------------------------------------------------------------------
</TABLE>
IKON OFFICE SOLUTIONS 41
<PAGE>
QUARTERLY FINANCIAL SUMMARY
Alco Standard Corporation and Subsidiaries
<TABLE>
<CAPTION>
(unaudited, in millions except per share data) First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Revenues $ 900.6 $ 1,015.4 $ 1,059.1 $ 1,124.7 $ 4,099.8
Gross profit 371.8 403.8 446.5 462.8 1,684.9
Income before taxes 61.3 66.3 72.8 72.5 272.9
Income (loss)
Continuing operations 36.9 40.5 43.7 43.8 164.9
Discontinued operations 26.3 28.6 (20.2) (a) 11.1 45.8 (a)
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 63.2 $ 69.1 $ 23.5 $ 54.9 $ 210.7
================================================================================================================================
Earnings (loss) per share
Continuing operations $ .25 $ .28 $ .30 $ .30 $ 1.12
Discontinued operations .22 .22 (.16) (a) .08 .36 (a)
- --------------------------------------------------------------------------------------------------------------------------------
$ .47 $ .50 $ .14 $ .38 $ 1.48
================================================================================================================================
Dividends per share $ .14 $ .14 $ .14 $ .14 $ .56
Common stock price
High/Low 46 3/8 - 42 54 5/8 - 37 3/8 66 - 44 5/8 49 7/8 - 38 66 - 37 3/8
- --------------------------------------------------------------------------------------------------------------------------------
1995
Revenues $ 678.7 $ 740.8 $ 812.0 $ 860.1 $ 3,091.6
Gross profit 279.7 300.0 332.9 345.6 1,258.2
Income before taxes 45.2 44.5 51.2 49.6 190.5
Income
Continuing operations 27.4 26.3 30.9 30.4 115.0
Discontinued operations 19.6 23.4 29.0 16.7 (b) 88.7 (b)
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 47.0 $ 49.7 $ 59.9 $ 47.1 $ 203.7
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per share
Continuing operations $ .21 $ .21 $ .24 $ .20 $ .86
Discontinued operations .17 .20 .25 .14 (b) .76 (b)
- --------------------------------------------------------------------------------------------------------------------------------
$ .38 $ .41 $ .49 $ .34 $ 1.62
- --------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
(a) Discontinued operations in the third quarter and year-to-date fiscal 1996
includes a pretax charge of $50,000,000 ($32,500,000 net of taxes or $.25 per
share) for restructuring activities of Unisource and a pretax charge of
$18,000,000 ($14,150,000 net of taxes or $.11 per share) for expenses related to
the spin-off of Unisource.
(b) Discontinued operations in the fourth quarter and year-to-date fiscal 1995
include a pretax charge of $23,630,000 ($16,541,000 net of taxes or $.14 per
share) for environmental liabilities of discontinued operations.
42 IKON OFFICE SOLUTIONS
<PAGE>
Exhibit 21
Subsidiaries of Alco Standard Corporation (Alco)
<TABLE>
<CAPTION>
Subsidiary % Voting Securities State of other jurisdiction
Owned (by whom) of incorporation or organization
<S> <C> <C>
Alco Cash Management Company 100% Alco Delaware
The Alco Standard Foundation 100% Alco Pennsylvania
Alco-Texas Realty, Inc. 100% Alco Texas
Alco Realty, Inc. (AR) 100% Alco Delaware
Alco Canada Realty, Inc. 100% AR Canada
Ikon Realty, Inc. 100% AR Delaware
AOS Acquisition Company, Inc. 100% Alco New York
Alco Office Products (U.K.) Plc (AOPUK) 100% IKON England
Alco Standard House 100% AOPUK England
IKON Capital Europe 100% AOPUK England
A-Copy (UK) PLC 100% AOPUK England
Copymore PLC 100% AOPUK England
Erskine House GmbH 100% AOPUK Germany
Eskofot Kontersystermer AS 100% AOPUK Denmark
Axion S.A. 100% AOPUK France
Erskine House Group PLC (EHG) 100% AOPUK England
Erskine Limited 100% PLC England
Alco Standard Acquisition Capital Company, Inc. (ASACC) 100% Alco Delaware
Alco Standard Limited 100% Alco Delaware
Alco Standard Petroleum Corporation 100% Alco Delaware
Alco Venture Capital Company 100% Alco Delaware
Alco Texas Realty, Inc. 100% Alco Texas
Chesterbrook Insurance Limited 100% Alco Bermuda
IKON, Inc. 100% Alco Delaware
IKON Office Solutions, Inc. (IKON) 100% Alco Delaware
IKON Brands, Inc. 100% IKON Delaware
IKON North America, Inc. (INA) 100% IKON Delaware
OCLA Corporation 100% Alco Delaware
RMA/Kolko Corporation 100% Alco New York
The Unisource Corporation 100% Alco Texas
Unisource Worldwide Holdings, Inc. 100% Alco Delaware
Upshur Coals Corporation 100% Alco West Virginia
Alco Office Products Group, Inc. 100% IKON Delaware
Erskine House Group, Inc. 100% IKON Delaware
Ikon Capital, Inc. 100% IKON Canada
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
IKON Baja (U.S.) Corporation 100% INA IKON Delaware
IKON Office Solutions Pty Ltd. 100% INA Australia
IKON de Mexico, S.A. de C.V. (IM) 99.99% INA & .01% IKON Mexico
IKON Servicos, S.A. de C.V. (IS) 99.99% IM & .01% INS Mexico
IKON Copiroyal, S.A. de C.V. 99.99% IM & .01% IS Mexico
IKON Enmuebles 99.99% IM & .01% IS Mexico
IKON Office Solutions Inc. and Bureau-Tech IKON, Inc. 100% IKON Canada
IKON Capital, Inc. (IC) 100% IKON Delaware
IKON Funding, Inc. 100% IC Delaware
Office Group, Inc. 100% IKON Delaware
Office Products, Inc. 100% IKON Delaware
Office World Trade, Inc. 100% IKON Florida
Partners Securities Company 100% Alco Delaware
TDFC Corporation 100% Alco Delaware
Unisource Worldwide, Inc. 100% Alco Delaware
Paper Corporation of North America (PCNA) 100% UWI Delaware
AOP Canada Limited 98% PCNA & 2% Alco Canada
Unisource Canada, Inc. 100% PCNA Canada
Unisource Distribudora S.A. de C.V. (UDSA) 99% PCNA & 1% UWI Mexico
Unisource Servicos S.A. de C.V. (US) 99.99% UDSA & .01% PCNA Mexico
Unisource DePapel, S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Global Paper, S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Feyra, S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisourice Multiplasticos S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Empaque S.A. de C.V. 99.99% UDSA & .01% US Mexico
Servicos Corporativos Unisource S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Planeacion S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Pimsa, S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Sinie, S.A. de C.V. 99.99% UDSA & .01% US Mexico
Unisource Grafipapel, S.A. de C.V. 99.99% UWI & .01% US Mexico
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Unisource Centro del Papel, S.A. de C.V. 99.99% UWI & .01% US Mexico
Unisource Megapapel, S.A. de C.V. 99.99% UWI & .01% US Mexico
Mercantil Papelera, S.A. de C.V. 99.99% UWI & .01% US Mexico
Unisource Direct, Inc. 100% UWI Delaware
Unisource International, Inc. 100% UWI Delaware
Unisource Sales Corporation 100% UWI Delaware
Unisource Realty, Inc. 100% UWI Delaware
Unisource Acquisition Capital Corporation 100% UWI Delaware
Unisource Brands, Inc. 100% UWI Delaware
</TABLE>
<PAGE>
Exhibit 23
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 16, 1996 (except for
Note 2, as to which the date is November 20, 1996), included in the 1996 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-3, Form S-4 and Form S-8 of Alco Standard Corporation and
in the related Prospectuses of our report dated October 16, 1996, (except for
Note 2, as to which the date is November 20, 1996), 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, 1996, and the related financial statement schedule included therein, filed
with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Registration
Number Filing 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
33-00120 September 6, 1985 Alco Standard Corporation
1985 Deferred Compensation Plan
33-3046 February 10, 1987 Alco Standard Corporation
1986 Stock Option Plan
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Registration
Number Filing Date Description
- --------------------------------------------------------------------------------
<S> <C> <C>
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
33-38193 December 10, 1990 Alco Standard Corporation
1986 Stock Option Plan
33-84376 June 4, 1992 Alco Standard Corporation
Stock Award Plan
33-55096 November 24, 1992 Alco Standard Corporation
1993 Directors' Stock Option Plan
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
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Registration
Number Filing Date Description
- --------------------------------------------------------------------------------
<S> <C> <C>
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
33-64177 November 14, 1995 Alco Standard Corporation
$750,000,000 Debt Securities
Preferred Stock or Common Stock
33-64739 January 5, 1996 Alco Standard Corporation
10,000,000 Shares of Common
Stock
333-01743 March 14, 1996 Alco Standard Corporation
5,000,000 Shares of Common Stock
</TABLE>
Philadelphia, Pennsylvania
December 30, 1996
3
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/JAMES R. BIRLE
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/PAUL J. DARLING, II
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/FREDERICK S. HAMMER
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that her is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/ RICHARD A. JALKUT
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/ PAUL C. O'NEILL
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/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 William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/ JAMES W. STRATTON
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is Chairman of the Board and Chief
Executive Officer of Alco Standard Corporation ("Alco").
The undersigned hereby appoints each of William F. Drake, Jr., Karin M.
Kinney 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 30th day of December, 1996.
/s/ JOHN E. STUART
---------------------------
<PAGE>
CERTIFICATION
I, Karin M. Kinney, 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 8, 1996, 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 William F. Drake, Jr., Karin M. Kinney and
Michael J. Dillon as his or her attorneys-in-fact on behalf of each of them
each attorney-in-fact with the power of substitution, to execute on such
officer's or director's behalf, one or more registration statements and
annual reports of the corporation for filing with the Securities and Exchange
Commission ("SEC"), and any and all amendments to said documents which said
attorney may deem necessary or desirable to enable the corporation to
register the offering of debt securities and to further enable the
corporation to file such reports as are necessary under Section 13 or 15(d)
of the Securities Exchange Act of 1934 and such other documents as are
necessary to comply with all rules, regulations or requirements of the SEC in
respect thereto; and
FURTHER RESOLVED, that any officer of the corporation is hereby
authorized to do and perform, or cause to be done or performed, any and all
things and to execute and deliver any and all agreements, certificates,
undertakings, documents or instruments necessary or appropriate in order to
carry out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of December,
1996.
/s/ Karin M. Kinney
-------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Alco Standard corporation and subsidiaries
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 46,056,000
<SECURITIES> 0
<RECEIVABLES> 548,686,000
<ALLOWANCES> 35,308,000
<INVENTORY> 350,774,000
<CURRENT-ASSETS> 1,509,155,000
<PP&E> 607,186,000<F1>
<DEPRECIATION> 323,325,000<F2>
<TOTAL-ASSETS> 5,384,595,000<F3>
<CURRENT-LIABILITIES> 1,257,987,000
<BONDS> 1,534,949,000
0
290,170,000
<COMMON> 1,305,413,000
<OTHER-SE> 659,921,000
<TOTAL-LIABILITY-AND-EQUITY> 5,384,595,000
<SALES> 2,381,151,000
<TOTAL-REVENUES> 4,099,773,000
<CGS> 1,552,183,000
<TOTAL-COSTS> 2,414,912,000<F4>
<OTHER-EXPENSES> 1,374,805,000<F5>
<LOSS-PROVISION> 18,296,000<F6>
<INTEREST-EXPENSE> 37,179,000
<INCOME-PRETAX> 272,877,000
<INCOME-TAX> 107,984,000
<INCOME-CONTINUING> 164,893,000
<DISCONTINUED> 45,848,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,741,000
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.46
<FN>
<F1> Includes equipment on operating leases, at cost of $248,952,000.
<F2> Includes accumulated depreciation for equipment on operating leases of
$153,909,000.
<F3> Includes net assets held for distribution to shareholders of
$1,489,201,000
<F4> Includes Finance Subsidiaries interest of $68,043,000.
<F5> Represents selling, general and administrative expenses.
<F6> Continuing operations only.
</FN>
</TABLE>
