ALCO STANDARD CORP (Form Type: S-1, Filing Date: 12/19/1994)

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1994 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- ALCO STANDARD CORPORATION ---------------- OHIO 23-0334400 5111 (STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL INCORPORATION OR CLASSIFICATION CODE ORGANIZATION) NUMBER) P.O. BOX 834 VALLEY FORGE, PENNSYLVANIA 19482 (610) 296-8000 J. KENNETH CRONEY, ESQUIRE ALCO STANDARD CORPORATION VICE PRESIDENT AND GENERAL COUNSEL P.O. BOX 834 VALLEY FORGE, PENNSYLVANIA 19482 (610) 296-8000 COPIES TO: RHONDA R. COHEN, ESQUIRE BALLARD SPAHR ANDREWS & INGERSOLL 51ST FLOOR, 1735 MARKET STREET PHILADELPHIA, PA 19103-7599 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following. [X] CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- <TABLE> <CAPTION> PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLES OF EACH CLASS TO BE OFFERING PRICE AGGREGATE REGISTRATION OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE* FEE - -------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Common Stock, no par value(1)................ 2,500,000 $55.625 $139,062,500 $47,953 </TABLE> - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * Estimated solely for the purpose of determining the registration fee, pursuant to Rule 457(c). (1) Each share of Common Stock being registered hereunder includes a Common Stock Purchase Right. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------

ALCO STANDARD CORPORATION CROSS REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND THE PROSPECTUS <TABLE> <CAPTION> ITEM LOCATION IN PROSPECTUS ---- ---------------------- <C> <S> <C> 1. Forepart of the Registration Statement and Outside Front Front Cover Page Cover Page of Prospectus........ 2. Inside Front and Outside Back Cover Pages of Prospectus....... Inside Front Cover Page 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Business Charges......................... 4. Use of Proceeds.................. Front Cover Page 5. Determination of Offering Price.. Not Applicable 6. Dilution......................... Not Applicable 7. Selling Security Holders......... Front Cover Page; Resales 8. Plan of Distribution............. Front Cover Page; Plan of Distribution 9. Description of Securities to be Description of Common Stock and Registered...................... Preferred Stock 10. Interests of Named Experts and Not Applicable Counsel......................... 11. Information with Respect to the Business; Quarterly Data; Report of Registrant...................... Independent Auditors; Consolidated Financial Statements; Management's Discussion and Analysis of Financial Condition and Results of Operations; Corporate Financial Summary; Management; Certain Transactions; Executive Compensation 12. Disclosure of Commission Position on Indemnification for Not Applicable Securities Act Liabilities...... </TABLE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY PROSPECTUS DATED DECEMBER 19, 1994, SUBJECT TO COMPLETION. PROSPECTUS DECEMBER , 1994 [LOGO OF ALCO STANDARD CORPORATION APPEARS HERE] 2,500,000 SHARES OF COMMON STOCK (NO PAR VALUE) This prospectus describes the offering by Alco Standard Corporation ("Alco") of shares of its common stock in connection with acquisitions of other businesses and properties which Alco (including its subsidiaries) may make from time to time. A maximum of 2,500,000 shares of common stock may be sold pursuant to this prospectus. These shares will ordinarily represent consideration paid directly upon the acquisition of other businesses or properties. The shares may also include shares to be delivered upon the exercise or satisfaction of conversion or purchase rights which are created in connection with acquisitions or which were previously created or assumed by the companies whose businesses or properties were acquired by Alco. This prospectus may be incorporated, in whole or in part, into proxy statements of companies whose assets are to be exchanged for shares covered hereby or which propose to merge with Alco or a subsidiary of Alco, in connection with meetings of shareholders of such companies called for the purpose of approving such transactions, so as to permit compliance with the requirements of Rule 145 of the Securities and Exchange Commission under the Securities Act of 1933. Certain information contained in such proxy statements concerning the terms of such transactions and the assets and businesses to be acquired thereby may be incorporated, by subsequent amendment or supplement, into this prospectus, solely for the purpose of offering shares in connection with the transactions. This prospectus may also be used for the offering of shares by persons who may be deemed affiliates of Alco or the companies acquired by Alco and who may not freely sell such shares under the Securities Act of 1933. If Alco gives its prior written consent and makes all filings required by law, such affiliates may sell such shares pursuant to this prospectus, subject to whatever conditions Alco may impose. Shares offered hereby generally may be resold by the persons acquiring them without further registration under the Securities Act of 1933. However, any affiliate of a company acquired by Alco, or anyone otherwise deemed an underwriter of such shares, may be subject to certain limitations on resale. For further information on such limitations, see "RESALES" in this prospectus. Shares of common stock of Alco are listed on the New York, Philadelphia and Chicago Stock Exchanges. As of November 28, 1994, there were approximately 14,404 holders of record of Alco's common stock. The reported closing price of the common stock of Alco on the New York Stock Exchange Composite Tape on December 15, 1994 was $59 1/4. ------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE SALE OF ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ALCO. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE OF THE SECURITIES COVERED HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALCO SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE. ---------------- TABLE OF CONTENTS <TABLE> <S> <C> BUSINESS................................................................... 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................................ 8 DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK............................ 13 MANAGEMENT................................................................. 16 EXECUTIVE COMPENSATION..................................................... 20 PLAN OF DISTRIBUTION....................................................... 26 RESALES.................................................................... 26 LEGAL OPINIONS............................................................. 27 EXPERTS.................................................................... 27 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING........................ 27 REPORT OF INDEPENDENT AUDITORS............................................. 28 CONSOLIDATED FINANCIAL STATEMENTS.......................................... 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................. 34 CORPORATE FINANCIAL SUMMARY................................................ 49 SEGMENT DATA............................................................... 50 QUARTERLY DATA............................................................. 52 </TABLE> ---------------- AVAILABLE INFORMATION Additional information is contained in a registration statement, of which this prospectus is a part. Alco is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the Securities and Exchange Commission. Reports, proxy statements and other information filed by Alco with the Securities and Exchange Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its Regional Offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048. Copies can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other information about Alco can also be inspected at the New York, Philadelphia and Chicago Stock Exchanges (on which Alco's common stock is listed). Alco has filed with the Commission a Registration Statement on Form S-1 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933 with respect to the securities to which this prospectus relates. This prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to Alco and such securities, reference is made to the Registration Statement. Statements contained in this prospectus as to the contents of any contract or any other document filed, or incorporated by reference, as an exhibit to the Registration Statement, are qualified in all respects by such reference. 2

BUSINESS Alco Standard Corporation ("Alco") was incorporated in Ohio in 1952 and is the successor to a business incorporated under a similar name in 1928. The term "Alco" generally includes Alco Standard Corporation and its subsidiaries and divisions. The address of Alco's principal executive offices is P.O. Box 834, Valley Forge, Pennsylvania 19482 (telephone number: (610) 296-8000). Alco markets and distributes office equipment and paper. In fiscal 1994, Alco had annual revenues of approximately $8 billion. Information concerning revenues, income before taxes and assets attributable to each of Alco's business segments for each of the three years in the period ended September 30, 1994 is set forth under "Segment Data" in the consolidated financial statements on page 50 of this prospectus. Alco was founded and continues to operate as "The Corporate Partnership." Under this entrepreneurial principle, Alco field executives maintain a high degree of operating autonomy, which enhances the company's ability to serve and support its customers. The following describes Alco's two business segments. ALCO OFFICE PRODUCTS Alco Office Products ("AOP") sells, rents and leases photocopiers, fax machines and other automated office equipment. AOP also provides equipment service, supplies, and equipment leasing, and provides reprographic facilities management and specialized document copying services. AOP has locations throughout the United States, Canada and in Europe (primarily in the United Kingdom). These companies comprise the largest network of independent copier and office equipment dealers in North America and in the United Kingdom, and represent the only independent distribution network with national scope. AOP competes against numerous competitors over a wide range of markets, competing on the basis of price, quality of service, and product performance. AOP distributes the products of numerous manufacturers, including Canon, Ricoh and Sharp, throughout 47 states, four Canadian provinces and in Europe. Customers include large and small businesses, professional firms and government agencies. During fiscal 1992, 1993 and 1994, AOP accounted for approximately 26%, 25% and 28%, respectively, of Alco's consolidated revenues, and 47%, 50% and 55%, respectively, of Alco's operating income (excluding Unisource restructuring costs in 1993). During fiscal 1994, AOP acquired 45 office products companies in the United States and Canada, with an aggregate of over $200 million in annualized revenues. AOP also expanded Erskine House Ltd., its office equipment distribution network based in the United Kingdom, through two contiguous acquisitions. In addition, as part of the IMM divestiture (described under "Divestitures" on page 5 of this prospectus), AOP acquired operations in Denmark and France. UNISOURCE Unisource Worldwide, Inc. ("Unisource") markets and distributes papers for office and reprographic use, distributes quality printing papers, and distributes paper and plastic packaging supply items for food retailers and food processors. Unisource also distributes commercial sanitary and maintenance products and industrial packaging equipment, closure systems, and supplies. The Unisource companies were formerly known as "Paper Corporation of America," and are currently in the process of restructuring and consolidating under the single name "Unisource." Information concerning the restructuring is described under "Restructuring Plan," on page 4 of this prospectus. 3

During fiscal 1992, 1993 and 1994, Unisource accounted for approximately 74%, 75% and 72%, respectively, of Alco's consolidated revenues from continuing operations, and 53%, 50%, and 45%, respectively, of Alco's operating income (excluding Unisource restructuring costs in 1993). Unisource's products are distributed to commercial printers and publishers, and to all types of manufacturers, offices, government agencies and other institutions. Paper, printing supplies and industrial and office supply products are also sold directly to the commercial retail market through Unisource's Paper Plus (R) retail stores. Unisource sells the products of substantially all major domestic and Canadian paper manufacturers and suppliers. There has been no difficulty in obtaining products from these suppliers. Supplier relationships are good and are expected to continue. Unisource's operations constitute the largest independent network of paper distributors in the United States and Canada. Although substantial in the aggregate, these operations compete separately in many different markets against numerous competitors, including both independent distributors and those owned by major paper manufacturers. Although its business is highly competitive and its competitors numerous, Unisource believes that its competitive position is strong. Unisource competes principally on the basis of price, quality customer service and the range of products maintained in inventory. Unisource has locations throughout the United States and Canada. In the aggregate, Unisource occupies over 17 million square feet of space. In June 1994, Unisource acquired Larsen Packaging Equipment Company, a distributor of packaging film and equipment located in St. Louis, Missouri, with approximately $10 million in annual revenues. INFORMATION CONCERNING ALCO'S BUSINESS IN GENERAL RESTRUCTURING PLAN In September 1993, the Board of Directors approved a restructuring plan for Alco's paper distribution business and changed the name of such business from "Paper Corporation of America" to "Unisource Worldwide, Inc." As a result of the restructuring, a pretax charge of $175 million was recorded in the fourth quarter of fiscal 1993. The Unisource restructuring plan was adopted as a proactive response to changes in the business environment in which Unisource operates. In recent periods, mills have experienced overcapacity, resulting in depressed pricing and pressure on distributors' margins. The usage and demand for paper has shifted significantly because of consolidation in the commercial printing industry, enhancements in imaging technology and the related growth in the reprographics segment. Customers are increasingly requiring distributors to provide enhanced services and greater capabilities. Most facets of the Unisource restructuring plan are proceeding as planned, with 68 facility consolidations substantially completed by the end of fiscal 1994. By September 30, 1994, Unisource reduced its employee base by approximately 725. This excludes the data processing personnel who transferred to Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM, as part of an information technology system outsourcing agreement with ISSC. This ten-year agreement for $300 million, which was effective January 1, 1994, will provide the information technology system to be implemented as part of the restructuring plan. The agreement was also expanded to automated warehouse and truck routing systems at an estimated cost of approximately $30 million over the ten-year period of the agreement. Due to a change in software, initial implementation of the information technology system was postponed by six months. This is not anticipated to delay the completion of the restructuring plan by the end of fiscal 1996. 4

BOARD AND MANAGEMENT CHANGES Three new members were elected in 1994 to Alco's Board of Directors: Paul J. Darling II, Chairman, President and Chief Executive of Corey Steel Company; James J. Forese, IBM Vice President, Chairman of IBM Credit Corporation and a member of IBM's Worldwide Management Council; and Dana J. Mead, President and Chief Executive Officer of Tenneco, Inc., Chairman and Chief Executive Officer of Case Corporation, a Tenneco subsidiary and former Executive Vice President and Director of International Paper Company. Retiring from the Board were Robert H. Potts and William J. Scharffenberger. Among other executive changes during the 1994 fiscal year, J. Kenneth Croney was appointed General Counsel of Alco succeeding Hugh G. Moulton, who continues as Executive Vice President. Kathleen M. Burns, Treasurer, and Michael J. Dillon, Controller, were named corporate vice presidents of Alco. In August 1994, William T. Leith was named Executive Vice President of Unisource with responsibility for all Unisource's U.S. operations. Mr. Leith was formerly President of Distribix (a Unisource operating company located in St. Louis, Missouri) and President of the Unisource Central Region. Jack H. Keeney, formerly Vice President--Finance of Distribix, was appointed Unisource's Vice President, Finance--U.S. Operations. Raymond A. Peterson was named Executive Vice President of Unisource's Canadian Operations. Two former AOP operating company presidents joined AOP group management in fiscal 1994 in new executive vice president positions. In June 1994, Peter W. Shoemaker was appointed Executive Vice President of AOP with responsibility for all North American operations. In July 1994, Michael S. Koether was appointed Executive Vice President--Marketing of AOP with responsibility for all North American marketing and acquisition activities. On October 17, 1994, Ray B. Mundt, who served as Chief Executive Officer from 1980 until August 1993, announced his retirement from his ongoing duties as an officer of Alco, effective December 31, 1994. Mr. Mundt will continue in his duties as Chairman of the Board during fiscal 1995 and will remain available to provide guidance and advice in the future as appropriate. EQUITY OFFERINGS In December 1993, Alco completed a public offering of 5,750,000 shares of common stock, and used the net proceeds of approximately $294 million primarily to reduce outstanding debt. DIVESTITURES In October 1992, Alco made a 49.9% investment in IMM Office Systems ("IMMOS"), a European office equipment distribution joint venture, marking Alco's entry into the European market. Alco's investment in IMMOS was intended to serve as a base for further expansion in Europe. The venture agreement provided Alco with the option of acquiring the remaining shares of IMMOS over a three-year period beginning in 1996 if IMMOS achieved certain operating goals. However, the capital structure and organizational complexities of IMMOS, exacerbated by the distressed European economy and operational differences among the venture partners, prevented IMMOS from progressing toward those goals. As a result, in September 1994, Alco sold its 49.9% interest in IMMOS for cash plus a passive interest in any subsequent sale of IMMOS for five years. Alco retains no ongoing liability in the joint venture and the parties exchanged complete mutual releases for past actions. In addition, Alco was relieved of the covenant not to compete in Europe contained in the joint venture agreement, although the parties will not compete with each other for a period expiring on December 31, 1995. As part of the transaction, Alco acquired profitable operations in Denmark and France and retained limited operations in Germany. Alco recognized a loss on the sale of its interest in IMMOS in the quarter ended June 30, 1994, and recorded a pre-tax loss of $115.3 million ($95.1 million, net 5

of tax) equating to a loss per share of $1.75 for the quarter ($1.77 for fiscal 1994). This charge represents the write-off of Alco's investment in IMMOS plus certain transactional costs less cash proceeds from the sale together with related tax benefits. SUPPLIERS AND CUSTOMERS Products distributed by Alco are purchased from numerous domestic and overseas suppliers. There has been no significant difficulty in obtaining products from these suppliers. No industry segment of Alco is dependent upon a single customer, or a few customers, the loss of any one or more of which would have a material adverse effect on Alco's business taken as a whole. Backlog is not significant because virtually all of Alco's revenues during the last two fiscal years were derived from its distribution operations which fill orders shortly after receipt from customers. There is no material seasonal fluctuation in Alco's business as a whole. Many of Alco's operations are required to carry significant amounts of inventory to meet rapid delivery requirements of customers. At September 30, 1994, inventories accounted for approximately 36% of Alco's total current assets. PROPRIETARY MATTERS Alco has a number of patents, licenses and trademarks. Alco does not believe, however, that any patent, license or trademark is material to its operations as a whole. ENVIRONMENTAL REGULATION Environmental laws and liabilities relating to Alco's current businesses (which are primarily distribution operations) have not had and are not expected to have a material adverse effect upon Alco's capital expenditures, earnings or competitive position. Although Alco has retained certain environmental liabilities relating to the predivestiture operations of its divested manufacturing companies, such environmental liabilities have not had and are not expected to have a material adverse effect on Alco. While it is not possible to estimate what expenditures may be required in order for Alco to comply with environmental laws or discharge environmental liabilities in the future, Alco does not believe that such expenditures will have a material adverse effect on it or its operations as a whole. EMPLOYEES At September 30, 1994, Alco had approximately 30,600 employees. FOREIGN OPERATIONS Alco's operations in Canada distribute paper, industrial supplies and packaging products, and distribute and service office equipment. Alco's European operations distribute and service office equipment. Alco's 49.9% equity interest in IMMOS, a German-based office equipment distribution network, was divested in September 1994 (see "Divestitures" on page 5 of this prospectus). Information concerning revenues, income before taxes and identifiable assets of Alco's foreign operations for each of the three years in the period ended September 30, 1994 set forth in note 9 to the consolidated financial statements included on pages 43 and 44 of this prospectus. Revenues from exports during the last three fiscal years were not significant. 6

There are additional risks attendant to foreign operations, such as possible currency fluctuations and unsettled political conditions. PROPERTIES At September 30, 1994, Alco owned or leased facilities in 47 states, nine Canadian provinces and in Europe. These properties occupy a total of approximately 22.6 million square feet of which approximately 8.1 million square feet are owned and the balance are leased under lease agreements with various expiration dates. Alco believes that none of its properties is materially important to its operations as a whole, and believes that its facilities are suitable and adequate for the purposes for which they are used. LEGAL PROCEEDINGS Alco does not believe that the outcome of lawsuits or other legal proceedings to which it is a party will materially affect Alco or its operations as a whole. However, Alco is presently in arbitration with a former subsidiary, which has asserted that Alco is liable to it for certain liabilities arising under the Coal Industry Health Benefit Act of 1992. Based on consultation with its counsel, Alco does not believe that it is responsible for such liabilities and, therefore, no provision for this matter has been recorded in Alco's financial statements for the fiscal year ended September 30, 1994. In the event that the arbitrators decide in favor of the claimant, Alco estimates that it would be obligated to pay approximately $36 million over a twenty-year period which would result in an after-tax charge of approximately $23 million to discontinued operations. 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW ALCO STANDARD CORPORATION AND SUBSIDIARIES The discussion of the results of operations for the three years ended September 30, 1994 reviews the continuing operations of Alco as contained in the Consolidated Statements of Income. RESULTS OF OPERATIONS--1994 Revenues and income before taxes by segment for fiscal years ended September 30, 1994 and September 30, 1993 and the percentage change for 1994 versus 1993 were: <TABLE> <CAPTION> REVENUES INCOME BEFORE TAXES ------------------------ ---------------------------- 1994 1993 % CHANGE 1994 1993 % CHANGE ------ ------ -------- ------- ------- -------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> Alco Office Products..... $2,240 $1,586 41.2% $ 199.4 $ 138.8 43.7% Unisource United States.......... 5,108 4,174 22.4 148.8 118.7 25.4 Canada................. 649 690 (5.9) 13.5 18.3 (26.2) Restructuring costs.... (175.0) ------ ------ ---- ------- ------- Total Unisource...... 5,757 4,864 18.4 162.3 (38.0) ------ ------ ---- ------- ------- Operating................ 7,997 6,450 24.0 361.7 100.8 Unconsolidated affiliate. (117.2) (2.5) Eliminations and nonallocated............ (1) (5) (87.7)* (73.7)* ------ ------ ---- ------- ------- $7,996 $6,445 24.1 $ 156.8 $ 24.6 ====== ====== ==== ======= ======= </TABLE> - -------- * Includes interest costs and net corporate expenses. FISCAL 1994 COMPARED TO FISCAL 1993 Alco's revenues for fiscal 1994 were $8 billion, an increase of $1.5 billion over fiscal 1993 revenues of $6.5 billion. Income before taxes from operations increased to $361.7 million from $100.8 million in fiscal 1993, which included a restructuring charge of $175 million related to the Unisource operations. Earnings per share from continuing operations for fiscal 1994 were $1.10 compared to $(.04) for fiscal 1993 which included a loss of $2.38 per share resulting from the Unisource restructuring charge. Earnings per share excluding the loss on the sale of the investment in IMMOS in fiscal 1994 and the effect of the restructuring charge in fiscal 1993 were $2.87 and $2.34, respectively. AOP generated $654 million in increased revenues of which $288 million relates to fiscal 1993 acquisitions and $134 million to fiscal 1994 acquisitions. The remaining $232 million increase reflects continued internal growth in all revenue areas of AOP's base companies, particularly in its equipment, service and facilities management businesses. The $934 million increase in revenues from Unisource's U.S. operations includes $764 million from acquisitions (primarily Butler Paper) and $170 million of internal growth from its base companies. The $41 million revenue decrease in the Unisource Canadian paper businesses is primarily attributable to a 5.9% decrease in the average foreign exchange rate. AOP's operating income increase of $60.6 million includes $16.4 million from prior year acquisitions and $10.2 million from current year acquisitions. The remaining $34 million increase reflects continued internal growth from its base companies which is primarily the result of higher operating contributions from the service, supply and facilities management areas of AOP's businesses, along with increased operating 8

income related to its leasing activities through Alco Capital Resource, Inc. ("Alco Capital"). Operating income from Unisource's U.S. paper operations increased $30.1 million. This increase represents a contribution of $17.6 million from prior year acquisitions and $12.5 million from its base companies. The internal growth is attributable to improved gross margins and expense reductions realized in the last half of the fiscal year offset primarily by lower comparable margins experienced in the first half of the year. The Canadian paper distribution business decrease in operating income of $4.8 million is the result of the carryover of certain incremental merger costs related to the Canadian merger plan implemented in fiscal 1993, gross margin erosion in the first half of the fiscal year, and the effects of the declining foreign exchange rates. Geographically, revenues from Alco's paper and office products operations outside the U.S. were $843 million for fiscal 1994 compared to $800 million for the prior fiscal year. The increase reflects $77 million from the European operations of Erskine acquired in fiscal 1993 along with $7 million from AOP internal growth offset by a decrease of $41 million from the Canadian paper distribution business. Operating income from foreign operations was $29.1 million for fiscal 1994, an increase of $1.8 million from the prior year, the result of increased AOP foreign operations, offset by the decrease in operating income of the Canadian paper distribution business. The 49.9% investment in IMMOS in October 1992 marked Alco's entry into the European market, and it was to serve as a base for further expansion in Europe. The venture agreement provided Alco with the option of acquiring the remaining shares of IMMOS over a three-year period beginning in 1996 if IMMOS achieved certain operating goals. However, the capital structure and organizational complexities of IMMOS, exacerbated by the distressed European economy and operational differences among the venture partners, had prevented IMMOS from progressing toward those goals. As a result, in September 1994, Alco sold its 49.9% interest in IMMOS for cash plus a passive interest in any subsequent sale of IMMOS for five years (see "Divestitures" on page 5 of this prospectus). Alco retains no ongoing liability in the joint venture and the parties exchanged complete mutual releases for past actions. In addition, Alco was relieved of the covenant not to compete in Europe contained in the joint venture agreement, although the parties will not compete with each other for a period expiring on December 31, 1995. As part of the transaction, Alco acquired profitable operations in Denmark and France and retained limited operations in Germany. Alco recognized a loss on the sale of its interest in IMMOS in the quarter ended June 30, 1994, and recorded a pretax loss of $115.3 million ($95.1 million, net of tax) equating to a loss per share of $1.75 for the quarter ($1.77 for fiscal 1994). This charge represents the write-off of Alco's investment in IMMOS plus certain transactional costs less cash proceeds from the sale together with related tax benefits. For the fiscal year ended September 30, 1994, Alco recorded a total pretax loss of $117.2 million from its investment in an unconsolidated affiliate. This includes the pretax loss of $115.3 million relating to the sale previously discussed and a $1.9 million operating loss on its investment through March 31, 1994. Interest expense increased by $3.6 million from fiscal 1993, a result of higher interest rates along with higher borrowing levels during the year to fund acquisitions and working capital requirements. Income before taxes from continuing operations increased by $132.2 million, which reflects the net effect of the $115.3 million loss on the sale of IMMOS in fiscal 1994 and the $175 million charge for restructuring costs in fiscal 1993. Income before taxes from continuing operations also includes improved operating results from base companies and earnings contributed by current and prior year acquisitions net of increased interest costs and other corporate items. The effective income tax rate for fiscal 1994 is 55% compared to 69% in fiscal 1993. The effective income tax rate for fiscal 1994, excluding the effect of the sale of IMMOS, is 39.1% compared with 39.6% in fiscal 1993, excluding the effect of the restructuring costs. Fiscal 1994 weighted average shares were 6.3 million shares greater than the 47.4 million shares for fiscal 1993, primarily the result of a public offering of common stock in December 1993. Most facets of the Unisource restructuring plan announced in September 1993 are proceeding as planned (see "Restructuring Plan" on page 4 of this prospectus). As of September 30, 1994, Unisource had substantially completed 68 facility consolidations and reduced its employee base by approximately 725. This 9

excludes the data processing personnel that transferred to Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of IBM, as part of the information technology system outsourcing agreement with ISSC. However, due to a change in software, initial implementation of the information technology system was postponed by six months. This is not anticipated to delay the completion of the restructuring plan by the end of fiscal 1996. At September 30, 1994, the remaining restructuring reserve is $107 million, which management believes is adequate to complete the restructuring plan by the end of fiscal 1996 and also obtain the goal of increasing Unisource's operating return on sales to a run rate of 4% by the end of fiscal 1996. The estimated cost to complete the facility consolidations is $44.4 million of which a significant portion relates to costs to dispose and maintain facilities which have been or will be vacated. Severance costs have been incurred during 1994 in accordance with the plan and $23.8 million is the estimated balance for severance costs. The related organizational and system redesign is estimated to have a remaining cost of $16.2 million. Alco is presently in arbitration with a former subsidiary, which has asserted that Alco is liable to it for certain liabilities arising under the Coal Industry Health Benefit Act of 1992 (see "Legal Proceedings" on page 7 of this prospectus). Based on consultation with its counsel, Alco does not believe that it is responsible for such liabilities and, therefore, no provision for this matter has been recorded in the financial statements. In the event that the arbitrators decide in favor of the claimant, Alco estimates that it would be obligated to pay approximately $36 million over a twenty-year period, which would result in an after-tax charge of approximately $23 million to discontinued operations. During the first quarter of fiscal 1994, Alco adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes"; the individual and combined effect on earnings of these accounting changes was immaterial. RESULTS OF OPERATIONS--1993 Revenues and income before taxes by segment for fiscal years ended September 30, 1993 and September 30, 1992 and the percentage change for 1993 versus 1992 were: <TABLE> <CAPTION> REVENUES INCOME BEFORE TAXES ------------------------ --------------------------- 1993 1992 % CHANGE 1993 1992 % CHANGE ------ ------ -------- ------- ------ -------- (IN MILLIONS) <S> <C> <C> <C> <C> <C> <C> Alco Office Products...... $1,586 $1,259 26.0% $ 138.8 $105.2 31.9% Unisource United States........... 4,174 3,585 16.4 118.7 118.2 .4 Canada.................. 690 83 18.3 2.3 Restructuring costs..... (175.0) ------ ------ ---- ------- ------ ----- Total Unisource....... 4,864 3,668 32.6 (38.0) 120.5 ------ ------ ---- ------- ------ ----- Operating................. 6,450 4,927 30.9 100.8 225.7 (55.3) Unconsolidated affiliate.. (2.5) Investment gain, net...... 6.7 Eliminations and nonallocated............. (5) (2) (73.7)* (59.9)* ------ ------ ---- ------- ------ ----- $6,445 $4,925 30.9 $ 24.6 $172.5 (85.7) ====== ====== ==== ======= ====== ===== </TABLE> - -------- * Includes interest costs and net corporate expenses. FISCAL 1993 COMPARED WITH FISCAL 1992 Alco increased revenues $1.6 billion to $6.5 billion in fiscal 1993 from $4.9 billion in fiscal 1992. Income before taxes from operations, which includes a restructuring charge of $175 million relating to Unisource operations, decreased from $226 million in fiscal 1992 to $101 million in fiscal 1993. Earnings per share from 10

continuing operations decreased from $2.22 to $(.04), including the Unisource restructuring charge of $2.38. Earnings per share from continuing operations excluding the effect of the restructuring charge were $2.34. AOP generated $327 million in increased revenues of which $17 million relates to fiscal 1992 acquisitions and $100 million to current year acquisitions. The remaining $210 million increase reflects continued growth in all revenue areas of AOP's base companies, including its equipment, service and facilities management businesses. The $589 million increase in revenues from Unisource's U.S. operations represents $161 million from its base companies and $428 million from current and prior year acquisitions. The $607 million revenue increase in the Unisource Canadian paper businesses is primarily attributable to the prior year acquisitions and includes a decrease of $32 million relating to changes in foreign currency rates. Alco's total foreign operations including the foreign operations of AOP and Unisource Canada generated $800 million in revenues for the fiscal year 1993 compared with $169 million for the same period of the prior fiscal year. The increase is primarily the result of the Canadian paper distribution acquisitions made in September 1992 and reflects a $48 million negative impact because of foreign currency rate changes. AOP's operating income increase of $33.6 million includes $1.7 million from fiscal 1992 acquisitions and $2.7 million from current year acquisitions. The remaining $29.2 million increase from its base companies is primarily the result of higher operating contributions from the service and supply areas of AOP's businesses. Unisource's U.S. paper operations include an increase in operating income of $.5 million, reflecting $10.2 million contributed by current and prior year acquisitions, offset by a decrease in earnings of $9.7 million from base paper distribution companies caused by competitive business conditions in the paper industry. Unisource's Canadian paper operations include a $16 million increase in operating income primarily relating to fiscal 1992 acquisitions. The overall decrease in operating income for Unisource is primarily attributed to the $175 million of restructuring costs, $171.5 million relating to U.S. operations and $3.5 million relating to Canadian operations. In September 1993, Alco adopted the Unisource restructuring plan as a proactive response to changes in the business environment in which Unisource operates (see "Restructuring Plan" on page 4 of this prospectus). In recent periods, mills have experienced overcapacity, resulting in depressed pricing and pressure on distributors' margins. The usage and demand for paper has shifted significantly because of consolidation in the commercial printing industry, enhancements in imaging technology and the related growth in reprographics segment. The restructuring plan encompasses the following: adoption of the "Unisource" identity, installation of a customer-focused information system, re-engineering of warehouse and transportation management functions, regionalization of management and administrative support functions and consolidation of service center locations. In connection with certain elements of the restructuring plan, Alco recorded a charge to earnings of $175 million ($112.9 million net of taxes or $2.38 per share) in the fourth quarter of fiscal 1993. The major components of the restructuring costs are location consolidation ($60.7 million), severance costs ($48 million) and related information system redesign ($22 million). Included in the charge are noncash asset writedowns relating to inventory and equipment that approximate $22.5 million and are directly attributable to the Unisource restructuring. The restructuring charge will be funded from Unisource's cash flow. Alco's objective in adopting the restructuring plan is to increase Unisource's operating return on sales from 2.6% in the fourth quarter of fiscal 1993 to 4% by the end of fiscal 1996. Income from foreign operations was $27.3 million for the year ended September 30, 1993. This represents an increase of $13.5 million over the prior year results of $13.8 million and is primarily attributable to the Canadian paper distribution acquisitions in September 1992. Fluctuations in the foreign currency rates reduced the increase by $1.9 million. Alco recorded a $2.5 million loss from an unconsolidated affiliate, IMM Office Systems GmbH, due to recessionary conditions and costs associated with an increase in sales force. Interest expense increased $8.5 million from the comparable period in fiscal 1992, a result of higher borrowing levels to fund acquisitions. Income before taxes from continuing operations decreased by $147.9 11

million, which reflects the $175 million restructuring charge in fiscal 1993. Income before taxes from continuing operations also includes the combined result of improved operations from base companies along with earnings contributed by key acquisitions made in the prior year, which were achieved despite the increase in interest cost and the $6.7 million net investment gain from the prior year. The effective income tax rate for the current period is 69%. The effective tax rate, excluding the restructuring costs, is 39.6%, the same as the effective rate for the year ended September 30, 1992. FINANCIAL CONDITION AND LIQUIDITY Debt, excluding finance subsidiaries, was $445 million at September 30, 1994, a decrease of $349 million from Alco's debt balance at September 30, 1993 of $794 million. Alco had a total of $616 million in bank credit commitments as of September 30, 1994, of which $525 million were unused and available. In December 1994, Alco intends to replace three of these credit agreements with one $500 million multi-currency facility with more favorable terms and to reduce the commitment under the remaining credit agreement to $100 million, resulting in total bank credit commitments of $600 million. Debt as a percentage of capitalization was 24.6% and the current ratio was 1.6 to 1 at September 30, 1994. At the end of fiscal 1994, Alco's commitments for capital expenditures were approximately $22 million, all of which is expected to be expended during fiscal 1995. In December 1993, Alco issued 5,750,000 shares of common stock in a public offering, and the net proceeds of approximately $294 million were used to reduce outstanding debt. Alco entered into an agreement in May 1994 retiring $25 million of redeemable preferred stock of a subsidiary and issued senior notes in an equivalent amount. Alco estimates that total cash expenditures in connection with the Unisource restructuring plan will amount to $148 million, of which approximately $52 million has been spent to date, with $53 million anticipated to be paid in fiscal 1995 and $43 million in fiscal 1996. Effective January 1, 1994, Unisource entered into a ten-year agreement with ISSC for $300 million, to provide the information technology system to be implemented as part of the restructuring plan. Such contract has been expanded to provide automated warehouse and truck routing systems at an estimated cost of approximately $30 million over the same contract period. The forgoing commitments are anticipated to be funded from Unisource's operating cash flow. Finance subsidiaries debt grew by $52 million from September 30, 1993, a result of increased leasing activity. Effective July 1, 1994, Alco Capital entered into a Medium Term Note Program, whereby Alco Capital may offer to the public from time to time medium term notes having an aggregate initial offering price not exceeding $500 million or the equivalent thereof in foreign currency. These notes are offered at varying maturities of nine months or more from their dates of issue and may be subject to redemption at the option of Alco Capital or repayment at the option of the holder, in whole or in part, prior to the maturity date in conjunction with meeting specified provisions. Interest rates are determined based on market conditions at the time of issuance. As of September 30, 1994, Alco Capital had issued $105 million of medium term notes bearing a weighted average interest rate of 6.9%. In addition, Alco Capital entered into an agreement in September 1994 to sell under an asset securitization program, an undivided ownership interest in $125 million of eligible direct financing lease receivables. The agreement, which expires in September 1995, contains limited recourse provisions that require Alco Capital to assign an additional undivided interest in leases to cover any potential losses to the purchaser due to uncollectible leases. As collections reduce previously sold interests, new lease receivables can be sold up to $125 million. As of September 30, 1994, $125 million of lease receivables have been sold pursuant to the agreement. Alco 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 expenditure, acquisition and restructuring programs. 12

DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK Alco is currently authorized to issue 75,000,000 shares of common stock and 2,135,988 shares of serial preferred stock. Both classes are without par value. On January 26, 1995, the shareholders are expected to approve an increase in the authorized number of common shares from 75,000,000 to 150,000,000. The common stock is subject to the express terms of the serial preferred stock. Two series of serial preferred stock are outstanding, and additional series may be authorized by the board of directors. DIVIDEND RIGHTS Common Stock. Dividends and other distributions of assets may be made with respect to the common stock from time to time by the board of directors within the limits and from the sources permitted by law after payment or provision for payment of all accrued and unpaid dividends (which are cumulative) on the serial preferred stock, so long as there is no default in any sinking fund provisions for the serial preferred stock. Certain loan agreements limit the amount of retained earnings from which Alco may pay dividends, repurchase its shares or take certain other actions. Preferred Stock. The serial preferred stock is entitled to payment of annual per share dividends as follows: Series 2, $5.00; and Series AA, $237.50 ($2.375 per Depositary Share) through January 1, 1996 and $325.00 ($3.25 per Depositary Share) thereafter. So long as any shares of serial preferred stock are outstanding, Alco may not (a) declare or pay any dividends (other than dividends payable in common stock or other shares of Alco ranking junior to the serial preferred stock) to holders of common stock or shares of Alco of any other class ranking on a parity with or junior to the serial preferred stock, or (b) make any distributions of assets (directly or indirectly, by purchase, redemption or otherwise) to the holders of common stock or shares of Alco of any other class ranking on a parity with or junior to the serial preferred stock (except in the case of shares purchases in compromise of claims, or to prevent loss on doubtful debts and except in the case of shares purchases out of the proceeds of the sale of common stock or other shares ranking junior to the serial preferred stock received by Alco, subsequent to January 1, 1968): (a) Unless all accrued and unpaid dividends on shares of serial preferred stock, including the full dividends for the then quarterly dividend period, shall have been paid or declared and funds sufficient for payment thereof set apart; and (b) Unless there shall be no arrearages with respect to redemption of shares of serial preferred stock from any sinking fund provided therefor. No dividends may be paid upon or declared or set apart for any of the serial preferred stock for any quarterly dividend period unless at the same time a like proportionate dividend for the same quarterly dividend period, ratably in proportion to the respective annual dividend rates fixed therefor, shall be paid upon or declared or set apart for all serial preferred stock of all series then issued and outstanding and entitled to receive such dividend. PREEMPTIVE RIGHTS Common Stock. The holders of common stock do not have any preemptive right to purchase or have offered to them for purchase any shares or other securities of Alco. Preferred Stock. The only preemptive right of holders of serial preferred stock is to participate in certain distributions, if any were to be made by Alco, to holders of common stock of options or rights to acquire common stock, or of evidences of Alco debt or assets (other than cash). COMMON STOCK PURCHASE RIGHTS In February 1988, Alco declared and paid a dividend distribution of one right ("Right") for each outstanding share of common stock. The Rights become exercisable ten days (or such later date, not beyond 13

thirty days, as is fixed by the Board of Directors) after the earlier of: (a) public announcement that an individual or group has acquired or obtained the right to acquire 20% or more of Alco's common stock or (b) an individual or group commences or announces an intention to commence a tender or exchange offer that could result in the acquisition of 30% or more of such securities (the "Separation Date"). When exercisable, each Right entitles the holder to purchase one one-hundredth of a share of Alco's Series 12 preferred stock for $75 (the "Exercise Price"), subject to adjustment. Further, if any person or group owning 20% or more of Alco's outstanding common stock (a) engages in certain self-dealing practices with Alco, or (b) causes Alco to forgo or reduce quarterly dividends or take an action which would result in a more than 2% increase in the other entity's proportionate share of Alco's outstanding shares; or if any person or group acquires 30% or more of Alco's outstanding stock, each Right would entitle the holder thereof to acquire for the Exercise Price shares of common stock having a market value equal to twice the Right's exercise price. If Alco were acquired in a merger or other business combination, or if more than 50% of its earning power or assets were sold in one transaction or a series of transactions, each Right would entitle the holder thereof to purchase shares of the acquiring company's common stock having a market value equal to twice the Right's exercise price. The Rights that are or were held by a person or group owning 20% or more of Alco's outstanding voting securities become void if such person or group engages in an event which entitles holders of the Rights to purchase common stock or common stock of the acquiring company having a market value equal to twice the Right's exercise price. The Rights, which expire on February 10, 1998, are non-voting and may be redeemed by Alco at a price of $.05 per Right any time prior to ten days after public announcement that a person has acquired 20% or more of Alco's outstanding voting securities. Until the Separation Date, the Rights are transferable with and only with the common stock. VOTING RIGHTS Common Stock. Subject to certain voting rights of holders of the serial preferred stock to vote in certain circumstances and with respect to certain matters as a class, the holders of the common stock currently have full voting rights upon all matters presented for shareholder action. Shareholders do not have the right to cumulate votes in electing directors. Preferred Stock. The holders of serial preferred stock are entitled to one vote per share, and except as otherwise provided by specific provisions of Alco's Articles of Incorporation or by Ohio law, to vote on all matters together with the holders of common stock as one class. The holders of serial preferred stock are not entitled to cumulate votes in electing directors. The Articles of Incorporation of Alco provide that in the event of default in the payment, in whole or in part, of six quarterly dividends on the serial preferred stock, whether or not consecutive, the holders of shares of serial preferred stock will be entitled to elect two directors, to serve in addition to the directors otherwise elected. Such right to elect additional directors is in lieu of all other rights of the holders of the serial preferred stock to vote for directors, and will remain in effect until no quarterly dividend is in default. It is also provided that the vote or the written consent of at least two-thirds of the outstanding shares of serial preferred stock voting as a class is necessary to effect (i) any amendment, alteration or repeal of any of the provisions of the Articles of Incorporation or the Code of Regulations of Alco which affects the voting powers, rights or preferences of the holders of the serial preferred stock, (ii) the authorization or issue of any stock, or any security convertible into any stock, ranking prior to the serial preferred stock, (iii) the purchase or redemption of less than all the serial preferred stock then outstanding (except in accordance with a stock purchase offer made to all holders of serial preferred stock) when any dividends or sinking fund obligations on the serial preferred stock are in arrears, or (iv) the sale, lease or conveyance by Alco of all or substantially all of its property or business, its voluntary liquidation or dissolution, or its consolidation with or merger into any other corporation, unless the resulting corporation will have no shares authorized or outstanding ranking prior to or on a parity with the serial preferred stock except the same number with the same rights and preferences as those of Alco authorized and outstanding immediately preceding such consolidation or merger, and unless each holder of serial preferred stock immediately prior thereto receives the same number of shares, with the same rights and preferences, of the 14

resulting corporation. It is further provided that the vote or written consent of two-thirds of the holders of shares of any series is necessary to amend the Articles of Incorporation or Code of Regulations of Alco in such a way as to affect adversely and particularly the preferences, rights, powers or privileges of such series. No such vote or consent is required if provision has been made for the redemption of all of the serial preferred stock or any series thereof. In addition, Alco may create additional classes of stock, increase the authorized number of shares of serial preferred stock or issue series of preferred stock ranking on a parity with the serial preferred stock with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution and winding up without the consent of any holder of serial preferred stock. REDEMPTION PROVISIONS AND SINKING FUND Common Stock. The common stock is not redeemable. Preferred Stock. The directors are empowered to determine any redemption rights and price of each series of the serial preferred stock. The outstanding shares of the Series 2 preferred stock are redeemable in whole or in part, at Alco's option, at any time after five years from the date of issue, at the redemption price of $100 per share, plus accrued unpaid dividends. Alco is required to provide a sinking fund for the redemption of the Series 2 preferred stock. Alco has determined to redeem the Series 2 preferred stock in equal annual installments from 1989 through 1995 at the redemption price stated above. The Series AA preferred stock and the depositary shares representing such stock are not redeemable prior to January 9, 1996. On and after January 9, 1996 and until January 9, 2000, the Series AA preferred stock will be redeemable, in whole or in part, at the option of Alco, for such number of shares of common stock as are issuable at a conversion rate of 1.1201 shares of common stock for each depositary share, subject to adjustment in certain circumstances. Alco may exercise this option only if for 20 trading days within any period of 30 consecutive days, including the last trading day of such 30 trading day period, the closing price of the Common Stock on the New York Stock Exchange ("NYSE") exceeds $58.03, subject to adjustment in certain circumstances. On and after January 9, 2000 the Series AA preferred stock will be redeemable, in whole or in part at the option of Alco, for cash at a redemption price equivalent to $50.00 per depositary share, plus accrued and unpaid dividends. The Series AA preferred stock is not entitled to the benefit of any sinking fund. CONVERSION RIGHTS Common Stock. The common stock is not convertible into any other security. Preferred Stock. The directors are empowered to determine whether the shares of any series of the serial preferred stock will be convertible into common stock, and, if so, the conversion price or prices and the other terms or provisions of such rights. Each outstanding share of Series 2 preferred stock is convertible, at the option of the holder, at any time prior to the close of business on the second day preceding the redemption date thereof, into 8.0 shares of common stock. Each outstanding share of Series AA preferred stock is convertible at any time prior to the close of business on the redemption date thereof into 112.01 shares of common stock (1.1201 shares per depositary share). The conversion rights with respect to serial preferred stock are subject to proportionate adjustment if Alco combines or splits the outstanding shares of common stock or pays a dividend in common stock. Shares of common stock issuable upon the exercise of outstanding stock options are similarly subject to proportionate adjustment in such events. Shares of serial preferred stock which have been converted must be retired and may not be reissued. LIQUIDATION RIGHTS Common Stock. The holders of common stock are entitled pro rata to the assets of Alco in the event of voluntary or involuntary liquidation, subject to the rights of creditors and the rights of the holders of the serial preferred stock to receive certain per share amounts plus accrued unpaid dividends. 15

Preferred Stock. In the event of voluntary or involuntary liquidation, the holders of preferred stock are entitled to receive the following per share amounts plus accrued unpaid dividends: Series 2, $100; and Series AA, $5,000.00 ($50 per depositary share). At September 30, 1994, the preference upon liquidation of the shares of serial preferred stock then outstanding aggregated $201,261,000. After provision for the liquidation preference of serial preferred stock, at September 30, 1994, the portion of shareholders' equity applicable to common stock was $1,167,000,000. In the opinion of counsel for Alco, there are no restrictions upon the payment of dividends or other distributions out of surplus solely by reason of any excess of the liquidation preference over the carrying value of the serial preferred stock, and there are no remedies available to security holders before or after the payment of any dividend or distribution solely because such dividend may reduce surplus to an amount less than the amount of such excess. The serial preferred stock has priority over the common stock on any liquidation, dissolution or winding up to the extent of the liquidation price plus any accrued unpaid dividends. The directors have authority in establishing any series to determine the liquidation price for each series in the event of any liquidation, dissolution or winding up. LIABILITY FOR ASSESSMENT Outstanding shares of the common and serial preferred stock, including the shares of stock to be sold by the Selling Shareholders hereunder, are fully paid and non-assessable. MANAGEMENT The following is a list of Alco's directors and executive officers, their ages and their positions for the last five years. Unless otherwise noted, such positions are with Alco or its subsidiaries. ---------------- <TABLE> <CAPTION> NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED) ---- --- ------------------------------------------- <C> <C> <S> O. Gordon Brewer, Jr. ........... 58 Vice President--Finance (1986-Present) J. Mahlon Buck, Jr. ............. 69 Director of Alco since 1984; Chairman and President, TDH Capital Corporation (1977- Present) (also a trustee of The Vanguard Real Estate Funds Nos. I and II, Main Line Health, Inc. and The Bryn Mawr Hospital) Kathleen M. Burns................ 42 Vice President (1994-Present) and Treasurer (1989-Present); Assistant Treasurer (1987-1989) J. Kenneth Croney................ 52 Vice President (1983-Present), General Counsel (1994-Present) and Secretary (1983-Present) Paul J. Darling, II.............. 56 Director of Alco since 1994; Chairman, President and Chief Executive Officer, Corey Steel Company (1984-Present) (also a director of Liberty Mutual Insurance Company, Liberty Life Assurance Company of Boston, Liberty Mutual Fire Insurance Company and Liberty Financial Companies, Inc.) Stephen K. Deay.................. 47 Vice President--Tax (1993-Present); Director-- Taxes (1989-1993) Michael J. Dillon................ 41 Vice President (1994-Present) and Controller (1993-Present); Group Controller, Alco Office Products (1991-1993); Associate Audit Director (1991); Senior Audit Manager (1987-1991) </TABLE> 16

<TABLE> <CAPTION> NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED) ---- --- ------------------------------------------- <C> <C> <S> Kurt E. Dinkelacker.............. 41 Executive Vice President and Chief Financial Officer (1993-Present); Executive Vice President--Finance, Alco Office Products (1989- 1991); Group Controller, Alco Office Products (1987-1989) William F. Drake, Jr. ........... 62 Director of Alco since 1969; Attorney and Partner, Montgomery, McCracken, Walker & Rhoads (1984-Present); Vice Chairman (1984-Present) (also a director of Nocopi Technologies, Inc.) James J. Forese.................. 59 Director of Alco since 1994; General Manager, IBM Customer Financing, and Chairman, IBM Credit Corporation (1993-Present); IBM Vice President, Finance (1990-1993); IBM Vice President and Group Executive (1988-1990) (also a director of Lexmark International, Inc., IBM Latin America, American Management Systems, Inc. and NUI Corporation) Frederick S. Hammer.............. 58 Director of Alco since 1986; A director of United Student Aid Group, Inc., Tri-Arc Financial Services and National Media Corporation; Chairman, Chief Executive Officer and a director, Mutual of America Capital Management Corporation (1993-1994); President, SEI Asset Management Services Group (1989-1993); Mazur Fellow, The Wharton School, University of Pennsylvania (1989-1990) Barbara Barnes Hauptfuhrer....... 66 Director of Alco since 1988; A director of The Vanguard Group of Investment Companies and of each of the mutual funds in the Group, The Great Atlantic and Pacific Tea Co., Inc., Knight- Ridder, Inc., Massachusetts Mutual Life Insurance Co. and Raytheon Company James E. Head.................... 49 Vice President (1993-Present); Group President, Alco Office Products (1993-Present); President, CopyRite (an Alco Office Products company) (1979-1993). William M. Laughlin.............. 52 Vice President--Financial Operation Support (1993-Present); Vice President--Operational Audit, Alco Office Products (1992-1993); Director--Audit (1982-1992) Dana G. Mead..................... 58 Director of Alco since 1994; Chairman and Chief Executive Officer (1994-Present), President and Chief Operating Officer (1992-1994) and a director (1992-Present), Tenneco, Inc.; Chairman (1992-Present), J I Case (a Tenneco division); Vice Chairman (1994-Present) and a director, National Association of Manufacturers; Executive Vice President (1989-1992), Senior Vice President (1986-1989), International Paper Company (also a director of National Westminster Bancorp, Cummins Engine Company, Inc. and Baker Hughes Incorporated) </TABLE> 17

<TABLE> <CAPTION> NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED) ---- --- ------------------------------------------- <C> <C> <S> Hugh G. Moulton.................. 61 Executive Vice President (1992-Present); General Counsel (1979-1994); Senior Vice President-- Administration (1983-1992) Ray B. Mundt..................... 66 Chairman (1986-Present) and a director (1971- Present); Chief Executive Officer (1980-1993); President (1974-1988) (also a director of Liberty Mutual Insurance Company, Liberty Life Assurance Company of Boston, Liberty Mutual Fire Insurance Company, Liberty Financial Companies, Inc., Nocopi Technologies, Inc., CoreStates Bank, N.A., and Clark Equipment Company) Paul C. O'Neill.................. 68 Director of Alco since 1978; Private investor; Chairman, Ovington Securities Ltd. (1989-1991) Rogelio G. Sada.................. 59 Director of Alco since 1980; Private investor; Mayor, San Pedro, N.L., Mexico (1992-1994); Director, International Advisory Board of Security Pacific National Bank (1980-1991); Director General, VITRO, a glass and glass- related products manufacturer in Mexico (1972- 1985) James W. Stratton................ 58 Director of Alco since 1988; President, Stratton Management Company (1972-Present); Chairman (1993-Present) and a director, Stratton Small- Cap Yield Fund; Chairman (1981-Present) and a director, Stratton Monthly Dividend Shares; Chairman (1972-Present) and a director, Stratton Growth Fund (also a director of UGI Corporation, Gilbert Associates and Teleflex) John E. Stuart................... 50 President, Chief Executive Officer and a director (1993-Present); Vice President (1989- 1993); Group President, Alco Office Products (1985-1993) </TABLE> All directors hold office until the election of successors by the shareholders of Alco. All executive officers hold office at the pleasure of the board of directors of Alco. All current directors will stand for reelection as directors at the 1995 Annual Meeting. SECURITY OWNERSHIP As of November 30, 1994, shares of common stock of Alco were beneficially owned (as determined by rules of the Securities and Exchange Commission, although in certain cases the persons may disclaim beneficial ownership) by the current directors, by each of the individuals named in the Summary Compensation Table (on page 22 of this prospectus) and by all current directors and executive officers of Alco as a group, as follows: <TABLE> <CAPTION> AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP ----------------------------------------------- SOLE VOTING SHARED VOTING ACQUIRABLE AND AND/OR WITHIN INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2) ---------------- ------------------- ---------- <S> <C> <C> <C> J. Mahlon Buck, Jr............ 20,984 0 15,991 Paul J. Darling, II........... 56 0 400 William F. Drake, Jr.......... 81,513 0 8,545 Kurt E. Dinkelacker........... 3,718 2,678 21,909 </TABLE> 18

<TABLE> <CAPTION> AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP ----------------------------------------------- SOLE VOTING SHARED VOTING ACQUIRABLE AND AND/OR WITHIN INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2) ---------------- ------------------- ---------- <S> <C> <C> <C> James J. Forese.............. 1,056 0 400 Frederick S. Hammer.......... 5,701 0 8,090 Barbara Barnes Hauptfuhrer... 1,619 0 11,140 James E. Head................ 3,918 3,606 22,645 Dana G. Mead................. 61 0 400 Hugh G. Moulton.............. 24,018 31,607 32,223 Ray B. Mundt................. 167,150 57,061 19,501 Paul C. O'Neill.............. 38,491 12,000 925 Rogelio G. Sada.............. 6,086 0 13,623 James W. Stratton............ 1,786 0 2,356 John E. Stuart............... 24,836 3,340 119,273 All current directors and ex- ecutive officers as a group. 425,493 153,518 328,644 </TABLE> -------- (1) Includes all shares held under Alco's Stock Participation Plan (and, for Mr. Head, under Alco's Defined Contribution Plan), and, where applicable, shares owned by spouses or minor children. (2) Represents shares which may be acquired within 60 days of November 30, 1994 through the exercise of stock options or vesting under Alco's Partners' Stock Purchase Plan. As of November 30, 1994, for each of the individuals named above, the percentage of common stock beneficially owned was less than 1%. The percentage of common stock beneficially owned by all current directors and executive officers as a group was approximately 1.6%. As of November 30, 1994, no person beneficially owned more than 5% of the outstanding shares of common stock of Alco, nor did any director, nominee or executive officer of Alco own any shares of preferred stock of Alco. As of November 30, 1994, Alco employees, through Alco's Stock Participation Plan, owned approximately 8.7% of the outstanding shares of common stock of Alco. For the fiscal year ended September 30, 1994, all reports required to be filed by Section 16(a) of the Securities Exchange Act of 1934 to reflect changes in beneficial ownership of Alco's securities were timely filed on behalf of Alco's directors and officers. Amended Form 3 and Form 4 reports, however, were filed on behalf of Mr. Head to reflect his ownership of 1,345 shares of Alco common stock (and reinvestment of dividends thereon) through an employee benefit plan. The original Form 3 and 4 reports filed on behalf of Mr. Head did not include these shares because of an administrative error. COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS There are four standing committees of the Board of Directors, including the Audit Committee and the Human Resources Committee. Between meetings of the Board of Directors, its powers may be exercised by the Executive Committee, Human Resources Committee and Investment Committee, and they, as well as the Board of Directors, sometimes act by unanimous written consent. The Audit Committee (Messrs. Buck, Darling, Sada, and Stratton) met four times during the fiscal year ended September 30, 1994. Its functions are to review the report of Alco's independent auditors relating to their audit of the financial statements of Alco, to review and discuss internal financial controls with both the independent auditors and internal auditors, and to direct that special studies relating to the adequacy of financial controls and accounting procedures be made from time to time as the Committee deems desirable. The Human Resources Committee (Mrs. Hauptfuhrer and Messrs. Buck, Hammer, Mead and Sada) met six times during the fiscal year. It is responsible for reviewing and evaluating persons who are suggested as nominees for election as members of the Board of Directors, and for making recommendations to the Board 19

of Directors concerning such nominees. The Human Resources Committee is also responsible for setting policies regarding executive compensation and for determining the salaries and other compensation of each of the executive officers of Alco. The Committee also has all of the powers and exercises all of the duties of the Board of Directors as described in Alco's stock option, stock purchase, deferred compensation and other similar plans. During the fiscal year, the Board of Directors met five times. Each director attended at least 75% of the total number of the meetings of the Board of Directors and the meetings of all committees on which he or she served. EXECUTIVE COMPENSATION Alco's executive compensation program is administered by the Human Resources Committee of the Board of Directors (the "Committee"), which has responsibility for all aspects of the compensation program for the executive officers of Alco. The Committee is comprised of five directors, none of whom is an employee of Alco and each of whom qualifies as a disinterested person for the purpose of Rule 16b-3 under the Securities Exchange Act of 1934 and an outside director for purposes of Section 162(m) of the Internal Revenue Code (the "Code"). The primary components of Alco's executive compensation program are (a) base salaries; (b) annual cash bonus opportunities; and (c) long term incentive opportunities. BASE SALARIES Base salaries for executive officers are reviewed annually and are subject to adjustment on the basis of individual, corporate, and business unit performance, as well as competitive, inflationary and internal equity considerations. Base salaries generally are fixed at or below the 50th percentile of predicted executive salaries paid by comparable companies based upon survey data compiled by Alco's compensation consultant. The companies considered to be comparable to Alco for compensation purposes include a broad cross-section of companies which are representative of industry generally. ANNUAL BONUS Annual bonus payments to executive officers are awarded pursuant to the Alco Standard Corporation Annual Bonus Plan, and are based on corporate or business unit performance compared to the annual business plans established for the year. These annual bonus payments are in amounts equal to a percentage of base salary. They generally range from 0% for threshold, 30-50% for target, and 60- 100% for maximum performance. LONG TERM INCENTIVE COMPENSATION LTIP Awards The Alco Standard Corporation Long Term Incentive Compensation Plan ("LTIP") directly aligns the long-term interests of Alco's executives with those of Alco's shareholders. The LTIP motivates and rewards growth in shareholder value by granting to eligible executives stock awards which vest only if certain performance criteria are met. For corporate officers, the LTIP is based on total shareholder return (stock price appreciation and dividends) over a three- year plan period compared with the total shareholder return of the Standard & Poor's 500 Stock Index (the "S&P 500") over the same period. Awards are made at the fair market value on the last trading day immediately preceding the first day of the plan period. Total shareholder return is measured over successive three-year periods (with a new three-year period beginning every fiscal year) and shares of common stock, if earned pursuant to the terms of the award, will 20

be issued at the end of each such three-year period. The number of shares issued is dependent upon achievement of performance targets and range from 0 (in the case of performance at or below threshold) to the number of shares determined by dividing a maximum of 100% of the participant's base salary at the beginning of the plan period by the share price on that date (for maximum performance). For performance between threshold and maximum, the number of shares issued pursuant to the award will be prorated on a straight-line basis. The value of the participant's award will depend on both Alco's total shareholder return relative to the S&P 500 and changes in the share price during the plan period. Regular Stock Options Stock options are granted under Alco's regular stock option plans as a reward for past performance and as motivation for future performance which maximizes shareholder value. Stock options are generally granted for ten-year terms and vest over a five-year employment period. The exercise price of these stock options is the fair market value of Alco common stock on the date of grant. 21

SUMMARY OF EXECUTIVE COMPENSATION The following table provides a summary of all compensation for the five most highly compensated officers of Alco during the fiscal years ended September 30, 1994, 1993 and 1992: <TABLE> <CAPTION> - --------------------------------------------------------------------------------------------- SUMMARY COMPENSATION TABLE - --------------------------------------------------------------------------------------------- ANNUAL COMPENSATION LONG TERM COMPENSATION(5) --------------------------------- ---------------------------- AWARDS ------------- OTHER NAME ANNUAL ALL OTHER AND COMPEN- SECURITIES COMPEN- PRINCIPAL FISCAL SATION UNDERLYING SATION POSITION(1) YEAR SALARY($) BONUS($) ($)(2) OPTIONS(3) ($)(4) ----------- ------ --------- -------- ------- ------------- ------------ <S> <C> <C> <C> <C> <C> <C> John E. Stuart 1994 700,000 700,000 250,000 177,642 President and 1993 393,750 350,000 500 100,533 Chief Executive Officer 1992 315,000 315,000 15,500 87,886 Ray B. Mundt 1994 820,000 820,000 2,850 1,146 44,842 Chairman 1993 820,000 0 2,850 1,605 31,821 1992 820,000 498,970 2,850 1,689 43,244 Kurt E. Dinkelacker 1994 300,000 300,000 50,000 74,806 Executive Vice President 1993 168,750 150,000 0 42,066 and Chief Financial Officer 1992 130,400 130,400 5,000 32,345 Hugh G. Moulton 1994 300,000 300,000 0 78,136 Executive Vice President 1993 300,000 0 20,000 34,097 1992 284,000 120,970 10,000 49,429 James E. Head 1994 300,000 300,000 50,000 80,954 Vice President and 1993 167,083 177,535 0 46,098 Alco Office Products 1992 135,000 160,000 5,000 39,589 Group President </TABLE> (1) During fiscal 1992 and ten months of fiscal 1993, Mr. Mundt was Chief Executive Officer of the corporation, Mr. Stuart was Group President of Alco Office Products, Mr. Dinkelacker was Executive Vice President of Alco Office Products, and Mr. Head was President of Copyrite, an Alco Office Products operating company. In August 1993, Mr. Stuart became President and Chief Executive Officer of the corporation, Mr. Dinkelacker became Executive Vice President and Chief Financial Officer of the corporation, and Mr. Head became Group President of Alco Office Products. In November 1993, Mr. Head was appointed a Vice President and executive officer of Alco. (2) Represents directors' fees. (3) All stock options except those granted to Mr. Mundt were granted pursuant to 1986 Stock Option Plan at an exercise price equal to fair market value of Alco common stock on date of grant. For Mr. Mundt, all options were granted in lieu of directors' fees pursuant to the 1989 Directors' Stock Option Plan, which is described under Directors' Compensation on page 25. Does not include LTIP awards granted during fiscal 1993 and fiscal 1994 pursuant to the Long Term Incentive Compensation Plan, which will only be earned if certain performance criteria are met. LTIP awards made during fiscal 1994 are included in the LTIP Awards Table on page 24. (4) Includes the value of shares of Alco common stock purchased with matching company contributions under Alco's stock purchase plans, calculated as of the date of purchase, as follows: John E. Stuart--$176,356 (1994); $99,703 (1993), and $87,572 (1992); Ray B. Mundt--$44,842 (1994), $31,821 (1993), and $43,244 (1992); Kurt E. Dinkelacker--$74,528 (1994) $41,884 (1993), and $32,276 (1992); Hugh G. Moulton--$69,374 (1994), $27,367 (1993), and $46,976 (1992); James E. Head--$80,954 (1994), $46,098 (1993) and $39,589 (1992). The remaining amounts represent above-market interest earned on deferred compensation. (5) There were no LTIP payouts in fiscal 1994, 1993 or 1992 to the named individuals. 22

OPTION GRANTS The following table shows option grants to the five individuals named in the Summary Compensation Table during the fiscal year ended September 30, 1994: <TABLE> <CAPTION> - -------------------------------------------------------------------------------- OPTION GRANTS IN LAST FISCAL YEAR - -------------------------------------------------------------------------------- % OF TOTAL NUMBER OPTIONS OF SECURITIES GRANTED TO EXERCISE GRANT UNDERLYING EMPLOYEES OR BASE DATE OPTIONS IN FISCAL PRICE EXPIRATION PRESENT NAME GRANTED (#) YEAR (%) ($/SH) DATE VALUE ($)(2) ---- ------------- ---------- -------- ---------- ------------ <S> <C> <C> <C> <C> <C> John E. Stuart..... 250,000 52.11 49.00 11/11/03 2,695,000 Ray B. Mundt....... 1,146(1) .23 42.28 2/17/14 31,962 Kurt E. Dinkelacker....... 50,000 10.42 49.00 11/11/03 539,000 Hugh G. Moulton.... -- -- -- -- -- James E. Head...... 50,000 10.42 49.00 11/11/03 539,000 </TABLE> (1) Represents directors' fees of $16,150 which Mr. Mundt elected to receive in the form of stock options pursuant to the 1989 Directors' Stock Option Plan (described on page 25) at an exercise price equal to 75% of the fair market value of Alco stock on the date of grant. (2) The present value of option grants to Messrs. Stuart, Dinkelacker and Head were calculated using Black-Scholes option valuation methodology, based on the following assumptions: (a) ten-year option term; (b) becomes exercisable 20% per year from date of grant; (c) 4.71% expected risk-free rate of return; (d) 21.87% expected volatility; and (e) 1.96% expected dividend yield. The present value of the option grant to Mr. Mundt was calculated using Black-Scholes option valuation methodology, based on the following assumptions: (a) twenty-year option term; (b) fully exercisable after one year from date of grant; (c) 5.97% expected risk-free rate of return; (d) 21.00% expected volatility and (e) 1.77% expected dividend yield. OPTION EXERCISES The following table shows option exercises for each of the five individuals named in the Summary Compensation Table for the fiscal year ended September 30, 1994: <TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------- AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES - -------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT FY-END (#) FY-END ($) SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE(1) UNEXERCISABLE(1) ---- --------------- ------------------ ---------------- ------------------- <S> <C> <C> <C> <C> John E. Stuart.......... -- -- 61,200/269,200 2,117,990/3,865,748 Ray B. Mundt............ 26,000 834,000 11,078/8,346 345,140/238,676 Kurt E. Dinkelacker..... -- -- 11,350/57,000 308,621/926,460 Hugh G. Moulton......... 10,000 268,125 23,200/28,200 520,177/985,185 James E. Head........... -- -- 10,550/55,700 293,318/885,587 </TABLE> (1) Value of unexercised options equals fair market value of Alco common stock as of September 30, 1994, less exercise price, times the number of shares underlying the stock options. 23

LONG TERM INCENTIVE COMPENSATION PLAN The following table shows the number of stock awards granted to each of the named individuals under the Long Term Incentive Compensation Plan during the fiscal year ended September 30, 1994 and the number of shares of Alco common stock which will become issuable upon attainment of threshold, target and maximum performance levels: <TABLE> <CAPTION> - -------------------------------------------------------------------------------- LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR - -------------------------------------------------------------------------------- PERFORMANCE ESTIMATED FUTURE NUMBER OF OR OTHER PAYOUTS (SHARES OF SHARES, UNITS PERIOD UNTIL COMMON STOCK) (#)(2) OR OTHER MATURATION OR ------------------------ NAME RIGHTS (#) PAYOUT THRESHOLD TARGET MAXIMUM ---- ------------- --------------- --------- ------ ------- <S> <C> <C> <C> <C> <C> John E. Stuart........ 15,909 10/1/93-9/30/96 0 7,954 15,909 Ray B. Mundt.......... -- -- -- -- -- Kurt E. Dinkelacker... 6,818 10/1/93-9/30/96 0 3,409 6,818 Hugh G. Moulton....... 6,818 10/1/93-9/30/96 0 3,409 6,818 James E. Head......... 6,818 10/1/93-9/30/96 0 3,409 6,818 </TABLE> (1) Represents the number of stock awards granted, which, if earned, will entitle the participant to receive shares of common stock. For a description of the LTIP, see "Executive Compensation" on pages 20 and 21 hereof. (2) Represents the number of shares of common stock which will be received upon attainment of threshold, target and maximum performance. For performance between threshold and maximum, the number of shares which will be received will be prorated on a straight-line basis. PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLANS Certain executive officers of Alco (including Messrs. Stuart, Mundt, Dinkelacker, Moulton and Head) are participants in a pension plan (the "Pension Plan") for salaried employees which provides to eligible retired employees at age 65 annual pension benefits equal to the number of years of credited service multiplied by 1% of average annual compensation earned during the three consecutive years within the employee's last ten years of participation in the Pension Plan which yield the highest average. All Pension Plan costs are paid by Alco and the Pension Plan and benefits are funded on an actuarial basis. The years of credited service as of September 30, 1994 for the individuals named in the Summary Compensation Table were: John E. Stuart--8.9 years; Ray B. Mundt-- 24.3 years; Kurt E. Dinkelacker--9.3 years; Hugh G. Moulton--23.9 years; and James E. Head-- 4.0 years. Alco also has a Supplemental Executive Retirement Plan ("SERP"). Coverage under the SERP is limited to participants in the Alco pension plan who are not commissioned sales employees and whose benefits under the pension plan are limited because of (a) restrictions imposed by the Code on the amount of benefits which may be paid from a tax-qualified plan, (b) restrictions imposed by the Code on the amount of an employee's compensation that may be taken into account in calculating benefits to be paid from a tax-qualified plan, or (c) any reductions in the amount of compensation taken into account under the pension plan because of an employee's participation in certain deferred compensation plans sponsored by Alco or one of its subsidiaries. The SERP provides for a supplement to the annual pension paid under the pension plan to participants who attain early or normal retirement under the pension plan or who suffer a total and permanent disability while employed by Alco or one of its subsidiaries and to the pre-retirement death benefits payable under the pension plan on behalf of such participants who die with a vested interest in the pension plan. The amount of the supplement will be the difference, if any, between the pension or pre-retirement death benefit paid under the pension plan and that which would otherwise have been payable but for the restrictions imposed by the Code and any reduction in the participant's compensation for purposes of the pension plan because of his participation in certain deferred compensation plans of Alco or one of its subsidiaries. The maximum amount of annual compensation upon which such supplement may be based is $500,000 per participant. 24

The following table shows estimated annual retirement benefits that would be payable to participants under Alco's pension plan and, if applicable, the SERP, upon normal retirement at age 65 under various assumptions as to final average annual compensation and years of credited service and on the assumption that benefits will be paid in the form of a single life annuity. The benefits are not subject to any deduction for Social Security benefits. <TABLE> <CAPTION> ESTIMATED ANNUAL RETIREMENT BENEFITS ----------------------------------------------------------------------------- YEARS OF CREDITED SERVICE FINAL AVERAGE ----------------------------------- COMPENSATION 10 20 30 35 ------------- -------- -------- -------- -------- <S> <C> <C> <C> <C> $200,000................................. $ 20,000 $ 40,000 $ 60,000 $ 70,000 250,000................................. 25,000 50,000 75,000 87,500 300,000................................. 30,000 60,000 90,000 105,000 400,000................................. 40,000 80,000 120,000 140,000 500,000 or above........................ 50,000 100,000 150,000 175,000 </TABLE> Covered compensation under the pension plan and SERP of Alco's five most highly compensated executive officers includes salary and bonus set forth in the Summary Compensation Table on page 22. Mr. Mundt will receive an additional supplement to the pension plan and SERP so that he shall receive a total annual pension benefit (including amounts paid pursuant to the pension plan and SERP) of $500,000, payable for life in the form of a joint and fifty percent survivor annuity (which will provide for an annual lifetime benefit to Mrs. Mundt of $250,000 upon Mr. Mundt's death). DIRECTORS' COMPENSATION All directors are entitled to receive the following fees for service on the Board of Directors and committees thereof: fees of $22,000 per year for directors who are not employees of Alco or its subsidiaries ("independent directors"), $12,000 per year for other directors, and attendance fees of $1,000 for independent directors for each board and committee meeting attended. Committee members also receive $3,000 per committee per year and committee chairmen receive $1,000 per chairmanship per year. In addition, independent directors who serve as trustees for Alco's employee benefit plans receive $3,000 per year for services rendered to the plans, $1,000 per year for trustee chairmanship, and attendance fees of $1,000 for each trustees' meeting attended. Certain directors have elected to receive a portion of the foregoing fees (excluding attendance fees) in the form of options to purchase Alco common stock, pursuant to the terms of Alco's 1989 Directors' Stock Option Plan, which enables directors of Alco to receive all or a portion of their directors' fees in the form of options to purchase Alco common stock at exercise prices equal to 75% of the fair market value on the date such options are granted. The Directors' Plan provides for an automatic annual grant of stock options to each director who has filed with Alco an election to receive such options in lieu of all or a portion of his or her board, committee and trustee fees. The options are exercisable for twenty years (except in the case of death), but generally may not be exercised prior to the twelve-month anniversary of the date of grant. In addition to the above amounts, each independent director receives an annual grant of options to purchase 400 shares of Alco common stock pursuant to the 1993 Stock Option Plan for Non-Employee Directors. Options are granted at an exercise price equal to the fair market value of Alco common stock on the date of grant. Options are immediately exercisable and remain exercisable for a period of ten years from the date of grant. Independent directors who complete at least five full years of service as a director are entitled to receive a monthly retirement benefit after retiring from Alco's Board of Directors. Payment of such benefit begins upon the later of the director's 70th birthday or his or her separation from service on the Board of Directors. The amount of such monthly benefit is equal to one-twelfth of the annual retainer in effect for such director 25

(excluding committee fees, chairmanship fees, trustee fees and attendance fees) immediately preceding his or her separation from service on the Board of Directors. Payment of the monthly retirement benefit ceases upon the director's death. CERTAIN TRANSACTIONS In August 1980, a subsidiary of Alco adopted a loan program which encourages persons designated as "partners" to purchase and retain Alco stock. It offers to make loans to partners in amounts limited to 50% of total annual compensation (including cash bonuses) with the requirement that the loan be secured by the borrower's pledge of Alco stock having a value at the time of the loan of not less than twice the amount of the loan. The loans are payable upon demand and bear interest at an annual rate of 6%. As of November 30, 1994, loans were outstanding to 29 partners in an aggregate amount of $1,311,500. From October 1, 1993 to November 30, 1994, the indebtedness of the following individuals and groups under the loan program was as follows: <TABLE> <CAPTION> - ------------------------------------------------------------------------------- LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING AT NAME OR GROUP DURING PERIOD($) NOVEMBER 30, 1994($) - ------------------------------------------------------------------------------- <S> <C> <C> John E. Stuart.............. -- -- Ray B. Mundt................ -- -- Kurt E. Dinkelacker......... 43,000 43,000 Hugh G. Moulton............. 247,000 0 James E. Head............... -- -- All current directors and executive officers as a group................. 678,000 428,000 - ------------------------------------------------------------------------------- </TABLE> Mr. Drake, who serves as Vice Chairman and a director of Alco, is a partner in the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, which rendered legal services to Alco and its subsidiaries during the 1994 fiscal year, and is expected to continue performing legal services during fiscal 1995. Ray B. Mundt will resign his position as an executive officer of Alco effective December 31, 1994, but will continue to perform consulting services for Alco for a period of two years following his resignation. Mr. Mundt will receive $250,000 annually for these consulting services (and for his covenant not to compete). At Alco's option, Mr. Mundt's consulting contract may be renewed for an additional two-year period after its expiration in December 1996. PLAN OF DISTRIBUTION Shares of common stock will be offered in connection with Alco's (or a subsidiary's) acquisition of other businesses and properties from time to time. A maximum of 2,500,000 shares of common stock may be sold pursuant to this prospectus. These shares will ordinarily represent consideration paid directly upon the acquisition of other businesses or properties. The shares may also include shares to be delivered upon the exercise or satisfaction of conversion or purchase rights which are created in connection with acquisitions or which were previously created or assumed by the companies whose businesses or properties were acquired by Alco (or a subsidiary). RESALES Shares offered hereby may be resold by the persons acquiring them without further registration under the Securities Act of 1933, unless the recipient is an "underwriter," as defined under such Act, with respect to the shares. Any person who is an "affiliate" of Alco, or is otherwise deemed an underwriter by reason of such person's relationship with Alco or the transaction, will be subject to certain limitations on resale for a period of two years. An "affiliate" of a company is a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the company. 26

During the two-year period, such persons may sell their shares in limited amounts in ordinary brokerage transactions or, if Alco consents, in offerings registered under the Securities Act of 1933. The amount of shares which may be sold by such persons in brokerage transactions in any three-month period may not exceed the greater of (i) 1% of the Alco shares outstanding as shown by the most recent report or statement published by Alco or (ii) the average weekly trading volume in Alco shares reported on the Composite Tape during the four calendar weeks preceding the order to sell. Such sales must be made in so- called "brokers' transactions," which are ordinary sales through a broker acting as agent without special commission arrangements or selling efforts. Alco may require in its acquisition agreements that persons who may be deemed underwriters deliver to Alco prior to any sales within such two-year period an opinion of counsel to the effect that the proposed sales are exempt from the registration requirements of the Securities Act of 1933. Such agreements may also contain additional restrictions on resales by such persons. In order for such persons to resell shares offered hereby in a registered offering under the Securities Act of 1933, Alco would have to agree to amend the registration statement of which this prospectus is a part to permit such resales or to file a new registration statement which includes the shares proposed to be resold. Unless the acquisition agreement obligates Alco to do so, there is no assurance that it will agree to such amendment or registration. LEGAL OPINIONS Legal matters in connection with the stock offered hereby have been, or prior to issue or delivery will be, passed upon by Ballard Spahr Andrews & Ingersoll, Philadelphia, Pennsylvania. EXPERTS The consolidated financial statements of Alco Standard Corporation at September 30, 1994 and 1993, and for each of the three years in the period ended September 30, 1994, appearing in this prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING Alco Standard Corporation and Subsidiaries The management of Alco Standard Corporation is responsible for the preparation and presentation of the financial statements and related financial information included in this prospectus. The financial statements include amounts that are based on management's best estimates and judgments. The statements have been prepared in conformity with generally accepted accounting principles consistently applied and have been audited by Ernst & Young LLP, independent auditors. Management is also responsible for maintaining systems of internal accounting controls that are designed to provide reasonable assurance as to the integrity of the financial records and the protection of corporate assets. Alco Standard Corporation supports an active program of auditing to monitor the proper functioning of its systems. The reports issued by the Alco Audit Department, as well as comment letters from Ernst & Young LLP, are reviewed regularly by the Audit Committee of the Board of Directors, which is composed of five directors who are not employees of Alco. The Audit Committee meets periodically with Ernst & Young LLP, the Alco Audit Department and management to review audit scope, timing and results. 27

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, 1994 and 1993, 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, 1994. These financial statements are the responsibility of Alco'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, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1994, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania October 17, 1994 28

ALCO STANDARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30, ---------------------------------------- 1994 1993 1992 ------------ ------------ ------------ (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> <C> REVENUES Net sales.......................... $ 7,925,784 $ 6,387,078 $ 4,882,908 Dividends, interest and other in- come.............................. 3,537 6,332 3,292 Finance subsidiaries (note 13)..... 66,731 51,149 38,936 ------------ ------------ ------------ 7,996,052 6,444,559 4,925,136 ------------ ------------ ------------ COSTS AND EXPENSES Cost of goods sold................. 5,884,819 4,799,757 3,638,494 Selling and administrative......... 1,765,483 1,378,814 1,069,602 Interest........................... 43,802 40,189 31,680 Finance subsidiaries interest (note 13)............................... 27,978 23,662 19,523 Restructuring costs (note 16)...... 175,000 ------------ ------------ ------------ 7,722,082 6,417,422 4,759,299 ------------ ------------ ------------ LOSS FROM UNCONSOLIDATED AFFILIATE (note 4)............................ (117,158) (2,538) INVESTMENT GAIN, net (note 11)....... 6,683 ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS BEFORE TAXES........................ 156,812 24,599 172,520 TAXES ON INCOME (note 7)............. 86,203 16,984 68,303 ------------ ------------ ------------ INCOME FROM CONTINUING OPERATIONS.... 70,609 7,615 104,217 LOSS FROM DISCONTINUED OPERATIONS, net of taxes (note 2)............... (7,515) (8,455) ------------ ------------ ------------ NET INCOME........................... 70,609 100 95,762 PREFERRED DIVIDENDS (note 6)......... 11,572 9,571 ------------ ------------ ------------ NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS........................ $ 59,037 $ (9,471) $ 95,762 ============ ============ ============ EARNINGS (LOSS) PER SHARE (note 1) Continuing operations.............. $ 1.10 $ (.04) $ 2.22 Discontinued operations............ (.16) (.18) ------------ ------------ ------------ $ 1.10 $ (.20) $ 2.04 ============ ============ ============ </TABLE> See notes to consolidated financial statements. 29

ALCO STANDARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> SEPTEMBER 30, ----------------------- 1994 1993 ----------- ----------- (DOLLARS IN THOUSANDS) <S> <C> <C> ASSETS CURRENT ASSETS Cash................................................. $ 53,369 $ 36,495 Accounts receivable, less allowance for doubtful ac- counts: 1994--$29,428; 1993--$27,528 (note 14).............. 915,495 855,666 Inventories (note 1)................................. 609,974 591,964 Prepaid expenses and deferred taxes.................. 131,638 92,600 ----------- ----------- Total current assets............................... 1,710,476 1,576,725 ----------- ----------- INVESTMENT IN UNCONSOLIDATED AFFILIATE (note 4)........ 118,060 OTHER INVESTMENTS AND LONG-TERM RECEIVABLES............ 68,472 46,813 PROPERTY AND EQUIPMENT, at cost (note 5) Land................................................. 29,308 23,959 Buildings and improvements........................... 213,037 226,256 Machinery and equipment.............................. 411,377 346,686 ----------- ----------- 653,722 596,901 Less accumulated depreciation........................ 299,775 260,551 ----------- ----------- 353,947 336,350 ----------- ----------- OTHER ASSETS Excess of cost of acquired companies over equity (note 1)............................................ 747,629 694,757 Miscellaneous........................................ 59,331 69,662 Deferred taxes....................................... 22,454 ----------- ----------- 806,960 786,873 ----------- ----------- FINANCE SUBSIDIARIES ASSETS (note 13).................. 562,403 484,069 ----------- ----------- $ 3,502,258 $ 3,348,890 =========== =========== </TABLE> See notes to consolidated financial statements. 30

ALCO STANDARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> SEPTEMBER 30, ------------------------ 1994 1993 ----------- ----------- (DOLLARS IN THOUSANDS) <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt.................. $ 12,299 $ 39,915 Notes payable (note 5)............................. 91,999 164,249 Trade accounts payable............................. 500,166 426,971 Accrued salaries, wages and commissions............ 96,987 80,097 Deferred revenues.................................. 134,485 116,631 Restructuring costs (note 16)...................... 56,971 27,480 Other accrued expenses............................. 164,023 164,831 ----------- ----------- Total current liabilities........................ 1,056,930 1,020,174 ----------- ----------- LONG-TERM DEBT (note 5).............................. 340,771 590,154 DEFERRED TAXES AND OTHER LIABILITIES Deferred taxes..................................... 32,192 Restructuring costs (note 16)...................... 50,000 142,459 Workers' compensation and other.................... 156,511 113,069 ----------- ----------- 238,703 255,528 ----------- ----------- FINANCE SUBSIDIARIES LIABILITIES (note 13)........... 498,710 437,418 REDEEMABLE PREFERRED STOCK OF SUBSIDIARY (note 5).... 25,000 SHAREHOLDERS' EQUITY (note 6) Series AA convertible preferred stock, no par val- ue: 4,025,000 depositary shares issued and outstand- ing.............................................. 199,912 197,900 Common stock, no par value: authorized 75,000,000 shares; issued 1994--54,522,000 shares; 1993--48,772,000 shares.. 551,215 259,031 Retained earnings.................................. 642,634 651,373 Foreign currency translation adjustment............ (22,550) (23,640) Cost of common shares in treasury: 1994--74,000 shares; 1993--1,808,000 shares............................ (4,067) (64,048) ----------- ----------- 1,367,144 1,020,616 ----------- ----------- $ 3,502,258 $ 3,348,890 =========== =========== </TABLE> See notes to consolidated financial statements. 31

ALCO STANDARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ----------------------------------------------------- 1994 1993 1992 ---------------- ---------------- ----------------- SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS ------ -------- ------ -------- ------ --------- (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> <C> SERIES AA CONVERTIBLE PREFERRED STOCK Balance, beginning of year................. 4,025 $197,900 Issued in public of- fering............... 4,025 $196,335 Dividend accretion.... 2,012 1,565 ------ -------- ------ -------- Balance, end of year.... 4,025 $199,912 4,025 $197,900 ====== ======== ====== ======== COMMON STOCK Balance, beginning of year................. 48,772 $259,031 48,772 $257,069 48,772 $ 249,870 Issued in public of- fering............... 5,750 293,500 Mergers............... (4,104) 5,854 Tax benefit relating to stock plans....... 2,788 1,962 1,345 ------ -------- ------ -------- ------ --------- Balance, end of year.... 54,522 $551,215 48,772 $259,031 48,772 $ 257,069 ====== ======== ====== ======== ====== ========= RETAINED EARNINGS Balance, beginning of year................. $651,373 $699,015 $ 687,892 Net income............ 70,609 100 95,762 Cash dividends de- clared: Preferred stock, per share: 1994-- $2.875; 1993-- $2.236............. (11,572) (9,571) Common stock, per share: 1994--$1.00; 1993--$.96; 1992-- $.92............... (52,222) (44,858) (41,520) Pooled companies, prior to merger.... (2,408) (3,907) Credits (charges) from issuance of treasury shares and other..... (13,146) 6,687 (39,212) -------- -------- --------- Balance, end of year.... $642,634 $651,373 $ 699,015 ======== ======== ========= FOREIGN CURRENCY TRANSLATION ADJUSTMENT Balance, beginning of year................. $(23,640) $ (6,622) $ 2,039 Translation adjust- ment................. (1,347) (17,018) (8,661) Sale of investment in unconsolidated affiliate............ 2,437 -------- -------- --------- Balance, end of year.... $(22,550) $(23,640) $ (6,622) ======== ======== ========= COST OF COMMON SHARES IN TREASURY Balance, beginning of year................. 1,808 $(64,048) 2,823 $(89,099) 4,134 $(118,606) Purchases............. 887 (47,733) 756 (32,389) 1,569 (57,200) Reissued for Exercise of options. (454) 18,027 (405) 13,063 (297) 8,814 Sales to employee stock plans........ (1,172) 47,799 (1,250) 40,564 (1,114) 33,127 Mergers, acquisi- tions and other.... (995) 41,888 (116) 3,813 (1,469) 44,766 ------ -------- ------ -------- ------ --------- Balance, end of year.... 74 $ (4,067) 1,808 $(64,048) 2,823 $ (89,099) ====== ======== ====== ======== ====== ========= </TABLE> See notes to consolidated financial statements. 32

ALCO STANDARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS) <S> <C> <C> <C> OPERATING ACTIVITIES Net income................................... $ 70,609 $ 100 $ 95,762 Additions (deductions) to reconcile net income to net cash provided by operating activities Depreciation............................... 70,037 57,272 47,510 Amortization............................... 26,791 22,137 16,628 Provision for losses on accounts receivable................................ 19,668 19,702 14,636 Provision (benefit) for deferred income taxes..................................... 22,487 (55,042) 10,243 Change in deferred liabilities............. 2,816 15,232 1,198 Restructuring costs........................ (46,588) 169,939 Loss (gain) on sale of Investment in unconsolidated affiliate... 115,265 Alco Diversified Services................ 9,841 15,294 Alco Food Systems........................ (5,669) Other investments........................ (6,683) Changes in operating assets and liabilities Decrease (increase) in Accounts receivable.................... (74,369) (72,064) (48,870) Inventories............................ 3,154 (52,877) (28,954) Prepaid expenses....................... (17,873) (5,083) (3,225) Increase (decrease) in accounts payable, deferred revenues, and accrued expenses. 79,855 (52,563) 44,254 Miscellaneous.............................. 364 (13,267) (10,880) --------- --------- --------- Net cash provided............................ 272,216 43,327 141,244 --------- --------- --------- INVESTING ACTIVITIES Proceeds from sale (net of cash retained) of Investment in unconsolidated affiliate..... 8,226 Alco Diversified Services.................. 69,836 Alco Food Systems.......................... 7,756 Other investments.......................... 15,881 Cost of companies acquired, net of cash acquired.................................... (46,705) (439,447) (330,635) Proceeds from sale of property and equipment. 24,833 21,769 8,123 Expenditures for property and equipment...... (107,969) (83,789) (58,076) Payments received on long-term receivables... 9,251 5,369 2,740 Purchases of miscellaneous assets............ (7,973) (10,702) (26,339) Finance subsidiaries receivables--Additions.. (408,412) (278,503) (228,951) Finance subsidiaries receivables-- Collections................................. 210,969 166,274 126,493 --------- --------- --------- Net cash used................................ (317,780) (549,193) (483,008) --------- --------- --------- FINANCING ACTIVITIES Proceeds from Issuance of long-term debt................. 20,835 319,338 191,898 Issuance of common stock, net.............. 293,500 Issuance of Series AA convertible preferred stock, net................................ 196,335 Option exercises and sale of treasury shares.................................... 69,914 62,284 47,096 Sale of finance subsidiaries lease receivables............................... 125,000 Life insurance borrowings.................. 31,055 Issuance (repayment) of short-term borrowings, net............................. (68,278) 163,563 Proceeds (repayments) of accounts receivable sold........................................ 14,985 (3,440) 52,124 Long-term debt repayments.................... (369,238) (241,827) (26,148) Finance subsidiaries debt--Issuance.......... 248,098 228,307 127,843 Finance subsidiaries debt--Repayments........ (196,308) (124,201) (48,000) Dividends paid............................... (59,392) (49,995) (41,582) Purchase of treasury shares.................. (47,733) (32,389) (57,200) --------- --------- --------- Net cash provided............................ 62,438 517,975 246,031 --------- --------- --------- NET INCREASE (DECREASE) IN CASH.............. 16,874 12,109 (95,733) CASH AT BEGINNING OF YEAR.................... 36,495 24,386 120,119 --------- --------- --------- CASH AT END OF YEAR.......................... $ 53,369 $ 36,495 $ 24,386 ========= ========= ========= </TABLE> See notes to consolidated financial statements. 33

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES CONSOLIDATION All wholly-owned subsidiaries are consolidated and intercompany transactions have been eliminated. The investment in unconsolidated affiliate at September 30, 1993 represented a 49.9% ownership interest in IMM Office Systems GmbH (IMMOS) which was accounted for by the equity method. Alco sold its investment in IMMOS in fiscal 1994 (note 4). REVENUE RECOGNITION Revenues are recorded at the time of shipment of products or performance of services. Revenues from service contracts are recognized in earnings over the term of the contract. The present values of payments due under sales-type lease contracts are recorded as revenues and cost of goods sold is charged with the book value of the equipment at the time of shipment. Future interest income is deferred and recognized over the related lease term. INVENTORIES Inventories are stated at the lower of cost or market and consist of finished goods available for sale. Alco uses the LIFO method of determining cost for approximately 60% of its inventories and the FIFO method for the balance. If the FIFO method of accounting had been used for all inventories, these balances would have been $36,877,000 higher at September 30, 1994 and $38,630,000 higher at September 30, 1993. EXCESS OF COST OF ACQUIRED COMPANIES OVER EQUITY Substantially all of the excess of cost of acquired companies over equity is amortized over 40 years by the straight-line method. The recoverability of the asset 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, Alco will measure impairment on the basis of undiscounted expected future cash flows from operations before interest. DEPRECIATION Properties and equipment are depreciated over their useful lives by the straight-line method. EARNINGS PER SHARE Earnings per share are based on 53,729,000 weighted average shares in 1994, 47,396,000 shares in 1993 and 46,876,000 shares in 1992, and include the dilutive effect of common stock equivalents, principally stock options. 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, Alco changed its methods of accounting for income taxes and retiree healthcare benefits. The cumulative effect of adopting each of these required new accounting methods was immaterial. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year presentation. 34

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. DISCONTINUED OPERATIONS In September 1992, Alco decided to sell Alco Diversified Services (ADS). Accordingly, ADS results for fiscal years 1993 and 1992 are reported in the accompanying Statements of Income as discontinued operations. In fiscal 1992, Alco provided for an anticipated loss on the sale of ADS of $15,294,000. In July 1993, Alco completed the sale of ADS assets of approximately $102,000,000 to an investor group for $84,000,000 in cash and notes. Alco recorded an additional loss of $9,841,000, net of a LIFO layer liquidation of $3,572,000, in fiscal 1993 in connection with this sale. The 1993 tax benefit for ADS in the table below is comprised of $1,449,000 relating to ADS operations and $4,966,000 relating to the loss on the sale of ADS. The 1992 tax expense for ADS relates to its operating income. No tax benefits were recorded for the loss on disposal anticipated at September 30, 1992, since it consisted principally of the write-off of nondeductible cost in excess of net assets of acquired businesses. In fiscal 1990, Alco decided to sell Alco Food Systems (AFS) and began presenting AFS as discontinued operations at that time. During fiscal 1991, Alco sold six AFS businesses for $201,000,000 in cash and notes. Assets of the companies sold were $155,599,000. The remaining two AFS businesses with assets of $16,764,000 were sold in fiscal 1992 for cash, notes and preferred stock of $20,714,000. The results of discontinued operations are: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ------------------ 1993 1992 -------- -------- (IN THOUSANDS) <S> <C> <C> Revenues Alco Diversified Services............................. $153,063 $222,764 Alco Food Systems..................................... 18,233 -------- -------- $153,063 $240,997 ======== ======== Income (loss) before taxes Alco Diversified Services Operating........................................... $ (3,946) $ 10,158 Loss on disposal.................................... (9,841) (15,294) Alco Food Systems Operating........................................... (5,281) Gain on disposals................................... 5,669 Other................................................. (477) -------- -------- (13,787) (5,225) -------- -------- Tax expense (benefit) Alco Diversified Services............................. (6,415) 3,239 Alco Food Systems..................................... 153 Other................................................. 143 (162) -------- -------- (6,272) 3,230 -------- -------- Net income (loss) Alco Diversified Services............................. (7,372) (8,375) Alco Food Systems..................................... 235 Other................................................. (143) (315) -------- -------- $ (7,515) $ (8,455) ======== ======== </TABLE> 35

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 3. ACQUISITIONS In fiscal 1994, Alco issued 698,675 common shares from treasury for three acquisitions accounted for as poolings-of-interests and their results of operations were included from the beginning of the fiscal year. Also during fiscal 1994, 47 other acquisitions were made for an aggregate purchase price of $62,009,000 in cash, notes and stock. Total assets related to these 47 acquisitions were $111,099,000 including excess of cost over equity of $55,165,000. An additional $4,900,000 was paid and capitalized in fiscal 1994 relating to prior years' acquisitions. In June 1993, Alco acquired over 90% of the outstanding shares of Erskine House Group PLC (Erskine), a United States and European distributor of office products, and the remaining outstanding shares were acquired during the fourth quarter of fiscal 1993. The purchase price was approximately $103,000,000, plus the assumption of approximately $101,000,000 of debt and redeemable preferred stock. Total assets acquired were $278,975,000, which includes excess of cost over acquired equity of $180,408,000. In July 1993, Alco acquired the paper distribution businesses of Butler Paper Company for a purchase price of $140,000,000. Total assets acquired were $277,843,000 and excess of acquired equity over cost of approximately $37,157,000 was allocated to fixed assets. During fiscal 1993, 21 other acquisitions were made for an aggregate purchase price of $50,606,000 in cash and stock. Total assets acquired were $68,878,000 including excess of cost over equity of $30,645,000. An additional $30,236,000 was paid and capitalized in 1993 relating to prior years' acquisitions. During fiscal 1992, Alco issued 1,416,311 common shares from treasury for two acquisitions accounted for as poolings-of-interests and their results of operations were included from the beginning of the fiscal year. In September 1992, Alco purchased the Paper Distribution Group of Abitibi-Price (Abitibi) for $309,246,000 in cash. Total assets acquired were $322,700,000 including excess of cost over acquired equity of $163,246,000. Alco made eight other acquisitions in fiscal 1992 for $40,839,000 in cash, and costs relating to prior years' acquisitions of $4,768,000 were paid and capitalized. Total assets related to fiscal 1992 acquisitions, excluding Abitibi, were $79,595,000 including excess of cost over acquired equity of $17,948,000. All acquisitions, unless otherwise noted, are included from their dates of acquisition. Had the purchase acquisitions been made at the beginning of the year prior to their acquisition and the poolings been made on October 1, 1991, pro forma results from continuing operations would have been: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 -------------------------------------- 1994 1993 1992 ------------ ------------ ------------ (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> <C> <C> Revenues.............................. $ 8,111,204 $ 7,735,647 $ 7,217,085 Income from continuing operations..... 77,560 24,277 117,054 Earnings per share.................... 1.20 .23 1.98 </TABLE> The pro forma results assume that $201,250,000 of the purchase price of 1993 and 1992 acquisitions was funded by the proceeds from issuance of the Series AA convertible preferred stock, while $293,500,000 of the total purchase price of 1994 and 1993 acquisitions was funded by the proceeds from issuance of common stock in December 1993. Pro forma earnings per share for fiscal 1993 are diluted by a $4,647,000 write-off of Advance Corporation Tax related to Erskine. 36

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE In October 1992, Alco purchased a 49.9% interest in IMM Office Systems GmbH, a European distributor of office products, for $122,500,000 in cash, which included excess of cost over equity of $107,478,000. In September 1994, Alco completed the sale of this investment for cash plus a passive interest in any subsequent sale of IMMOS for five years. Alco retains no ongoing liability in the joint venture and the parties exchanged complete mutual releases for past actions. In addition, Alco was relieved of the covenant not to compete in Europe contained in the joint venture agreement, although the parties will not compete with each other for a period expiring on December 31, 1995. As part of the transaction, Alco acquired profitable operations in Denmark and France and retained limited operations in Germany. Alco recognized a loss on the sale of its investment in IMMOS in the quarter ended June 30, 1994, recording a pretax loss of $115,300,000 ($95,100,000, net of tax) equating to a loss per share of $1.75 in the quarter ended June 30, 1994 and $1.77 for the fiscal year ended September 30, 1994. This loss represents the write-off of Alco's investment in IMMOS, plus certain transactional costs less the cash proceeds from the sale together with related tax benefits. In addition, Alco recorded losses totaling $1,900,000 which represent Alco's share of IMMOS operating losses for the first half of the fiscal year. 5. NOTES PAYABLE AND LONG-TERM DEBT Notes payable consisted of: <TABLE> <CAPTION> SEPTEMBER 30 ---------------- 1994 1993 ------- -------- (IN THOUSANDS) <S> <C> <C> Notes payable to banks at average interest rate: 1994--5.5%; 1993--3.9%................................... $91,419 $ 73,563 Commercial paper at interest rate of 3.2%.................. 90,000 Other notes payable at average interest rate: 1994--7.1%; 1993--6.9%................................... 580 686 ------- -------- $91,999 $164,249 ======= ======== </TABLE> Long-term debt consisted of: <TABLE> <CAPTION> SEPTEMBER 30 ----------------- 1994 1993 -------- -------- (IN THOUSANDS) <S> <C> <C> Notes payable at average interest rate of 3.9%........... $300,000 Bond issue at interest rate of 8 7/8% due 2001........... $150,000 150,000 Private placement debt at average interest rate: 1994--8.2%; 1993--8.1%; due 1996-1998.................. 70,000 100,000 Notes payable to insurance company at average interest rate: 1994--9.7%; 1993--10.7%; due 1997-2005................. 60,000 35,000 Industrial revenue bonds at average interest rate: 1994--8.4%; 1993--8.0%; due 1994-2001.................. 10,537 11,787 Sundry notes, bonds and mortgages at average interest rate: 1994--7.5%; 1993--7.3%; due 1994-2005.................. 38,341 6,850 Present value of capital lease obligations (gross amount: 1994--$40,928; 1993--$45,784).......................... 24,192 26,432 -------- -------- 353,070 630,069 Less current maturities.................................. 12,299 39,915 -------- -------- Long-term debt........................................... $340,771 $590,154 ======== ======== </TABLE> 37

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Long-term debt matures in fiscal years: 1995--$12,299,000; 1996--$16,599,000; 1997--$26,119,000; 1998--$5,227,000; 1999--$54,481,000; 2000-2005-- $238,345,000. On June 8, 1993, Alco entered into a revolving credit agreement with four banks allowing Alco to borrow up to $100,000,000 or the Pounds Sterling equivalent. This credit agreement carries a facility fee of 3/16% per annum and expires in October 1995. Loans under this agreement may be made under a selection of rate formulas including prime, Eurodollar or Eurosterling rates. Alco amended its April 21, 1993 credit agreement with four banks in April 1994, allowing Alco to borrow up to $200,000,000 or the Canadian dollar equivalent. A facility fee of 1/10% per annum is charged for the $100,000,000 portion of the commitment expiring in April 1995, and 3/20% per annum is charged for the $100,000,000 portion expiring in April 1996. 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. On October 15, 1992, Alco entered into a credit agreement with six banks to borrow up to DM180,000,000, or the U.S. dollar equivalent ($116,000,000). A facility fee of 1/8% per annum is charged for this commitment, which expires on January 11, 1995 per an amendment executed in January 1994. Loans under this agreement may be made under a selection of prime, DM Eurocurrency or Eurodollar rate formulas. On December 18, 1991, Alco entered into a credit agreement with 15 banks to borrow up to $200,000,000. The agreement, which was amended in December 1993, has two parts: half is subject to termination on December 18, 1996; the other half is available for 364 days subject to annual renewal for successive 364-day periods. Annual fees of 3/16% on the three-year portion and 1/8% on the 364-day portion are charged for these commitments. The agreement provides that loans may be made under either domestic or Eurodollar notes at rates computed under various formulas selected by Alco from among the domestic certificates of deposit rate, prime rate or Eurodollar rate. At September 30, 1994, $91,419,000 was outstanding under the combined lines of credit and $524,581,000 was unused and available. In December 1994, Alco intends to replace three of the above lines of credit with one $500,000,000 multi-currency facility with more favorable terms and to reduce the commitment under the April 21, 1993 agreement to $100,000,000. On May 13, 1994, Alco entered into an agreement to amend the terms of $35,000,000 of 10.7% notes payable to an insurance company and replaced $25,000,000 of 9.14% redeemable preferred stock of a subsidiary. The notes and redeemable preferred stock were assumed in connection with the acquisition of Erskine in fiscal 1993. Under the terms of the new agreement, Alco issued $35,000,000 of 10.51% senior notes which are due in equal annual installments beginning on April 24, 1997 through April 24, 2001 and $25,000,000 of 8.61% senior notes which are due in equal annual installments beginning on April 1, 2000 through April 1, 2005. Alco is in compliance with all covenants, including financial, for all loan agreements. The industrial revenue bonds, capital lease obligations and mortgages are secured by property and equipment that had a net book value of $53,671,000 at September 30, 1994. Interest paid approximated the amounts of interest expense in the Consolidated Statements of Income for fiscal years 1994, 1993 and 1992. 6. SHAREHOLDERS' EQUITY In December 1993, Alco issued 5,750,000 shares of common stock in a public offering. The net proceeds from the offering of $293,500,000 were used for repayment of debt. Income and earnings per share from continuing operations for fiscal year 1993 would have been $13,288,000 and $.07, respectively, if the offering 38

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) had occurred on October 1, 1992. Income from continuing operations for fiscal 1994 would have been $71,896,000 and earnings per share would have been unchanged if the offering had occurred on October 1, 1993. On December 22, 1992, Alco sold 4,025,000 depositary shares, each representing 1/100th of a share of Series AA convertible preferred stock at $50.00 per depositary share totaling $201,250,000, and used the net proceeds to reduce debt. Dividends are cumulative at $2.375 per year per depositary share through January 2, 1996 and $3.25 per depositary share per year thereafter. The dividend is accrued on a straight-line basis ($2.875 per depositary share) and accretion for the difference between the accrued and cash dividend amounting to $3,577,000 at September 30, 1994 has been credited to Series AA convertible preferred stock. This series of preferred stock has one vote per share (equivalent to 1/100 vote per depositary share) and is convertible at a rate of 1.1201 shares of Alco's common stock per depositary share at any time. The Series AA convertible preferred stock, unless previously converted into common stock, is redeemable by issuance of common stock at Alco's option at the rate of 1.1201 shares of common stock per depositary share (with certain limitations) on or after January 9, 1996 through January 9, 2000. On or after January 9, 2000, this series of preferred stock is redeemable at Alco's option at $50.00 per depositary share. Upon liquidation, the Series AA convertible preferred stock has preference equivalent to $50.00 per depositary share plus an amount equal to accrued and unpaid dividends. At September 30, 1994, 4,508,403 shares of common stock were reserved for conversion of the Series AA convertible preferred stock. Employee stock options are granted at the market price at dates of grant and expire in ten years. The proceeds of options exercised are credited to shareholders' equity. There are no charges or credits to income in connection with these options. A 1989 plan for Alco's directors enables participants to receive their annual directors' fees in the form of options to purchase shares of common stock at a discount. The discount is equivalent to the annual directors' fees and is charged to expense. Changes in common shares under option were: <TABLE> <CAPTION> DIRECTORS EMPLOYEES --------------------------- ----------------------------- SHARES OPTION PRICE RANGE SHARES OPTION PRICE RANGE ------- ------------------ --------- ------------------ <S> <C> <C> <C> <C> September 30, 1991... 70,450 $19.55 to $26.34 2,162,325 $ 9.13 to $35.63 Granted.............. 18,624 28.69 432,250 31.50 to 38.25 Exercised............ (2,391) 19.55 to 26.34 (294,908) 9.13 to 35.63 Cancelled............ (44,070) 9.38 to 38.25 ------- ---------------- --------- ---------------- September 30, 1992... 86,683 19.55 to 28.69 2,255,597 16.13 to 38.25 Granted.............. 24,669 30.19 to 40.25 567,817 35.25 to 40.25 Exercised............ (17,224) 19.55 to 26.34 (387,916) 16.13 to 38.25 Cancelled............ (211,717) 22.88 to 40.25 ------- ---------------- --------- ---------------- September 30, 1993... 94,128 19.55 to 40.25 2,223,781 16.13 to 40.25 Granted.............. 17,416 42.28 to 56.38 462,335 49.00 to 62.00 Exercised............ (21,315) 19.55 to 40.25 (432,741) 16.13 to 40.25 Cancelled............ (760) 30.19 (10,551) 16.13 to 57.63 ------- ---------------- --------- ---------------- September 30, 1994... 89,469 19.55 to 56.38 2,242,824 18.19 to 62.00 ======= ================ ========= ================ </TABLE> At September 30, 1994, options to purchase 1,171,573 shares were exercisable (1994: employees--1,099,520, directors--72,053; 1993: employees--1,070,710, directors--69,459) and 648,632 shares were available for grant (1994: employees--183,767, directors--464,865; 1993: employees--782,051, directors-- 481,521). At September 30, 1994, 6,782,962 shares of common stock were reserved for sale to employee stock plans. 39

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Alco has issued options pursuant to Alco's 1986 Stock Option Plan to purchase common stock in accordance with Alco's Long-Term Incentive Compensation Plan. The options become exercisable only to the extent that credits are issued pursuant to the plan and the award of credits is conditional 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 1994, Alco issued options to purchase 150,575 shares of common stock relating to the three-year performance period ending September 30, 1996. Options to purchase 107,814 shares of common stock were issued in fiscal 1993, of which 4,575 were cancelled in fiscal 1994, leaving 103,239 options to cover the performance period ending September 30, 1995. 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 Alco 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 Alco, or (b) causes Alco 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 Alco having a then- current market value equal to twice the exercise price. The Rights are redeemable by Alco prior to becoming exercisable at $.05 per Right and expire on February 10, 1998. 7. TAXES ON INCOME--CONTINUING OPERATIONS Effective October 1, 1993, Alco adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 permitted Alco to recognize the benefit of certain deferred tax assets that could not be recognized under the previous standard, SFAS No. 96, which Alco adopted in fiscal 1988. The cumulative effect of adopting SFAS No. 109 as of October 1, 1993 was to increase net income by $1,421,000 or $.03 per share. As permitted under SFAS No. 109, prior years' financial statements have not been restated. Provision for income taxes: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ---------------------------------------------------- 1994 1993 1992 ---------------- ---------------- ---------------- CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- (IN THOUSANDS) <S> <C> <C> <C> <C> <C> <C> Federal..................... $46,349 $29,421 $57,200 $(48,149) $45,872 $10,503 Foreign..................... 11,862 (7,855) 6,602 (948) 5,239 State....................... 5,505 921 3,706 (1,427) 6,254 435 ------- ------- ------- -------- ------- ------- Taxes on income............. $63,716 $22,487 $67,508 $(50,524) $57,365 $10,938 ======= ======= ======= ======== ======= ======= </TABLE> 40

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Deferred taxes resulting from temporary differences between financial and tax accounting, which have not been restated for SFAS No. 109: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ------------------- 1993 1992 --------- -------- (IN THOUSANDS) <S> <C> <C> Depreciation........................................... $ 4,741 $ (1,658) Lease income recognition............................... 11,993 13,648 Nondeductible reserves................................. (67,115) (5,568) Other.................................................. (143) 4,516 --------- -------- Deferred taxes......................................... $ (50,524) $ 10,938 ========= ======== </TABLE> The components of deferred income tax assets and liabilities as of September 30, 1994, including finance subsidiaries, were as follows (in thousands): <TABLE> <S> <C> Deferred tax assets: Nondeductible reserves........................................... $143,579 Net operating loss carryforwards................................. 34,932 Other--net....................................................... 10,454 -------- Total deferred tax assets...................................... 188,965 Valuation allowance.............................................. (50,592) -------- Total deferred tax assets...................................... 138,373 -------- Deferred tax liabilities: Depreciation..................................................... 42,778 Lease income recognition......................................... 82,837 -------- Total deferred tax liabilities................................. 125,615 -------- Net deferred tax assets............................................ $ 12,758 ======== </TABLE> The net operating loss deferred tax asset consists primarily of foreign carryforwards of $59,371,000 principally expiring in years 1996 through 2000. The valuation allowance increased by $11,124,000 during fiscal 1994 primarily due to the effects of the IMMOS sale. Components of the effective income tax rate: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ------------------- 1994 1993 1992 ----- ----- ----- <S> <C> <C> <C> Federal................................................. 35.0% 34.8% 34.0% State................................................... 2.3 6.1 2.6 Goodwill................................................ 3.5 16.1 2.0 Foreign................................................. 1.0 8.2 1.2 Effect of sale of IMMOS................................. 12.9 Other................................................... .3 3.8 (.2) ----- ----- ----- Effective income tax rate............................... 55.0% 69.0% 39.6% ===== ===== ===== </TABLE> 41

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The effective tax rate for the fiscal year ended September 30, 1994, excluding the effects of the loss on the sale of the investment in IMMOS, is 39.1%. The effective tax rate for the fiscal year ended September 30, 1993, excluding the effects of the restructuring costs, is 39.6%. Net income tax payments for all operations amounted to $62,270,000 in 1994, $77,487,000 in 1993 and $57,861,000 in 1992. Undistributed earnings of Alco's foreign subsidiaries were approximately $28,040,000 at September 30, 1994. Those earnings are considered to be indefinitely reinvested and, therefore, no provision has been recorded for U.S. federal and state income taxes. 8. PENSION AND STOCK PURCHASE PLANS Alco sponsors defined benefit pension plans for the majority of its employees. The benefits generally are based on years of service and compensation. Alco 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 ($6,880,000 in 1994, $5,134,000 in 1993 and $2,642,000 in 1992), charged to continuing operations amounted to $18,283,000 for 1994, $12,684,000 for 1993 and $7,116,000 for 1992. The components of net periodic pension cost for the company-sponsored defined benefit pension plans are: <TABLE> <CAPTION> FISCAL YEAR ENDED SEPTEMBER 30 ---------------------------------- 1994 1993 1992 ---------- ---------- ---------- (IN THOUSANDS) <S> <C> <C> <C> Service cost............................... $ 16,991 $ 11,123 $ 8,131 Interest cost on projected benefit obliga- tion...................................... 18,507 13,416 11,644 Actual return on plan assets............... (11,020) (34,238) (22,732) Net amortization and deferral.............. (13,075) 17,249 6,520 ---------- ---------- ---------- Net pension cost........................... $ 11,403 $ 7,550 $ 3,563 ========== ========== ========== </TABLE> Assumptions used in accounting for the company-sponsored defined benefit pension plans were: <TABLE> <CAPTION> 1994 1993 1992 ------ ------ ------ <S> <C> <C> <C> Weighted average discount rates............................ 7.75% 7.25% 7.75% Rates of increase in compensation levels................... 6.25% 5.75% 6.25% Expected long-term rate of return on assets................ 10.00% 10.00% 10.00% </TABLE> 42

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The funded status and amounts recognized in the Consolidated Balance Sheets for the company-sponsored defined benefit pension plans are: <TABLE> <CAPTION> SEPTEMBER 30 ------------------ 1994 1993 -------- -------- (IN THOUSANDS) <S> <C> <C> Actuarial present value of benefit obligations Vested................................................... $237,874 $216,926 ======== ======== Accumulated.............................................. $241,069 $224,431 ======== ======== Projected................................................ $277,500 $258,136 Plan assets at fair value.................................. 256,610 254,083 -------- -------- Plan assets less than projected benefits................... (20,890) (4,053) Items not yet recognized Net gain................................................. (3,873) (7,445) Prior service cost....................................... 11,657 7,737 Net asset existing at transition date.................... (16,397) (18,260) Adjustment required to recognize minimum liability......... (8,385) (4,902) -------- -------- Net pension liability...................................... $(37,888) $(26,923) ======== ======== </TABLE> Substantially all of the plan assets at September 30, 1994 are invested in listed stocks, bonds and government securities including common stock of Alco of $49,700,000. During fiscal 1994, Alco increased its net pension liability by $5,949,000 due to early retirement benefits granted to 338 employees in connection with the Unisource restructuring program (note 16). The majority of Alco's employees are also eligible to participate in Alco's Stock Participation Plan. They may invest 2% to 6% of regular compensation before taxes. Alco contributes an amount equal to two-thirds of the employees' investments and all amounts are invested in Alco's common shares. Employees fully vest in Alco's contributions upon the completion of five years of service. There is a similar plan for eligible management employees. The cost of these plans charged to continuing operations amounted to $23,484,000 in 1994, $16,174,000 in 1993 and $12,797,000 in 1992. 9. SEGMENT REPORTING A description of each of Alco's industry segments appears elsewhere in this prospectus. Dollar amounts for revenues, income before taxes, assets, capital expenditures, and depreciation and amortization for each segment for 1994, 1993 and 1992 are reported on page 50. 43

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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> 1994 1993 1992 -------- -------- -------- (IN MILLIONS) <S> <C> <C> <C> REVENUES Domestic..................................... $7,153.8 $5,649.8 $4,758.3 Foreign...................................... 843.1 799.9 168.8 -------- -------- -------- Operating.................................... 7,996.9 6,449.7 4,927.1 Eliminations and nonallocated................ (.9) (5.1) (2.0) -------- -------- -------- Total...................................... $7,996.0 $6,444.6 $4,925.1 ======== ======== ======== INCOME BEFORE TAXES Domestic..................................... $ 332.6 $ 73.5 $ 211.9 Foreign...................................... 29.1 27.3 13.8 -------- -------- -------- Operating.................................... 361.7 100.8 225.7 Unconsolidated affiliate..................... (117.2) (2.5) Investment gain, net......................... 6.7 Nonallocated................................. (87.7)* (73.7)* (59.9)* -------- -------- -------- Total...................................... $ 156.8 $ 24.6 $ 172.5 ======== ======== ======== ASSETS Domestic..................................... $2,787.7 $2,547.5 $1,838.3 Foreign...................................... 572.5 536.4 413.7 -------- -------- -------- Operating.................................... 3,360.2 3,083.9 2,252.0 Unconsolidated affiliate..................... 118.1 Nonallocated................................. 142.1 146.9 69.2 -------- -------- -------- Total...................................... $3,502.3 $3,348.9 $2,321.2 ======== ======== ======== </TABLE> - -------- * Includes interest costs and net corporate expenses. Included in income before taxes for fiscal 1993 are restructuring costs of $171,500,000 for domestic operations and $3,500,000 for foreign operations. 10. LEASES--CONTINUING OPERATIONS Equipment acquired under capital leases is included in property and equipment in the amount of $37,160,000 in 1994 and $34,583,000 in 1993 and the related amounts of accumulated amortization are $15,888,000 in 1994 and $15,735,000 in 1993. Related obligations are in long-term debt and related amortization is included in depreciation. At September 30, 1994, future minimum payments under noncancelable operating leases with initial or remaining terms of more than one year were: 1995-- $76,023,000; 1996--$63,552,000; 1997--$52,906,000; 1998--$43,444,000; 1999-- $51,477,000; thereafter--$84,289,000. Total rental expense was $89,998,000 in 1994, $68,293,000 in 1993 and $56,894,000 in 1992. 44

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 11. INVESTMENT GAIN In fiscal 1992, Alco sold debentures received in the 1989 sale of its equity interest in a former subsidiary, which resulted in a pretax gain of approximately $8,100,000 and also recorded nonrecurring expenses of approximately $1,400,000. 12. CONTINGENCIES There were contingent liabilities for taxes, guarantees, lawsuits, and environmental 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 Alco. Alco is presently in arbitration with a former subsidiary, which has asserted that Alco is liable to it for certain liabilities arising under the "Coal Industry Health Benefit Act of 1992". Based on consultation with its counsel, Alco does not believe that it is responsible for such liabilities and, therefore, no provision for this matter has been recorded in the financial statements. In the event that the arbitrators decide in favor of the claimant, Alco estimates that it would be obligated to pay approximately $36,000,000 over a twenty-year period, which would result in an after-tax charge of approximately $23,000,000 to discontinued operations. 13. FINANCE SUBSIDIARIES Alco's wholly-owned finance subsidiaries are engaged in purchasing office equipment from Alco dealers and leasing the equipment to customers under direct financing leases. Summarized financial information of the finance subsidiaries is as follows: <TABLE> <CAPTION> SEPTEMBER 30 ------------------- 1994 1993 --------- -------- (IN THOUSANDS) <S> <C> <C> Future minimum lease payments receivable................ $ 645,083 $555,020 Less: Unearned income................................... (109,416) (82,102) --------- -------- Lease receivables....................................... 535,667 472,918 Accounts receivable and other assets.................... 26,736 11,151 --------- -------- Finance subsidiaries assets............................. $ 562,403 $484,069 ========= ======== Debt at average interest rate: 1994-5.8%; 1993-6% due 1995-1997........................ $ 464,882 $413,092 Other liabilities....................................... 33,828 24,326 --------- -------- Finance subsidiaries liabilities........................ $ 498,710 $437,418 ========= ======== </TABLE> The finance subsidiaries results of operations included in Alco's consolidated net income were net income of $13,347,000 in 1994, $8,180,000 in 1993, and $6,055,000 in 1992. At September 30, 1994, future minimum payments to be received under direct financing leases were: 1995-$255,987,000; 1996-$197,789,000; 1997-$120,699,000; 1998-$52,281,000; 1999-$18,090,000; thereafter-$237,000. Effective July 1, 1994, Alco Capital Resource, Inc. (Alco Capital), a wholly- owned finance subsidiary of Alco, may offer to the public from time to time medium term notes having an aggregate initial offering price 45

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) not exceeding $500,000,000 or the equivalent thereof in foreign currency. These notes will be offered at varying maturities of nine months or more from their dates of issue and may be subject to redemption at the option of Alco Capital or repayment at the option of the holder, in whole or in part, prior to the maturity date in conjunction with meeting specified provisions. Interest rates are determined based on market conditions at the time of issuance. As of September 30, 1994, $105,000,000 of medium term notes are outstanding with a weighted average interest rate of 6.9%. Alco Capital has followed a policy of matching the maturities of borrowed funds to the average life of its direct financing leases in order to minimize the impact of interest rate changes on its operations. Alco Capital has therefore entered into interest rate swap agreements to eliminate the impact of interest rate changes on its variable rate notes payable. The interest rate swap agreements effectively convert the variable rate notes into fixed rate obligations. At September 30, 1994, there were two variable rate notes outstanding and two related interest rate swap agreements on a principal/notional amount of $57,000,000. The weighted average interest rate on these variable rate notes and related interest rate swap agreements was 5.48% and 5.04%, respectively, at September 30, 1994. During fiscal 1994, there were four variable rate notes outstanding and four related interest rate swap agreements on a weighted average principal/notional amount of $88,000,000. The weighted average interest rate on these variable rate notes and related interest rate swap agreements was 4.14% and 5.93%, respectively, during fiscal 1994. The interest rate swap agreements mature at the time the related notes mature. Alco Capital is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, Alco Capital does not anticipate nonperformance by the counterparties. In September 1994, Alco Capital entered into an agreement to sell, under an asset securitization program, an undivided ownership interest in $125,000,000 of eligible direct financing lease receivables. The agreement, which expires in September 1995, contains limited recourse provisions which require Alco Capital to assign an additional undivided interest in leases to cover any potential losses to the purchaser due to uncollectible leases. As collections reduce previously sold interests, new leases can be sold up to $125,000,000. As of September 30, 1994, $125,000,000 of leases have been sold pursuant to the agreement. 14. SALE OF ACCOUNTS RECEIVABLE In September 1992, Alco entered into an agreement to sell, with limited recourse, up to CN$70,000,000 of certain eligible Canadian accounts receivable. In December 1993, this agreement was amended to extend the termination date from December 20, 1993 to December 1, 1995. In September 1994, this agreement was further amended to increase the maximum amount of receivables sold to CN$85,000,000. The agreement provides limited recourse to the Company in the event that any of the previously sold receivables become uncollectible. As collections reduce previously sold interests, new receivables will be sold up to CN$85,000,000. The amount of receivables outstanding under the agreement was CN$81,000,000 (US$60,000,000) and CN$60,000,000 (US$45,000,000) at September 30, 1994 and 1993, respectively. 15. FINANCIAL INSTRUMENTS Alco uses financial instruments in the normal course of its business. These financial instruments include debt, commitments to extend credit and interest rate swap agreements. The notional or contractual amounts of these commitments and other financial instruments are discussed below. CONCENTRATION OF CREDIT RISK Alco 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. 46

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Short-term cash investments are placed with high credit quality financial institutions and in short duration corporate and government debt securities funds. By policy, Alco limits the amount of credit exposure in any one type of investment instrument. INTEREST RATE SWAP AGREEMENTS Please refer to note 13 for information on these instruments. The following methods and assumptions were used by Alco in estimating fair value disclosures for financial instruments: CASH, NOTES PAYABLE AND LONG-TERM RECEIVABLES The carrying amount reported in the balance sheet approximates fair value. LONG-TERM DEBT The fair value of long-term debt instruments is estimated using a discounted cash flow analysis. For more information on these instruments, refer to note 5. OFF-BALANCE SHEET INSTRUMENTS Fair values for Alco's off-balance sheet instruments (interest rate swaps) are based on the termination of the agreements. The carrying amounts and fair values of Alco's financial instruments at September 30, 1994 are as follows: <TABLE> <CAPTION> CARRYING AMOUNT FAIR VALUE --------------- ---------- (IN THOUSANDS) <S> <C> <C> Long-term debt: Bond issue...................................... $150,000 $156,833 Private placement debt.......................... 70,000 71,837 Notes payable to insurance company.............. 60,000 62,614 Industrial revenue bonds........................ 10,537 11,442 Sundry notes, bonds and mortgages............... 38,341 36,786 Finance subsidiaries debt......................... 464,882 455,674 Interest rate swaps............................... 1,426 </TABLE> 16. RESTRUCTURING COSTS On September 29, 1993, Alco adopted a plan to restructure its paper distribution business including the following: installation of a customer- focused information system, redesigning of warehouse and transportation management functions, regionalization of management and administrative support functions and consolidation of service center locations. In connection with certain elements of the restructuring plan, Alco recorded a charge to earnings of $175,000,000 ($112,875,000 net of taxes or $2.38 per share) in the fourth quarter of fiscal 1993. The charge provided for facility consolidation ($60,700,000), severance costs ($48,000,000) and related organizational and system redesign ($22,000,000). At September 30, 1994, the remaining restructuring reserve is $106,971,000, which management believes is adequate to complete the restructuring plan by the end of fiscal 1996. As of September 30, 1994, 68 facility 47

ALCO STANDARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) consolidations had been substantially completed. The estimated cost to complete the facility consolidations is $44,400,000 of which a significant portion relates to costs to dispose and maintain facilities which have been or will be vacated. Severance costs have been incurred during 1994 in accordance with the plan and $23,800,000 is the estimated balance for severance costs. The related organizational and system redesign is estimated to have a remaining cost of $16,200,000. Alco estimates cash expenditures for the restructuring plan will be $53,000,000 in fiscal 1995 and $43,000,000 in fiscal 1996. 17. COMMITMENTS Effective January 1, 1994, Alco entered into an outsourcing agreement which will provide the information technology system to be implemented as part of the Unisource restructuring plan (note 16). This agreement calls for the payment of $300,000,000 over a ten-year period. This contract has been expanded to provide automated warehouse and truck routing systems at an estimated cost of approximately $30,000,000 over the contract period. 48

ALCO STANDARD CORPORATION AND SUBSIDIARIES CORPORATE FINANCIAL SUMMARY <TABLE> <CAPTION> SEVEN-YEAR COMPOUND GROWTH 1994 1993 1992 1991 1990 1989 1988 1987 ---------- -------- -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS EXCEPT PER SHARE DATA, SHAREHOLDERS OF RECORD, EMPLOYEES) <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> CONTINUING OPERATIONS Revenues................. 14.1% $7,996.0 $6,444.6 $4,925.1 $4,516.0 $4,293.4 $3,783.6 $3,379.4 $3,173.7 Gross profit............. 18.2 2,083.3 1,621.1 1,267.1 1,110.0 1,022.4 841.9 690.3 646.8 % of revenues........... 26.1 25.2 25.7 24.6 23.8 22.3 20.4 20.4 Selling and administra- tive.................... 18.1 1,765.5 1,378.8 1,069.6 946.8 864.4 711.1 584.7 552.1 % of gross profit....... 84.7 85.1 84.4 85.3 84.5 84.5 84.7 85.4 Operating income......... 21.0 361.7 100.8 225.7 195.3 190.0 153.0 128.4 95.2 % of revenues........... 4.5 1.6 4.6 4.3 4.4 4.0 3.8 3.0 Income before taxes...... 18.1(a) 156.8 24.6 172.5 125.8 111.5(c) 97.8 90.2 84.7(b) % of revenues........... 2.0 .4 3.5 2.8 2.6 2.6 2.7 2.7 Effective income tax rate (%)..................... 55.0 69.0 39.6 39.1 42.3 17.1 18.2 38.3 Income................... 18.8(a) 70.6 7.6 104.2 76.7 64.3(c) 81.1 72.5 49.7(b) % of revenues........... .9 .1 2.1 1.7 1.5 2.1 2.1 1.6 Earnings (loss) per share Primary................. 1.10 (.04) 2.22 1.70 1.44(c) 1.80 1.49 1.10(b) Fully diluted........... (d) (d) (d) (d) (d) (d) (d) 1.05(b) Capital expenditures..... 17.0 108.0 78.8 54.8 47.4 57.9 57.1 38.3 35.9 Depreciation and amorti- zation.................. 15.0 96.8 76.1 59.3 58.2 49.5 43.8 37.3 36.4 -------- -------- -------- -------- -------- -------- -------- -------- DISCONTINUED OPERATIONS Income (loss)............ $ (7.5) $ (8.4) $ 40.9 $ 29.2 $ 85.5 $ 37.0 $ 30.5 Earnings (loss) per share Primary................. (.16) (.18) .91 .66 1.89 .76 .68 Fully diluted........... (d) (d) (d) (d) (d) (d) .62 -------- -------- -------- -------- -------- -------- -------- -------- TOTAL OPERATIONS Net income............... 10.9%(a) $ 70.6 $ .1 $ 95.8 $ 117.6 $ 93.5(c) $ 166.6 $ 109.5 $ 80.2(b) Earnings (loss) per share Primary................. 1.10 (.20) 2.04 2.61 2.10(c) 3.69 2.25 1.78(b) Fully diluted........... (d) (d) (d) (d) (d) (d) (d) 1.67(b) -------- -------- -------- -------- -------- -------- -------- -------- SHARE ACTIVITY Dividends per share...... 6.6% $ 1.00 $ .96 $ .92 $ .88 $ .84 $ .76 $ .68 $ .64 Per share book value..... 8.1 21.44 17.52 18.72 18.40 16.93 14.96 14.08 12.43 Return on shareholders' equity.................. 14.8(a) 11.5(a) 11.4 15.0 13.5 16.9(e) 16.9 15.8 Average common and common equivalent shares....... 53.7 47.4 46.9 45.1 44.6 45.2 48.7 45.2 Shareholders of record... 14,348 13,999 13,726 14,096 14,152 13,410 14,103 12,875 -------- -------- -------- -------- -------- -------- -------- -------- SUPPLEMENTARY INFORMATION Days sales outstanding... 37.8 38.9 37.8 38.6 39.7 39.3 38.5 38.9 Inventory turns (FIFO ba- sis).................... 6.3 6.3 5.9 5.7 5.7 5.7 5.6 5.3 Current ratio............ 1.6 1.5 1.7 1.9 1.7 1.6 1.9 2.1 Pretax return on capital employed................ 17.1(a) 14.7(a) 15.3 20.8 20.1 20.8(e) 19.9 21.3 Pretax return on capital employed with finance subsidiaries on equity method.................. 18.4(a) 15.7(a) 16.2 22.5 21.6 21.7(e) 20.3 21.3 Working capital.......... 5.1% $ 653.5 $ 556.6 $ 496.0 $ 516.0 $ 404.3 $ 342.8 $ 412.3 $ 462.5 Total assets............. 14.1 3,502.3 3,348.9 2,444.8 2,020.6 1,916.5 1,623.9 1,512.4 1,389.3 Total debt............... 21.8 910.0 1,207.4 782.2 524.9 450.6 378.0 253.6 229.4 % of capitalization..... 40.0 53.6 47.6 38.9 37.4 36.9 26.6 26.3 Total debt excluding fi- nance subsidiaries...... 11.7 445.1 794.3 481.7 304.2 291.0 283.5 201.4 205.8 % of capitalization..... 24.6 43.2 35.8 27.0 27.8 30.5 22.4 24.2 Serial preferred stock... .3 1.6 2.9 4.9 7.4 9.9 11.4 Employees................ 30,600 28,500 23,500 18,800 20,900 19,800 17,300 17,300 </TABLE> - -------- (a) Excludes the effect of the sale of IMMOS (note 4) in fiscal 1994 and restructuring costs (note 16) in fiscal 1993. (b) Includes the sale of an automobile leasing subsidiary which resulted in a pretax gain of $17,637,000. (c) Includes unusual pretax charges relating to the Hillman Companies of $10,323,000. (d) Dilution is immaterial after 1987, therefore no disclosure. (e) Excludes gain on sale of Alco Health Services Corporation of pretax-- $96,800,000; net income--$61,900,000. Note: Unless otherwise noted, ratios and operating results include the effect of: fiscal 1994--loss on sale of investment in IMMOS (note 4), pretax income ($115,265,000), net income ($95,086,000), earnings per share ($1.77); fiscal 1993--restructuring costs (note 16), operating income ($175,000,000), net income ($112,875,000), earnings per share ($2.38). 49

ALCO STANDARD CORPORATION AND SUBSIDIARIES SEGMENT DATA <TABLE> <CAPTION> INCOME DEPRECIATION BEFORE CAPITAL AND REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION -------- ------ -------- ------------ ------------ (CONTINUING OPERATIONS, IN MILLIONS) <S> <C> <C> <C> <C> <C> SEVEN-YEAR COMPOUND GROWTH 1987-1994 Alco Office Products.... 33.0% 41.4% 38.5% 23.0% 22.4% Unisource............... 14.1 11.1 18.0 19.7 17.2 ======== ====== ======== ====== ===== 1994 Alco Office Products.... $2,240.4 $199.4 $1,672.2 $ 72.5 $62.7 Unisource United States......... 5,107.6 148.8 1,391.5 30.5 26.1 Canada................ 648.9 13.5 296.5 3.4 6.4 -------- ------ -------- ------ ----- Total Unisource......... 5,756.5 162.3 1,688.0 33.9 32.5 -------- ------ -------- ------ ----- Operating............... 7,996.9 361.7 3,360.2 106.4 95.2 Unconsolidated affili- ate.................... (117.2) Eliminations and nonallocated........... (.9) (87.7)* 142.1 1.6 1.6 -------- ------ -------- ------ ----- $7,996.0 $156.8 $3,502.3 $108.0 $96.8 ======== ====== ======== ====== ===== 1993 Alco Office Products.... $1,585.6 $138.8 $1,450.0 $ 55.9 $45.4 Unisource United States......... 4,173.7 118.7 1,319.6 18.8 22.3 Canada................ 690.4 18.3 314.3 2.9 6.9 Restructuring costs... (175.0) -------- ------ -------- ------ ----- Total Unisource......... 4,864.1 (38.0) 1,633.9 21.7 29.2 -------- ------ -------- ------ ----- Operating............... 6,449.7 100.8 3,083.9 77.6 74.6 Unconsolidated affili- ate.................... (2.5) 118.1 Eliminations and nonallocated........... (5.1) (73.7)* 146.9 1.2 1.5 -------- ------ -------- ------ ----- $6,444.6 $ 24.6 $3,348.9 $ 78.8 $76.1 ======== ====== ======== ====== ===== 1992 Alco Office Products.... $1,259.2 $105.2 $ 967.5 $ 33.8 $37.0 Unisource United States......... 3,585.1 118.2 988.7 19.1 20.0 Canada................ 82.8 2.3 295.8 1.1 .6 -------- ------ -------- ------ ----- Total Unisource......... 3,667.9 120.5 1,284.5 20.2 20.6 -------- ------ -------- ------ ----- Operating............... 4,927.1 225.7 2,252.0 54.0 57.6 Investment gain, net.... 6.7 Eliminations and nonallocated........... (2.0) (59.9)* 69.2 .8 1.7 -------- ------ -------- ------ ----- $4,925.1 $172.5 $2,321.2 $ 54.8 $59.3 ======== ====== ======== ====== ===== </TABLE> 50

<TABLE> <CAPTION> INCOME DEPRECIATION BEFORE CAPITAL AND REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION -------- ------ -------- ------------ ------------ (CONTINUING OPERATIONS, IN MILLIONS) <S> <C> <C> <C> <C> <C> 1991 Alco Office Products..... $1,047.1 $ 79.6 $ 781.3 $28.6 $36.3 Unisource United States.......... 3,441.1 113.8 897.3 16.1 18.4 Canada................. 35.8 1.9 8.2 .2 .4 -------- ------ -------- ----- ----- Total Unisource.......... 3,476.9 115.7 905.5 16.3 18.8 -------- ------ -------- ----- ----- Operating................ 4,524.0 195.3 1,686.8 44.9 55.1 Eliminations and nonallocated............ (8.0) (69.5)* 177.8 2.5 3.1 -------- ------ -------- ----- ----- $4,516.0 $125.8 $1,864.6 $47.4 $58.2 ======== ====== ======== ===== ===== 1990 Alco Office Products..... $ 951.7 $ 58.9 $ 680.5 $32.3 $33.2 Unisource United States.......... 3,316.3 129.4 843.9 24.6 14.9 Canada................. 22.2 1.7 8.5 .1 .2 -------- ------ -------- ----- ----- Total Unisource.......... 3,338.5 131.1 852.4 24.7 15.1 -------- ------ -------- ----- ----- Operating................ 4,290.2 190.0 1,532.9 57.0 48.3 Investment Gain.......... 5.6 Unusual charges (AOP).... (10.3) Eliminations and nonallocated............ 3.2 (73.8)* 88.8 .9 1.2 -------- ------ -------- ----- ----- $4,293.4 $111.5 $1,621.7 $57.9 $49.5 ======== ====== ======== ===== ===== 1989 Alco Office Products..... $ 729.5 $ 41.3 $ 540.4 $26.5 $26.7 Unisource--United States. 3,047.3 111.7 692.7 27.5 14.5 -------- ------ -------- ----- ----- Operating................ 3,776.8 153.0 1,233.1 54.0 41.2 Eliminations and nonallocated............ 6.8 (55.2)* 108.3 3.1 2.6 -------- ------ -------- ----- ----- $3,783.6 $ 97.8 $1,341.4 $57.1 $43.8 ======== ====== ======== ===== ===== 1988 Alco Office Products..... $ 484.8 $ 28.9 $ 328.7 $19.6 $19.4 Unisource--United States. 2,755.5 99.5 670.9 15.9 13.9 -------- ------ -------- ----- ----- Operating................ 3,240.3 128.4 999.6 35.5 33.3 Gains, net of losses, from divestitures....... 7.9 Eliminations and nonallocated............ 139.1 (46.1)* 140.0 2.8 4.0 -------- ------ -------- ----- ----- $3,379.4 $ 90.2 $1,139.6 $38.3 $37.3 ======== ====== ======== ===== ===== 1987 Alco Office Products..... $ 303.7 $ 17.6 $ 171.0 $17.0 $15.2 Unisource--United States. 2,281.7 77.6 528.8 9.6 10.7 -------- ------ -------- ----- ----- Operating................ 2,585.4 95.2 699.8 26.6 25.9 Gains, net of losses, from divestitures....... 17.6 Eliminations and nonallocated............ 588.3 (28.1)* 348.5 9.3 10.5 -------- ------ -------- ----- ----- $3,173.7 $ 84.7 $1,048.3 $35.9 $36.4 ======== ====== ======== ===== ===== </TABLE> - -------- * Includes interest costs and net corporate expenses. 51

ALCO STANDARD CORPORATION AND SUBSIDIARIES QUARTERLY DATA <TABLE> <CAPTION> FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------------- ------------- ------------- ------------- ------------- (UNAUDITED, IN MILLIONS EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> <C> 1994 Revenues................ $ 1,921.8 $ 1,969.4 $ 2,001.3 $ 2,103.5 $ 7,996.0 Gross profit............ 485.4 511.7 535.4 550.8 2,083.3 Income (loss) before taxes.................. 53.4 63.0 (38.9)(b) 79.3 156.8(b) Net income (loss)....... 31.9 38.0 (48.3)(b) 49.0 70.6(b) Earnings (loss) per share.................. .60 .64 (.95)(b) .83 1.10(b) Dividends............... $ .25 $ .25 $ .25 $ .25 $ 1.00 Common stock price High/Low.............. 54 3/4-43 1/2 58 7/8-51 1/2 60 3/8-49 1/2 65 1/2-57 65 1/2-43 1/2 ------------- ------------- ------------- ------------- ------------- 1993 Revenues................ $ 1,444.5 $ 1,490.6 $ 1,547.1 $ 1,962.4 $ 6,444.6 Gross profit............ 364.2 382.1 389.2 485.6 1,621.1 Income (loss) before taxes.................. 40.9 48.5 50.8 (115.6)(c) 24.6(c) Income (loss) Continuing operations. $ 24.8 $ 29.5 $ 30.7 $ (77.4)(c) $ 7.6(c) Discontinued opera- tions (a)............ 1.2 2.0 (10.7) (7.5) ------------- ------------- ------------- ------------- ------------- Net income (loss)....... $ 26.0 $ 31.5 $ 30.7 $ (88.1)(c) $ .1(c) ============= ============= ============= ============= ============= Earnings (loss) per share Continuing operations. $ .52 $ .57 $ .58 $ (1.71)(c) $ (.04)(c) Discontinued opera- tions (a)............ .03 .04 (.23) (.16) ------------- ------------- ------------- ------------- ------------- $ .55 $ .61 $ .58 $ (1.94)(c) $ (.20)(c) ============= ============= ============= ============= ============= Dividends............... $ .24 $ .24 $ .24 $ .24 $ .96 Common stock price High/Low.............. 38 1/2-33 1/4 45 3/4-35 3/4 50 5/8-44 3/4 49 3/8-42 1/4 50 5/8-33 1/4 </TABLE> - -------- (a) Alco recorded an additional pretax charge of $9,800,000 or $.10 per share, in 1993 for the loss on the disposal of ADS. (b) Includes a pretax charge of $115,265,000 ($95,086,000 net of taxes or $1.75 per share for the third quarter and $1.77 for the fiscal year) for the sale of the investment in IMMOS. (c) Includes a pretax charge of $175,000,000 ($112,875,000 net of taxes or $2.38 per share) for restructuring costs. The New York Stock Exchange is the principal market on which Alco's common stock is traded (ticker symbol ASN). Alco's common stock is also traded on the Philadelphia and Chicago Stock Exchanges. Alco currently expects to continue its policy of paying quarterly 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. 52

PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION <TABLE> <S> <C> SEC Filing Fee..................................................... $47,953 Listing Fees....................................................... 8,000 Accounting Fees.................................................... 10,000 Legal Fees......................................................... 2,000 Miscellaneous expenses............................................. 5,000 ------- Total.............................................................. $72,953 ======= </TABLE> All of the above amounts, except for the SEC filing fee, have been estimated. All such amounts will be paid by Alco. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Ohio General Corporation Law provides that a corporation may indemnify persons who incur certain liabilities or expenses by reason of such persons being or having been directors, officers, or employees of the registrant or serving or having served in such capacities or similar capacities at the registrant's request for other corporations or entities. Pursuant to the Ohio law, the registrant has adopted, as a part of its Code of Regulations, provisions whereby the registrant shall indemnify such persons against such liabilities and expenses resulting from suits or other proceedings brought by third persons and against expenses resulting from suits or other proceedings brought in the right of the registrant, except that no indemnification against expenses is to be made in respect of claims brought in the right of the registrant where such person is finally adjudged to be liable for negligence or misconduct in the performance of his duty to the registrant unless specific court approval for such indemnification is obtained. The registrant has purchased liability insurance policies covering its directors and officers to provide additional protection where the registrant cannot legally indemnify a director or officer and where a claim arises under the Employee Retirement Income Security Act of 1974 against a director or officer based upon an alleged breach of fiduciary or other wrongful act. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES From time to time during the three-year period prior to the filing of this registration statement, Alco has made unregistered sales of its common stock to the sellers of acquired businesses pursuant to an exemption from registration contained in Section 4(2) of the Securities Act of 1933. Such shares were subsequently registered for resale on Form S-3 as follows: <TABLE> <CAPTION> REGISTRATION STATEMENT NO. FILING DATE NUMBER OF SHARES OF COMMON STOCK ------------- ----------- -------------------------------- <S> <C> <C> 33-50974 August 17, 1992 1,034,061 33-50976 August 17, 1992 382,250 33-49863 July 30, 1993 42,200 33-53711 May 19, 1994 496,090 33-54779 July 28, 1994 365,871 33-55947 October 7, 1994 122,409 33-56455 November 14, 1994 25,655 33-56457 November 14, 1994 46,774 </TABLE> Based upon the market value of the Alco common shares described above, the total consideration received by Alco for the above businesses was $117,751,000. II-1

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES* (a) EXHIBITS <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- <C> <S> 3.1 Amended and Restated Articles of Incorporation of Alco Standard Corporation, filed as Exhibit 3.1 to Alco's Form 10-Q for the quarter ended June 30, 1994 are incorporated herein by reference. 3.2 Code of Regulations of Alco Standard Corporation, as amended February 9, 1982, filed as Exhibit 3(b) to Alco's 1982 Form 10-K, is incorporated herein by reference. 4.1 Credit Agreement dated December 1, 1994 among Alco Standard Corporation and various lending institutions. 4.2 Revolving Credit and Acceptance Agreement, dated as of April 21, 1993, among Alco Standard Corporation, Unisource Canada Inc. and The Toronto Dominion Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10- K, is incorporated herein by reference. Amendment No. 1 to Revolving Credit and Acceptance Agreement, filed as Exhibit 4.2 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 4.3 Receivables Purchase Agreement and Guarantee between PCA Paper Acquisition Inc., Stars Trust, Alco Standard Corporation and Bank of Montreal, filed as Exhibit 4.4 to Alco's 1992 10-K, is incorporated herein by reference. Amendment dated September 30, 1994 to Receivables Purchase Agreement, filed as Exhibit 4.4 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 4.4 Rights Agreement dated as of February 10, 1988 between Alco Standard Corporation and National City Bank, filed on February 11, 1988 as Exhibit 1 to Alco's Registration Statement on Form 8-A, is incorporated herein by reference. 4.5 Assumption Agreement and Amended and Restated Note Agreement dated as of May 13, 1994 between Alco Standard Corporation and the Prudential Insurance Company of America, filed as Exhibit 4.7 to Alco Standard Corporation's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 4.6 Pursuant to Regulation S-K item 601(b)(4)(iii), Alco Standard Corporation agrees to furnish to the Commission, upon request, a copy of other instruments defining the rights of holders of long- term debt of Alco Standard Corporation and its subsidiaries. 5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the legality of the securities being registered. 7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the liquidation preference of preferred stock. 10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco Standard Corporation and certain Institutional Investors, filed as Exhibit 4.2 to Alco's Current Report, dated July 1, 1988, on Form 8- K, is incorporated herein by reference. 10.2 Alco Standard Corporation Long Term Incentive Compensation Plan, as amended and restated, filed as Exhibit 99 to Registration Statement No. 33-56471 on Form S-8, is incorporated herein by reference. 10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit 10.3 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.4 Alco Standard Corporation Partners' Stock Purchase Plan, as amended and restated, filed as Exhibit 10.4 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as Exhibit 10.5 to Alco's 1992 Form 10-K, is incorporated herein by reference. </TABLE> II-2

<TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- <C> <S> 10.6 Alco Standard Corporation 1986 Stock Option Plan, filed as Exhibit 10.6 to Alco's 1993 Form 10-K, is incorporated herein by reference. 10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan, filed as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated herein by reference. 10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan, filed as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated herein by reference. 10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as Exhibit 99 to Alco's Registration Statement No. 33-56469 on Form S-8, is incorporated herein by reference. 10.10 Alco Standard Corporation 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated herein by reference. 10.11 Alco Standard Corporation 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated herein by reference. 10.12 Alco Standard Corporation 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated herein by reference. 10.13 Alco Standard Corporation Retirement Plan for Non-Employee Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is incorporated herein by reference. 10.14 Alco Standard Corporation 1994 Deferred Compensation Plan, as amended and restated, filed as Exhibit 10.14 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.15 Indenture, dated as of April 1, 1986 between Alco Standard Corporation and the Chase Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to Alco Standard Corporation's Registration Statement No. 33-4829, is incorporated herein by reference. 10.16 Support Agreement dated as of June 1, 1994 between Alco Standard Corporation and Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as Exhibit 10.4 to Alco Capital Resource's Amended Registration Statement on Form 10-12G/A dated May 27, 1994, is incorporated herein by reference. 10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco Standard Corporation and Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as Exhibit 10.2 to Alco Capital Resource's Registration Statement on Form 10 dated May 4, 1994, is incorporated herein by reference. 10.18 Operating Agreement, dated as of August 15, 1991 between Alco Standard Corporation and Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as Exhibit 10.3 to Alco Capital Resource's Registration Statement on Form 10 dated May 4, 1994, is incorporated herein by reference. 10.19 Share Purchase Agreement dated September 7, 1994 between Alco Standard Corporation and shareholders of IMM Office Systems Holding GmbH, filed as Exhibit 10.19 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.20 Agreement effective January 1, 1994 between Unisource Worldwide, Inc. and Integrated Systems Solution Corporation, a subsidiary of IBM, portions of which contain confidential material, filed as Exhibit 10.20 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.21 Receivables Transfer Agreement dated as of September 23, 1994 among Alco Capital Resource, Inc., Twin Towers, Inc. and Deutsche Bank AG, New York Branch, portions of which contain confidential material, filed as Exhibit 10.21 to Alco's Form 10-K for the fiscal year ended September 30, 1994 is incorporated by reference. 10.22 Distribution Agreement dated as of July 1, 1994 between Alco Capital Resource, Inc. and various distribution agents, filed as Exhibit 1 to Alco Capital Resource's Form 10-Q for the fiscal quarter ended June 30, 1994, is incorporated herein by reference. </TABLE> II-3

<TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- <C> <S> 10.23 Indenture dated as of July 1, 1994 between Alco Capital Resource, Inc. and Nations Bank, N.A., as Trustee, filed as Exhibit 4 to Alco Capital Resource's Registration Statement No. 33-53779, is incorporated herein by reference. 11 Statement re: computation of earnings per share. 21 Subsidiaries of Alco Standard Corporation. 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. (b) FINANCIAL STATEMENT SCHEDULES <TABLE> <CAPTION> NUMBER DESCRIPTION OF SCHEDULE ------ ----------------------- <C> <S> S-1 --Schedule II--Amounts Receivable From Related Parties and Underwriters, Promoters and Employees Other Than Related Parties. S-2 --Schedule VIII--Valuation and Qualifying Accounts. S-3 --Schedule IX--Short-Term Borrowings. </TABLE> ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to any provision or arrangement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4

The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5

SIGNATURES THE REGISTRANT. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN VALLEY FORGE, PENNSYLVANIA, ON THE 19TH DAY OF DECEMBER, 1994. Alco Standard Corporation /s/ Michael J. Dillon Date: December 19, 1994 By: _________________________________ (MICHAEL J. DILLON) VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. <TABLE> <CAPTION> SIGNATURE TITLE DATE --------- ----- ---- <S> <C> <C> *John E. Stuart President, Chief December 19, 1994 - ------------------------------------- Executive Officer (JOHN E. STUART) and Director (Principal Executive Officer) *Kurt E. Dinkelacker Executive Vice December 19, 1994 - ------------------------------------- President and Chief (KURT E. DINKELACKER) Financial Officer (Principal Financial Officer) /s/ Michael J. Dillon Vice President and December 19 , 1994 - ------------------------------------- Controller (MICHAEL J. DILLON) (Principal Accounting Officer) *Ray B. Mundt Chairman December 19, 1994 - ------------------------------------- (RAY B. MUNDT) *J. Mahlon Buck, Jr. Director December 19, 1994 - ------------------------------------- (J. MAHLON BUCK, JR.) *Paul J. Darling, II Director December 19, 1994 - ------------------------------------- (PAUL J. DARLING, II) </TABLE> II-6

SIGNATURE TITLE DATE --------- ----- ---- *William F. Drake, Jr. Director December 19, 1994 - ------------------------------------- (WILLIAM F. DRAKE, JR.) *James J. Forese Director December 19, 1994 - ------------------------------------- (JAMES J. FORESE) *Frederick S. Hammer Director December 19, 1994 - ------------------------------------- (FREDERICK S. HAMMER) *Barbara Barnes Hauptfuhrer Director December 19, 1994 - ------------------------------------- (BARBARA BARNES HAUPTFUHRER) *Dana G. Mead Director December 19, 1994 - ------------------------------------- (DANA G. MEAD) *Paul C. O'Neill Director December 19, 1994 - ------------------------------------- (PAUL C. O'NEILL) *Rogelio G. Sada Director December 19, 1994 - ------------------------------------- (ROGELIO G. SADA) *James W. Stratton Director December 19, 1994 - ------------------------------------- (JAMES W. STRATTON) * By his signature set forth below, Hugh G. Moulton, pursuant to duly executed Powers of Attorney duly filed with the Securities and Exchange Commission, has signed this registration statement on behalf of the persons whose signatures are printed above, in the capacities set forth opposite their respective names. /s/ Hugh G. Moulton December 19, 1994 - ------------------------------------- (HUGH G. MOULTON) II-7

ALCO STANDARD CORPORATION AND SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES <TABLE> <CAPTION> COL. A COL. B COL. C COL. D COL. E ------ ------ ------ --------------------- -------------------------- DEDUCTIONS BALANCE AT END OF PERIOD ---------- ------------------------ BALANCE AT BEGINNING AMOUNTS AMOUNTS NAME OF DEBTOR(1) OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT ----------------- --------- --------- --------- ----------- ---------- -------------- YEAR ENDED SEPTEMBER 30, 1994 - ------------------------ <S> <C> <C> <C> <C> <C> <C> Hugh G. Moulton......... $247,000 $247,000 William F. Drake, Jr. .. 121,000 $121,000 J. Kenneth Croney....... 115,000 $ 15,000 130,000 Peter W. Shoemaker...... 150,000 150,000 James J. Swearingen..... 150,000 150,000 <CAPTION> YEAR ENDED SEPTEMBER 30, 1993 - ------------------------ <S> <C> <C> <C> <C> <C> <C> Hugh G. Moulton......... $247,000 $247,000 O. Gordon Brewer, Jr.... 165,000 $115,000 50,000 Hallie H. Gibbs......... 150,000 150,000 William F. Drake, Jr.... 121,000 121,000 J. Kenneth Croney....... 115,000 115,000 Raymond A. Peterson..... 111,000 111,000 Peter Shoemaker......... $150,000 150,000 <CAPTION> YEAR ENDED SEPTEMBER 30, 1992 - ------------------------ <S> <C> <C> <C> <C> <C> <C> Hugh G. Moulton......... $247,000 $247,000 O. Gordon Brewer, Jr.... 165,000 165,000 Hallie H. Gibbs......... 150,000 150,000 William F. Drake, Jr.... 121,000 121,000 J. Kenneth Croney....... 115,000 115,000 Raymond A. Peterson..... 111,000 111,000 </TABLE> - -------- (1) The notes receivable are secured by the debtors' pledge of Alco stock, bear interest at 6% and are due upon demand. S-1

ALCO STANDARD CORPORATION AND SUBSIDIARIES SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS <TABLE> <CAPTION> COL. A COL. B COL. C COL. D COL. E ------ ------ ------ ------------ ----------- ADDITIONS ---------------------- CHARGED TO BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD ----------- ----------- ----------- ---------- ------------ ----------- YEAR ENDED SEPTEMBER 30, 1994 - ------------------------ <S> <C> <C> <C> <C> <C> Allowance for doubtful accounts............... $27,528,000 $19,668,000 $ 836,000(1) $18,604,000(2) $29,428,000 =========== =========== ========== =========== =========== <CAPTION> YEAR ENDED SEPTEMBER 30, 1993 - ------------------------ <S> <C> <C> <C> <C> <C> Allowance for doubtful accounts............... $23,947,000 $19,702,000 $4,768,000(1) $20,889,000(2) $27,528,000 =========== =========== ========== =========== =========== <CAPTION> YEAR ENDED SEPTEMBER 30, 1992 - ------------------------ <S> <C> <C> <C> <C> <C> Allowance for doubtful accounts............... $20,493,000 $14,636,000 $6,414,000(1) $17,596,000(2) $23,947,000 =========== =========== ========== =========== =========== </TABLE> - -------- (1) Represents beginning balances of acquired companies. (2) Accounts written off during year, net of recoveries. S-2

ALCO STANDARD CORPORATION AND SUBSIDIARIES SCHEDULE IX--SHORT-TERM BORROWINGS <TABLE> <CAPTION> COL. A COL. B COL. C COL. D COL. E(3) COL. F(4) ------ ------ ------ ------ --------- --------- MAXIMUM AMOUNT WEIGHTED AVERAGE WEIGHTED OUTSTANDING AVERAGE AMOUNT INTEREST RATE CATEGORY OF AGGREGATE BALANCE AT AVERAGE DURING THE OUTSTANDING DURING THE SHORT-TERM BORROWINGS END OF PERIOD INTEREST RATE PERIOD DURING THE PERIOD PERIOD --------------------- ------------- ------------- -------------- ----------------- ---------------- YEAR ENDED SEPTEMBER 30, 1994 - ------------------------ <S> <C> <C> <C> <C> <C> Notes payable to banks-- domestic(1)............ $43,000,000 5.2% $303,000,000 $160,317,000 3.6% Notes payable--foreign.. 48,519,000 5.7 52,050,000 47,348,000 5.0 Notes payable--other.... 480,000 6.9 1,583,000 848,000 8.1 Commercial paper(2)..... 90,000,000 15,769,000 3.3 <CAPTION> YEAR ENDED SEPTEMBER 30, 1993 - ------------------------ <S> <C> <C> <C> <C> <C> Notes payable to banks-- domestic(1)............ $ 1,166,000 3.3% $164,000,000 $123,999,000 3.3% Notes payable--foreign.. 72,639,000 5.6 72,639,000 18,056,000 5.3 Notes payable--other.... 444,000 6.8 1,755,000 968,000 4.5 Commercial paper(2)..... 90,000,000 3.2 100,000,000 33,445,000 3.3 <CAPTION> YEAR ENDED SEPTEMBER 30, 1992 - ------------------------ <S> <C> <C> <C> <C> <C> Notes payable to banks-- domestic(1)............ $ 39,000,000 $ 23,099,000 3.9% Notes payable--foreign.. $ 241,000 6.3% 835,000 187,000 9.1 Notes payable--other.... 1,324,000 4.3 4,752,000 1,377,000 7.5 </TABLE> - -------- (1) Notes payable to banks represent borrowings under confirmed lines of credit that are supported by bank credit agreements (See note 5 to the consolidated financial statements). (2) Commercial paper matures generally 30 days from date of issue. (3) The average amount outstanding during the period was computed by dividing the sum of the daily principal balances by 365. (4) The weighted average interest rate during the period was computed by dividing the actual interest expense by the average short-term debt outstanding. S-3

EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NUMBER EXHIBIT ------- ------- <C> <S> 4.1 Credit Agreement dated December 1, 1994 among Alco Standard Corporation and various lending institutions. 5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the legality of the securities being registered. 7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the liquidation preference of preferred stock. 11 Statement re: computation of earnings per share. 21 Subsidiaries of Alco Standard Corporation. 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. 1

Exhibit 4.1 - -------------------------------------------------------------------------------- Alco Standard Corporation Certain of its Subsidiaries and Bank One, Columbus, NA, Bank of America Illinois, The Chase Manhattan Bank, N.A., Chemical Bank CoreStates Bank, N.A., Deutsche Bank AG, First Bank National Association, First Fidelity Bank, National Association, First Interstate Bank of California, NationsBank of North Carolina, N.A., Shawmut Bank Connecticut, N.A., Society National Bank, The Toronto-Dominion Bank, Trust Company Bank and CoreStates Bank, N.A., as Agent -------------------------- CREDIT AGREEMENT dated December 1, 1994 U.S. $500,000,000 - --------------------------------------------------------------------------------

Table of Contents <TABLE> <S> <C> <C> 1. Definitions ............................................................... 1 1.1 Certain Definitions .............................................. 1 2. The Credit ................................................................ 8 2.1 The Loans ...................................................... 8 (a) The 364 Day Facility .................................... 8 (b) Five Year Facility ...................................... 9 2.2 Selected Currency .............................................. 10 2.3 Funding Procedures ............................................. 10 (a) Request for Advances .................................... 10 (b) Actions by Agent ........................................ 11 (d) Funding Assumptions ..................................... 11 (e) Maximum Borrowings Outstanding........................... 12 2.4 The Notes ...................................................... 12 2.5 Joint and Several Obligations................................... 12 2.6 Interest Rates ................................................. 13 (a) Alternate Base Rate Loans ............................... 13 (b) Eurocurrency Rate Loans ................................. 13 (c) Post Maturity Rate ...................................... 14 2.7 Facility Fee ................................................... 14 2.8 Termination or Reduction of Credit; Recomputation Date ......... 14 (a) Termination or Reduction of Credit....................... 14 (b) Reduction ............................................... 14 (c) Recomputation Date ...................................... 15 2.9 Optional Loan Prepayments....................................... 15 2.10 Payments ....................................................... 15 2.11 Illegality ..................................................... 16 2.12 Increased Cost.................................................. 17 2.13 Indemnity Against Funding Losses or Expenses.................... 19 2.14 Substitution of Bank ........................................... 19 3. Representations and Warranties ............................................. 19 3.1 Organization and Good Standing ................................. 19 3.2 Corporate Power and Authority .................................. 19 3.3 Validity of Agreement and Notes ................................ 19 3.4 Litigation ..................................................... 20 3.5 Financial Statements ........................................... 20 3.6 ERISA .......................................................... 20 3.7 Regulations G, T, U and X ...................................... 21 3.8 Compliance with Laws ........................................... 21 3.9 Taxes and Assessments .......................................... 21 3.10 Investment Company ............................................. 21 3.11 Environmental Matters .......................................... 21 </TABLE>

<TABLE> <S> <C> <C> 3.12 Liens ............................................................ 22 3.13 Disclosure Generally ............................................. 22 3.14 Ownership of Subsidiary Borrowers ................................ 22 4. Conditions ................................................................ 22 4.1 Effectiveness of Agreement ..................................... 22 (a) Compliance .............................................. 22 (b) Evidence of Corporate Action ............................ 23 (c) Opinions of Counsel ..................................... 23 (d) Incumbency Certificate .................................. 23 (e) Executed Agreements ..................................... 23 (f) Notes ................................................... 23 (g) Material Adverse Change ................................. 23 4.2 Conditions to Loans ............................................ 24 4.3 Copies of Documents ............................................ 24 5. Covenants .................................................................. 24 5.1 Financial Statements and Information ........................... 25 5.2 Funded Debt to Net Worth Ratio ................................. 26 5.3 Interest Coverage Ratio ........................................ 26 5.4 Subsidiaries' Debt ............................................. 26 5.5 Contingent Liabilities.......................................... 27 5.6 Sale of Assets.................................................. 27 5.7 Mergers and Acquisitions........................................ 27 5.8 Negative Pledge................................................. 27 5.9 Sale, Discount of Receivables; Sale, Leaseback Transactions..... 28 5.10 Regulations G, T, U and X....................................... 28 5.11 Corporate Existence ............................................ 28 5.12 Books and Records .............................................. 29 5.13 Insurance ...................................................... 29 5.14 Litigation; Event of Default ................................... 29 5.15 Taxes .......................................................... 29 5.16 Compliance with Laws............................................ 29 5.17 Employee Benefit Plans ......................................... 30 5.18 Use of Proceeds................................................. 30 5.19 Continued Ownership of each Subsidiary Borrower................. 30 6. Defaults .................................................................. 30 6.1 Defaults ....................................................... 30 6.2 Acceleration by Reason of Default .............................. 32 7. The Banks and the Agent ................................................... 33 7.1 Authority of Agent ............................................. 33 7.2 Responsibility of Agent ........................................ 33 </TABLE> -ii-

<TABLE> <S> <C> <C> 7.3 Pro-Rata Payments .................................................. 34 7.4 Indemnification of Agent ........................................... 34 7.5 Credit Decision .................................................... 34 7.6 The Agent as a Bank ................................................ 35 7.7 Successor Agent .................................................... 35 7.8 Withholding Taxes .................................................. 35 7.9 Allocations Made By Agent .......................................... 35 8. Indemnification ........................................................... 36 8.1 Indemnification of the Agent and the Banks ......................... 36 9. Miscellaneous ............................................................. 36 9.1 Notices ............................................................ 36 9.2 Effective Date, Successors and Assigns and Survival of Terms ....... 36 9.3 Participations ..................................................... 37 9.4 Expenses ........................................................... 37 9.5 Modifications and Waivers .......................................... 37 9.6 No Implied Rights or Waivers ....................................... 38 9.7 Offsets ............................................................ 38 9.8 Application of Payments ............................................ 38 9.9 Counterparts ....................................................... 38 9.10 Governing Law; Submission to Jurisdiction .......................... 39 9.11 Severability of Provisions ......................................... 40 9.12 Captions ........................................................... 40 9.13 Plural and Singular ................................................ 40 9.14 Judgment Currency .................................................. 40 9.15 Termination of the 1991 Credit, the 1993 Credit and the DM Credit .. 40 </TABLE> Exhibit A List of Subsidiary Borrowers Exhibit B List of Banks and Commitments Exhibit C-1 Form of 364 Day Facility Note Exhibit C-2 Form of Five Year Facility Note Exhibit D Opinion of Counsel Form Exhibit E Opinion of Counsel to Subsidiary Borrower Form -iii-

Credit Agreement This Agreement, dated December 1, 1994 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 and general corporate purposes and have requested the Banks to establish credit facilities and make available loans to one or more of them under the terms and conditions hereinafter set forth; WHEREAS, the Company, certain of the Banks and the Agent are parties to a Credit Agreement dated December 8, 1991, as amended (the "1991 Credit"); and WHEREAS, the Company, Alco Office Products (U.K.), Plc ("AOP-UK") a subsidiary of the Company and certain of the Banks are parties to an Amended and Restated Credit Agreement, dated as of September 30, 1993 (the "1993 Credit"); and WHEREAS, the Company and certain of the Banks are parties to a 180,000,000 Deutsche Mark Revolving Credit Agreement dated October 1992 (the "DM Credit"); and WHEREAS, in connection with the establishment of the credit facilities provided hereunder, the Borrower, AOP-UK and each Bank that is a party to the 1991 Credit, the 1993 Credit and/or the DM Credit are terminating the 1991 Credit, the 1993 Credit and the DM Credit, respectively. 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 (S)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 (S)6.1(g) hereof. -------- "1991 Credit" shall have the meaning assigned to it in the recitals to this ----------- Agreement.

"1993 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 1/4 of 1% per annum. "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, (i) with respect to 364 Day Facility Loans, ----------------- 22 basis points per annum and (ii) with respect to Five Year Facility Loans, 20 basis points per annum; provided, however that at such time and so long as the Company's Funded Debt is rated below BBB- by Standard and Poor's Rating Group or below Baa3 by Moodys Investor Service, Inc., such Applicable Margin shall be increased by 12.5 basis points. "Bank" shall mean any bank listed in Exhibit B hereto. ---- "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 Loan the Selected Currency of which is not the U.S. Dollar, 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 such Selected Currency in the interbank market. -2-

"Code" shall have the meaning assigned to it in (S)5.17 hereof. ---- "Commitment" of any Bank shall mean the sum of its 364 Day Facility ---------- Commitment and its Five Year Facility Commitment. "Commitment Percentage" shall have the meaning assigned to it in (S)2.1(a) --------------------- hereof. "Company" shall mean Alco Standard Corporation, an Ohio corporation. ------- "Consolidated Subsidiaries" shall mean all Subsidiaries. ------------------------- "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. "Contingent Liabilities" shall mean letters of credit (excluding commercial ---------------------- documentary letters of credit), unconditional guaranties to banks or other lenders of indebtedness of another person or entity, and liabilities associated with interest rate hedging agreements, provided, however that -------- ------- Contingent Liabilities shall not be deemed to include any recorded liability provided for on the Company's consolidated balance sheet. "Controlling Person" shall have the meaning assigned to it in (S)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. "DM Credit" shall have the meaning assigned to it in the recitals to this --------- Agreement. "Employee Benefit Plan" shall have the meaning given in (S)3.6 hereof. --------------------- "Environmental Control Statutes" shall have the meaning assigned to it in ------------------------------ (S)3.11 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as ----- amended. -3-

"ERISA Affiliate" shall have the meaning given in (S)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 set forth in (S)6.1 hereof. ---------------- "Facility" shall mean either of the 364 Day Facility or the Five Year -------- Facility. "Facility Fee" shall have the meaning assigned to it in (S)2.7 hereof. ------------ "FAX" shall mean any means of facsimile transmission. --- "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. ---- "Finance Leasing Subsidiaries" shall mean Alco Capital Resource, Inc., a ---------------------------- Delaware corporation, Alco Capital Resource Canada Limited, a Canadian corporation, and TNL Financial, Inc., a Texas corporation, and their respective successor corporations. "Five Year Facility" shall have the meaning assigned to it in Section ------------------ 2.1(b) hereof. "Five Year Facility Amount" shall have the meaning assigned to it in ------------------------- Section 2.1(b) hereof. "Five Year Facility Commitment" shall have the meaning assigned to it in ----------------------------- Section 2.1(b) hereof. "Five Year Facility Loans" shall have the meaning assigned to it in Section ------------------------ 2.1(b) hereof. "Five Year Facility Termination Date" shall have the meaning assigned to it ----------------------------------- in Section 2.1(b) hereof. "French Francs" shall mean lawful currency of the Republic of France. -4-

"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 Advance (and ending 90 days thereafter if the Company shall fail to so elect), provided that no Interest Period shall end later than the 364 Day Facility Termination Date or the Five Year Facility Termination Date, as applicable; and (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 -5-

(c) no Interest Period shall end later than the 364 Day Facility Termination Date or the Five Year Facility Termination Date, as applicable. The end of an Interest Period shall be deemed a maturity for purposes of all Loans. "LIBO Rate" shall mean the average (rounded upward, if necessary, to the --------- next 1/6 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 an Alternate Base Rate Loan or a Eurocurrency Rate 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. "Multiemployer Plan" shall have the meaning given in (S)3.6 hereof. ------------------ "Notes" shall have the meaning assigned to it in (S)2.4. ----- "PBGC" shall have the meaning assigned to it in (S)3.6 hereof. ---- "Participant" shall have the meaning assigned to it in (S)9.3 hereof. ----------- "Participations" shall have the meaning assigned to it in (S)9.3 hereof. -------------- "Pension Plan" shall have the meaning given in (S)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 (S)2.8(c). ------------------ "Reference Bank" shall mean each of CoreStates Bank, N.A. and The Chase -------------- Manhattan Bank, N.A. -6-

"Request for Advance" shall have the meaning assigned to it in (S)2.3(a) ------------------- hereof. "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 (S)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. "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. "364 Day Facility" shall have the meaning assigned to it in Section 2.1(a) ---------------- hereof. "364 Day Facility Amount" shall have the meaning assigned to it in Section ----------------------- 2.1(a) hereof. "364 Day Facility Commitment" shall have the meaning assigned to it in --------------------------- Section 2.1(a) hereof. "364 Day Facility Loans" shall have the meaning assigned to it in Section ---------------------- 2.1(a) hereof. "364 Day Facility Termination Date" shall have the meaning assigned to it --------------------------------- in Section 2.1(a) hereof. "Unfunded Pension Liabilities" shall have the meaning given in (S)3.6 ---------------------------- hereof. "Unisource Canada" shall mean Unisource Canada, Inc., a corporation ---------------- continued under the federal laws of Canada, and a wholly-owned Subsidiary. "Unrecognized Retiree Welfare Liability" shall have the meaning given in -------------------------------------- (S)3.6 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 -7-

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 an ---------------- Eurodollar Rate Loan. 2. The Credit 2.1 The Loans. --------- (a) The 364 Day Facility. Each Bank severally agrees, upon the terms and -------------------- conditions hereinafter set forth, to make loans to the Borrowers (the "364 Day Facility Loans") from time to time during the period beginning on the date hereof and ending on December 1, 1995 or on the earlier date of termination in full, pursuant to (S)2.8 or (S)6.2 hereof, of the obligations of such Bank under this (S)2.1 (December 1, 1995 or such earlier date of termination being herein called the "364 Day 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 (each such amount, as the same may be reduced pursuant to (S)2.8 hereof, being hereinafter called such Bank's "364 Day Facility Commitment"). (The Banks' collective commitment to make 364 Day Facility Loans shall be the "364 Day Facility"). All 364 Day Facility Loans shall be made to the Borrowers at the main office of the Agent, Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. Within the limits of each Bank's 364 Day Facility Commitment and subject to (S)2.9, the Borrowers may borrow, prepay pursuant to (S)2.9 and reborrow under this (S)2.1(a). Any Bank may make, carry or transfer Eurocurrency Rate Loans at, to or for the account of, its Eurocurrency lending office or affiliate or such other offices or affiliates all as may be designated from time to time in writing by any Bank to the Agent. The obligation of each Bank to make a 364 Day Facility Loan to the Borrowers at any time shall be limited to its percentage (the "Commitment Percentage") as set forth opposite the name of such Bank on Exhibit B hereto multiplied by the aggregate amount of the 364 Day Facility Loans requested. The principal amounts of the respective 364 Day Facility Loans made by the Banks on the occasion of each Borrowing shall be pro rata in accordance with their respective Commitment Percentages under the 364 Day Facility. No Bank shall be required or permitted to make any 364 Day Facility Loan if, immediately after giving effect to such 364 Day Facility Loan, and the application of the proceeds thereof to the extent applied to the repayment of the 364 Day Facility Loans, the sum of (a) the aggregate principal amount of such Bank's 364 Day Facility Loans in U.S. Dollars outstanding to the Borrowers and (b) the U.S. Dollar Equivalent of the aggregate principal amount of such Bank's 364 Day Facility Loans in a -8-

Selected Currency other than U.S. Dollars outstanding to the Borrowers would exceed such Bank's 364 Day Facility Commitment. The maximum amount available to the Borrowers, individually and in the aggregate, under this 364 Day Facility shall not at any time exceed U.S. $150,000,000 or $150,000,000 in U.S. Dollar Equivalent, and at the option of the Borrowers, may be reduced from time to time hereafter pursuant to (S)2.8 hereof (such maximum amount, as the same may be so reduced, being hereinafter called the "364 Day Facility Amount"). The failure of any one or more of the Banks to make 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 364 Day Facility, exceed its 364 Day Facility Commitment. On or before the 30th day (but not earlier than the 60th day) prior to the 364 Day Facility Termination Date the Company may request in writing to the Agent that a new 364 Day Facility be established with a new 364 Day Facility Termination Date three hundred sixty-four (364) days from the previous 364 Day Facility Termination Date. The Agent will promptly distribute such notice to the Banks. The Banks shall notify the Agent not less than ten Business Days prior to the then current 364 Day Facility Termination Date of their willingness, in their sole discretion, to establish a new date, which agreement may be revocable by any Bank on or prior to the then current 364 Day Facility Termination Date. If Banks with Commitment Percentages aggregating 66 2/3% or more agree to a new 364 Day Facility and a new 364 Day Facility Termination Date, the Agent, on the then current 364 Day Facility Termination Date, shall advise the Company and the Banks, in writing, that a new 364 Day Facility and 364 Day Facility Termination Date has been established and this Agreement shall be deemed amended to such extent. Such new 364 Day Facility Termination Date shall be the 364 Day Facility Termination Date for all purposes under this Agreement. If a new 364 Day Facility and a new 364 Day Facility Termination Date is established hereunder but fewer than all of the Banks agree to establish such facility, the Borrowers shall repay the 364 Day Facility Loans of each Bank that does not so agree, together with accrued but unpaid interest thereon, on the then current 364 Day Facility Termination Date. The Company may at its option elect to seek a substitute bank or banks (which may be one or more of the Banks and which shall be reasonably satisfactory to the Company and the Agent) to purchase the portion of the 364 Day Facility Loans then held by, and to assume the 364 Day Facility Commitments hereunder of, such Banks that did not elect to establish a new 364 Day Facility. (b) Five Year Facility. Each Bank severally agrees, upon the terms and ------------------ conditions hereinafter set forth, to make loans to the Borrowers (the "Five Year Facility Loans") from time to time during the period beginning on the date hereof and ending on December 1, 1999 or on the earlier date of termination in full, pursuant to (S)2.8 or (S)6.2 hereof, of the obligations of such Bank under this (S)2.1(b) (December 1, 1999 or such earlier date of termination being herein called the "Five Year 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 -9-

B hereto under the caption "Banks' Commitments and Percentages" (each such amount, as the same may be reduced pursuant to (S)2.8 hereof being hereinafter called such Bank's "Five Year Facility Commitment"). (The Banks' collective commitment to make Five Year Facility Loans shall be the "Five Year Facility"). The obligation of each Bank to make a Five Year Facility Loan to the Borrowers at any time shall be limited to the Bank's Commitment Percentage times the aggregate amount of the Five Year Facility Loans requested. The maximum amount available to the Borrowers under this Five Year Facility shall not at any time exceed U.S. $350,000,000 or $350,000,000 in U.S. Dollar Equivalent, and at the option of the Borrowers, may be reduced from time to time hereafter pursuant to (S)2.8 hereof (such maximum amount, as the same may be so reduced, being hereinafter called the "Five Year Facility Amount"). The failure of any one or more of the Banks to make Five Year 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 Five Year Facility exceed its Five Year Facility Commitment. 2.2 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. 2.3 Funding Procedures. ------------------ (a) Request for Advances. 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 at least one Business Day, in the case of Alternate Base Rate Loans and four London Business Days in the case of Eurocurrency Rate Loans, 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, -10-

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, U.S. $25,000,000 in the aggregate by all Borrowers or any larger integral multiple of U.S. $1,000,000, or the U.S. Dollar Equivalent thereof; (3) whether the Loans comprising such Borrowing are to be Alternate Base Rate Loans or Eurocurrency Rate Loans; (4) if the Borrowing is to be comprised of Eurocurrency Rate Loans, the Selected Currency; (5) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; and (6) whether the Borrowing is under the 364 Day Facility or the Five Year Facility. Each written Request for Advance shall be signed by an authorized officer of the Company on behalf of the Borrowers and shall be for 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 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 Loan at the main office of the Agent, or at an office or account in London of the Agent 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 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 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 Loan available to the Agent on the date for the Borrowing of such Loan and the Agent may, in reliance upon -11-

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 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 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. 2.4 The Notes. The obligation of Borrowers to repay the 364 Day Facility --------- Loans and the Five Year Facility Loans, respectively, of each Bank shall be evidenced by a separate promissory note issued by the Borrowers in the form attached hereto as Exhibit C-1 (collectively, the "364 Day Facility Notes") and Exhibit C-2 (collectively, the "Five Year Facility Notes" and, together with the 364 Day Facility Notes, the "Notes"). Each 364 Day Facility Note shall be in a stated amount equal to the 364 Day Facility Commitment of such Bank. Each Five Year Facility Note shall be in a stated amount equal to the Five Year Facility Commitment of such Bank and each such 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 Notes, the Borrowers' liability under the Notes shall be limited at all times to the outstanding principal amount of the Loans evidenced thereby (which principal amount may be less than or may exceed the stated amount of such 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. 2.5 Joint and Several Obligations. ------------------------------ (a) Each Borrower (including without limitation the Company) shall bear liability under the Notes 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. -12-

(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. 2.6 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 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 (S)2.9 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 (S)2.9 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 -13-

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. 2.7 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 (i) 8 basis points per annum of such Bank's 364 Day Facility Commitment and (ii) 10 basis points per annum of such Bank's Five Year Facility Commitment, in each case accruing from the date hereof to and including the 364 Day Facility Termination Date and the Five Year Facility Termination Date, respectively; provided, however, that at such time and so long as the Company's Funded Debt is rated below either BBB- by Standard and Poor's Corporation or Baa3 by Moody's Investor Service, Inc., such rates shall be increased to 12.5 basis points and 20 basis points, respectively. The Facility Fee shall be payable in quarterly installments on the last Business Day of each March, June, September, and December and on the 364 Day Facility Termination Date or the Five Year Facility Termination Date, as applicable. 2.8 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 364 Day Facility Amount or the Five Year Facility Amount, 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 under the applicable Facility shall be reduced pro rata in proportion to its Commitment Percentage. (b) Reduction. In the event the 364 Day Facility Amount or the Five Year --------- Facility Amount 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 under such Facility immediately after such reduction will not exceed the 364 Day Facility Amount or the Five Year Facility Amount as reduced. If prepayment in full of the Alternative Base Rate Loans does not reduce the amount of all Loans outstanding under such Facility to an amount that will not exceed the 364 Day Facility Amount or the Five Year Facility Amount as reduced, the Borrowers shall deposit with the Agent cash in an amount sufficient to repay that -14-

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 outstanding under such Facility immediately after such reduction less the principal amount of Eurocurrency Rate Loans under each Facility repaid by such collateral will not exceed the 364 Day Facility Amount or the Five Year Facility Amount as reduced, such collateral 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 364 Day Facility Amount or the Five Year Facility Amount (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 364 Day Facility Loans or Five Year Facility Loans is greater than 105% of the 364 Day Facility Amount or the Five Year Facility Amount, respectively, as then in effect, the Agent shall so advise the Borrowers, and the Borrowers shall prepay the amount in excess of 100% of the 364 Day Facility Amount or the Five Year Facility Amount, respectively, together with accrued interest on the amount so prepaid within five Business Days of receipt of such notice from the Agent. 2.9 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, (b) the Borrower shall specify the Facility, 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 2.13 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 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 Facility Fee and all payments (including -15-

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 Facility 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 Facility 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 364 Day Facility Loan shall mature on the earlier of the last day of the applicable Interest Period therefor and the 364 Day Facility Termination Date, and each Five Year Facility Loan shall mature on the earlier of the last day of the applicable Interest Period therefor and Five Year 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 (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. 2.11 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 -16-

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 2.12 and 2.13) 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 2.11 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 2.11, 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 2.11 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. 2.12 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 (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; -17-

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 (S)2.12(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 (S)2.12(b). (c) If a Bank becomes entitled to claim any additional amounts pursuant to this (S)2.12, 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 (S)2.12, and in calculating the amount 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 (S)2.12. (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 (S)2.12(c) hereof. -18-

2.13 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 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 (S)2.13, it shall promptly notify the Agent, which shall promptly notify the Borrowers thereof. 2.14 Substitution of Bank. If any Bank has demanded compensation under -------------------- (S)2.11 or (S)2.12, 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 Alco Capital Resource, Inc., Alco Standard Acquisition Capital Corporation, AOP, Inc., MDR Corporation, Unisource Holdings, Inc. and Unisource Worldwide, Inc. 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 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. -19-

3.4 Litigation. 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 consolidated balance sheets of the Company and its Subsidiaries as at September 30, 1994 and September 30, 1993 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. All such financial statements were prepared in accordance with GAAP. Since September 30, 1994, 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 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 -20-

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. 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, 1987; 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 (S)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 -21-

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. 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 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. This Agreement shall not become effective -------------------------- and 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 -22-

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 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 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. (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 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 364 Day Facility ----- Note and a Five Year Facility Note duly executed, completed and issued in accordance herewith. (g) Material Adverse Change. Since September 30, 1994, 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. (h) Satisfaction of 1991 Credit, 1993 Credit and DM Credit. The Agent ------------------------------------------------------ shall have received evidence acceptable to it of the termination of each of the 1991 Credit, the 1993 Credit and the DM Credit and the satisfaction by the Company and its Subsidiaries of all obligations thereunder. -23-

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; (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) Since the date of this Agreement, 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. (f) 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 (S)4.1 and (S)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 (S)4.1 and (S)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. -24-

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; (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 the Treasurer of the Company, 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 -25-

(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 Net Worth 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. 5.3 Interest Coverage Ratio. The consolidated earnings (before reduction ----------------------- for taxes and after interest expense has been added back) of the Company and its Consolidated Subsidiaries for the most recent four quarters shall not be less than 3.5 times the consolidated interest expense of the Company and its Consolidated Subsidiaries for such four quarters. For purposes of calculating such ratio, (a) the Finance Leasing Subsidiaries shall be treated as if they were accounted for under the equity accounting method (i.e., the net or deficit of their income over their expenses shall be taken into account in determining consolidated earnings of the Company and its Consolidated Subsidiaries but their aggregate interest expense shall not be added to the consolidated interest expense of the Company and its Consolidated Subsidiaries) and (b) the amount of either unusual or special non-operating gains or unusual or special non- operating losses during such four quarters that, in either case, are in the aggregate in excess of U.S. $25,000,000 shall be excluded. The aggregate amount of either such gains or such losses up to and including U.S. $25,000,000 of either or both is to be included in the consolidated earnings for purposes of calculating compliance with this (S)5.3. 5.4 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 liable with respect to any Debt (other than Loans hereunder) in an aggregate amount outstanding at any time in excess of 10% of Consolidated Net Worth plus the amount of such Debt outstanding on the date hereof except (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, and (vii) unsecured Debt of Unisource Canada in an amount not to exceed U.S. $100,000,000 (or the equivalent amount on any day in Canadian currency calculated after giving effect to a conversion of such amount from U.S. Dollars to Canadian dollars calculated at the buy spot rate quoted for wholesale transactions by the Agent at approximately 11:00 a.m. Philadelphia time). -26-

5.5 Contingent Liabilities. The Company will not permit Contingent ---------------------- Liabilities to exceed U.S. $20,000,000 plus 10% of Consolidated Net Worth. 5.6 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. 5.7 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 5.7 shall apply to a Subsidiary Borrower only if and so long as such Subsidiary Borrower has outstanding Loans. 5.8 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; (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; -27-

(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 (S)5.9 do not in the aggregate exceed 10% of Consolidated Net Worth; and (h) liens, security interests and any other encumbrances on any of its treasury shares. 5.9 Sale, Discount of Receivables; Sale, Leaseback Transactions. 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 (S)5.8(g) exceed 10% of Consolidated Net Worth. 5.10 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. 5.11 Corporate Existence. The Company will maintain its existence and, ------------------- except as otherwise allowed by Section 5.7 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. -28-

5.12 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. 5.13 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. 5.14 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. 5.15 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. 5.16 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 -29-

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. 5.17 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 5.17 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. $5,000,000. 5.18 Use of Proceeds. Each Borrower shall use the proceeds of its Loans to --------------- repay any and all loans outstanding under the 1991 Credit, the 1993 Credit and the DM Credit, to pay all other obligations under the 1991 Credit, the 1993 Credit and the DM Credit and for working capital and general corporate purposes. 5.19 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 5.19 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 -30-

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. $5,000,000, 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 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. $5,000,000 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. $5,000,000 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 -31-

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 November 30, 1994 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 (S)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; (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 5.19. 6.2 Acceleration by Reason of Default. If an Event of Default occurs --------------------------------- under (S)6.1(a) through (S)6.1(g) or (S)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 Banks then holding 51.0% of the aggregate outstanding principal amount of all Loans then outstanding, 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 (S)6.1(h) or (S)6.1(i) above, then, forthwith and without any election or notice, the Commitments shall -32-

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 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 -33-

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. In case at any time any Bank, whether by setoff or ----------------- otherwise, has payment made to it in respect of Notes in a greater proportion than payments made in respect of the Notes to any other Bank, the Bank so receiving such greater proportionate payment agrees to purchase a portion of the Loans held by each other Bank, so that after such purchase there shall be held by each Bank an unpaid balance of Loans bearing the same proportion to the total principal amount of Notes at such time outstanding as existed in the original Loans made by the Banks provided that if all or any portion of such proportionately greater payment of such Notes 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. 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 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 2.3(d) 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. -34-

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 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 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 -35-

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 (S)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. 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 telegraphic communication and communication by FAX) and mailed, telegraphed, 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, telegraphed or FAXed, be effective when deposited in the mails or delivered to the telegraph company 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 -36-

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 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 (S)2.12 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 Note, (b) change any of the -37-

terms of the Commitments, (c) change or affect the provisions of (S)2.1, (S)2.5, (S)2.7, (S)2.11, (S)2.12, (S)2.13, (S)6.1 or (S)6.2 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 (S)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 Section 2.10, ----------------------- the Agent and each Bank agree that all payments on account of the Loans shall be applied by the Agent and the Banks as follows: (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, to the Banks for their percentage shares of the Facility Fee then due and payable under this Agreement until such fee is paid in full; (3) Third, 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, 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 (5) Fifth, 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. 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. -38-

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. (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, telegraphing, FAXing or delivering a copy of such process to it in care of the Company at the Company's address as provided in (S)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 arising out of this Agreement or any Note by the mailing, telegraphing, 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 -39-

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. 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 1991 Credit, the 1993 Credit and the DM Credit. ----------------------------------------------------------------- Upon the execution and delivery of this Agreement by the parties hereto that also are parties to the 1991 Credit, the 1993 Credit and/or the DM 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 -40-

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. 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: By: /s/ O. Gordon Brewer, Jr. ------------------------------ /s/ Karin M. Kinney O. Gordon Brewer, Jr. - ------------------------------ Vice President-Finance Karin M. Kinney 825 Duportail Road Assistant Secretary of P.O. Box 834 Alco Standard Corporation Valley Forge, PA 19482 FAX No. (215) 296-8419 [CORPORATE SEAL] ERSKINE LIMITED Attest: By: /s/ Kurt E. Dinkelacker ------------------------------ /s/ Karin M. Kinney Name: Kurt E. Dinkelacker - ------------------------------ Title: Director Karin M. Kinney Address: Erskine House Assistant Secretary of Oak Hill Road Alco Standard Corporation SevenOaks Kent TN13 1NW United Kingdom [CORPORATE SEAL] ERSKINE HOUSE GROUP PLC Attest: By: /s/ Kurt E. Dinkelacker ------------------------------ /s/ Karin M. Kinney Name: Kurt E. Dinkelacker - ------------------------------ Title: Director Karin M. Kinney Address: Erskine House Assistant Secretary of Oak Hill Road Alco Standard Corporation SevenOaks Kent TN13 1NW United Kingdom -41-

CORESTATES BANK, N.A., for itself and as Agent By: /s/ James A. Bennett ------------------------------ James A. Bennett Senior Vice President FC 1-8-3-14 1345 Chestnut Street Philadelphia, PA 19107 FAX No. (215) 973-7820 BANK ONE, COLUMBUS, NA SHAWMUT BANK CONNECTICUT, N.A. By: /s/ David A. Hammond By: /s/ Jeffrey C. Lynch ------------------------------ ------------------------------ David A. Hammond Jeffrey C. Lynch Vice President Vice President 100 East Broad Street 777 Main Street-MSN 203 Columbus, OH 43215 Hartford, CT 06115 FAX No. 614-248-5518 FAX No. 203-722-9378 FIRST BANK NATIONAL ASSOCIATION NATIONSBANK OF NORTH CAROLINA, N.A. By: /s/ Mark R. Olmon By: /s/ M. Gregory Seaton ------------------------------ ------------------------------ Mark R. Olmon M. Gregory Seaton Vice President Senior Vice President 601 Second Avenue South, 7th Fl. 100 North Tryon Street Minneapolis, MN 55402-4302 (NC 1007-08-04) FAX No. 612-973-0825 Charlotte, NC 28255 FAX No. 704-386-3271 -42-

CHEMICAL BANK TRUST COMPANY BANK By: /s/ Laura Thorne By: /s/ Elizabeth A. Muse ------------------------------ ------------------------------ Laura Thorne Elizabeth A. Muse Vice President-Banking and Assistant Vice President Corporate Finance 270 Park Avenue, 10th Fl. New York, NY 10017-2070 By: /s/ Susan Stall FAX No. 212-270-2112 ------------------------------ Susan Stall Group Vice President 118-23rd Floor 25 Park Place N.E. Atlanta, GA 30303 FAX No. 404-588-8833 THE CHASE MANHATTAN BANK, N.A. FIRST FIDELITY BANK, NATIONAL ASSOCIATION By: /s/ Nancy A. Bridgman ------------------------------ By: /s/ Carl E. Goelz Nancy A. Bridgman ------------------------------ Vice President Carl E. Goelz One Chase Manhattan Plaza, 4th Fl. Vice President New York, NY 10081 Broad & Walnut Streets, PMB006 FAX No. 212-552-7773 Philadelphia, PA 19109 FAX No. 215-985-8793 THE TORONTO-DOMINION BANK SOCIETY NATIONAL BANK By: /s/ David G. Parker By: /s/ R. Robertson Hilton ------------------------------ ------------------------------ David G. Parker R. Robertson Hilton Manager, Credit Administration Senior Vice President 31 West 52nd Street OH-01-27-0606 New York, NY 10019-6101 127 Public Square FAX No. 212-262-1926 Cleveland, OH 44114-1306 FAX No. 216-689-4981 -43-

DEUTSCHE BANK AG, NEW YORK BRANCH BANK OF AMERICA ILLINOIS AND/OR CAYMAN ISLANDS BRANCH By: /s/ Brock T. Harris By: /s/ Rolf-Peter Mikolayczyk ------------------------------ ------------------------------ Brock T. Harris Rolf-Peter Mikolayczyk Vice President Director 31 West 52nd Street 231 South LaSalle Street New York, NY 10019 Chicago, IL 60697 FAX No. 212-474-8212 Attn: Jennifer M. Kerwin FAX: 312-828-5140 with a copy to: By: /s/ Ross A. Howard ------------------------------ 335 Madison Avenue Ross A. Howard New York, NY 10017 Assistant Vice President Attn: Brock T. Harris FAX No. 212-503-7771 FIRST INTERSTATE BANK OF CALIFORNIA Notices for First Interstate Bank of California should be directed to: By: /s/ Peter G. Olson ------------------------------ Clark R. Wilcox Peter G. Olson Vice President Senior Vice President 885 Third Avenue, 5th Fl. New York, NY 10022-4802 FAX No. 212-593-5238 By: /s/ Wendy V.C. Purcell ------------------------------ Wendy V.C. Purcell Assistant Vice President -44-

EXHIBIT A SUBSIDIARY BORROWERS Erskine Limited Erskine House Group PLC A-1

EXHIBIT B Banks' Commitments and Percentages <TABLE> <CAPTION> 364 Day Five Year Facility Facility Commitment Commitment Commitment Bank (US Dollars) (US Dollars) Percentage <S> <C> <C> <C> CoreStates Bank, N.A. $ 13,500,000 $ 31,500,000 9.0% Deutsche Bank AG 13,500,000 31,500,000 9.0% The Toronto-Dominion Bank 13,500,000 31,500,000 9.0% Bank of America Illinois 12,000,000 28,000,000 8.0% The Chase Manhattan Bank, N.A. 12,000,000 28,000,000 8.0% Chemical Bank 12,000,000 28,000,000 8.0% NationsBank of North Carolina, N.A. 12,000,000 28,000,000 8.0% Shawmut Bank Connecticut, N.A. 12,000,000 28,000,000 8.0% Trust Company Bank 12,000,000 28,000,000 8.0% Bank One, Columbus, NA 7,500,000 17,500,000 5.0% First Bank National Association 7,500,000 17,500,000 5.0% First Fidelity Bank, National Association 7,500,000 17,500,000 5.0% First Interstate Bank of California 7,500,000 17,500,000 5.0% Society National Bank 7,500,000 17,500,000 5.0% ------------ ------------ ----- $150,000,000 $350,000,000 100.0% </TABLE> B-1

EXHIBIT C-1 364 DAY FACILITY NOTE U.S.$ (U.S. Dollar Equivalent) Philadelphia, PA [Bank's 364 Day Facility Commitment] December __, 1994 FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, ERSKINE LIMITED and ERSKINE HOUSE GROUP PLC (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 364 Day 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 364 Day Facility Commitment] or $[Bank's 364 Day Facility Commitment] in U.S. Dollar Equivalent (or in a combination of U.S. Dollars and U.S. Dollar Equivalent equal to U.S.$[Bank's 364 Day Facility Commitment] in the aggregate) or, if less, the then aggregate unpaid principal amount of all 364 Day 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 1, 1994 (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 364 Day 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 364 Day Facility Loans, including all principal and interest, together with all fees C-1-1

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: ERSKINE LIMITED By: ------------------------------ Title: ERSKINE HOUSE GROUP PLC By: ------------------------------ Title: C-1-2

EXHIBIT C-2 FIVE YEAR FACILITY NOTE U.S.$ (U.S. Dollar Equivalent) Philadelphia, PA [Bank's Five Year Facility Commitment] December __, 1994 FOR VALUE RECEIVED, ALCO STANDARD CORPORATION, an Ohio corporation, ERSKINE LIMITED and ERSKINE HOUSE GROUP PLC (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 Five Year 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 Five Year Facility Commitment] or $[Bank's Five Year Facility Commitment] in U.S. Dollar Equivalent (or in a combination of U.S. Dollars and U.S. Dollar Equivalent equal to U.S.$[Bank's Five Year Facility Commitment] in the aggregate) or, if less, the then aggregate unpaid principal amount of all Five Year 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 1, 1994 (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 Five Year 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 Five Year Facility Loans, including all principal and interest, together with all fees C-2-1

EXHIBIT D --------- J. KENNETH CRONEY, ESQ. GENERAL COUNSEL ALCO STANDARD CORPORATION December __, 1994 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. James A. Bennett Senior Vice President Re: Credit Agreement, dated December 1, 1994 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 1, 1994 (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 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 D-1

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 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 of this Agreement nor the Notes (i) require any consent or approval of any shareholder of the Company, 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

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, J. Kenneth Croney General Counsel D-3

EXHIBIT A BANKS Bank One, Columbus, NA Bank of America Illinois The Chase Manhattan Bank, N.A. Chemical Bank CoreStates Bank, N.A. Deutsche Bank AG First Bank National Association First Fidelity Bank, National Association First Interstate Bank of California NationsBank of North Carolina, N.A. Shawmut Bank Connecticut, N.A. Society National Bank The Toronto-Dominion Bank Trust Company Bank D-4

EXHIBIT E --------- December __, 1994 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. James A. Bennett Senior Vice President Re: Credit Agreement, dated December 1, 1994 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 $500 million 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) 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; (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-1

[(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 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 E-2

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 [ ] 1994 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: (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 E-3

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.] (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-4

(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; (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 E-5

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

EXHIBIT 5 December 19, 1994 Alco Standard Corporation P.O. Box 834 Valley Forge, PA 19482 Ladies and Gentlemen: We have acted as counsel to Alco Standard Corporation ("Alco") in connection with the filing of a Registration Statement on Form S-1 (the "Registration Statement") to register under the Securities Act of 1933, as amended, 2,500,000 shares of its Common Stock (the "Shares") for offering from time to time in connection with the acquisition of other business and properties by Alco and its subsidiaries. The Shares may be presently authorized but unissued shares or shares held as treasury shares at the time of their delivery. In this connection we have made such investigation and reviewed such documents as we deem necessary in the circumstances to render the following opinion. Based upon such investigation and review, it is our opinion that the Shares have been duly authorized for issue, and when (i) authorized for issuance by the Board of Directors of Alco in transactions of the type and for the consideration described in the Registration Statement and (ii) issued or delivered upon receipt of such consideration, such Shares will be legally issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this opinion and to our firm in the prospectus included therein. Very truly yours, /s/ Ballard Spahr Andrews & Ingersoll

EXHIBIT 7 December 19, 1994 Alco Standard Corporation P.O. Box 834 Valley Forge, Pa 19482 Ladies and Gentlemen: In connection with the filing by Alco Standard Corporation ("Alco") of a registration statement on Form S-1 with respect to the registration of 2,500,000 shares of its Common Stock (no par value) (the "Registration Statement"), to be issued from time to time by Alco in connection with acquisitions of other businesses and properties, we have been requested to furnish our opinion as to whether any preference upon liquidation provided in shares of Serial Preferred Stock (no par value) of Alco places any restrictions upon Alco's surplus if such preference exceeds the stated or carrying value of such shares. In this connection we have reviewed Alco's Articles of Incorporation and the relevant provisions of the Ohio General Corporation Law, particularly Sections 1701.30, 1701.32 and 1701.33, Revised Code of Ohio. Under the Articles of Incorporation of Alco the Board of Directors is empowered to fix the liquidation preference of each series of Serial Preferred Stock in the event of any liquidation, dissolution or winding up, which preference may exceed the stated or carrying value of such shares on the books of Alco. In our opinion, there are no restrictions upon the payment of dividends or other distributions out of Alco's surplus solely by reason of the excess of the liquidation preference over the stated or carrying value of shares of Serial Preferred Stock and there are no remedies available to security holders before or after the payment of any dividend or distribution by Alco solely because such dividend may reduce its surplus to an amount less than the amount of such excess. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Ballard Spahr Andrews & Ingersoll


 
                                                                      Exhibit 11



                           ALCO STANDARD CORPORATION
                   COMPUTATIONS OF EARNINGS (LOSS) PER SHARE
               (in thousands, except earnings (loss) per share)

<TABLE> 
<CAPTION> 

                                                                 1994                       1993                     1992         
                                                          --------------------       --------------------     --------------------
                                                                      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                                              52,691     52,691          46,657     46,657       46,178     46,178
Preferred stock
  Considered common equivalents                                 5          5              48         48          108        108
Options                                                     1,033      1,186             691        751          590        619
                                                          -------    -------        --------   --------     --------   --------
  Total shares                                             53,729     53,882          47,396     47,456       46,876     46,905
                                                          =======    =======        ========   ========     ========   ========
Income (Loss)
- -------------
Continuing Operations                                     $70,609    $70,609        $  7,615   $  7,615     $104,217   $104,217
Discontinued Operations                                                               (7,515)    (7,515)      (8,455)    (8,455)
                                                          -------    -------        --------   --------     --------   --------
Net Income                                                 70,609     70,609             100        100       95,762     95,762
Less: Preferred dividends                                  11,572     11,572           9,571      9,571
                                                          -------    -------        --------   --------     --------   --------
Net income (loss) available to common shareholders        $59,037    $59,037        $ (9,471)  $ (9,471)    $ 95,762   $ 95,762
                                                          =======    =======        ========   ========     ========   ========

Earnings Per Share
- ------------------
Continuing operations                                       $1.10      $1.10           $(.04)     $(.04)       $2.22      $2.22
Discontinued operations                                                                 (.16)      (.16)        (.18)      (.18)
                                                          -------    -------        --------   --------     --------   --------
                                                            $1.10      $1.10           $(.20)     $(.20)       $2.04      $2.04
                                                          =======    =======        ========   ========     ========   ========
</TABLE> 

(1) This calculation is submitted in accordance with Regulation S-K item
    601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15
    because it results in dilution of less than 3%.

Exhibit 21 ---------- SUBSIDIARIES OF REGISTRANT -------------------------- The registrant is Alco Standard Corporation, an Ohio corporation, which has no parent. The following sets forth information with respect to Alco's subsidiaries as of November 15, 1994. <TABLE> <CAPTION> State or other % Voting jurisdiction of Securities incorporation Subsidiary Owned (by whom) or organization - ---------- --------------- --------------- <S> <C> <C> Alco Realty, Inc. (ARI) 100% Alco Delaware Alco Canada Realty, Inc. 100% ARI Canada 375347 British Columbia Ltd. 100% ARI Canada The Alco Standard Foundation 100% Alco Pennsylvania Alco-Texas Realty, Inc. 100% Alco Texas Chesterbrook Insurance Limited 100% Alco Bermuda MDR Corporation (MDR) 100% Alco Delaware AOP Brands, Inc. 100% MDR Delaware AOP, Inc. (AOP) 100% MDR Delaware Alco Business Machines, Inc. 100% AOP Delaware Alco Capital Resource Canada Ltd. 100% AOP Canada Alco Capital Resource, Inc. 100% AOP Georgia Alco Office Products (UK) Plc (AOPUK) 100% AOP England Erskine House Group PLC (EHGPLC) 100% AOPUK England Erskine Holdings, Inc. (EHI) 100% AOP Delaware Advanced Image Systems, Inc. 100% EHI Delaware Ameritech Equipment, Inc. 100% EHI Delaware Copytex Corporation 100% EHI Delaware Edgemont Sales Co., Inc. 100% EHI Delaware Mirex Corporation of Texas 100% EHI Delaware Omi of California, Inc. 100% EHI Delaware University Copy Systems, Inc. 100% EHI Delaware Zeno Systems of Colorado, Inc. 100% EHI Delaware Zeno Systems of Georgia, Inc. 100% EHI Delaware Zeno Systems of Houston, Inc. 100% EHI Delaware Allegheny Business Machines, Inc. 100% AOP Delaware American Business Machines, Inc. 100% AOP Ohio American Business Machines, Inc. 100% AOP Oregon Associated Business Products, Inc. 80% AOP, 20% EHI Idaho Badger Business Products 100% AOP Delaware Benndorf-Verster Limited 100% AOP Canada Business Systems of Arizona, Inc. 100% AOP Delaware Business Machines Center, Inc. (NSL) 100% AOP New Mexico Calgary Copier, Ltd. 100% AOP Canada Copier Consultants, Inc. 100% AOP North Carolina </TABLE>

<TABLE> <CAPTION> State or other % Voting jurisdiction of Securities incorporation Subsidiary Owned (by whom) or organization - ---------- --------------- --------------- <S> <C> <C> Copy Corporation 100% AOP Kentucky Copy Corporation of Canada Limited (CCC) 100% AOP Canada Lion Business Machines, Ltd. 100% CCC Canada Copy Data Group, Inc. 100% AOP Delaware Copyline Corporation (Copy) 100% AOP California Advanced Image Systems, Inc. 100% Copy California Copy-Van, Incorporated 100% AOP Delaware D.C. Hey Company, Inc. 100% AOP Minnesota Halifax Office Products Limited 100% AOP Canada Hovinga Business Systems, Inc. 100% AOP Michigan Innovative Office Systems, Inc. (IOS) 100% AOP Texas Innovative Office Systems-Louisiana (IOSL) 100% IOS South Carolina O'Brien Business Equipment, Inc. 100% AOP Ohio Office Products, Inc. (OP) 100% AOP Delaware Office Group, Inc. (OG) 100% AOP Delaware Omni Business Systems, Inc. 80% AOP, 20% EHI Florida Southern Copy Machines, Inc. 100% AOP Delaware Standard Office Machines, Inc. (MOM) 100% AOP Delaware Modern Office Machines, Inc. (MOM) 100% BPL South Carolina TNL Financial, Inc. 100% AOP Delaware Taft Locke Companies 100% AOP Delaware The T. Talbott Bond Company 100% AOP Maryland Taylor-Made Office Systems, Inc. 100% AOP California J. L. Teel Company, Inc. 100% AOP Delaware Texas Copy Systems, Inc. 100% AOP Delaware Uni-Copy Corporation of North Carolina 100% AOP Delaware Unitech, Inc., of Mississippi 100% AOP Mississippi University Copy Systems of Hawaii, Inc. 100% AOP Hawaii Western Business Resources, Inc. 100% AOP South Dakota Worcester Business Machines, Inc. 100% AOP Massachusetts Xtec Office Systems, Inc. 80% AOP, 20% EHI Pennsylvania </TABLE> -2-

EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated October 17, 1994, in the Registration Statement (Form S-1) and related Prospectus of Alco Standard Corporation for the registration of 2,500,000 shares of its common stock. Our audits also included the financial statement schedules of Alco Standard Corporation listed in item 16(b). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. Philadelphia, Pennsylvania /s/ Ernst & Young LLP December 14, 1994 ----------------------- Ernst & Young LLP

Exhibit 24 POWER OF ATTORNEY ----------------- The undersigned certifies that he is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 19th day of December, 1994. SIGNED: /s/ J. MAHLON BUCK, JR. ------------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that he is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 19th day of December, 1994. SIGNED: /s/ PAUL J. DARLING, II ---------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that he is Chief Financial Officer of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 19th day of December, 1994. SIGNED: /s/ KURT E. DINKELACKER ----------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that he is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 16th day of December, 1994. SIGNED: /s/ FREDERICK S. HAMMER ----------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that she is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as her attorneys-in-fact, each with the power of substitution, to execute, on her behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 16th day of December, 1994. SIGNED: /s/ BARBARA BARNES HAUPTFUHRER -------------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that he is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 17th day of December, 1994. SIGNED: /s/ DANA G. MEAD ----------------------------

POWER OF ATTORNEY ----------------- The undersigned certifies that he is a Director of Alco Standard Corporation ("Alco"). The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney and Michael J. Dillon as his attorneys-in-fact, each with the power of substitution, to execute, on his behalf the foregoing registration statement on Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to execute any and all amendments to said registration statement, and to do all such other acts and execute all such other documents which said attorney may deem necessary or desirable. Dated this 16th day of December, 1994. SIGNED: /s/ ROGELIO G. SADA ----------------------------

Exhibit 24.1 CERTIFICATION I, J. Kenneth Croney, Secretary of Alco Standard Corporation do hereby certify that the following resolutions were duly passed by the Board of Directors of the Corporation on November 11, 1994, and that such resolutions are, as of the date hereof, in full force and effect: RESOLVED, that each of the officers and directors of the corporation is hereby authorized to appoint Hugh G. Moulton and J. Kenneth Croney and Michael J. Dillon as his or her attorneys-in-fact on behalf of each of them each attorney-in-fact with the power of substitution, to execute on such officer's or director's behalf, one or more registration statements and annual reports of the corporation for filing with the Securities and Exchange Commission ("SEC"), and any and all amendments to said documents which said attorney may deem necessary or desirable to enable the corporation to register the offering of 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 17th day of December, 1994. /s/ J. KENNETH CRONEY -----------------------------

<TABLE> <S> <C>


 
<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-30-1994
<PERIOD-END>                                      Sep-30-1994
<CASH>                                                 53,369
<SECURITIES>                                                0
<RECEIVABLES>                                         944,923
<ALLOWANCES>                                           29,428
<INVENTORY>                                           609,974
<CURRENT-ASSETS>                                    1,710,476
<PP&E>                                                653,722
<DEPRECIATION>                                        299,775
<TOTAL-ASSETS>                                      3,502,258 <F2>
<CURRENT-LIABILITIES>                               1,056,930
<BONDS>                                               340,771
<COMMON>                                              551,215
<PREFERRED-MANDATORY>                                       0
<PREFERRED>                                           199,912 <F1>
<OTHER-SE>                                            616,017
<TOTAL-LIABILITY-AND-EQUITY>                        3,502,258 <F3>
<SALES>                                             7,925,784
<TOTAL-REVENUES>                                    7,996,052
<CGS>                                               5,884,819
<TOTAL-COSTS>                                       5,912,797 <F4>
<OTHER-EXPENSES>                                            0
<LOSS-PROVISION>                                       19,668
<INTEREST-EXPENSE>                                     43,802
<INCOME-PRETAX>                                       156,812
<INCOME-TAX>                                           86,203
<INCOME-CONTINUING>                                    70,609
<DISCONTINUED>                                              0
<EXTRAORDINARY>                                             0
<CHANGES>                                                   0
<NET-INCOME>                                           70,609
<EPS-PRIMARY>                                            1.10
<EPS-DILUTED>                                            1.10
<FN> 
 <F1> Redeemable solely at the Company's option.
 <F2> Includes Finance Subsidiaries assets (primarily lease receivables) of
      $562,403.
 <F3> Includes Finance Subsidiaries liabilities (primarily debt) of $498,710.
 <F4> Includes Finance Subsidiaries interest of $27,978.
</FN> 
        

</TABLE>