<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
WALLACE COMPUTER SERVICES
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
WALLACE COMPUTER SERVICES
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 1994
------------------------
TO THE STOCKHOLDERS OF
WALLACE COMPUTER SERVICES, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Wallace
Computer Services, Inc., a Delaware corporation, will be held at the Company's
corporate headquarters, 4600 West Roosevelt Road, Hillside, Illinois, on
Wednesday, November 9, 1994, at 10:00 a.m., for the following purposes:
1. To elect three directors for the class of directors whose terms are
expiring at the 1994 Annual Meeting.
2. To consider and vote upon a proposal to approve an amendment to the
Company's Employee Stock Purchase Plan which would (i) provide two
additional six-month offering periods under the Plan, thereby extending
the Plan to December 31, 1997, and (ii) increase the aggregate number of
shares of the Company's Common Stock that may be purchased pursuant to
options granted under the Plan from 4,200,000 shares to 4,700,000
shares.
3. To consider and vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for fiscal
year 1995.
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on September 21,
1994, as the record date for the determination of stockholders entitled to
notice of and to vote at the 1994 Annual Meeting. The stock transfer books of
the Company will not be closed. A list of stockholders entitled to vote at the
1994 Annual Meeting will be open to examination by any stockholder during
ordinary business hours at the corporate headquarters of the Company for ten
days prior to the meeting.
The Annual Report of the Company for the fiscal year ended July 31, 1994 is
enclosed.
It is important that your shares be voted at the 1994 Annual Meeting.
Whether or not you expect to attend, you are urged to sign and date the
accompanying proxy card and promptly return it to the Company in the
accompanying envelope. If you receive more than one proxy card, your shares may
be registered in more than one name. To ensure that all of your shares are
voted, you should sign, date and return all proxy cards that you receive from
the Company.
By Order of the Board of Directors
MICHAEL J. HALLORAN
SECRETARY
Hillside, Illinois
October 7, 1994
<PAGE>
WALLACE COMPUTER SERVICES, INC.
4600 WEST ROOSEVELT ROAD
HILLSIDE, ILLINOIS 60162
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 1994
------------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Wallace Computer Services, Inc. (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to be
held on November 9, 1994, and at any and all adjournments thereof.
A stockholder may revoke a proxy at any time prior to its exercise. If a
stockholder who has signed a proxy attends the 1994 Annual Meeting, the
stockholder may revoke the proxy and vote in person.
The cost of the solicitation of proxies will be borne by the Company. Morrow
& Co., Inc. has been retained to act as proxy solicitor for a fee of $5,500,
plus expenses.
This Proxy Statement and the accompanying proxy card are first being mailed
to stockholders on or about October 7, 1994.
Unless directed otherwise, it is intended that all properly signed proxies
in the form enclosed will be voted as follows:
FOR the election as directors of the three nominees listed below in the
section captioned "Election of Directors" (Item 1).
FOR the approval of an amendment to the Company's Employee Stock
Purchase Plan which would (i) provide two additional six-month offering
periods under the Plan, thereby extending the Plan to December 31, 1997, and
(ii) increase the aggregate number of shares of the Company's Common Stock
that may be purchased pursuant to options granted under the Plan from
4,200,000 shares to 4,700,000 shares (Item 2).
FOR the ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 1995 (Item 3).
Shares represented by a properly signed proxy that is not revoked prior to
or at the 1994 Annual Meeting will be voted in accordance with the directions
specified on such proxy by the stockholder giving such proxy.
A majority of the outstanding shares of the Company's Common Stock entitled
to vote, present in person or represented by proxy, shall constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
With respect to the election of directors, a stockholder may vote for one,
two or all three of the nominees or withhold authority with respect to any or
all of the nominees. The Company's By-Laws provide that directors shall be
elected by a plurality of the votes cast by stockholders holding shares of stock
of the Company entitled to vote for the election of directors. Consequently,
votes that are withheld in the election of directors and broker non-votes will
have no effect on the election.
With respect to the amendment to the Company's Employee Stock Purchase Plan
and the ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants, a stockholder may vote for or against the
amendment or ratification or abstain from voting. The Company's By-Laws provide
that, in all matters other than the election of directors, the affirmative vote
of stockholders holding a majority of the shares of stock of the Company
entitled to vote shall be the act of the stockholders. Consequently, an
abstention or a broker non-vote on the ratification of accountants will have the
effect of a negative vote.
1
<PAGE>
VOTING SECURITIES
The Board of Directors has fixed the close of business on September 21,
1994, as the record date for the determination of stockholders entitled to
notice of and to vote at the 1994 Annual Meeting and at any and all adjournments
thereof. On the record date, a total of 22,396,386 shares of Common Stock were
outstanding. Each stockholder is entitled to cast one vote for each share of
Common Stock held in their name as of the record date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of August 31, 1994, with
respect to each person or entity known to the Board of Directors to be the
beneficial owner of more than five percent (5%) of the outstanding shares of the
Company's Common Stock.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
---------------------------------------- ------------ --------
<S> <C> <C>
Fidelity Management & Research Co. 1,936,500(1) 8.6%
82 Devonshire Street
Boston, MA 02109
David L. Babson & Co., Inc. 1,232,762(2) 5.5%
One Memorial Drive
Cambridge, MA 02142
Merrill Lynch Capital Fund, Inc. 1,143,000(3) 5.1%
c/o Merrill Lynch Asset Management, L.P.
800 Scudders Mill Road
Plainsboro, NJ 08536
<FN>
- - ------------------------
(1) The Company has been advised by Fidelity Management & Research Co. that it
beneficially owned 1,936,500 shares as a result of its serving as
investment advisor to various investment companies and certain other funds.
Fidelity Management & Research Co. indicated that it had sole voting power
with respect to zero shares and sole dispositive power with respect to
1,936,500 shares.
(2) The Company has been advised by David L. Babson & Co., Inc. that it
beneficially owned 1,232,762 shares, of which it had sole voting and
dispositive power with respect to 821,925 shares, and shared voting and
dispositive power with respect to 410,837 shares.
(3) The Company has been advised by Merrill Lynch Capital Fund, Inc., that it
beneficially owned 1,143,000 shares and that it had shared power to vote
and shared power to dispose of or direct the disposition of 1,143,000
shares. Merrill Lynch & Co., Inc., Merrill Lynch Group, Inc., and Princeton
Services, Inc., are parent holding companies which may be deemed to share
investment discretion and voting authority with Merrill Lynch Capital Fund,
Inc. Merrill Lynch Asset Management, L.P. acts as discretionary investment
advisor to Merrill Lynch Capital Fund, Inc.
</TABLE>
2
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table lists the beneficial ownership, as of September 21,
1994, of the Company's Common Stock by each director and nominee, the five
executive officers listed in the compensation table on page 7, and all directors
and executive officers as a group. Unless otherwise noted, the listed director,
nominee, or executive officer has sole power to vote and sole power to dispose
of or direct the disposition of all shares listed opposite such person's name.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- - --------------------------- ------------------ -----------
<S> <C> <C>
Fred F. Canning 1,100 *
Robert J. Cronin 53,400(1) *
Theodore Dimitriou 114,980(2) *
Richard F. Doyle 2,800 *
R. Darrell Ewers 500 *
William N. Lane, III 8,000 *
William E. Olsen 400 *
Neele E. Stearns, Jr. 500 *
Michael O. Duffield 19,596(3) *
Michael J. Halloran 12,585(4) *
Bruce D'Angelo 6,601(5) *
All Directors and Officers 260,218(6) 1.2%
as a group
<FN>
- - ------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Includes 49,559 shares that Mr. Cronin has the right to acquire through the
exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days.
(2) Includes 30,000 shares that Mr. Dimitriou has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock
Option Plan that are presently exercisable or will become exercisable
within a period of 60 days.
(3) Includes 19,240 shares that Mr. Duffield has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock
Option Plan that are presently exercisable or will become exercisable
within a period of 60 days.
(4) Includes 9,200 shares that Mr. Halloran has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock
Option Plan that are presently exercisable or will become exercisable
within a period of 60 days.
(5) Includes 6,400 shares that Mr. D'Angelo has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock
Option Plan that are presently exercisable or will become exercisable
within a period of 60 days.
(6) Includes 149,859 shares that all executive officers as a group have the
right to acquire through the exercise of options granted under the
Company's 1989 Stock Option Plan that are presently exercisable or will
become exercisable within a period of 60 days.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors and officers are required to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission and
the New York Stock Exchange. Whenever a director or officer files a Form 3, 4 or
5, a copy of the Form is required to be furnished to the Company.
3
<PAGE>
Based solely upon a review of the Form 3, 4 and 5 filings received by the
Company since the beginning of fiscal year 1994, the Company has not identified
any failure on the part of any of its directors and officers to file on a timely
basis any Form 3, 4 or 5 during fiscal year 1994 or any prior fiscal year.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes and consists of eight
directors. The terms of three directors currently expire at the 1994 Annual
Meeting, the terms of three directors currently expire at the 1995 Annual
Meeting, and the terms of two directors currently expire at the 1996 Annual
Meeting.
At the 1994 Annual Meeting, three directors will be elected for a term
expiring at the 1997 Annual Meeting. The three nominees listed below are
incumbent directors who have consented to being named in this Proxy Statement
and to serve as directors if elected.
It is the policy of the Company that no person may serve as a director past
the month in which he reaches age 70, except that any person who was a director
on November 7, 1984 (which includes Messrs. Canning, Dimitriou, Doyle, and
Olsen), may serve as a director through the month in which he reaches age 72.
The Board of Directors may, in its discretion, allow a director to continue to
serve after the month in which he reaches age 70 or 72, as the case may be,
until the next Annual Meeting. Mr. Canning (who is one of the nominees listed
below) will reach age 72 on April 1, 1996. In accordance with the Company's
director age policy, Mr. Canning will serve as a director only until the 1996
Annual Meeting. It is anticipated that a replacement director will be elected at
the 1996 Annual Meeting to fill the remainder of Mr. Canning's term.
It is intended that all properly signed proxies in the form enclosed will be
voted FOR the election as directors of the three nominees listed below, unless
the authority to vote for all nominees or for any particular individual nominee
is withheld. If, for any reason, any nominee listed below should cease to be a
candidate for election, it is intended that all properly signed proxies in the
form enclosed will be voted for a substitute nominee designated by the Board of
Directors. Each of the nominees listed below has consented to serve as a
director, and the Board of Directors has no reason to believe that any nominee
will be unwilling or unable to serve, if elected.
The three nominees receiving the greatest number of votes will be elected as
directors.
The Company's By-Laws permit nominations for election of directors to be
made by the Board of Directors, by a nominating committee of the Board of
Directors (there currently is no such committee), or by any stockholder having
the right to vote generally in the election of directors. However, the By-Laws
provide that, in the case of any nomination by a stockholder at an annual
meeting, written notice (containing certain required information) of the
stockholder's intention to make the nomination must be given to the Secretary of
the Company not later than 90 days prior to the annual meeting. The chairman of
an annual meeting may refuse to acknowledge the nomination of any person that is
not made in compliance with the procedures set forth in the By-Laws. Since no
notice of intention to make any nomination for election of director has been
received from any stockholder for the 1994 Annual Meeting, no stockholder will
have the right to nominate any person for director at the 1994 Annual Meeting.
4
<PAGE>
NOMINEES AND DIRECTORS
The following table sets forth information on the nominees for election as
directors at the 1994 Annual Meeting and the incumbent directors with terms
expiring at either the 1995 Annual Meeting or the 1996 Annual Meeting.
<TABLE>
<CAPTION>
BOARD COMMITTEE
NAME AND AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS DIRECTOR SINCE MEMBERSHIPS
-------------------------- ---------------------------------------- ------------------ ----------------------
<S> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS AT 1994 ANNUAL MEETING
Theodore Dimitriou (68) Chairman of the Board of the Company. November 1, 1972 Executive (Chairman)
Chief Executive Officer of the Company
until November 11, 1992, and President
of the Company until April 3, 1990.
Interim President of the Company from
January 15, 1992, to June 1, 1992 (1)
Fred F. Canning (70) Former President and Chief Operating January 12, 1984 Compensation
Officer of Walgreen Co , a drug store (Chairman) and
chain (2) Executive
William N. Lane, III (51) Chairman and Chief Executive Officer of January 17, 1990 Compensation
Lane Industries, Inc., a holding company
with operations in office machines,
hotels, ranching and radio broadcasting
(3)
DIRECTORS WITH TERMS EXPIRING AT 1995 ANNUAL MEETING
Neele E. Stearns, Jr. (58) President and Chief Executive Officer of January 17, 1990 Audit
CC Industries, Inc., a holding company
with operations in home furnishings,
casual furniture and envelope
manufacturing, and real estate
development and management (4)
Robert J. Cronin (49) President and Chief Executive Officer of November 11, 1992 Executive
the Company since November 11, 1992.
President and Chief Operating Officer of
the Company from June 1, 1992, until
November 11, 1992. Senior Vice President
-- Sales of the Company from November
14, 1990, until June 1, 1992, and Vice
President -- Sales of the Company from
November 16, 1988, until November 14,
1990. Previously held various sales
management positions within the
Company's Business Forms Division
R. Darrell Ewers (61) Executive Vice President of Wm. Wrigley January 20, 1993 Audit and Compensation
Jr. Company, a manufacturer of chewing
gum (5)
DIRECTORS WITH TERMS EXPIRING AT 1996 ANNUAL MEETING
Richard F. Doyle (66) Former Senior Vice President -- Finance October 26, 1971 Audit (Chairman) and
& Administration of Texas Oil & Gas Executive
Corp., a developer of oil and gas
interests
William E. Olsen (66) Independent Consultant. Former President June 20, 1979 Compensation
and Chief Executive Officer of IGA,
Inc., a food wholesaler and retailer
<FN>
- - ------------------------------
(1) Mr. Dimitriou is also a director of Walgreen Co. and General Binding
Corporation.
(2) Mr. Canning is also a director of Walgreen Co.
(3) Mr. Lane is also a director of Microseal Corporation and General Binding
Corporation.
(4) Mr. Stearns is also a director of Maytag Corporation.
(5) Mr. Ewers is also a director of Wm. Wrigley Jr. Company and Amurol Products
Company.
</TABLE>
5
<PAGE>
MEETINGS OF THE BOARD AND COMMITTEES
During fiscal year 1994, the Board of Directors met six times, the Audit
Committee met two times, the Compensation Committee met three times, and the
Executive Committee met once. There is no Nominating Committee. Each of the
incumbent directors, with the exception of William N. Lane, III, attended at
least 75% of the meetings of the Board of Directors and its Committees on which
he served during fiscal year 1994.
The Audit Committee is responsible for recommending to the Board of
Directors the appointment of independent public accountants (subject to
ratification by the stockholders); reviewing the fees charged by the Company's
independent public accountants; reviewing the Company's annual financial
statements prior to submission to the Board of Directors; reviewing the scope
and results of the Company's annual audits; and certain other matters concerning
the Company's accounts and financial affairs as specified in the Company's By-
Laws.
The Compensation Committee is responsible for reviewing and recommending to
the Board of Directors the salaries of officers and key managers of the Company;
reviewing and recommending incentive bonus, stock option, retirement, and
welfare plans and programs for officers and key managers of the Company; and
certain other matters concerning the performance and compensation of the
Company's management employees as specified in the Company's By-Laws. Qualified
members of the Compensation Committee also serve as the Salary, Bonus and Option
Committee under the Company's Executive Incentive Plan and as the committee of
the Company's Board of Directors that administers the Company's 1989 Stock
Option Plan.
The Executive Committee is authorized, subject to certain limitations
imposed by law and in the Company's By- Laws, to exercise the powers and
authority of, and act in lieu of, the Board of Directors in the management and
direction of the Company's business and affairs.
COMPENSATION OF DIRECTORS
Each director receives an annual director's fee of $19,000 . Each director
also receives a fee of $600 plus expenses for each meeting of the Board of
Directors and its Committees that he attends.
The Company has a Retirement Plan for outside directors pursuant to which
outside directors (which include all directors other than Mr. Cronin and Mr.
Dimitriou) will be eligible to receive benefits when they complete five years of
service as outside directors. Messrs. Canning, Doyle, and Olsen have completed
five years of service as outside directors and are participants in the Plan. The
annual retirement benefit payable to each participating director is equal to the
annual director's fee in effect on his retirement date. Retirement benefits
commence upon the retirement of a participating director, continue for the
lesser of ten years or the number of years of service as an outside director,
and cease upon the death of the participating director. Because the actual
retirement benefits to be received by each participating director will be based
upon the annual director's fee in effect on his retirement date and the period
of time during which he serves as an outside director, the amount of the
retirement benefits to be paid to participating outside directors cannot be
calculated prior to retirement. As of the end of fiscal year 1994, the amount of
retirement benefits accrued under the Plan for Mr. Canning, Mr. Doyle and Mr.
Olsen was $19,000 per year for ten years.
The Company established a Deferred Compensation/Capital Accumulation Plan
for directors for each of calendar years 1988, 1993 and 1994 in which all
incumbent directors were eligible to participate. For the 1994 Plan, Messrs.
Canning, Dimitriou, Doyle, and Ewers elected to participate. For the 1993 Plan,
Messrs. Canning, Doyle, and Ewers elected to participate. For the 1988 Plan,
only Mr. Olsen elected to participate. Each participating director was allowed
to elect to defer up to 100% of his director's and meeting fees. Subject to
certain conditions, the amount of fees deferred bears interest, compounded
annually at 16% per annum for amounts deferred under the 1988 Plan and at 12%
per annum for amounts deferred under the 1993 and 1994 Plans. A participating
director is entitled to receive payment of the undistributed amount of his
deferral account in either fifteen annual installments beginning at age 65 or,
if a participating director so elects, in ten annual installments beginning at
age 70 or age 72. If a participating director has not previously begun to
receive installment payments from his deferral account, he will receive an
interim distribution from his deferral account in both the seventh and the
eighth years following the deferral year in an amount equal to the amount of
fees that he deferred.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation and certain other
components of compensation for fiscal years 1994, 1993, and 1992 for the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company for the fiscal year ended July 31, 1994:
SUMMARY COMPENSATION TABLE*
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
-------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS (1) (2)(3) OPTIONS (4) (2)(5)(6)
-------------------------------- ------ ---------- --------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cronin (7) 1994 $ 318,750 $ 194,077 $ 21,200(8) 10,000 $ 34,960
President and Chief Executive 1993 293,750 150,530 12,625 6,000 27,468
Officer 1992 230,633 69,187 13,000
Theodore Dimitriou (7) 1994 300,000 134,310 21,200(8) 5,000 64,036
Chairman of the Board 1993 341,667 148,000 19,500 5,000 83,994
1992 395,001 165,000 10,000
Michael O. Duffield 1994 182,750 101,079 4,900 15,411
Senior Vice President/ 1993 165,000 35,424 3,100 12,875
Operations 1992 114,167 26,675 8,000
Michael J. Halloran 1994 185,250 91,960 4,400 19,222
Vice President/Chief 1993 177,400 36,307 3,000 18,790
Financial Officer/Secretary 1992 167,200 48,063 2,000
Bruce D'Angelo 1994 162,500 69,347 4,000 14,467
Vice President/Sales 1993 145,000 51,260 3,500 10,913
1992 115,001 22,921 3,000
<FN>
- - ------------------------
* There were no Restricted Stock Awards, SARs, or LTIP Payouts during the
three most recent fiscal years.
(1) Compensation deferred at the election of the executive officer pursuant to
Deferred Compensation/Capital Accumulation Plans established by the Company
for the calendar years 1994 and 1993 is included in the relevant salary and
bonus columns.
(2) In accordance with the transitional provisions of the management
compensation disclosure rules of the Securities and Exchange Commission, no
information with respect to Other Annual Compensation and All Other
Compensation for fiscal year 1992 has been included.
(3) Perquisites and other personal benefits paid to the named executive
officers aggregated in each case less than the lower of either $50,000 or
10% of the total annual salary and bonus reported. In accordance with the
management compensation disclosure rules of the Securities and Exchange
Commission, no amounts have been shown for perquisites and other personal
benefits for any executive officer.
(4) Represents the number of shares of the Company's Common Stock for which
options were granted to each executive officer for fiscal years 1994, 1993,
and 1992 under the Company's 1989 Stock Option Plan. Stock options for
fiscal year 1994 were approved and granted by the Board of Directors on
September 7, 1994. Option grants set forth in the Summary Compensation
Table are reported on a current basis. In prior years, options were not
determined until after the Annual Meeting of Stockholders. Accordingly,
stock options were reported one year in arrears.
(5) All Other Compensation includes (a) Company contributions under the
Company's Profit Sharing and Retirement Plan, (b) Company contributions
under the Company's Supplemental Profit Sharing Plan, and
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(c) above-market accrued interest on compensation deferred under the
Company's Deferred Compensation/Capital Accumulation Plans to the extent
that such accrued interest exceeds interest that would have accrued on such
deferred compensation at market interest rates. The amounts of All Other
Compensation for each of the three components above were as follows:
</TABLE>
FISCAL YEAR 1994
<TABLE>
<CAPTION>
PROFIT SHARING SUPPLEMENTAL
AND RETIREMENT PROFIT SHARING ABOVE-MARKET
PLAN PLAN ACCRUED INTEREST
---------------- ---------------- ----------------
<S> <C> <C> <C>
Mr. Cronin $ 18,874 $ 10,407 $ 5,679
Mr. Dimitriou 17,033 17,557 27,672
Mr. Duffield 13,879 -- 1,532
Mr. Halloran 15,407 -- 3,815
Mr. D'Angelo 13,113 -- 1,354
</TABLE>
FISCAL YEAR 1993
<TABLE>
<CAPTION>
PROFIT SHARING SUPPLEMENTAL
AND RETIREMENT PROFIT SHARING ABOVE-MARKET
PLAN PLAN ACCRUED INTEREST
---------------- ---------------- ----------------
<S> <C> <C> <C>
Mr. Cronin $ 18,309 $ 5,494 $ 3,665
Mr. Dimitriou 7,840 51,254 22,938
Mr. Duffield 12,214 -- 661
Mr. Halloran 15,979 -- 2,811
Mr. D'Angelo 10,410 -- 503
<FN>
Interest accrued on bonuses deferred under the Company's Executive Incentive
Plan, and, in the case of Mr. Dimitriou, his employment agreement, are at or
below market interest rates.
(6) For Mr. Dimitriou, All Other Compensation also includes $1,774 and $1,962
of reimbursed medical expenses provided under his employment agreement for
fiscal years 1994 and 1993, respectively.
(7) On November 11, 1992, Mr. Cronin was promoted to Chief Executive Officer
from Chief Operating Officer. Mr. Cronin succeeded Mr. Dimitriou as Chief
Executive Officer. Mr. Dimitriou remained Chairman of the Board.
(8) Other Annual Compensation for Mr. Cronin and Mr. Dimitriou includes
director and meeting fees each earned as directors of the Company.
</TABLE>
OPTION GRANTS FOR FISCAL YEAR 1994
The following table sets forth information with respect to options granted
for fiscal year 1994 to purchase shares of the Company's Common Stock granted
under the Company's 1989 Stock Option Plan to the five executive officers listed
in the compensation table on page 7.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT
OF TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO EXERCISE OR
UNDERLYING EMPLOYEES BASE
OPTIONS IN FISCAL PRICE ($/SH.) EXPIRATION DATE GRANT DATE
NAME GRANTED (1) YEAR (1) (1) PRESENT VALUE (2)
- - ---------------------- ------------ --------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin 10,000 11.4% $ 33.38 9/7/04 $ 104,700
Theodore Dimitriou 5,000 5.7% 33.38 9/7/04 52,350
Michael O. Duffield 4,900 5.6% 33.38 9/7/04 51,303
Michael J. Halloran 4,400 5.0% 33.38 9/7/04 46,068
Bruce D'Angelo 4,000 4.6% 33.38 9/7/04 41,880
<FN>
- - ------------------------
(1) Under the terms of the Company's 1989 Stock Option Plan, options can be
either tax-favored incentive stock options or non-qualified stock options.
Tax-favored incentive stock options must have an option price
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
not less than 100% of market value on the date of grant. Non-qualified
stock options may have an option price not less than 85% of market value on
the date of grant; however, no options have been granted to date at an
option price less than 100% of market value on the grant date. Options
become exercisable as to 40% of the shares one year after the grant date
and as to the remaining 60% of the shares two years after the grant date;
however, the Compensation Committee has the authority to accelerate the
exercisability of an option. Options may be granted with exercise periods
up to ten years. All options granted to date have had an exercise period of
ten years from the grant date.
(2) The Black-Scholes option pricing method has been used to calculate the
present value of options as of the date of grant. The model assumptions
include: (a) an option term of 7 years, which represents the weighted
average (by number of option shares) over the past ten years of the length
of time between the grant date of options and the exercise date of such
options for the listed executive officers; (b) an interest rate equal to
the interest rate on a U.S. Treasury Bond with a maturity date
corresponding to that of the option term; (c) a volatility factor
calculated using monthly stock prices for the Company's Common Stock for
the 3 years (36 months) prior to the grant date; and (d) a dividend rate of
$.625 per share, which was the total amount of dividends paid with respect
to a share of the Company's Common Stock in fiscal year 1994.
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1994 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the exercise in
fiscal year 1994 of options to purchase shares of the Company's Common Stock
granted under the Company's 1989 Stock Option Plan by the five executive
officers listed in the compensation table on page 7. In addition, this table
includes the fiscal year-end number and value of unexercised options held by
each listed executive officer.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF SHARES OPTIONS AT 7/31/94 7/31/94 (2)
ACQUIRED ON VALUE REALIZED ------------------------ ------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------- ----------------- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cronin -- -- 49,200 7,800 $ 489,275 $ 24,975
Theodore Dimitriou -- -- 22,000 11,000 132,250 43,875
Michael O. Duffield 6,000 $ 71,250 16,200 4,900 144,150 17,363
Michael J. Halloran -- -- 6,800 4,200 60,100 14,025
Bruce D'Angelo 2,000 22,125 3,200 5,300 30,150 18,413
<FN>
- - ------------------------
(1) Value realized equals the aggregate excess of the fair market value on the
date of exercise over the relevant exercise price(s).
(2) Value of unexercised in-the-money options is calculated as the aggregate
excess of the fair market value of $31.50 per share (which was the closing
price of the Company's Common Stock as reported in the New York Stock
Exchange Composite Transactions for July 29, 1994) over the relevant
exercise price(s).
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL
ARRANGEMENTS
The Company has an employment agreement with Mr. Dimitriou pursuant to which
Mr. Dimitriou shall serve the Company, and the Company shall employ Mr.
Dimitriou, as its Chairman of the Board until December 31, 1994, or such earlier
date (subject to certain conditions) as Mr. Dimitriou may elect, and a
consulting period after his retirement until August 31, 1998, or such earlier
date (subject to certain conditions) as Mr. Dimitriou may elect. Mr. Dimitriou
is required to devote at least 40% of his business time and energies to the
Company and its subsidiaries during the employment period, and up to 20% of his
business time and energies to the Company and its subsidiaries during the
consulting period. The employment agreement provides for Mr. Dimitriou to be
paid a base salary of $300,000 per year and annual bonuses up to 50% of the base
salary as determined by the Compensation Committee of the Board of Directors,
provided that, if a Material Change should occur, Mr. Dimitriou's annual bonus
would be the equivalent of that awarded in calendar year 1993. A "Material
Change" includes the acquisition of beneficial ownership of 35% or more of the
9
<PAGE>
outstanding shares of the Company's Common Stock, the election as directors
representing one-fourth or more of the Company's Board of Directors of persons
who were not nominated or recommended by the incumbent Board of Directors, or
the occurrence of any other event or state of facts that the Board of Directors
determines to be a "Material Change" for the purposes of the employment
agreement. At the election of Mr. Dimitriou, his annual bonus for any fiscal
year may be deferred and paid, with interest (based on the rate paid on 90 day
bank certificates of deposit), in 120 equal monthly installments following the
termination of his employment. For the consulting period, Mr. Dimitriou shall be
paid a consulting fee at a rate of not less than $100,000 per annum. The
employment agreement also provides that, if Mr. Dimitriou should become disabled
during the term of his employment, he will be paid 50% of his base salary then
in effect for the remainder of the employment term or until his death, whichever
occurs earlier, and provides for the Company to reimburse Mr. Dimitriou for
certain uninsured medical expenses. In addition, the employment agreement
provides for Mr. Dimitriou to receive a supplemental retirement benefit which
supplements retirement benefits provided under social security and the Company's
Profit Sharing and Retirement Plan and Supplemental Profit Sharing Plan so that
he can anticipate receiving a retirement income equal to 50% of the average
monthly compensation he received during the last sixty months of his full-time
employment. The estimated supplemental retirement benefit for Mr. Dimitriou,
based upon his anticipated retirement at age 68, is $142,200 per year. After a
Material Change, Mr. Dimitriou may (as a result of changes in his title, duties
and responsibilities, interference with the performance of his duties and
responsibilities, or failure to be paid compensation or receive benefits) elect
to terminate his services and receive a termination payment in an amount equal
to the discounted present value of the minimum compensation he would have been
entitled to receive under the employment agreement for the remainder of the
employment term and the consulting period, as well as lump sum distributions of
his deferred bonuses (and related interest) and his supplemental retirement
benefit.
The Company has adopted an Executive Severance Pay Plan, in which Mr.
Cronin, Mr. Duffield, Mr. Halloran, and Mr. D'Angelo are Level II Participants
and certain other executive employees are either Level I Participants or Level
II Participants. The Plan provides for each participant to receive a severance
benefit of either one (in the case of Level I Participants) or two (in the case
of Level II Participants) times the participant's annual compensation if the
participant's employment with the Company and its subsidiaries voluntarily or
involuntarily terminates at any time during the two-year period after the
occurrence of a Material Change for any reason other than Cause (as defined in
the Plan). A "Material Change" includes the acquisition of beneficial ownership
of 35% or more of the outstanding shares of the Company's Common Stock, the
election as directors representing one-fourth or more of the Company's Board of
Directors of persons who were not nominated or recommended by the incumbent
Board of Directors, or the occurrence of any other event or state of facts that
the Board of Directors determines to be a "Material Change" for the purposes of
the Plan. Participants in the Company's Executive Severance Pay Plan may also be
entitled to receive a severance benefit under the Company's Employee Severance
Pay Plan, which provides a severance benefit to non-union employees of the
Company and its subsidiaries based upon length of service in the event that a
participant's employment is involuntarily terminated without Cause within a
period of two years after the occurrence of a Material Change (as such terms are
defined in the Plan); however, any severance benefit provided under the
Company's Employee Severance Pay Plan is reduced by any severance benefit
received under the Executive Severance Pay Plan, and, in most cases, the
severance benefit provided under the Executive Severance Pay Plan would exceed
the severance benefit provided under the Company's Employee Severance Pay Plan.
The Company has a Profit Sharing and Retirement Plan that covers all
full-time employees of the Company (other than employees covered by collective
bargaining agreements) who have completed one year of service. The Plan has a
provision that is intended to preserve and protect the Plan assets for the
benefit of participants in the event of a change in control or other similar
material change with respect to the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dimitriou, the Chairman of the Board of the Company, serves on the Board
of Directors of General Binding Corporation. Mr. Lane, who is the Chairman of
the Board of General Binding Corporation, serves on the Compensation Committee
of the Company. Mr. Dimitriou does not serve on the Compensation Committee of
General Binding Corporation.
10
<PAGE>
ITEM 2
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved an amendment to the Company's Employee
Stock Purchase Plan which would (i) provide two additional six-month offering
periods under the Plan, thereby extending the Plan to December 31, 1997, and
(ii) increase the aggregate number of shares of the Company's Common Stock that
may be purchased pursuant to options granted under the Plan from 4,200,000
shares to 4,700,000 shares (subject to adjustment for stock dividends,
recapitalizations, mergers, consolidations, reorganizations, split ups,
combinations, exchanges and the like). If approved by the stockholders, the
amendment would become effective as of January 1, 1995, subject to the condition
that the amendment not adversely affect previous rulings issued by the United
States Department of the Treasury with respect to the tax exempt status of the
Plan.
The Company's Employee Stock Purchase Plan is available to all employees of
the Company who have completed at least one year of service (as of July 31,
1994, 2,954 employees were eligible to participate in the Plan). Under the Plan,
employees electing to participate may purchase shares of the Company's Common
Stock at an exercise price equal to the lower of (a) 85% of the mean market
value on the first day of the offering period or (b) 85% of the mean market
value on the last day of the offering period. The offering period is a six-month
period beginning on January 1 and July 1 of each year. Participating employees
may purchase stock equal to the lesser of (a) shares having a market value of no
more than 10% of the participant's base salary or (b) shares having a market
value of $25,000 (market value is determined using the market price of the stock
as of the first day of the offering period). Through June 30, 1994, an aggregate
of 3,757,747 shares of Common Stock had been issued through the exercise of
options granted under the Plan in thirty-nine semi-annual offering periods.
The Company's Employee Stock Purchase Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended. Under current law, neither the granting of options nor the
exercise of options should have any federal income tax consequences for the
Company or any participant in the Plan. If shares purchased under the Plan are
sold after two years have elapsed since the commencement of the six-month
offering period in which such shares were purchased and the selling price
exceeds the exercise price, then, under current federal tax law, any amount of
the selling price in excess of market value on the first day of the offering
period is treated as a long-term capital gain and the balance of the selling
price in excess of the exercise price is treated as ordinary income; if the
selling price does exceed the exercise price, then the entire difference between
the selling price and the exercise price is treated as a long-term capital loss.
If a participant sells shares purchased under the Plan within a period of two
years from the commencement of the six-month offering period in which such
shares were purchased, then, under current federal tax law, the participant will
have ordinary income equal to the difference between the exercise price and the
market value on the last day of the offering period and the Company will be
entitled to a deduction to the extent of any ordinary income required to be
reported by the participant; any difference between the selling price and market
value as of the last day of the offering period is treated as long-term or
short-term capital gain or loss, as the case may be, depending upon the period
of time the shares were held prior to sale.
The Company's Employee Stock Purchase Plan may be terminated, suspended or
amended at any time by the Board of Directors. However, no amendment which would
increase the number shares of stock as to which options may be granted under the
Plan may be made without the approval of the stockholders.
11
<PAGE>
The benefits that might be received by employees as a result of the proposed
amendment cannot be determined because the benefits depend upon the degree of
participation by employees and the trading price of the Company's Common Stock
in future offering periods. The following table, however, discloses the benefits
received by employees during fiscal year 1994 from the Employee Stock Purchase
Plan.
<TABLE>
<CAPTION>
DOLLAR VALUE
OF BENEFITS NUMBER OF SHARES
NAME AND POSITION (1) ACQUIRED
- - ------------------------------------------ ------------- ------------------
<S> <C> <C>
Robert J. Cronin
President and Chief Executive Officer $ 7,379 819
Theodore Dimitriou
Chairman of the Board 6,792 841
Michael O. Duffield
Senior Vice President/Operations -- --
Michael J. Halloran
Vice President/Chief Financial
Officer/Secretary 6,344 637
Bruce D'Angelo
Vice President/Sales 1,269 141
All Officers as a group 33,622 3,698
All Employees 2,026,917 236,407
<FN>
- - ------------------------
(1) Dollar Value of Benefits is calculated as the aggregate difference between
the fair market value at the date of exercise and the lower of (a) 85% of
the mean market value on the first day of the offering period or (b) 85% of
the mean market value on the last day of the offering period for the two
offering periods during fiscal year 1994.
</TABLE>
The Board of Directors believes that the Company's Employee Stock Purchase
Plan provides an important community of interest between the Company's employees
and that of its stockholders. The Board of Directors believes that the
continuation of the Plan is in the best interest of the Company and its
stockholders. Accordingly, the Board of Directors recommends that the
stockholders vote in favor of the amendment to the Plan being presented for
approval. The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented in person or by proxy at the 1994 Annual
Meeting is required to approve the amendment.
The closing price of the Company's Common Stock as reported in the New York
Stock Exchange Composite Transactions for September 21, 1994 was $30.125 per
share.
ITEM 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders, the Board of Directors has appointed Arthur Andersen LLP as
independent public accountants for the Company for fiscal year 1995.
Arthur Andersen LLP has served as the Company's independent public
accountants since fiscal year 1960. Representatives of Arthur Andersen LLP are
expected to be present at the 1994 Annual Meeting with the opportunity to make a
statement if they so desire, and such representatives will be available to
respond to appropriate questions from the stockholders.
12
<PAGE>
ITEM 4
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented at the
1994 Annual Meeting other than those listed in the notice of the meeting.
However, if any other matters do come before the 1994 Annual Meeting, it is
intended that the holders of proxies solicited by the Board of Directors will
vote on such other matters at their discretion in accordance with their best
judgment.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of four non-employee members of the
Board of Directors. The Compensation Committee is responsible for reviewing and
recommending to the Board of Directors for approval the compensation of officers
and key management positions in the Company. Under the supervision of the
Committee, the Chairman of the Board and the Chief Executive Officer define the
Company's compensation philosophy and objectives and develop compensation plans
to achieve those objectives.
The Company's compensation philosophy and objectives as it relates to
executives are: (a) to include those individuals who are officers or are in
other key management positions that have a direct effect on profits; (b) to
adequately compensate those individuals at levels which are competitive with
similar positions in other companies, and (c) to provide methods of compensation
that both retain executives long-term and offer incentives in a manner that
enhances shareholder value.
COMPENSATION OF EXECUTIVE OFFICERS
In the case of Mr. Dimitriou, compensation is governed by the terms of his
employment agreement with the Company (which is described under the heading
"Employment Contracts and Termination, Severance and Change-of-Control
Arrangements" on page 9). Compensation of all other executive officers for
fiscal year 1994 was structured to consist of the following elements:
BASE SALARY -- Base salary is intended to provide a sufficient level of
compensation to attract and retain qualified management. Base salaries are
determined based on an established salary range for each position and the
incumbent's performance in the position. Salary ranges are determined through
comparative compensation surveys supplied by professional compensation
consultants that compare the evaluated position to positions of equal
responsibilities at companies of similar size and complexity. The Company's
salaries generally fall at median levels of the established range. Salary
increases generally range from zero to seven percent depending on the evaluation
of the executive's performance and the executive's salary relative to the
established salary range. The Committee believes that the Company's most direct
competitors for executive talent are not necessarily the companies that would be
included in a peer group. Thus, the survey comparison group is not the same as
the peer group used in the performance graph on page 16.
INCENTIVE AND DEFERRED BONUSES -- Incentive bonuses under the Incentive
Bonus Plan and deferred bonuses under the Deferred Bonus Plan are intended to
motivate executives to achieve goals that improve the business and increase
shareholder value. The incentive bonus is a cash bonus up to 30% to 40% of an
executive's base salary (except that the Chief Executive Officer can earn a cash
bonus up to 50% of his base salary). The deferred bonus is an amount not to
exceed two-thirds of the incentive bonus. The maximum incentive bonus percentage
varies depending on the relative position of the executive within the Company.
The amount of bonus received is based upon the attainment of non-subjective
objectives established by the executive and the Chief Executive Officer and
approved by the Committee (or, in the case of the Chief Executive Officer, by
the Chief Executive Officer and Chairman of the Board and approved by the
Committee). Objectives relate to financial goals for the Company and to the
executives' specific responsibilities. Key objectives are assigned point values.
The percentage of points achieved to total points available determines the
amount of bonus to be awarded. Generally, 30% of the points relate to the
Company's performance, based on measurements such as earnings per share, return
on shareholders' equity, percentage of operating expense to sales and pretax and
after-tax profit ratios. A second 30% relates to financial objectives specific
to the executive's areas of responsibility; these
13
<PAGE>
objectives usually focus on divisional profitability or asset turnover ratios. A
third 30% relates to operational objectives in the executive's area of
responsibility, such as the development and implementation of major products,
programs or projects. The final 10% relates to an executive's own
self-development.
CAPITAL ACCUMULATION PLAN -- The Capital Accumulation Plan (CAP) is intended
to motivate executive officers and employees in certain key management positions
to remain in the employment of the Company, thus providing the Company with a
qualified and stable executive team to achieve its long-term goals. The CAP
allows participants to elect to defer up to 20% of their salary and cash bonus.
A CAP has been in effect for each calendar year since 1988, with the exception
of 1992. The deferred amount bears interest at a rate determined by the
Committee, and has ranged between 12% and 16% per annum. The Committee elected
12% for the 1994 Plan. If a participant remains in the continuous employment of
the Company for a period of seven years after the year of deferral, an interim
distribution equal to the amount deferred will be made from the participant's
deferral account. A second interim distribution equal to the first interim
distribution will be made to each participant who remains in the continuous
employment of the Company for a period of eight years after the year of
deferral. Most participants will also receive additional distributions beginning
at age 65. A participant whose employment terminates prior to retirement
receives a lump-sum distribution equal to the amount deferred plus interest
between 6% and 8%, less the amount of any interim distributions. The Company has
purchased for its account life insurance on the participants, which is expected
to be sufficient to fund distributions under the Plan.
STOCK COMPENSATION -- Stock compensation is intended to provide a longer
term reward to executives for sound Company performance and to align the
interests of the executive more closely with those of the stockholders by
increasing management stock ownership. The Company provides stock compensation
via two plans, the 1989 Stock Option Plan (Option Plan) and the Employee Stock
Purchase Plan (ESP). The Committee administers the Option Plan pursuant to which
options to purchase shares of the Company's Common Stock are granted to
executive officers and other key members of management. Options under the Plan
become exercisable as to 40% of the shares one year after grant and the
remaining 60% of the shares become exercisable two years after grant; however,
the Committee has the authority to accelerate the exercisability of any option.
In determining the number of shares for which options are to be granted, the
Committee considers the recommendations of the Chief Executive Officer (or, in
the case of the Chief Executive Officer, the Chairman of the Board), the
performance of each participant, the Company's financial performance,
comparative information regarding stock grants made by similar companies, and
historical stock grants made by the Company. The ESP is available to all
employees of the Company who have completed at least one year of service. Under
the Plan, employees electing to participate may purchase shares of the Company's
Common Stock at an exercise price equal to the lower of (a) 85% of the mean
market value on the first day of the offering period or (b) 85% of the mean
market value on the last day of the offering period. The offering period is a
six-month period beginning on January 1 and July 1 of each year. Participating
employees may purchase stock equal to the lesser of (a) shares having a market
value of no more than 10% of the participant's base salary or (b) shares having
a market value of $25,000 (market value is determined using the market price of
the stock as of the first day of the offering period).
OTHER COMPENSATION ELEMENTS -- The Company provides a Profit Sharing and
Retirement Plan (P.S. Plan) in which executive officers participate on the same
terms as non-executive employees subject to limits on the amounts that may be
contributed. In addition, a Supplemental Profit Sharing Plan provides to
executives additional contributions to compensate them for contributions not
allowed under the P.S. Plan due to contribution limitations. This supplemental
plan is designed to place executives in the same relative position as non-highly
compensated participants in the P.S. Plan. The Company also provides each
executive officer with term life insurance (up to $200,000 of coverage) and an
automobile for which the Company makes the lease and insurance payments.
COMPENSATION ELEMENTS AND PLANS FOR FISCAL YEAR 1995 -- The Compensation
Committee and Board of Directors have approved for fiscal year 1995 new
executive compensation plans to further link the level of executive incentive
compensation to the financial results and success of the Company. New plans
approved include:
14
<PAGE>
- An ANNUAL BONUS PLAN that pays a cash bonus based upon the level of the
Company's return on investment and the percentage of completion an
executive achieves on predefined and approved individual performance
objectives. This Plan replaces the existing Incentive Bonus Plan;
- A STOCK OPTION GUIDELINE, that determines the number of stock option
grants based upon the executive's individual performance and the Company's
return on investment;
- A LONG-TERM PERFORMANCE PLAN that provides a bonus equal to a defined
percentage of "Value Added" as calculated in a modified "Economic Value
Added" model. Bonus amounts in the Long-Term Performance Plan are deferred
(banked) for a period of three years and are paid at the end of the third
year provided subsequent year results have maintained a positive balance
in the executive's deferred account. This Plan replaces the existing
Deferred Bonus Plan.
In addition, the Compensation Committee and Board of Directors have adopted
an executive stock ownership guideline for fiscal year 1995. The guideline
recommends that executive officers accumulate over a period of time, stock equal
to a market value of one to three times base salary.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The fiscal year 1994 compensation for Robert J. Cronin, the Chief Executive
Officer, was established following the same philosophy and objectives as
discussed in this report, as were the compensation levels determined for all the
executive officers of the Company.
As reported in the Summary Compensation Table, total fiscal year 1994
compensation to Mr. Cronin was $568,987, the significant elements of which were
base salary and incentive and deferred bonuses. Mr. Cronin also was granted
options for 10,000 shares of the Company's Common Stock under the Company's 1989
Stock Option Plan.
Mr. Cronin's base salary as of July 31, 1994 of $325,000 was determined
based upon the Company's established salary range for the Chief Executive
Officer. Mr. Cronin's base salary as of July 31, 1994, is at approximately the
25th percentile of Chief Executive Officer base salary compensation as
determined in a 1993 survey by professional compensation consultants using
companies of similar size and complexity. Effective November 1, 1994, Mr.
Cronin's base salary will be increased to $365,000. The Compensation Committee
believes that Mr. Cronin's salary is within an acceptable range.
Mr. Cronin's fiscal 1994 incentive bonus was $116,500 (35.8% of his base
salary and 71.7% of his maximum incentive bonus) and his fiscal 1994 deferred
bonus was $77,577. Both amounts were determined by his level of achievement
against objectives approved by the Committee at the beginning of the year. There
were nine categories of performance objectives. Objectives included the level of
earnings per share, return on equity, level of sales, and net pre-tax and
after-tax earnings as a percentage to sales and various financial ratios. Other
objectives related to the development and implementation of new products and
services and the improvement in manufacturing efficiencies. The Compensation
Committee believes Mr. Cronin's incentive and deferred bonuses are reasonable as
compared to the Company's fiscal year 1994 performance.
In summary, the Compensation Committee views Mr. Cronin's fiscal 1994
compensation as an appropriate amount, given the Company's financial performance
in fiscal year 1994, his individual achievements, and the competitive standards
for Chief Executive Officer talent.
Submitted by the Compensation Committee of the Board of Directors of the
Company.
Fred F. Canning Chairman
R. Darrell Ewers
William N. Lane, III
William E. Olsen
15
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total shareholder
return on the Company's Common Stock for the five-year period from July 31, 1989
to July 31, 1994, with the cumulative total return for the same period of the
Standard & Poor's (S&P) 500 stock index, the S&P MIDCAP 400 index, and a stock
index composed of a group of six publicly traded companies, consisting of
American Business Products, Duplex Products, Ennis Business Forms, Moore
Corporation, New England Business Service, and Standard Register Company (the
"Peer Group Index"). Comparisons are based on the assumption that the value of
an investment on July 31, 1989, in the Company's Common Stock, the S&P 500 stock
index, the S&P MIDCAP 400 index, and the Peer Group Index was $100 and that all
dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Wallace Computer Services,
Inc. Peer Group S&P 500 S&P 400 MidCap
<S> <C> <C> <C> <C>
7/31/89 100.00 100.00 100.00 100.00
7/31/90 84.71 86.44 106.43 106.46
7/31/91 89.08 86.55 119.78 130.33
7/31/92 98.31 78.17 134.76 152.97
7/30/93 100.54 88.71 146.07 178.41
7/29/94 134.07 90.56 152.91 184.69
</TABLE>
INDEMNIFICATION ARRANGEMENTS AND LIMITATION ON LIABILITY
Pursuant to the provisions of the Company's Certificate of Incorporation and
the provisions of indemnification agreements between the Company and each of its
directors and officers, the Company is obligated (subject to certain conditions)
to hold harmless and indemnify its directors and officers, to the fullest extent
permitted from time to time by applicable law, from and against expenses
(including attorney's fees), judgments, fines, amounts paid in settlement, and
other liabilities and claims that its directors and officers may incur or become
subject to as a result of or in connection with serving or having served at any
time as a director or officer of the Company (including liabilities relating to
service as a trustee or otherwise in connection with employee benefit plans)
and, in the case of officers, as an employee or agent of the Company or as a
director, officer, employee, or agent or in any other capacity at the request of
the Company with any subsidiary or other entity. The Company's indemnification
obligations under its Certificate of Incorporation and under indemnification
agreements with its directors and officers do not extend to liabilities or
claims based upon or attributable to any breach of duty of loyalty to the
Company or its stockholders, any acts or omissions that are not in good faith or
that involve intentional misconduct or deliberate dishonesty, any improper
personal profit or benefit, or any income taxes in respect of compensation.
Directors and officers also have indemnification rights against the Company
under Section 145 of the Delaware General Corporation Law, and the Company
maintains director and officer liability insurance coverage for its directors
and officers.
16
<PAGE>
Under the provisions of the Company's Certificate of Incorporation, no
director of the Company shall have any personal liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that, unless and except to the extent otherwise permitted
from time to time by applicable law, the liability of a director for monetary
damages is not eliminated or limited for any breach of duty of loyalty to the
Company or its stockholders, for acts or omissions that are not in good faith or
that involve intentional misconduct, deliberate dishonesty, or a knowing
violation of law, for any dividends or redemptions or repurchases of stock that
are unlawful under the Delaware General Corporation Law, or for any act or
omission that occurred prior to November 12, 1986.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
It is presently anticipated that the 1995 Annual Meeting will be held on
November 8, 1995. Stockholder proposals intended for inclusion in the proxy
statement for the 1995 Annual Meeting must be received at the Company's
corporate headquarters, 4600 West Roosevelt Road, Hillside, Illinois 60162, not
later than June 10, 1995. Stockholder proposals should be addressed to the
attention of the Company's Corporate Secretary.
By Order of the Board of Directors
T. DIMITRIOU
CHAIRMAN OF THE BOARD OF DIRECTORS
Hillside, Illinois
OCTOBER 7, 1994
17
<PAGE>
WALLACE COMPUTER SERVICES, INC.
PROXY CARD
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 9, 1994.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints T. Dimitriou, R.F. Doyle and
F.F. Canning, and each of them, true and lawful agents and proxies of the
undersigned, with full power of substitution, to represent the undersigned and
to vote all shares of stock which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of WALLACE COMPUTER SERVICES, INC. to be held on
November 9, 1994, and at any and all adjournments thereof, on all matters before
such meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. HOWEVER, IF NO VOTE
IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION AS DIRECTORS OF THE
NOMINEES LISTED ON THE REVERSE SIDE; "FOR" THE APPROVAL OF THE AMENDMENT TO THE
COMPANY'S EMPLOYEE STOCK PURCHASE PLAN; AND "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS, ALL OF
WHICH MATTERS ARE MORE FULLY DESCRIBED IN THE PROXY STATEMENT FOR THE MEETING.
THIS PROXY GRANTS DISCRETIONARY AUTHORITY (1) TO VOTE FOR A SUBSTITUTE NOMINEE
OF THE BOARD OF DIRECTORS IF ANY NOMINEE FOR DIRECTOR LISTED ON THE REVERSE SIDE
IS UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE AS A DIRECTOR (UNLESS
AUTHORITY TO VOTE FOR ALL NOMINEES OR FOR THE PARTICULAR NOMINEE WHO HAS CEASED
TO BE A CANDIDATE IS WITHHELD) AND (2) TO VOTE ON OTHER MATTERS THAT MAY COME
BEFORE THE MEETING IN ACCORDANCE WITH THE BEST JUDGMENT OF THE NAMED PROXIES.
PLEASE VOTE AND SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears hereon. Joint owners should
each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, the signature should be that of an authorized
officer who should state his or her title.
HAS YOUR ADDRESS CHANGED?
- - ----------------------------------------
- - ----------------------------------------
- - ----------------------------------------
DO YOU HAVE ANY COMMENTS?
- - ----------------------------------------
- - ----------------------------------------
- - ----------------------------------------
<PAGE>
DETACH CARD DETACH CARD
WALLACE COMPUTER SERVICES, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Card.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the Proxy Card to indicate how your shares shall be
voted. Then sign the card, detach it and return it in the enclosed postage paid
envelope.
Your Proxy Card must be received prior to the Annual Meeting of Stockholders on
November 9, 1994.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Wallace Computer Services, Inc.
<PAGE>
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1.) Election of Directors.
/ / For / / Withhold / / For All Except
NOMINEES:
Theodore Dimitriou, Fred F. Canning and William N. Lane, III
If you do not wish your shares voted "FOR" a particular nominee or nominees,
mark the "For All Except" box and strike a line through the nominee's name(s).
Your shares will be voted for the remaining nominee(s).
2.) Amendment to the Company's Employee Stock Purchase Plan.
/ / For / / Against / / Abstain
3.) Ratification of appointment of Arthur Andersen LLP as independent public
accountants.
/ / For / / Against / / Abstain
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Shareholder sign here Co-owner sign here
Mark box at right if comments or an address change have been noted on the
reverse side of this card. / /
