<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[x] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended July 31, 1995 Commission File Number 1-6528
Wallace Computer Services, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2515832
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 W. Roosevelt Road Hillside, Illinois 60162
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 626-2000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $1.00 par value New York Stock Exchange
Series A Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
---- ----
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant.
$1,336,848,720 (BASED ON THE OCTOBER 12, 1995, CLOSING PRICE OF THESE
SHARES ON THE NEW YORK STOCK EXCHANGE)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
AS OF OCTOBER 12, 1995, 22,706,560 SHARES OF COMMON STOCK WERE OUTSTANDING.
Documents incorporated by reference:
1. Annual Report to Stockholders for 1995 - Parts I, II, and IV of this
Form 10-K
2. Definitive Proxy Statement - Part III of this Form 10-K
Indicate by check mark if the disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
<PAGE>
TABLE OF CONTENTS
Form 10-K
Item No. Name of Item Page
- --------- ------------ ----
Part I
Item 1 Business 3
Item 2 Properties 7
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of
Security Holders 12
Part II
Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters 12
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 8 Financial Statements and Supplementary Data 13
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 13
Part III
Item 10 Directors and Executive Officers of the
Registrant 13
Item 11 Executive Compensation 16
Item 12 Security Ownership of Certain Beneficial
Owners and Management 16
Item 13 Certain Relationships and Related
Transactions 16
Part IV
Item 14 Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 17
Signatures 27
Exhibit Index 28
2
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Wallace Computer Services, Inc. Fiscal 1995 10-K
Part I
Item 1 Business
- ------ --------
As used in this report, the term "Company" is used to refer to the
Registrant and its wholly-owned subsidiary, Visible Computer Supply
Corporation.
(a) Development of Business
The Registrant was organized in June l963 as "Wallace Business
Forms, Inc.", a Delaware corporation and is the successor to an
Illinois corporation known as "Wallace Press, Inc." that was
merged into the Registrant in August 1963. To better reflect the
nature of the Company's business, the Registrant changed its
corporate name in November 1981 from "Wallace Business Forms,
Inc." to "Wallace Computer Services, Inc."
(b) Industry Segment
The Company is engaged predominantly in the computer services and
supply industry. Wallace sells a broad line of products and
services including business forms, commercial and promotional
graphics printing, computer labels, machine ribbons, computer
hardware and software, computer accessories, office products, and
electronic forms.
(c) Narrative Description of Business
(1) Principal Products and Services
Principal products and services supplied by the Company
include the design, manufacture and sale of both paper based
and electronic business forms, industrial and consumer
catalogs, directories and price lists, pressure sensitive
labels, prime labels, computer and business machine ribbons,
a standard line of office products forms, and direct mail
promotional printing. The Company also markets computer
accessory supplies, office supplies, and computer hardware
and software.
The only class of similar products that contributed 10% or
more of total sales for the past three years is printed
products. The contribution of printed products to total
sales was 90% for fiscal 1995, 90% for fiscal 1994, and 89%
for fiscal 1993.
3
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Item 1 Continued
- ------ ----------
(2) The principal raw material used by the Company is paper
which is purchased in the open market from numerous
suppliers in a variety of weights, widths, color and
sizes.
The Company believes that it has adequate sources of supply
of raw materials to meet the requirements of its business.
The Company's current inventory levels are in line with the
inventory levels necessary to satisfy customer demand that
the Company anticipates for fiscal year 1996.
(3) Although certain features of the Company's products and
manufacturing processes are covered by owned or licensed
patents, the Company does not consider patents to be
critical to its business.
The Company believes that principal factors in its success
include its engineering, manufacturing, distribution and
information services capabilities, and its salesforce.
(4) The tax forms product lines (which account for less than
2% of consolidated net sales) are sold primarily in the
first six months of the Company's fiscal year.
(5) The Company continues to maintain a strong working capital
position, with a current ratio of 3.9 at July 31, 1995 (3.8
at July 31, 1994). The Company funds its operating needs
through internally generated funds. The Company has not
borrowed any money for working capital since 1974.
Business conditions require the Company to produce and
store inventories to meet its customers' requirements.
Custom and stock finished goods inventories are stored
throughout the United States in both public and company-
owned warehouses. Finished products represent 64.7% of
total inventory at July 31, 1995.
Substantially all of the Company's sales are made on terms
of Net 30 days. The accounts receivable balance at July 31,
1995, increased by 33.8%, in line with the increase in
fourth quarter sales. Further information on liquidity and
capital resources is contained in Management's Discussion
and Analysis of Financial Condition and Results of
Operations on page 22 of the Company's Annual Report to
Stockholders for 1995, which is incorporated herein by
reference.
4
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Item 1 Continued
- ------ ---------
(6) The Company is not dependent upon any one customer or a
group of customers under common control. No single
customer or group of customers accounts for more than 10% of
consolidated net sales.
(7) Within the computer services and supply industry, the
Company sells its products through three distribution
channels: 1) a direct sales force of approximately 700
employee sales representatives, 2) direct mail catalogs sent
to the customer, and 3) the office products wholesaler/
dealer distribution network.
The predominant distribution channel is the direct sales
force. The Company hires college graduates who start at a
base salary of $20,000 plus commissions. Sales
representatives are placed in one of the Company's 160 sales
offices located throughout the United States and are
assigned a specific geographic territory. Within this
assigned territory, a sales representative is free to sell
all of the Company's products to any customer. Sales
support for the direct sales force is provided by the
Corporate Marketing department. The Company has identified
the following specific markets as large users of its product
lines: financial services, telecommunications, retail,
transportation/distribution, utilities, and healthcare.
The direct mail catalog operation accounts for approximately
2% of the Company's sales. Customers are offered products
through a general catalog, plus monthly flyers that offer
special pricing on a limited number of products. The
general catalog carries approximately 8,000 items. Most of
the paper-based products in the catalog are produced by the
Company. Products sold through the catalog are either drop-
shipped directly from the manufacturer to the customer, or
shipped from the Company's warehouses in California,
Illinois, and Pennsylvania.
The office products wholesaler/dealer distribution network
accounts for less than 13% of the Company's sales. The
network is accessed through the use of the Company's direct
sales force, who are paid a salary plus commissions. The
wholesaler/dealer distribution network is located throughout
the United States and Canada. The product line sold
through the network consists mainly of office and paper
products and computer supplies. The Company is also doing
an increasing amount of business with the office
superstores, which are estimated to control approximately
one-fourth of the office products market.
5
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Item l Continued
- ------
(8) The principal markets served by the Company are business
forms, commercial printing, pressure sensitive labels, and
office/computer products.
Within the business form market, the Company is one of the
few firms in the United States that is positioned to
accommodate the needs of large, forms-intensive customers
with multiple locations. These customers typically require
a forms vendor with the following characteristics:
a. sufficient forms manufacturing capacity across several
regions of the U.S. to satisfy their needs;
b. distribution capability across several regions of the
U.S. to deliver multiple types of forms to hundreds of
locations on short notice (the consequence of a supply
disruption often being the cessation of the customer's
business); and
c. the information services capability to provide
centralized billing, reporting, forms management, and
control for such shipments.
The Company is well positioned to meet customer needs in
the above three respects. For many large, forms-intensive
customers with multiple locations, the only acceptable
vendors other than the Company are Moore Corporation
Limited and The Standard Register Company.
The Company also sells business forms to customers that are
not large, forms-intensive firms with multiple locations.
These customers typically have a choice from among many
different acceptable vendors, and the Company accordingly
faces more competition than it does in sales to large,
forms-intensive customers with multiple locations.
The commercial printing market served by the Company
includes the design and manufacture of industrial and
consumer catalogs, directories and price lists that require
computer manipulation of data for electronic type
composition. The Company primarily competes with commercial
printers. This market is highly competitive and is very
large in comparison to the Company's sales in this area,
with most work being done on a job bid basis.
6
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Item 1 Continued
- ------
The pressure sensitive label market is highly competitive
with over 1,800 converters in the United States. This
market is estimated to total approximately $2.75 billion.
The Company is both a manufacturer and distributor for the
$30.0 billion office supplies market. The Company's sales
are small in relation to the total market.
(9) The Company is continuously involved in research activities
relating to development of new products and improvement of
existing products (none of which are customer sponsored).
The amounts that the Company spends on research activities
are not significant in relation to annual sales volume.
(10) Compliance with federal, state and local provisions
governing the discharge of materials into the environment
has not had and is not anticipated to have a material effect
on the Company's capital expenditures, earnings or
competitive position.
(11) The total number of persons employed by the Company was
3,765 as of July 31, 1995.
(d) Foreign Operation and Export Sales
Net sales and income derived from export sales are not
material.
Item 2 Properties
- ------
The Company's corporate offices are located in Hillside, Illinois, a
suburb of Chicago.
The Company believes that all of its properties are well maintained
and in good operating condition.
The following are the Company's principal properties:
Approximate
Square
Location Footage Description
- -------- ------- -----------
Gastonia, North Carolina 120,000 Business Forms Plant
- owned by Company.
7
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Item 2 Continued
- ------
Approximate
Square
Location Footage Description
- -------- ------- -----------
Luray, Virginia 162,300 Business Forms Plant
- owned by Company.
Marlin, Texas 115,700 Business Forms Plant
- owned by Company.
Metter, Georgia 126,600 Business Forms Plant
- owned by Company.
Osage, Iowa 152,500 Business Forms Plant
- owned by Company.
San Luis Obispo, 110,000 Business Forms Plant
California - owned by Company.
Hillside, Illinois 206,600 Press Division Plant
and Corporate Head -
quarters (35,000
square feet)
attached to plant
- owned by Company.
Lebanon, Kentucky 10,000 Press Division Plant
- temporary facility, lease
ending October, 1995
Bellwood, Illinois 30,000 Engineering Facilities
- lease ending March, 1997.
Hillside, Illinois 24,400 Additional Corporate Offices
- owned by Company.
Brenham, Texas 128,200 Ribbon and Label
Manufacturing Plant
- owned by Company.
Streetsboro, Ohio 80,000 Label Manufacturing
Plant - owned by
Company.
Wilson, North Carolina 127,200 Label Manufacturing
Plant - owned by
Company.
8
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Item 2 Continued
- ------
Approximate
Square
Location Footage Description
- -------- ------- -----------
Cincinnati, Ohio 22,900 Label Manufacturing
Plant - owned by
Company.
Lodi, California 138,100 Warehouse and
Distribution Center
and Manufacturing
Plant for the Label
and TOPS Divisions
- owned by Company.
St. Charles, Illinois 293,000 Warehouse and
Distribution Center
and Manufacturing
Plant for the
Business Forms and
TOPS Divisions -
owned by Company.
St. Charles, Illinois 92,400 Distribution Center
and Label Manu-
facturing Plant
- owned by Company
Osage, Iowa 104,400 TOPS Business Forms
Plant - owned by
Company.
Covington, Tennessee 168,200 TOPS Business Forms
Plant - owned by
Company.
Allentown, Pennsylvania 101,400 Warehouse and
Distribution Center
- owned by Company.
Clinton, Illinois 219,000 Colorforms
Manufacturing Plant
- owned by Company.
Manchester, Vermont 162,300 Colorforms
Manufacturing Plant
- owned by Company.
Tonawanda, New York 113,000 Colorforms
Manufacturing Plant
- owned by Company.
Elk Grove Village, Illinois 142,000 Colorforms
Manufacturing Plant
and Hardware Systems
Office
- owned by Company.
9
<PAGE>
Item 2 Continued
- ------
Distribution warehouses and sales offices throughout the United States are
leased.
Item 3 LEGAL PROCEEDINGS
- ------
THE MOORE ACTION. On July 31, 1995, Moore Corporation Limited
("Moore") and FRDK, Inc. ("FRDK") commenced an action in the United
States District Court for the District of Delaware by filing a
complaint (the "Moore Action") against the Company and each of the
directors of the Company, entitled MOORE CORPORATION LIMITED AND FRDK,
INC. V. WALLACE COMPUTER SERVICES, INC., ROBERT J. CRONIN, THEODORE
DIMITRIOU, FRED F. CANNING, WILLIAM N. LANE, III, NEELE E. STEARNS,
JR., R. DARRELL EWERS, RICHARD F. DOYLE AND WILLIAM E. OLSEN. The
Moore Action, as amended by the Amended and Supplemental Complaint
filed on October 17, 1995, asserts, among other things, that the use
of certain anti-takeover devices and other defensive measures by the
Company is not proportionate nor within the range of reasonable
responses to the tender offer made by FRDK, a wholly owned subsidiary
of Moore, to purchase all outstanding shares of common stock of the
Company, together with associated preferred stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of
March 14, 1990 (the "Rights Agreement"), at a price of $60.00, net to
the seller in cash (the "Offer"), and is in breach of the directors'
fiduciary duties to the Company's stockholders. The Moore Action also
asserts that the Offer and a merger with FRDK or another wholly owned
subsidiary of Moore (the "Proposed Merger") and proxy solicitation
comply or will comply with all applicable laws and other obligations
and seeks a declaratory judgment that the Offer and the Proposed
Merger and proxy solicitation comply with all applicable laws and
other obligations. The Moore Action seeks: (i) preliminary and
permanent injunctive relief prohibiting the Company, its directors,
officers and certain other related parties from taking steps to impede
the ability of the Company's stockholders to consider and make their
own determination as to whether to accept the terms of the Offer or
give or withhold consent to the terms of the proxy solicitation, or
taking any other action to thwart or interfere with the Offer, the
Proposed Merger or the proxy solicitation; (ii)(a) to compel the
Company's directors to redeem the Rights or amend the Rights Agreement
to make the Rights inapplicable to the Offer and the Proposed Merger,
and (b) preliminary and permanent injunctive relief enjoining the
Company, its directors, officers and certain other related parties
from taking any action to implement and distribute the Rights and from
taking actions pursuant to the Rights Agreement; (iii)(a) to compel
the Company's directors to approve the Offer and the Proposed Merger
for the purposes of Section 203 of the Delaware General Corporation
Law ("Section 203"), and (b) preliminary and permanent injunctive
relief enjoining the Company, its directors, officers and certain
other related parties from taking any actions to enforce or apply
Section 203 that would interfere with the Offer; and (iv)(a) to compel
the Company's directors to approve the Offer and the
10
<PAGE>
Item 3 Continued
- ------
Proposed Merger for purposes of Article Ninth of the Restated
Certificate of Incorporation of the Company ("Article Ninth"), and
(b) preliminary and permanent injunctive relief enjoining the Company,
its directors, officers and certain other related parties from taking
any actions to enforce or apply Article Ninth that would interfere
with the Offer. On August 15, 1995, the Company and each of the
directors of the Company filed a Motion to Dismiss the Moore Action.
On September 19, 1995, the United States District Court for the
District of Delaware denied the Motion to dismiss the Moore Action.
On September 25, 1995, the Company and its directors filed an Answer
and Counterclaim in the United States District Court for the District
of Delaware in connection with the Moore Action. The counterclaim
brought against Moore, Bidder and Reto Braun, Chairman of the Board
and Chief Executive Officer of Moore, asserts (i) that the effect of
the transactions contemplated by the Offer to Purchase may be
substantially to lessen competition in a relevant market and
therefore violate Section 7 of the Clayton Act, 15 U.S.C. Section 18;
and (ii) that Moore, the Bidder, and Mr. Braun have made false and
misleading statements of fact in connection with the Offer and their
proxy solicitation materials. The counterclaim seeks declaratory and
injunctive relief (i) enjoining Moore and the Bidder from acquiring
any voting securities of the Company and (ii) enjoining Moore, the
Bidder and Mr. Braun from acquiring any shares of Common Stock of
the Company until 60 days after they have fully complied with the
Securities Exchange Act of 1934, as amended.
STOCKHOLDER ACTIONS. The Company and its directors have been named as
defendants in three purported class actions filed between July 31,
1995 and August 3, 1995 on behalf of the public stockholders of the
Company in the
11
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Item 3 Continued
- ------
Court of Chancery of the State of Delaware in and for New Castle
County. These actions are entitled: BERNARD KOFF V. THEODORE
DIMITRIOU, FRED CANNING, WILLIAM N. LANE, NEELE E. STEARNS, JR.,
ROBERT J. CRONIN, DARRELL R. EWERS, RICHARD F. DOYLE, WILLIAM E.
OLSEN, AND WALLACE COMPUTER SERVICES, INC.; KITTY LAPERRIERE V.
WALLACE COMPUTER SERVICES, INC., THEODORE DIMITRIOU AND ROBERT J.
CRONIN ; and ROBIN K. PITTMAN V. THEODORE DIMITRIOU, FRED F. CANNING,
WILLIAM N. LANE, III, NEELE E. STEARNS, JR., ROBERT J. CRONIN, DARRELL
R. EWERS, RICHARD F. DOYLE, WILLIAM E. OLSEN, AND WALLACE COMPUTER
SERVICES, INC. (collectively, the "Stockholder Actions"). The
complaints in the Stockholder Actions contain substantially similar
allegations, and allege breach of fiduciary duty claims arising out of
the proposal by FRDK to acquire the Company. The complaints in the
Stockholder Actions also seek substantially similar relief, including
declaratory and injunctive relief barring defendants from breaching
their fiduciary duties to plaintiffs and the putative class members
and taking steps to impede any offer to acquire the Company, as well
as damages in an unspecified amount. On September 22, 1995, the
plaintiffs in KOFF V. DIMITRIOU, ET AL. and LAPERRIERE V. WALLACE
COMPUTER SERVICES, INC. ET AL. filed an Amended Class Action
Complaint, which, among other things, consolidates the actions such
plaintiffs filed in the Court of Chancery of the State of Delaware.
The Amended Class Action Complaint, among other things, seeks
injunctive relief with respect to enforcement of certain amendments to
the Company's Profit Sharing Plan and Profit Sharing Trust.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------
None
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the executive officers of the Company is contained in
Item 10 below.
Part II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------ MATTERS
The total number of holders of record of the Company's common stock
was 2,962 as of October 12, 1995. Information about the market and
payment of dividends for the Company's common stock is contained in
the 1995 Annual Report to Stockholders on page 23, and is incorporated
herein by reference.
12
<PAGE>
Part II (continued)
ITEM 6 SELECTED FINANCIAL DATA
- ------
Selected financial data for each of the eleven years ended July 31,
1995, is contained in the Company's Annual Report to Stockholders for
1995, on pages 16-17, and is incorporated herein by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------ RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three years ended July 31, 1995 is
contained in the Company's Annual Report to Stockholders for 1995, on
pages 18-23, and is incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------
The consolidated balance sheets of the Company as of July 31, 1995
and 1994, the consolidated statements of income, cash flows and
stockholders' equity for the years ended July 31, 1995, 1994 and
1993, and the notes to consolidated financial statements, together
with the report of Arthur Andersen LLP thereon dated August 23, 1995,
are contained in the Company's Annual Report to Stockholders for 1995,
on pages 24-32, and are incorporated herein by reference. Quarterly
financial information for the years ended July 31, 1995 and 1994 is
included in Management's Discussion and Analysis of Financial
Condition and Results of Operations, which is contained in the
Company's Annual Report to Stockholders for 1995 on page 23, and is
incorporated herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ FINANCIAL DISCLOSURE
None
Part III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------
Information concerning the directors of the Company will be contained
in the Company's definitive Proxy Statement and is incorporated herein
by reference.
13
<PAGE>
ITEM 10 Continued
- ------
EXECUTIVE OFFICERS OF THE COMPANY
(a) Names, ages and positions of the executive officers:
Name Age Position
---- --- --------
Robert J. Cronin 50 President and Chief Executive
Officer
Bruce D'Angelo 43 Vice President - Corporate Sales
Theodore Dimitriou 69 Chairman of the Board
Michael O. Duffield 43 Senior Vice President -
Operations
Michael R. Finger 55 Vice President - General
Manager - Direct Mail Division
Michael J. Halloran 47 Vice President - Chief Financial
Officer and Assistant Secretary
Donald J. Hoffmann 57 Vice President - Engineering
and Research
Michael T. Laudizio 38 Secretary
Michael T. Leatherman 42 Senior Vice President - Chief
Information Officer
Michael M. Mulcahy 53 Vice President - General
Manager - Colorforms Division
Michael T. Quane 46 Treasurer
Wayne E. Richter 39 Vice President - General
Manager - Label Division
All officers are elected at the Annual Meeting of the Board of Directors, which
is held immediately after the Annual Meeting of Stockholders.
14
<PAGE>
ITEM 10 Continued
- -------
(b) Business Experience of the Executive Officers:
Mr. Cronin has been with the Company since 1967. He was elected
President and Chief Executive Officer in 1993. Mr. Cronin was
previously elected Chief Operating Officer in 1992. Prior to
that time, Mr. Cronin held various sales management positions,
most recently Senior Vice President - Sales from 1991 to 1992.
Mr. Cronin is also a director of the Company.
Mr. D'Angelo has been with the Company since 1980. He was
elected Vice President - Corporate Sales in 1992. Mr. D'Angelo
was previously General Manager - Label Division from 1990 to
1992, and has held management positions in both sales and
operations.
Mr. Dimitriou joined the Company in 1959. He was Chief
Executive Officer of the Company from 1992 to 1993. Prior to
that time, Mr. Dimitriou was President and Chief Executive
Officer of the Company from 1975 to 1992. He is also a director
of the Company and has been its Chairman of the Board since 1979.
Mr. Duffield has been with the Company since 1974. He was
elected Senior Vice President - Operations in 1992. Mr. Duffield
has previously held various manufacturing management positions,
most recently Vice President - Operations from 1990 to 1992.
Mr. Finger has been with the Company since 1965. He was elected
Vice President - General Manager - Direct Mail Division in 1990.
Mr. Finger previously held the position of Vice President -
General Manager - Label Division from 1986 to 1990.
Mr. Halloran has been with the Company since 1975. He was
elected Vice President - Chief Financial Officer in 1987.
Mr. Hoffmann has been with the Company since 1969. He was
elected Vice President - Engineering and Research in 1986.
Mr. Laudizio joined the Company as Director of Taxation in 1989.
In addition to this position, he was elected Secretary in 1995.
Previously, he had been Assistant Secretary since 1994.
Mr. Leatherman has been with the Company since 1990. He was
elected Senior Vice President - Chief Information Officer in
1995. Mr. Leatherman was previously Vice President - Management
Information
15
<PAGE>
ITEM 10 Continued
- -------
Services. He previously held the position of Managing Director
at FSC Paper, where he had been employed since 1984.
Mr. Mulcahy has been with the Company since 1961. He was
appointed Vice President - Colorforms Division in 1992. Mr.
Mulcahy previously held various manufacturing management
positions, most recently Vice President - General Manager -
Manufacturing Operations from 1991 to 1992.
Mr. Quane joined the Company as Treasurer in 1993. He previously
held the position of Vice President - Treasurer at Rymer Food
Co., where he had been employed since 1988.
Mr. Richter has been with the Company since 1979. He was elected
Vice President - General Manager - Label Division in 1992. Mr.
Richter has previously been Director of Manufacturing - Business
Forms Division from 1990 to 1992 and has held several operational
management positions at various locations.
There are no family relationships between these executives.
ITEM 11 EXECUTIVE COMPENSATION
- ------
Information concerning management remuneration and transactions for
the year ended July 31, 1995 will be contained in the Company's
definitive Proxy Statement and is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------
Information concerning the beneficial ownership of the Company's
common stock will be contained in the Company's definitive Proxy
Statement and is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------
Information concerning certain relationships and related transactions
will be contained in the Company's definitive Proxy Statement and is
incorporated herein by reference.
16
<PAGE>
Wallace Computer Services, Inc. Fiscal 1995 10-K
Part IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------
(a) Financial statements and schedules are included in this Form 10-K
Annual Report as indicated below. Those portions of the 1995
Annual Report to Stockholders listed below are hereby
incorporated by reference.
Page Number
Annual Report
to Stockholders
---------------
Quarterly Financial Data for the years
ended July 31, 1995 and 1994 23
Consolidated Statements of Income
for the years ended July 31, 1995,
1994, and 1993 24
Consolidated Statements of
Stockholders' Equity for the years
ended July 31, 1995, 1994, and 1993 25
Consolidated Balance Sheets as of
July 31, 1995 and 1994 26
Consolidated Statements of Cash
Flows for the years ended July 31,
1995, 1994, and 1993 27
Notes to Consolidated Financial Statements 28-32
Report of Independent Public Accountants 32
Schedule -
II Valuation and Qualifying Accounts - Page 26 of Form 10-K
17
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ITEM 14 Continued
- ------
Schedules Omitted
All other schedules have been omitted because they are not
applicable or not required or because the required information is
included in the financial statements or notes thereto.
(b) A report on Form 8-K was filed in July 1995. The exhibits filed
with the report were:
(1) Amended and Restated By-laws of Registrant effective as
of June 14, 1995.
(2) Agreement made and entered into as of January 1, 1995
between Registrant and Robert J. Cronin.
(c) Exhibit Index
3. ARTICLES OF INCORPORATION AND BY-LAWS
3.1A Restated Certificate of Incorporation of the Registrant as
filed with the Secretary of State of the State of Delaware
on January 7, 1987 (previously filed as part of Exhibit 3 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1987, and incorporated herein by
reference to such Report)
3.1B Certificate of Amendment amending Section 1 of Article
FOURTH of the Certificate of Incorporation of the Registrant
as filed with the Secretary of State of the State of
Delaware on November 28, 1989 (previously filed as part of
Exhibit 3 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1987, and incorporated herein
by reference to such Report)
3.1C Certificate of Designation, Preferences and Rights of Series
A Preferred Stock of the Registrant as filed with the
Secretary of State of the State of Delaware on March 15,
1990 (previously filed as part of Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
3.2 Amended and Restated By-Laws of the Registrant as adopted on
June 14, 1995 (previously filed as Exhibit 1 to the
Registrant's Current Report on Form 8-K dated June 14, 1995,
and incorporated herein by reference to such Report)
18
<PAGE>
ITEM 14 Continued
- -------
4. INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES *
* The Registrant has not filed as an Exhibit any instrument
defining the rights of holders of long-term debt because the
Registrant and its consolidated subsidiaries do not have any
instrument with respect to long-term debt under which the total
amount of authorized securities exceeds 10% of the total assets
of the Registrant and its subsidiaries on a consolidated basis.
The Registrant has filed an agreement with the Securities and
Exchange Commission to furnish a copy of any instrument defining
the rights of holders of long-term debt to the Commission upon
request.
10. MATERIAL CONTRACTS
10.1 Form of Rights Agreement, dated as of March 14, 1990,
between Registrant and Harris Trust and Savings Bank, as
Rights Agent, which includes as Exhibit A the Certificate
of Designation, Preferences and Rights of Series A
Preferred Stock, as Exhibit B the form of Rights
Certificate, and as Exhibit C the form of Summary of
Rights (previously filed as Exhibit 28.2 to the
Registrant's Current Report on Form 8-K dated March 14,
1990, and incorporated herein by reference to such Report)
10.2A Fourth Amended and Restated Agreement made and entered
into as of January l, 1993 between the Registrant and
Theodore Dimitriou (previously filed as part of Exhibit 10
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1993, and incorporated herein
by reference to such Report)
10.2B First Amendment to Fourth Amended and Restated Agreement
made and entered into as of January l, 1993 between the
Registrant and Theodore Dimitriou (previously filed as
part of Exhibit 10 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1993, and
incorporated herein by reference to such Report)
10.3 1989 Stock Option Plan of the Registrant, which amends
and restates as a single, integrated plan the 1974 Non-
Qualified Stock Option Plan of the Registrant and the 1981
Incentive Stock Option Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31,
1990, and incorporated herein by reference to such Report)
19
<PAGE>
ITEM 14 Continued
- -------
10.4A Executive Incentive Plan of the Registrant, as restated to
reflect Amendment No. 3 thereto, adopted as of November 9,
1994
10.4B Fourth Amendment, adopted as of September 6, 1995, to the
Executive Incentive Plan of the Registrant
10.5A 1988 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1988, and incorporated herein by
reference to such Report)
10.5B 1989 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.5C 1990 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.5D First Amendment to the 1990 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5E 1991 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1991, and incorporated herein by
reference to such Report)
10.5F First Amendment to the 1991 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5G 1993 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1993, and incorporated herein by
reference to such Report)
10.5H First Amendment to the 1993 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5I 1994 Deferred Compensation/Capital Accumulation Plan of
the Registrant (previously filed as part of Exhibit 10 to
the Registrant's
20
<PAGE>
Item 14 Continued
- -------
Annual Report on Form 10-K for the fiscal year ended July
31, 1994, and incorporated herein by reference to such
Report)
10.5J First Amendment to the 1994 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5K 1995 Deferred Compensation/Capital Accumulation Plan of
the Registrant
10.5L First Amendment to the 1995 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.6 Supplemental Profit-Sharing Plan of the Registrant
(previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1988, and incorporated herein by
reference to such Report)
10.7A Executive Severance Pay Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31,
1990, and incorporated herein by reference to such Report)
10.7B First Amendment to the Executive Severance Pay Plan of the
Registrant
10.8 Employee Annual Bonus Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31,
1994, and incorporated herein by reference to such Report)
10.9A Employee Long-Term Performance Plan of the Registrant
(previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1994, and incorporated herein by
reference to such Report)
10.9B First Amendment of the Employee Long-Term Performance Plan
of the Registrant
10.10 Employee Stock Option Guideline of the Registrant
(previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1994, and incorporated herein by
reference to such Report)
21
<PAGE>
Item 14 Continued
- -------
10.11A 1988 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1988, and incorporated
herein by reference to such Report)
10.11B 1989 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1990, and incorporated
herein by reference to such Report)
10.11C 1993 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1993, and incorporated
herein by reference to such Report)
10.11D 1994 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1994, and incorporated
herein by reference to such Report)
10.11E 1995 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant
10.12 Retirement Plan for Outside Directors of the Registrant
(previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.13 Employee Stock Purchase Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31,
1992, and incorporated herein by reference to such Report)
10.14A Employee Severance Pay Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 31,
1992, and incorporated herein by reference to such Report)
22
<PAGE>
Item 14 Continued
- -------
10.14B First Amendment of the Employee Severance Pay Plan of the
Registrant
10.15A Form of Indemnification Agreement with Director between
the Registrant and each of the following: Fred F.
Canning, Robert J. Cronin, Theodore Dimitriou, Richard F.
Doyle, R. Darrell Ewers, William M. Lane III, William E.
Olsen and Neele E. Stearns, Jr. (previously filed as part
of Exhibit 10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended July 31, 1990, and
incorporated herein by reference to such Report)
10.15B Form of Addendum to Indemnification Agreement with
Director (Member of Profit Sharing Committee) between the
Registrant and William E. Olsen (previously filed as part
of Exhibit 10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended July 31, 1990, and
incorporated herein by reference to such Report)
10.16A Form of Indemnification Agreement with Officer between the
Registrant and each of the following: Robert J. Cronin,
Bruce D'Angelo, Theodore Dimitriou, Michael O. Duffield,
Michael R. Finger, Michael J. Halloran, Donald J.
Hoffmann, Michael T. Laudizio, Michael T. Leatherman,
Michael M. Mulcahy, Michael T. Quane and Wayne E. Richter
(previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.16B Form of Addendum to Indemnification Agreement with Officer
(Trustee of Profit Sharing and Retirement Trust and Member
of Profit Sharing Committee) between the Registrant and
each of the following: Robert J. Cronin, Theodore
Dimitriou and Michael J. Halloran (previously filed as
part of Exhibit 10 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1990, and
incorporated herein by reference to such Report)
10.16C Form of Addendum to Indemnification Agreement with Officer
(Member of Profit Sharing Committee) between the
Registrant and Michael O. Duffield
10.17A Acquisition Agreement dated as of July 18, 1991, by and
among Wallace Computer Services, Inc., a Delaware
corporation, MGI Industries, Inc., a New Jersey
corporation, Colorforms Incorporated, a Delaware
corporation, Colorforms Image Center,
23
<PAGE>
Item 14 Continued
- -------
Inc., an Illinois corporation, Colorforms Mailing
Services, Inc., an Illinois corporation, Evergreen
Realty, a New York partnership, Frank A. Leo,
William J. O'Brien, Robert L. Patton, and R. Robert
Verniero, including Exhibits and General Schedules
but excluding Disclosure Schedules (previously filed
as part of Exhibit 2 to the Registrant's Current Report
on Form 8-K dated August 20, 1991, and incorporated
herein by reference to such Report)
10.17B Amendment No. 1 dated as of August 7, 1991 to Acquisition
Agreement dated as of July 18, 1991 by and among Wallace
Computer Services, Inc., a Delaware corporation, MGI
Industries, Inc., a New Jersey corporation, Colorforms
Incorporated, a Delaware corporation, Colorforms Image
Center, Inc., an Illinois corporation, Colorforms Mailing
Services, Inc., an Illinois corporation, Evergreen Realty,
a New York partnership, Frank A. Leo, William J. O'Brien,
Robert L. Patton, and R. Robert Verniero, including
Exhibits and General Schedules but excluding Disclosure
Schedules (previously filed as part of Exhibit 2 to the
Registrant's Current Report on Form 8-K dated August 20,
1991, and incorporated herein by reference to the Report)
10.17C Supplemental Agreement No. l dated as of August 7, 1991 in
connection with Acquisition Agreement dated as of July 18,
1991, as amended by Amendment No. l dated as of August 7,
1991, by and among Wallace Computer Services, Inc., a
Delaware corporation, MGI Industries, Inc., a New Jersey
corporation, Colorforms Incorporated, a Delaware
corporation, Colorforms Image Center, Inc., an Illinois
corporation, Colorforms Mailing Services, Inc., an
Illinois corporation, Evergreen Realty, a New York
partnership, Frank A. Leo, William J. O'Brien, Robert L.
Patton, and R. Robert Verniero (previously filed as part
of Exhibit 2 to the Registrant's Current Report on Form 8-
K dated August 20, 1991, and incorporated herein by
reference to such Report)
10.17D Supplemental Agreement No. 2 dated as of August 7, 1991,
in connection with Acquisition Agreement dated as of July
18, 1991, as amended by Amendment No. l dated as of August
7, 1991, by and among Wallace Computer Services, Inc., a
Delaware corporation, MGI Industries, Inc., a New Jersey
corporation, Colorforms Incorporated, a Delaware
corporation, Colorforms Image Center, Inc., an Illinois
corporation, Colorforms Mailing Services, Inc., an
Illinois corporation, Evergreen Realty, a New York
partnership, Frank A. Leo, William J. O'Brien, Robert L.
24
<PAGE>
ITEM 14 Continued
- -------
Patton, and R. Robert Verniero (previously filed as part
of Exhibit 2 to the Registrant's Current Report on Form
8-K dated August 20, 1991, and incorporated herein by
reference to such Report)
10.17E Amendment No. 2 dated as of August 31, 1993, to
Acquisition Agreement dated as of July 18, 1991, by and
among Wallace Computer Services, Inc., a Delaware
corporation (on its own behalf and as successor by merger
to MGI Industries, Inc., a New Jersey corporation, and
Colorforms Incorporated, a Delaware corporation,
Colorforms Image Center, Inc., an Illinois corporation,
and Colorforms Mailing Services, Inc., an Illinois
corporation), Evergreen Realty, a New York partnership,
Frank A. Leo, William J. O'Brien, Robert C. Patton, and R.
Robert Verniero (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 31, 1993, and incorporated herein by
reference to such Report)
10.18 Agreement made and entered into as of January 1, 1995
between Registrant and Robert J. Cronin (previously filed
as Exhibit 2 to the Registrant's Current Report on Form 8-
K dated June 14, 1995, and incorporated herein by
reference to such Report)
13. ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR QUARTERLY REPORT
TO SECURITY HOLDERS
13. Annual Report - Fiscal 1995 of the Registrant (filed as
part of this Report only to the extent portions thereof
are expressly incorporated by reference in this report)
21. SUBSIDIARIES OF REGISTRANT
21. Subsidiary of the Company
23. CONSENTS OF EXPERTS AND COUNSEL
23. Consent of Arthur Andersen LLP.
27. FINANCIAL DATA SCHEDULE
27. Financial Data Schedule
25
<PAGE>
Wallace Computer Services, Inc. and Subsidiary
Schedule II - Valuation and Qualifying Accounts
For the years ended July 31
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Balance at Beginning of Year $1,982,000 $1,849,000 $1,618,000
Provision for Doubtful Accounts 1,132,000 893,000 1,127,000
Accounts Written Off Against Allowance 1,061,000 1,161,000 1,260,000
Recoveries Credited to Allowance 593,000 401,000 364,000
Other Credits (1) 25,000 --- ---
---------- ---------- ----------
Balance at End of Year $2,671,000 $1,982,000 $1,849,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(1) Acquisition of Lampro Graphics, Inc. as of November 1, 1994.
26
<PAGE>
Wallace Computer Services, Inc Fiscal 1995 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on October 16, 1995.
Wallace Computer Services, Inc.
/s/ Michael J. Halloran
By ________________________
Michael J. Halloran
Vice President, Chief Financial
Officer and Assistant Secretary
(principal accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in capacities indicated, on October 16, 1995.
/s/ Theodore Dimitriou /s/ R. Darrell Ewers
_________________________ _________________________
Theodore Dimitriou R. Darrell Ewers
Chairman of the Board Director
/s/ Robert J. Cronin /s/ William N. Lane III
_________________________ _________________________
Robert J. Cronin William N. Lane III
Director, President and Director
Chief Executive Officer
/s/ Fred F. Canning /s/ William E. Olsen
_________________________ _________________________
Fred F. Canning William E. Olsen
Director Director
/s/ Richard F. Doyle /s/ Neele E. Stearns, Jr.
_________________________ _________________________
Richard F. Doyle Neele E. Stearns, Jr.
Director Director
27
<PAGE>
Exhibit Index
Exhibit
Number Description
----- -----------
3.1A Restated Certificate of Incorporation of the Registrant as
filed with the Secretary of State of the State of Delaware on
January 7, 1987 (previously filed as part of Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1987, and incorporated herein by reference to
such Report)
3.1B Certificate of Amendment amending Section 1 of Article FOURTH
of the Certificate of Incorporation of the Registrant as filed
with the Secretary of State of the State of Delaware on
November 28, 1989 (previously filed as part of Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1987, and incorporated herein by reference to
such Report)
3.1C Certificate of Designation, Preferences and Rights of Series A
Preferred Stock of the Registrant as filed with the Secretary
of State of the State of Delaware on March 15, 1990 (previously
filed as part of Exhibit 3 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1990, and
incorporated herein by reference to such Report)
3.2 Amended and Restated By-Laws of the Registrant as adopted on
June 14, 1995 (previously filed as Exhibit 1 to the
Registrant's Current Report on Form 8-K dated June 14, 1995,
and incorporated herein by reference to such Report)
10.1 Form of Rights Agreement, dated as of March 14, 1990, between
Registrant and Harris Trust and Savings Bank, as Rights Agent,
which includes as Exhibit A the Certificate of Designation,
Preferences and Rights of Series A Preferred Stock, as Exhibit
B the form of Rights Certificate, and as Exhibit C the form of
Summary of Rights (previously filed as Exhibit 28.2 to the
Registrant's Current Report on Form 8-K dated March 14, 1990,
and incorporated herein by reference to such Report)
10.2A Fourth Amended and Restated Agreement made and entered into as
of January l, 1993 between the Registrant and Theodore
Dimitriou (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1993, and incorporated herein by reference to
such Report)
10.2B First Amendment to Fourth Amended and Restated Agreement made
and entered into as of January l, 1993 between the Registrant
and Theodore Dimitriou (previously filed as part of Exhibit 10
to the Registrant's Annual
28
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
----- -----------
Report on Form 10-K for the fiscal year ended July 31, 1993,
and incorporated herein by reference to such Report)
10.3 1989 Stock Option Plan of the Registrant, which amends and
restates as a single, integrated plan the 1974 Non-Qualified
Stock Option Plan of the Registrant and the 1981 Incentive
Stock Option Plan of the Registrant (previously filed as part
of Exhibit 10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended July 31, 1990, and incorporated
herein by reference to such Report)
10.4A Executive Incentive Plan of the Registrant, as restated to
reflect Amendment No. 3 thereto, adopted as of November 9, 1994
10.4B Fourth Amendment, adopted as of September 6, 1995, to the
Executive Incentive Plan of the Registrant
10.5A 1988 Deferred Compensation/Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1988, and incorporated herein by reference to
such Report)
10.5B 1989 Deferred Compensation/Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
10.5C 1990 Deferred Compensation /Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
10.5D First Amendment to the 1990 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5E 1991 Deferred Compensation/Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1991, and incorporated herein by reference to
such Report)
29
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
------ -----------
10.5F First Amendment to the 1991 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5G 1993 Deferred Compensation/Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1993, and incorporated herein by reference to
such Report)
10.5H First Amendment to the 1993 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5I 1994 Deferred Compensation/Capital Accumulation Plan of the
Registrant (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1994, and incorporated herein by reference to
such Report)
10.5J First Amendment to the 1994 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.5K 1995 Deferred Compensation/Capital Accumulation Plan of the
Registrant
10.5L First Amendment to the 1995 Deferred Compensation/Capital
Accumulation Plan of the Registrant
10.6 Supplemental Profit-Sharing Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1988, and
incorporated herein by reference to such Report)
10.7A Executive Severance Pay Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1990, and
incorporated herein by reference to such Report)
10.7B First Amendment to the Executive Severance Pay Plan of the
Registrant
10.8 Employee Annual Bonus Plan of the Registrant (previously filed
as part of Exhibit 10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended July 31, 1994, and incorporated
herein by reference to such Report)
10.9A Employee Long-Term Performance Plan of the Registrant
(previously filed as part of Exhibit 10 to the Registrant's
Annual Report on Form 10-K for the
30
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
------ -----------
fiscal year ended July 31, 1994, and incorporated herein by
reference to such Report)
10.9B First Amendment of the Employee Long-Term Performance Plan of
the Registrant
10.10 Employee Stock Option Guideline of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1994, and
incorporated herein by reference to such Report)
10.11A 1988 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1988, and incorporated herein by
reference to such Report)
10.11B 1989 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.11C 1993 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1993, and incorporated herein by
reference to such Report)
10.11D 1994 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant (previously filed as part of
Exhibit 10 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1994, and incorporated herein by
reference to such Report)
10.11E 1995 Deferred Compensation/Capital Accumulation Plan for
Directors of the Registrant
10.12 Retirement Plan for Outside Directors of the Registrant
(previously filed as part of Exhibit 10 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended July 31,
1990, and incorporated herein by reference to such Report)
31
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
------ -----------
10.13 Employee Stock Purchase Plan of the Registrant (previously
filed as part of Exhibit 10 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 31, 1992, and
incorporated herein by reference to such Report)
10.14A Employee Severance Pay Plan of the Registrant (previously filed
as part of Exhibit 10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended July 31, 1992, and incorporated
herein by reference to such Report)
10.14B First Amendment of the Employee Severance Pay Plan of the
Registrant
10.15A Form of Indemnification Agreement with Director between the
Registrant and each of the following: Fred F. Canning, Robert
J. Cronin, Theodore Dimitriou, Richard F. Doyle, R. Darrell
Ewers, William M. Lane III, William E. Olsen and Neele E.
Stearns, Jr. (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
10.15B Form of Addendum to Indemnification Agreement with Director
(Member of Profit Sharing Committee) between the Registrant and
William E. Olsen (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
10.16A Form of Indemnification Agreement with Officer between the
Registrant and each of the following: Robert J. Cronin, Bruce
D'Angelo, Theodore Dimitriou, Michael O. Duffield, Michael R.
Finger, Michael J. Halloran, Donald J. Hoffmann, Michael T.
Laudizio, Michael T. Leatherman, Michael M. Mulcahy, Michael T.
Quane and Wayne E. Richter (previously filed as part of Exhibit
10 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended July 31, 1990, and incorporated herein by
reference to such Report)
10.16B Form of Addendum to Indemnification Agreement with Officer
(Trustee of Profit Sharing and Retirement Trust and Member of
Profit Sharing Committee) between the Registrant and each of
the following: Robert J. Cronin, Theodore Dimitriou and
Michael J. Halloran (previously filed as part of Exhibit 10 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1990, and incorporated herein by reference to
such Report)
10.16C Form of Addendum to Indemnification Agreement with Officer
(Member of Profit Sharing Committee) between the Registrant and
Michael O. Duffield
32
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
------ -----------
10.17A Acquisition Agreement dated as of July 18, 1991, by and among
Wallace Computer Services, Inc., a Delaware corporation, MGI
Industries, Inc., a New Jersey corporation, Colorforms
Incorporated, a Delaware corporation, Colorforms Image Center,
Inc., an Illinois corporation, Colorforms Mailing Services,
Inc., an Illinois corporation, Evergreen Realty, a New York
partnership, Frank A. Leo, William J. O'Brien, Robert L.
Patton, and R. Robert Verniero, including Exhibits and General
Schedules but excluding Disclosure Schedules (previously filed
as part of Exhibit 2 to the Registrant's Current Report on Form
8-K dated August 20, 1991, and incorporated herein by
reference to such Report)
10.17B Amendment No. 1 dated as of August 7, 1991 to Acquisition
Agreement dated as of July 18, 1991 by and among Wallace
Computer Services, Inc., a Delaware corporation, MGI
Industries, Inc., a New Jersey corporation, Colorforms
Incorporated, a Delaware corporation, Colorforms Image Center,
Inc., an Illinois corporation, Colorforms Mailing Services,
Inc., an Illinois corporation, Evergreen Realty, a New York
partnership, Frank A. Leo, William J. O'Brien, Robert L.
Patton, and R. Robert Verniero, including exhibits and General
Schedules but excluding Disclosure Schedules (previously filed
as part of Exhibit 2 to the Registrant's Current Report on Form
8-K dated August 20, 1991, and incorporated herein by reference
to the Report)
10.17C Supplemental Agreement No. l dated as of August 7, 1991 in
connection with Acquisition Agreement dated as of July 18,
1991, as amended by Amendment No. l dated as of August 7, 1991,
by and among Wallace Computer Services, Inc., a Delaware
corporation, MGI Industries, Inc., a New Jersey corporation,
Colorforms Incorporated, a Delaware corporation, Colorforms
Image Center, Inc., an Illinois corporation, Colorforms Mailing
Services, Inc., an Illinois corporation, Evergreen Realty, a
New York partnership, Frank A. Leo, William J. O'Brien, Robert
L. Patton, and R. Robert Verniero (previously filed as part of
Exhibit 2 to the Registrant's Current Report on Form 8-K dated
August 20, 1991, and incorporated herein by reference to such
Report)
10.17D Supplemental Agreement No. 2 dated as of August 7, 1991, in
connection with Acquisition Agreement dated as of July 18,
1991, as amended by Amendment No. l dated as of August 7, 1991,
by and among Wallace Computer Services, Inc., a Delaware
corporation, MGI Industries, Inc., a New Jersey corporation,
33
<PAGE>
Exhibit Index (continued)
Exhibit
Number Description
------ ------------
Colorforms Incorporated, a Delaware corporation, Colorforms
Image Center, Inc., an Illinois corporation, Colorforms Mailing
Services, Inc., an Illinois corporation, Evergreen Realty, a
New York partnership, Frank A. Leo, William J. O'Brien, Robert
L. Patton, and R. Robert Verniero (previously filed as part of
Exhibit 2 to the Registrant's Current Report on Form 8-K dated
August 20, 1991, and incorporated herein by reference to such
Report)
10.17E Amendment No. 2 dated as of August 31, 1993, to Acquisition
Agreement dated as of July 18, 1991, by and among Wallace
Computer Services, Inc., a Delaware corporation (on its own
behalf and as successor by merger to MGI Industries, Inc., a
New Jersey corporation, and Colorforms Incorporated, a Delaware
corporation, Colorforms Image Center, Inc., an Illinois
corporation, and Colorforms Mailing Services, Inc., an Illinois
corporation), Evergreen Realty, a New York partnership, Frank
A. Leo, William J. O'Brien, Robert C. Patton, and R. Robert
Verniero (previously filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended July 31, 1993, and incorporated herein by reference to
such Report)
10.18 Agreement made and entered into as of January 1, 1995 between
Registrant and Robert J. Cronin (previously filed as Exhibit 2
to the Registrant's Current Report on Form 8-K dated June 14,
1995, and incorporated herein by reference to such Report)
13 Annual Report - Fiscal 1995 of the Registrant (filed as part of
this Report only to the extent portions thereof are expressly
incorporated by reference in this report)
21 Subsidiary of the Company
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
34
<PAGE>
EXHIBIT 10.4A
WALLACE COMPUTER SERVICES, INC.
EXECUTIVE INCENTIVE PLAN
(Restated to Reflect Amendment No. 3)
SECTION 1. PURPOSE OF PLAN. The purpose of this Plan is to provide a means of
providing reward for performance and incentive for future performance, in
addition to salaries and other benefits to employees (including officers) of
WALLACE COMPUTER SERVICES, INC. and its subsidiaries ("Company") in managerial
and other important positions who contribute materially to the success of the
Company's business by their ability, ingenuity and industry, and demonstrated by
results shown in the consolidated financial statements in the Annual Reports to
Stockholders. This Plan is designed to include only a select group of
management or highly compensated employees.
SECTION 2. GENERAL DEFINITIONS.
(a) The term "Committee" shall mean the Compensation Committee of the
Company's Board of Directors, as from time to time constituted.
(b) The term "Employee" shall mean persons employed by the Company or any
subsidiary in which the Company owns directly or indirectly all or
substantially all of the common stock and shall include employees who are
also directors of the Company or any such subsidiary and may, in the
discretion of the Committee, include persons who at the request of the
Company accept employment with any company in which the Company has a
substantial ownership interest.
(c) The term "Participant" as used in this Plan shall include the
beneficiaries designated by a participant as provided in Section 6(b) or
if no such designation of any beneficiary has been made, the
Participant's legal representatives or other persons entitled to any
payment or benefit with respect to the Participant pursuant to this Plan.
SECTION 3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Committee in a manner consistent with the
By-Laws of the Company.
SECTION 4. ELIGIBILITY.
(a) An Employee shall be eligible for consideration for an Award under this
Plan based on such criteria as the Committee shall from year to year
determine. A person whose
<PAGE>
employment terminates during the year or who is granted a leave of
absence during the year, and who at the time of such termination of
employment or granting of leave is eligible for consideration of bonus,
may, at the discretion of the Committee and under such rules as the
Committee may from time to time approve, be awarded a bonus with respect
to the period of his services during the year.
(b) No bonus shall be awarded to a member of the Committee. Membership on any
other committee of the Board of Directors shall not itself render an
Employee ineligible for a bonus award.
(c) Nothing in this Plan shall be construed as preventing the Company from
establishing incentive or other variable compensation plans applicable to
Employees.
SECTION 5.1 CASH AWARDS TO PARTICIPANTS.
(a) Awards under the Plan shall be made on a deferred payment basis. The
Cash Award made by the Committee shall not exceed 66-2/3% (.6666) of any
current cash bonus paid to a Participant. The amount of each Cash Award
shall be credited to the Participant on the books of the Company, but
will not otherwise be set aside from the Company's other funds.
(b) No Participant shall have any right with respect to any Cash Award until
such award shall have been delivered to him.
(c) There shall be deducted from all payments of Cash Awards under the Plan,
any taxes required by law to be withheld.
SECTION 5.2 STOCK EQUIVALENT AWARDS TO PARTICIPANTS.
(a) At the sole discretion and consent of the Committee, a Participant may
convert a Cash Award (either on a current basis from time to time, or
with respect to Cash Awards previously granted) into hypothetical common
stock of the Company to be credited to the Participant ("Stock
Equivalent").
(b) When a Stock Equivalent is elected by a Participant, the Stock Equivalent
shall be valued at an amount equal to the Fair Market Value of an actual
share of the Company's common stock ("Stock") on the date of the award or
conversion and shall be credited to the Participant on the books of the
Company. For the purposes of the Plan, the Fair Market Value of a share
of Stock at any date will be either:
(i) the closing price of the Stock as reported in the New York Stock
Exchange Composite Transaction Table in THE WALL STREET JOURNAL, on
that date; or
<PAGE>
(ii) if such shares are not then listed on the New York Stock Exchange
or so reported (or determined by the Committee to be improperly
reported), then as established by the Committee.
(c) Stock Equivalent Awards shall not entitle a Participant or any other
person succeeding to the Participant's rights, to any voting or other
rights as a stockholder of the Company, except to the extent of parallel
dividend payments set forth in Paragraph 6(e) below.
(d) Stock Equivalent Awards granted hereunder shall be subject to adjustment,
in the event of changes in the outstanding Stock by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the Stock Equivalent Award to
the same extent as would effect an actual share of Stock issued or
outstanding on the effective date of such change. The Committee, in its
sole discretion, may make such adjustments as it determines to be
appropriate.
SECTION 6. PAYMENT OF AWARDS.
(a) Subject to the conditions set forth in Section 6(c) of the Plan, payment
of Award balances shall be made in 120 monthly installments commencing on
the first day of the calendar quarter following the month in which the
Participant's employment with the Company terminates ("Termination
Date"). In lieu of installment payments, the Committee, after
consultation with the Participant, may pay any amount due in a lump sum.
In the event that a Stock Equivalent Award has been credited to a
Participant, the Fair Market Value of the Stock recorded on the books of
the Company as of the Participant's Termination Date shall be converted
to a cash balance at any time within the twelve (12) month period
following the Termination Date, subject to the provisions of this
Section 6.
(b) Any Award, or remaining unpaid portions thereof, which becomes payable
after the death of a Participant, shall be paid in installments or in a
lump sum to his beneficiaries. Unless otherwise designated in a written
form given to the Company, where permitted under the laws of the state in
which the Participant resides, the written designation of a beneficiary
filed by a Participant in connection with the Group Life Insurance
Program of the Company or a Subsidiary, as the case may be, shall
determine who is to receive any Award standing to the Participant's
credit at any time under the Plan in the event of such Participant's
death prior to delivery to him of such Award.
(c) All Awards are contingently payable and shall be subject to the following
conditions:
<PAGE>
1. That the Participant continue to render services as an Employee of
the Company until his Normal Retirement Date or Early Retirement
date, as defined in the Company's Profit Sharing and Retirement
Fund, which condition shall be waived in the event of death or
disability of a Participant prior to termination of employment.
2. If a Participant at any time engages in any activity that the
Committee determines, in its discretion, was or is harmful to the
interests of the Company, the Committee may determine whether or
not and, if so, the extent to which any unpaid contingent deferred
installment credited to the Participant shall be forfeited. This
subparagraph shall apply: (i) to activities that may occur prior to
and that do not result in termination of service but which do not
become known to the Committee until after termination of service;
(ii) to activities that occur prior to but result in termination of
service; and (iii) to activities that occur following termination
of service and during the period when the Participant would
otherwise be entitled to receive payment of the contingent
allotments credited to him. The Committee shall have the
authority, in its discretion, to determine what kinds of activities
shall be deemed to be harmful for the purposes of this
subparagraph. A determination by the Committee under this
subparagraph, including its determination as to the time at which
harmful activities commenced, shall be conclusive.
(d) Notwithstanding the provisions of paragraphs (a) and (b) of this Section
6, the Committee shall possess absolute discretion to accelerate or to
defer the payment of all or part of any remaining unpaid installments to
the extent that it deems equitable or desirable under the circumstances.
(e) The Participant's Cash Award Account shall be credited with an assumed
interest rate of 5% on at least an annual basis. The Participant's Stock
Equivalent Account shall be credited on any dividend payment date with a
dividend amount equal to what would have been payable as if such Stock
Equivalent represented actually issued Stock.
(f) The Committee shall provide a Participant, former Participant or
Beneficiary (hereinafter referred to as "Claimant") who has been denied a
claim for benefits, a written notice within ninety (90) days of such
denial setting forth (a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions upon which the denial
is based; (c) if applicable, a description of any additional material or
information necessary to perfect the claim, and (d) appropriate
information as to the steps required by the Claimant to request a full
review of the benefit denial. The Claimant (or his duly authorized
representative) who has been denied a benefit may within sixty (60) days
of such denial request a review of the denial upon written application to
the Committee. The Claimant must be able to review all pertinent
<PAGE>
documents and submit in writing any issues and comments upon which such
request for review is based. Within sixty (60) days of receiving such
request, the Committee shall conduct a full and fair review of the claim
and its denial and shall furnish the decision on review on the Claimant
in writing. Should this decision or review not be communicated to the
Claimant within sixty (60) days the claim shall be deemed denied.
SECTION 7. GENERAL CONDITIONS.
(a) The Board of Directors may from time to time amend, suspend or terminate
in whole or in part, and if terminated, may reinstate any or all of the
provisions of the Plan.
(b) The validity, construction, interpretation, administration and effect of
the Plan, and of its rules and regulations, and the rights of any and all
persons having or claiming to have an interest therein or thereunder,
shall be governed by, and determined exclusively and solely in accordance
with, the law of the State of Delaware.
(c) The selection of any Employee for participation in the Plan shall not
give such Participant any right to be retained in the employ of the
Company and the right and power of the Company to dismiss or discharge
any Participant is specifically reserved. Nor shall any such Participant
or any person claiming under or through him have any right or interest,
whether vested or otherwise, in this Plan, or in any Award hereunder,
unless and until all the terms, conditions and provisions of the Plan
that affect such Participant have been complied with as specified herein.
(d) Any decision or action taken or to be made by the Company, or the Board
of Directors, or the Committee, arising out of or in connection with the
construction, administration, interpretation, and effect of the Plan and
of its rules and regulations shall lie within their absolute discretion
and shall be conclusive and binding upon all Participants and any person
claiming under or through any Participant.
(e) The Board of Directors and the Committee may rely upon any information
supplied to them by any officer of the Company in connection with the
administration of the Plan.
(f) No member of the Board of Directors or of the Committee shall be liable
for any act or action, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee.
(g) The Committee shall conduct its business and hold meetings as determined
by it from time to time and any action taken by the Committee at meetings
duly called shall require the affirmative vote of at least a majority of
its members then in office.
(h) The expenses of administering this Plan shall be borne by the Company.
<PAGE>
(i) Every right of action by or on behalf of the Company or by any
stockholders against any past, present or future member of the Board of
Directors, officer or employee of the Company arising out of or in
connection with this Plan shall, irrespective of the place where action
may be brought and irrespective of the place of residence of any such
director, officer or employee, cease and be barred by the expiration of
three years from whichever is the later of (a) the date of the act or
omission in respect of which such right of action arises or (b) the first
date upon which there has been made generally available to stockholders
an annual report of the Company and a proxy statement for the annual
meeting of stockholders following the issuance of such annual report,
which annual report and proxy statement alone or together set forth, for
the related period, the amount of the credits to the reserve for the
purposes of this Plan and the aggregate bonus awards; any and all right
of action by any employee (past, present or future) against the Company
arising out of or in connection with this Plan shall, irrespective of the
place where action may be brought cease and be barred by the expiration
of three years from the date of the act or omission in respect of which
such right of action arises.
SECTION 8. INDEMNIFICATION OF THE COMMITTEE MEMBERS AND DIRECTORS BY THE
COMPANY.
The Company hereby agrees to indemnify the Committee Members and Directors for
and to hold each of them harmless against any and all liabilities, losses, costs
or expenses (including legal fees and expenses) of whatsoever kind and nature
which may be imposed on, incurred by or asserted against them at any time by
reason of their actions under this Plan if they did not act dishonestly or in
willful or grossly negligent violation of the law or regulation under which such
liability, loss, cost or expense is not insured against or exceeds any insurance
recovery.
SECTION 9. EFFECTIVE DATE.
This Plan shall be applicable for the fiscal year beginning August 1, 1977 and
subsequent fiscal years.
SECTION 10. MATERIAL CHANGE PROVISIONS.
10.1 APPLICATION. Notwithstanding any other provision of the Plan, the
provisions of this Section 10 shall apply on and after the date that a
Material Change (as defined in Section 10.4) occurs.
10.2 VESTING OF ACCOUNT BALANCES. At all times after the Material Change
occurs, the accounts of the Participants shall be fully vested and not
subject to forfeiture for any reason.
10.3. ADMINISTRATION OF PLAN. At all times after the Material Change occurs,
the exercise of
<PAGE>
authority and responsibility in the administration of the Plan with
respect to each individual who was a Participant in the Plan immediately
prior to the date that the Material Change occurs (a "Protected
Participant") or with respect to the beneficiary of a Protected
Participant, shall be subject to a DE NOVO standard of review by a court
in any action brought by a Protected Participant.
10.4 MATERIAL CHANGE DEFINED. For purposes of this Section 10, a "Material
Change" shall be deemed to have occurred if any of the following should
occur:
(a) the acquisition (in one or more transactions) of beneficial
ownership of thirty-five percent (35%) or more of the outstanding
shares of Common Stock of the Company by any person or entity (or
by any group of persons or entities acting in concert for the
purpose of acquiring, voting, holding or disposing of shares of the
Company's Common Stock);
(b) the election (in one or more elections) as directors comprising
one-fourth (1/4) of the Board of Directors of the Company of
persons who were not nominated or recommended by the Company's
incumbent Board of Directors; or
(c) the occurrence of any other event or state of facts that the Board
of Directors of the Company may determine (by the adoption of a
resolution) has, does, or would constitute a Material Change for
the purposes of this Section 10.
10.5 RELATED COMPANY DEFINED. The term "Related Company" means any
corporation, trade, or business during any period that is, along with the
Company, a member of a controlled group of corporations, a controlled
group of trades or businesses, or an affiliated service group, as
described in Sections 414(b), 414(c), or 414(m), respectively, of the
Code.
10.6 ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES. Any Protected Participant
(or a Beneficiary of a Protected Participant) who brings any legal action
after a Material Change to enforce the provisions of this Section 10 or
any other provisions of the Plan shall be entitled to recover from the
Company any and all attorneys' fees and other costs and expenses incurred
in enforcing such provisions for his benefit or for the benefit of any or
all Protected Participants (or Beneficiaries of Protected Participants).
10.7 BINDING ON SUCCESSORS. The provisions of the Plan shall be binding upon
and shall inure to the benefit of the Company, any Related Company that
adopts the Plan, the Participants, and their respective successors in
interest and assigns, including, without limitation, the surviving
corporation in any merger or consolidation with the Company or such
Related Company and, to the extent provided in the Plan, the
Beneficiaries of the Participants. After a Material Change, except as
may otherwise be determined by a
<PAGE>
resolution of the Board of Directors of the Company adopted prior to the
occurrence of the Material Change, a successor in interest to the Company
or a Related Company that adopts the Plan shall be deemed to have adopted
the Plan and shall have all of the liabilities and obligations of the
Company or that Related Company under the Plan. Except as may otherwise
be determined by a resolution of the Board of Directors of the Company
adopted prior to the occurrence of a Material Change, the Company shall
require any person or entity that becomes a successor in interest to the
Company or a Related Company that adopts the Plan to expressly assume the
Plan and agree to perform all of the obligations of the Company or that
Related Company, as the case may be, under the Plan. For purposes of
this Section 10.7, following a Material Change, a "successor in interest"
to the Company or a Related Company that adopts the Plan shall include,
without limitation, any person or entity (or group of related or
affiliated persons or entities) that acquires (in a single transaction or
a series of related transactions) any businesses or assets of the Company
or such related Company representing twenty-five percent (25%) or more of
the Company's or such Related Company's sales, operating profits, or
operating assets.
10.8 AMENDMENT OF SECTION 10. Notwithstanding any other provision of the
Plan, except as may otherwise be provided in a resolution of the Board of
Directors of the Company adopted prior to the occurrence of a Material
Change, the provisions of this Section 10 may not be amended and shall
continue to apply, without amendment, in any successor plan.
IN WITNESS WHEREOF, Wallace Computer Services, Inc. has caused these presents to
be executed in its name by its proper officers and its duly attested Corporate
Seal to be hereunto affixed pursuant to the authority granted by its Board of
Directors.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
--------------------------
Its President
ATTEST:
/s/ Michael J. Halloran
- ------------------------------
Assistant Secretary
<PAGE>
EXHIBIT 10.4B
WALLACE COMPUTER SERVICES, INC.
EXECUTIVE INCENTIVE PLAN
AMENDMENT NO. 4
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a bonus plan for the benefit of
certain of its employees designated the "Wallace Computer Services, Inc.
Executive Incentive Plan" (the "Plan");
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 7 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in Subsection 10.8 of the Plan which prohibits
the amendment of Section 10 of the Plan (which contains certain provisions which
apply upon the occurrence of a "Material Change," as defined in the Plan) on or
after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 7 of the
Plan, clause (b) of Subsection 10.4 of the Plan is hereby amended to read as
follows:
(b) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; PROVIDED, HOWEVER, that any
individual who becomes a member of the Board of Directors of the Company
subsequent to such date whose election, or nomination for election by the
stockholders of the Company, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed to be
a member of the Incumbent Board; and PROVIDED FURTHER, that no individual
whose election or initial assumption of office as a director of the Company
occurs as a result of an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended) with respect to the election
or removal of directors, or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board of
Directors of the Company, shall be deemed to be a member of the Incumbent
Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
---------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.5D
WALLACE COMPUTER SERVICES, INC.
1990 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a non-qualified deferred
compensation arrangement for the benefit of certain of its employees designated
the "Wallace Computer Services, Inc. 1990 Deferred Compensation/Capital
Accumulation Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 21 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in paragraph F of Section 10 of the Plan which
prohibits the amendment of Section 10 of the Plan (which contains certain
provisions which apply upon the occurrence of a "Material Change," as defined in
the Plan) on or after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 21 of
the Plan, clause (2) of paragraph A of Section 10 of the Plan is hereby amended
to read as follows:
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
-------------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.5F
WALLACE COMPUTER SERVICES, INC.
1991 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a non-qualified deferred
compensation arrangement for the benefit of certain of its employees designated
the "Wallace Computer Services, Inc. 1991 Deferred Compensation/Capital
Accumulation Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 21 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in paragraph F of Section 10 of the Plan which
prohibits the amendment of Section 10 of the Plan (which contains certain
provisions which apply upon the occurrence of a "Material Change," as defined in
the Plan) on or after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 21 of
the Plan, clause (2) of paragraph A of Section 10 of the Plan is hereby amended
to read as follows:
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
----------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.5H
WALLACE COMPUTER SERVICES, INC.
1993 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a non-qualified deferred
compensation arrangement for the benefit of certain of its employees designated
the "Wallace Computer Services, Inc. 1993 Deferred Compensation/Capital
Accumulation Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 21 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in paragraph F of Section 10 of the Plan which
prohibits the amendment of Section 10 of the Plan (which contains certain
provisions which apply upon the occurrence of a "Material Change," as defined in
the Plan) on or after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 21 of
the Plan, clause (2) of paragraph A of Section 10 of the Plan is hereby amended
to read as follows:
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
---------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.5J
WALLACE COMPUTER SERVICES, INC.
1994 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a non-qualified deferred
compensation arrangement for the benefit of certain of its employees designated
the "Wallace Computer Services, Inc. 1994 Deferred Compensation/Capital
Accumulation Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 21 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in paragraph F of Section 10 of the Plan which
prohibits the amendment of Section 10 of the Plan (which contains certain
provisions which apply upon the occurrence of a "Material Change," as defined in
the Plan) on or after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 21 of
the Plan, clause (2) of paragraph A of Section 10 of the Plan is hereby amended
to read as follows:
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
---------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.5K
1995 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
PLAN DOCUMENT
Wallace Computer Services, Inc. (the "Company") and its subsidiaries hereby
establish a non-qualified deferred compensation program for certain of their
employees as described herein. The following shall constitute the terms and
conditions of the Wallace Computer Services, Inc. 1995 Deferred
Compensation/Capital Accumulation Plan (the "Plan"), effective January 1, 1995
(the "Effective" Date). The Company and its subsidiaries are referred to below
collectively as the "Employers" and individually as an "Employer."
1. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee shall
have the authority to make determinations provided for or permitted to be
made under the Plan, to interpret the Plan, and to promulgate such rules
and regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2. Eligibility and Participation. The Committee, in its sole discretion, shall
establish eligibility qualifications for participation in the Plan.
Participation shall be limited to key executives and a select group of
highly compensated employees of the Employers.
3. Deferred Compensation.
A. Each Participant may make an irrevocable election in writing to defer
up to 20% of Compensation, as defined in Subsection 3B, paid during
the period January 1, 1995 through December 31, 1995 (the "Deferral
Amount"). Such amount shall not be less than $1,000. Deferred
compensation at the deferral percentage will be deducted from all
Compensation payable to the Participant during the deferral period.
B. "Compensation" means salary, bonuses, and commission of the
Participant before reduction pursuant to this or any other employee
benefit plan.
C. The Employer shall establish and maintain a bookkeeping account in the
name of each Participant, which shall be known as the "Deferral
Account." It shall be credited with the Deferral Amount and interest
at the rate established by the Committee compounded annually from
January 1, 1995. As provided in Sections 4, 5, 6 and 7 of the Plan,
the interest rate on lump sum payments caused by certain events will
differ from the rate established by the Committee. Amounts paid to the
Participant or his/her Beneficiary pursuant to this Plan, shall be
deducted from the account balance as of the first day of the month in
which such payment is made.
D. The Participant's Deferral Account shall at all times be reflected on
the Employer's books in accordance with generally accepted accounting
practices as a general unsecured and unfunded obligation of the
Employer and the Plan shall not give any person any right or security
interest in any asset of the Employer nor shall it imply any trust or
segregation of assets by the Employer. Payments from the Participant's
Deferral Account shall be made from the general assets of the
Employer.
<PAGE>
4. Time and Manner of Payment. The Participant's Deferral Account shall be
distributed as follows:
A. Installment Payments.
(1) A Participant shall be entitled to fifteen (15) equal annual
installment payments commencing at age sixty-five (65) if one of
the following conditions is met:
a. the Participant remains in the continuous employ of the
Employers during the period from January 1, 1995 until the
Participant reaches age sixty-five (65); or
b. after a period of continuous employment with the Employers
beginning on or before January 1, 1995 the Participant
retires as defined in Subsection 4D.
(2) Participant who attained age fifty-five (55) as of January 1,
1995 may elect, at the time of making the deferral election
pursuant to Subsection 3A, to receive ten (10) equal annual
installments commencing at age seventy (70) in lieu of
installment payments under Subsection 4A(1) if he/she becomes
eligible for such payments.
Installment payments shall be calculated to amortize fully the
accumulated value of the Deferral Amount over the payment period.
For purposes of this Subsection A, the interest rate to be
credited in this calculation of the accumulated value of the
Deferral Amount shall be the rate(s) established by the Committee
at its sole discretion prior to the beginning of the deferral
period.
B. Interim Payments. A payment equal to the Participant's Deferral Amount
shall be paid to the Participant within a reasonable time after
January 1, 2002 if installment payments under Subsection A have not
then commenced and will not commence during the 2002 calendar year. In
addition, a payment equal to the Participant's Deferral Amount shall
be paid to the Participant within a reasonable time after January 1,
2003 if installment payments under Subsection A have not then
commenced and will not commence during the 2003 calendar year. These
payments shall be charged to the Participant's Deferral Account as of
the first day of the month in which the payment is made. This
Subsection does not apply to Participants terminated under Subsection
C or Sections 5, 6, or 7B.
C. Payment Upon Termination. A Participant whose employment with the
Employers is voluntarily or involuntarily terminated prior to the
Participant's Retirement for reasons other than those described in
Sections 5 and 6 below, shall receive, as soon as practicable after
such termination, a lump sum payment in the amount of the accumulated
value of the Deferral Amount. For purposes of this Subsection C, the
rate to be credited in the calculation of the accumulated value of the
Deferral Amount shall be six percent (6%).
D. Retirement. Retirement shall mean leaving the active employ of the
Employer at or after age sixty (60) or age fifty-five (55) with at
least twenty (20) years of service.
5. Non-Competition. Notwithstanding any other provision of this Plan, if the
Committee at any time determines that a Participant, without having
obtained the prior written consent of the Committee or its designee, has
engaged in Competition with an Employer, as defined below,
<PAGE>
the sole amount payable to Participant hereunder shall be a lump sum
payment of the accumulated value of the Deferral Amount, payable as soon as
practicable after such determination. For purposes of this Section 5, the
simple rate of interest applied to determine the accumulated value of the
Deferral Amount shall be two percent (2%) annually, without compounding. A
Participant shall be considered to have engaged in "Competition with an
Employer" if, while employed by an Employer or within twenty-four (24)
months of Participant's termination of employment with an Employer: (a) if
the Participant is or has been employed by an Employer in a sales capacity,
the Participant sells to, contacts, or deals with customers of an Employer
that the Participant called upon, or whose account(s) the Participant
directly or indirectly supervised on behalf of an Employer with respect to
products or services of an Employer; (b) if the Participant is or has been
employed by an Employer in a nonsales capacity, the Participant renders
services for a new or existing competitor of an Employer with respect to
products or services that are competitive with those of an Employer within
the geographical area in which an Employer does business, except that the
Participant may accept employment with a competitor of an Employer whose
business is diversified and which part of its business is not a competitor
of an Employer provided that prior to accepting such employment, the
Participant provides and obtains for the Employers from such competitor,
separate written assurances satisfactory to the Employers that the
Participant will not render services directly or indirectly in connection
with one or more products or services that are competitive with those of an
Employer; and (c) the Participant hires, solicits, induces or attempts to
induce any employee of an Employer to leave its employ, engage in any
competing business, or to otherwise aid or assist any person or company
that is or intends to be in competition with an Employer.
The foregoing provision shall be deemed in addition to and not in lieu of
any rights or remedies that an Employer might otherwise have with respect
to the conduct of a Participant during or after employment that breaches
any other contractual or common law duty to the Employer; this Section
shall not preclude Employer from seeking injunctive relief or actual or
punitive monetary damages, or both such relief and damages, with respect to
any wrongful conduct of a Participant, either during or subsequent to
his/her employment with an Employer.
6. Dishonest Conduct. Notwithstanding any other provision of this Plan, if
Participant's employment with an Employer is terminated at any time for
reason of dishonest or fraudulent conduct injurious to the Employer, the
sole amount payable to or on behalf of Participant hereunder shall be a
lump sum payment of the accumulated value of the Participant's Deferral
Amount, payable as soon as practicable after such termination of
employment. For purposes of this Section 6, the simple rate of interest to
be credited in the calculation of the accumulated value of the Deferral
Amount shall be zero percent (0%).
7. Payment Upon Death of Participant.
A. If a Participant dies after age sixty-five (65), the Employer shall
pay any unpaid annual Installment Payments due the Participant under
Subsection 4A to the Participant's Beneficiary, commencing with the
next such payment due following the date of Participant's death.
B. If a Participant dies prior to age sixty-five (65), Installment
Payments described in Subsection 4A(1) shall be payable to the
Participant's Beneficiary, commencing at the time of the Participant's
death. Interim Payments described in Subsection 4B will not be made.
<PAGE>
8. Beneficiary Designation. A Participant may, from time to time designate any
legal or natural person or persons (who may be designated contingently or
successively) as his/her Beneficiary to whom payments are to be made if the
Participant dies before receiving payment of all amounts due hereunder, by
signing a form approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with the Committee
while the Participant is alive. A properly filed designation shall cancel
all beneficiary designation forms filed earlier. If a Participant fails to
designate a Beneficiary as provided above, or if all designated
Beneficiaries of a Participant die before the Participant, or before
complete payment of all amounts due hereunder, the Committee, in its
discretion, may direct the Employers to pay the unpaid amounts to one or
more of such Participant's relatives by blood, adoption or marriage in any
manner permitted by law which the Committee considers to be appropriate,
including but not limited to payment to the legal representative or
representatives of the estate of the last to die of Participant and
Participant's designated Beneficiaries.
9. Disability. If Participant's employment with the Employers is terminated
prior to Participant's Retirement by reason of Participant's Disability,
Participant's employment with the Employers, for purposes of the Plan,
shall be deemed to continue until the earliest of his/her death, the date
his/her Disability ceases, or the date the Participant would have first
been eligible for Retirement and the provisions of the Plan shall be
applicable to such Participant to the same extent as if Participant were,
in fact, employed by the Employers during that period. However, if such
termination of employment occurs prior to January 1, 1996, the
Participant's benefit will be determined taking into account only the
amount actually deferred by the Participant during the Deferral Period.
A Participant shall be deemed to incur a Disability if, in the opinion of a
physician selected by the Committee, the Participant is no longer capable
of performing a substantial portion of the duties of his/her employment
because of a physical or mental disability which is likely to be permanent
and continuous during the remainder of the Participant's lifetime.
10. Payment Upon a Material Change of Control.
A. For purposes of this paragraph 10, a "Material Change" shall be deemed
to have occurred if any of the following should occur:
(1) the acquisition (in one or more transactions) of beneficial
ownership of twenty percent (20%) or more of the outstanding
shares of Common Stock of the Company by any person or entity (or
by any group of persons or entities acting in concert for the
purpose of acquiring, voting, holding or disposing of shares of
the Company's Common Stock). The Board of Directors may reduce
the ownership threshold to a percentage not less than ten percent
(10%);
(2) the election (in one or more elections) as directors comprising
one-fourth (1/4) or more of the Board of Directors of the Company
of persons who were not nominated or recommended by the Company's
incumbent Board of Directors; or
(3) the occurrence of any other event or state of facts that the
Board of Directors of the Company may determine (by the adoption
of a resolution) has, does, or would constitute a Material Change
for the purposes of this paragraph 10.
<PAGE>
B. At the time of a Material Change, the Company shall remit to an
independent Trustee, the cumulative book balance in the Participant's
Deferral Account, representing individual Deferral Amounts plus
accrued interest.
At all times after the Material Change occurs, the exercise of
authority and responsibility in the administration of the Plan with
respect to each individual who was a Participant in the Plan
immediately prior to the date that the Material Change occurs (a
"Protected Participant"), or with respect to the Beneficiary of a
Protected Participant, shall be subject to a de novo standard of
review by a court in any action brought under Title I of ERISA. At all
times after the Material Change occurs, a bank that is organized under
the laws of the United States of America or one of its States, that
has a combined capital and surplus in excess of $250,000,000, and that
is otherwise independent of and has no material business relationships
with the Company or Related Company (as defined in paragraph 10C)
shall be the Trustee of the Trust and the authority to manage,
acquire, and dispose of all assets of the Trust shall be vested in
that Trustee to the extent not vested in one or more investment
managers (as defined in Section 3(38) of ERISA) who are selected by
that Trustee and otherwise independent of, and have no material
business relationships with, the Company or a Related Company.
C. The term "Related Company" means any corporation, trade, or business
during any period that it is, along with the Company, a member of a
controlled group of corporations, a controlled group of trades or
businesses, or an affiliated service group, as described in Section
414(b), 414(c), or 414(m), respectively, of the Internal Revenue Code.
D. Any Protected Participant (or a Beneficiary of a Protected
Participant) who brings any legal action after a Material Change to
enforce the provisions of this paragraph 10 or any other provisions of
the Plan or the Trust shall be entitled to recover from the Company
any and all attorneys' fees and other costs and expenses incurred in
enforcing such provisions for his/her benefit or for the benefit of
any or all Protected Participants (or Beneficiaries of Protected
Participants).
E. Notwithstanding any other Section except Section 6, if the
Participant's employment with the Employer terminates, for any reason
other than death, within the two-year (2) period beginning on the date
that a Material Change of Control of the Company (as described above)
occurs, payment shall be made to the Participant as soon as practical
after termination in a single lump sum in lieu of any other subsequent
payment under the Plan. The lump sum payment shall be equal to the sum
of the amounts determined by discounting, at an 8% rate of interest,
to the lump sum payment date, each payment that the Participant would
have received under the Plan (determined without regard to Sections 5
and 6) after the date of such termination if employment had continued
without change through the date that the Participant would have first
been eligible for Retirement. Such amount shall be determined by the
Trustee (described in Section 10B), who in his/her own discretion may
use an independent third party to calculate such amount. If the
Participant dies after termination of employment but before payment of
any amount under this Section, then such amount shall be paid to the
Beneficiary as soon as practical after the Participant's death.
<PAGE>
F. Notwithstanding any other provision of the Plan, except as may
otherwise be provided in a resolution of the Board of Directors of the
Company adopted prior to the occurrence of a Material Change, the
provisions of this paragraph 10 may not be amended and shall continue
to apply, without amendment, in any successor plan.
11. Facility of Payment. If, in the Committee's opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or
is in any way incapacitated so as to be unable to manage his/her financial
affairs, then the Committee may, until claim is made by a conservator or
other person legally charged with the care of his/her person or of his/her
estate, direct the Employer to make payment to a relative or friend of such
person for his/her benefit. Thereafter, any benefits under the Plan to
which such Participant or other person is entitled shall be paid to such
conservator or other person legally charged with the care of his/her person
or his/her estate.
12. Insurance. An Employer may, in its sole discretion, purchase policy or
policies of insurance on the life of any Participant or disability
insurance with respect to any Participant, the cash value, if any, and
proceeds of which may, but need not, be used by the Employer to satisfy
part or all of its obligations, hereunder. The Employer will be the owner
of any such policies and neither the Participant nor any other person or
entity claiming through the Participant shall have any ownership rights in
such policies or any proceeds thereof. The Participant, as a condition of
receiving any benefits hereunder, on behalf of him/herself of any person or
entity claiming through him/her, shall cooperate with the Employer in
obtaining any such insurance that the Employer desires to purchase by
submitting to such physical examinations, completing such forms, and making
such records available as may be required by the Employer from time to
time.
13. Effect on Other Benefits. The Deferral Amount of a Participant shall be
included in the Participant's 1995 compensation for purposes of calculating
the Participant's bonuses and awards under any incentive or similar
compensation plan or program of the Employer, insurance, and other employee
benefits, except that in accordance with the terms of any plan qualified
under Section 401 or Section 423(b) of the Internal Revenue Code maintained
by an Employer, the amount deferred under Section 3 shall not be included
as 1995 calendar year compensation in calculating the Participant's
benefits or contributions by or on behalf of the Participant under such
plan or plans. Payment under the Plan shall be excluded from compensation
in years paid for purposes of calculating a Participant's bonuses and
awards under any incentive or similar compensation plan or program of an
Employer, insurance, and other employee benefits, except that in accordance
with the terms of any plan qualified under Section 401 or Section 423(b) of
the Internal Revenue Code maintained by an Employer, payments made while
the Participant is an employee of an Employer shall be included as
compensation in the year paid.
14. Non-Alienation. Neither a Participant nor anyone claiming through him/her
shall have any right to commute, sell, assign, transfer or otherwise convey
the right to receive any payments hereunder, which payments and the rights
thereto hereby are expressly declared to be non-assignable and non-
transferable, nor shall any such right to receive payments hereunder be
subject to the claims of creditors of a Participant or anyone claiming
through him/her to any legal, equitable, or other proceeding or process for
the enforcement of such claims.
<PAGE>
15. Tax Withholding. Notwithstanding the provisions of Section 13, an Employer
may withhold from any payment made by it under the Plan such amount or
amounts as may be required for purposes of complying with the tax
witholding or other provisions of the Internal Revenue Code or the Social
Security Act or any state or local income tax act or for purposes of paying
any estate, inheritance or other tax attributable to any amounts payable
hereunder.
16. Non-Secured Promise. The rights under this Plan of a Participant and any
person or entity claiming through him/her shall be solely those of an
unsecured, general creditor of the Employer. Any insurance policy or other
asset acquired or held by an Employer shall not be deemed to be held by the
Employer for or on behalf of a Participant, or any other person, or to be
security for the performance of any obligations hereunder of the Employer,
but shall, with respect to this Plan, be and remain a general, unpledged,
unrestricted asset of the Employer.
17. Independence of Plan. Except as otherwise expressly provided herein, this
Plan shall be independent of, and in addition to, any other employment
agreement or employment benefit agreement or plan or rights that may exist
from time to time between the parties hereto. This Plan shall not be deemed
to constitute a contract of employment between an Employer and a
Participant, nor shall any provision hereof restrict the right of an
Employer to discharge a Participant, or restrict the right of a Participant
to terminate his/her employment with an Employer.
18. Paragraph Headings. The Paragraph headings used in this Plan are for
convenience of reference only and shall not be considered in construing
this Plan.
19. Responsibility for Legal Effect. Neither the Committee nor any Employer
makes any representation or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects
of this Plan.
20. Committee Determinations Final. Each determination provided for in this
Plan shall be made in the absolute discretion of the Committee. Any such
determination shall be binding on all persons.
21. Amendment. The Company may in its sole discretion amend the Plan from time
to time. No such amendment shall reduce a Participant's or Beneficiary's
benefits under the Plan to an amount less than an amount that he/she would
have been entitled to under the Plan on the later of the date the amendment
is adopted or made effective if the Plan had been terminated on that date.
22. Termination at the Employer's Option. Notwithstanding any other provision
of this Plan, the Company may terminate this Plan at any time if the
Committee, in its sole and absolute discretion, determines that any change
in federal or state law, or judicial or administrative interpretation
thereof, has materially affected the Employer's cost of providing the
benefits otherwise payable under this Plan, or for any other reason
whatsoever. Upon such termination, the sole amount payable to Participant
shall be a lump sum payment, as soon as practicable after such termination,
of the accumulated value of the Deferral Amount. For purposes of this
Section, the rate to be credited in the calculation of the accumulated
value of the Deferral Amount shall be the rate specified for Installment
Payments in Subsection 4A.
<PAGE>
23. Binding on Successors. The provisions of this Plan shall be binding upon
and shall inure to the benefit of the Company, any Related Company that
adopts the Plan, the Participants, and their respective successors in
interest and assigns, including, without limitation, the surviving
corporation in any merger or consolidation with the Company or such Related
Company and, to the extent provided in the Plan, the Beneficiaries of the
Participants. After a Material Change, except as may otherwise be
determined by a resolution of the Board of Directors of the Company adopted
prior to the occurrence of the Material Change, a successor in interest to
the Company or a Related Company that adopts the Plan shall be deemed to
have adopted the Plan and shall have all of the liabilities and obligations
of the Company or that Related Company under the Plan. Except as may
otherwise be determined by a resolution of the Board of Directors of the
Company adopted prior to the occurrence of a Material Change, the Company
shall require any person or entity that becomes a successor in interest to
the Company or a Related Company that adopts the plan to expressly assume
the Plan and agree to perform all of the obligations of the Company or that
Related Company, as the case may be, under the plan. For purposes of this
paragraph 23, following a Material Change, a successor in interest to the
Company or a Related Company that adopts the Plan shall include, without
limitation, any person or entity (or group of related or affiliated persons
or entities) that acquires (in a single transaction or a series of related
transactions) any businesses or assets of the Company or such Related
Company representing twenty-five percent (25%) or more of the Company's or
such Related Company's sales, operating profits, or operating assets.
24. Controlling Law. The Plan shall be construed in accordance with the laws of
the state of Illinois to the extent not pre-empted by laws of the United
States of America.
<PAGE>
EXHIBIT 10.5L
WALLACE COMPUTER SERVICES, INC.
1995 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a non-qualified deferred
compensation arrangement for the benefit of certain of its employees designated
the "Wallace Computer Services, Inc. 1995 Deferred Compensation/Capital
Accumulation Plan" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Section 21 of the Plan generally permits the Company to amend the Plan,
subject to a limitation set forth in paragraph F of Section 10 of the Plan which
prohibits the amendment of Section 10 of the Plan (which contains certain
provisions which apply upon the occurrence of a "Material Change," as defined in
the Plan) on or after the occurrence of a Material Change; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 21 of
the Plan, clause (2) of paragraph A of Section 10 of the Plan is hereby amended
to read as follows:
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
---------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.7B
WALLACE COMPUTER SERVICES, INC.
EXECUTIVE SEVERANCE PAY PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a severance pay plan for the
benefit of certain of its executive employees designated the "Wallace Computer
Services, Inc. Executive Severance Pay Plan" (the "Plan");
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Subsection 6.1 of the Plan permits the Company to amend the Plan,
subject to a limitation set forth in Subsection 6.2 of the Plan which prohibits
the amendment of the Plan on or after the occurrence of a "Material Change" (as
defined in the Plan) if such amendment is adverse to the interests of Plan
participants and their beneficiaries; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Subsection 6.1
of the Plan, clause (b) of Subsection 3.3 of the Plan is hereby amended to read
as follows:
(b) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; PROVIDED, HOWEVER, that any
individual who becomes a member of the Board of Directors of the Company
subsequent to such date whose election, or nomination for election by the
stockholders of the Company, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed to be
a member of the Incumbent Board; and PROVIDED FURTHER, that no individual
whose election or initial assumption of office as a director of the Company
occurs as a result of an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended) with respect to the election
or removal of directors, or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board of
Directors of the Company, shall be deemed to be a member of the Incumbent
Board; or
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
----------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
Exhibit 10.9B
WALLACE COMPUTER SERVICES, INC.
LONG-TERM PERFORMANCE PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a bonus plan for the benefit of
certain of its employees designated the "Wallace Computer Services, Inc. Long-
Term Performance Plan" (the "Plan");
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, pursuant to the power of amendment contained in Section 7(a) of
the Plan, the Plan is amended to add a new section at the end thereof to read as
follows:
Section 10. MATERIAL CHANGE PROVISIONS.
10.1 APPLICATION. Notwithstanding any other provision of the Plan, the
provisions of this Section 10 shall apply on and after the date that a
Material Change (as hereinafter defined) occurs.
10.2 VESTING AND PAYMENT OF AWARDS.
(a) VESTING. Notwithstanding any provision of Section 6 to the
contrary, a Participant's accrued bonus balance under the Plan shall
in no event be reduced below the amount of the Participant's
cumulative deferred balance as calculated after inclusion of the
Participant's award, if any, for the Plan Year immediately preceding
the Plan Year during which the Material Change occurs.
(b) PAYMENT. Notwithstanding any provision of Section 6 to the
contrary, an individual who is a Participant immediately prior to the
occurrence of a Material Change (a "Protected Participant") shall be
entitled to receive payment of his accrued bonus balance pursuant to
this paragraph (b) if, at any time during the two-year period
beginning on the date that the Material Change occurs, the Protected
Participant's employment with the Company terminates, whether
voluntarily or involuntarily, for any reason other than for Cause (as
defined below) or on account of the Protected Participant's death or
permanent disability. Such amount shall be paid to the Protected
Participant (or beneficiary thereof) within ten (10) days after the
date of such termination of the Protected Participant's employment, in
the form of a single lump sum.
<PAGE>
(c) INTEREST ON LATE PAYMENT. If any amount to be paid to a
Protected Participant (or beneficiary thereof) pursuant to paragraph
(b) of this Subsection is not paid in full within ten (10) days after
the date of the termination of his employment, then the Company shall
also pay to that Participant (or beneficiary) interest on the unpaid
amount for the period between the date of termination of his
employment and the date that the amount is paid in full. The amount
of interest to be paid to a Protected Participant (or beneficiary
thereof) pursuant to this paragraph shall be computed using an annual
rate of four (4) percent over the corporate base rate of The First
National Bank of Chicago (changing as and when such corporate base
rate changes), compounded monthly. Payments received by a Protected
Participant (or beneficiary thereof) under the Plan shall be credited
first against accrued interest until all accrued interest is paid in
full before any such payment is credited against the amount payable
under paragraph (b) of this Subsection.
10.3 ADMINISTRATION OF PLAN. At all times after the Material Change
occurs, the exercise of authority and responsibility in the administration
of the Plan with respect to each Protected Participant, or with respect to
a beneficiary of a Protected Participant, shall be subject to a DE NOVO
standard of review by a court in any action brought by a Protected
Participant (or beneficiary thereof).
10.4 MATERIAL CHANGE DEFINED. For purposes of this Section 10, a
"Material Change" shall be deemed to have occurred if any the following
should occur:
(a) the acquisition (in one or more transactions) of beneficial ownership
of thirty-five percent (35%) or more of the outstanding shares of
common stock of the Company by any person or entity (or by any group
of persons or entities acting in concert for the purpose of acquiring,
voting, holding or disposition of the Company's common stock);
(b) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason
to constitute at least a majority of such Board; PROVIDED, HOWEVER,
that any individual who becomes a member of the Board of Directors of
the Company subsequent to such date whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be deemed to be a member of the Incumbent Board; and
PROVIDED FURTHER, that no individual whose election or initial
assumption of office as a director of the Company occurs as a result
<PAGE>
of an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the election or
removal of directors, or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board of Directors of the Company, shall be deemed to be a member of
the Incumbent Board; or
(c) the occurrence of any other event or state of facts that the Board of
Directors of the Company may determine (by the adoption of a
resolution) has, does, or would constitute a "Material Change" for the
purposes of this Section 10.
10.5 CAUSE DEFINED. For the purposes of the Plan, the employment of a
Protected Participant shall be deemed to have been terminated for "Cause"
after a Material Change only if:
(a) there has been any misappropriation or misapplication by such
Participant of any properties or assets of the Company on the basis of
which the employment of such Participant would have been terminated
under the Company's employment policies and practices as in effect
immediately prior to such Material Change; or
(b) there has been any willful misconduct, gross negligence or criminal
conduct by such Participant in connection with the operations,
business or affairs of the Company on the basis of which the
employment of such Participant would have been terminated under the
Company's employment policies and practices as in effect immediately
prior to such Material Change.
10.6 RELATED COMPANY DEFINED. The term "Related Company" means any
corporation, trade or business during any period that is, along with the
Company, a member of a controlled group of corporations, a controlled group
of trades or businesses, or an affiliated service group, as described in
subsections (b), (c) and (m), respectively, of section 414 of the Internal
Revenue Code of 1986, as amended.
10.7 ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES. Any Protected
Participant (or beneficiary of a Protected Participant) who brings any
legal action after a Material Change to enforce the provisions of this
Section 10 or any other provision of the Plan shall be entitled to recover
from the Company any and all attorneys' fees and other costs and expenses
incurred in enforcing such provisions for his or her benefit or for the
benefit of any or all Protected Participants (or beneficiaries of Protected
Participants).
<PAGE>
10.8 BINDING ON SUCCESSORS. The provisions of the Plan shall be binding
upon and shall inure to the benefit of the Company, any Related Company
that adopts the Plan, the Participants, and their respective successors in
interest and assigns, including, without limitation, the surviving
corporation in any merger or consolidation with the Company or such Related
Company and, to the extent provided in the Plan, the beneficiaries of the
Participants. After the occurrence of a Material Change, except as may
otherwise be determined by a resolution of the Board of Directors of the
Company adopted prior to the occurrence of a Material Change, a successor
in interest to the Company, or a Related Company that adopts the Plan,
shall be deemed to have adopted the Plan and shall have all of the
liabilities and obligations of the Company or such Related Company under
the Plan. Except as may otherwise be determined by a resolution of the
Board of Directors of the Company adopted prior to the occurrence of a
Material Change, the Company shall require any person or entity that
becomes a successor in interest to the Company, or a Related Company that
adopts the Plan, to expressly assume the Plan and agree to perform all of
the obligations of the Company or that Related Company, as the case may be,
under the Plan. For purposes of this Subsection 10.7, following the
occurrence of a Material Change, a "successor in interest" to the Company,
or a Related Company that adopts the Plan, shall include, without
limitation, any person or entity (or group of related or affiliated persons
or entities) that acquires (in a single transaction or a series of related
transactions) any businesses or assets of the Company or such Related
Company representing twenty-five percent (25%) or more of the Company's or
such Related Company's sales, operating profits, or operating assets.
10.9 AMENDMENT OF SECTION 10. Notwithstanding any other provision of the
Plan, except as may otherwise be provided in a resolution of the Board of
Directors of the Company adopted prior to the occurrence of a Material
Change, the provisions of this Section 10 may not be amended and shall
continue to apply, without amendment, in any successor plan.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
----------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.11E
1995 DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN FOR DIRECTORS
PLAN DOCUMENT
Wallace Computer Services, Inc. (the "Company") hereby establishes a non-
qualified deferred compensation program for the members of its Board of
Directors, who are eligible under, and elect to participate in the Plan. The
following shall constitute the terms and conditions of the Wallace Computer
Services, Inc. 1995 Deferred Compensation/Capital Accumulation Plan for
Directors (the "Plan"), effective January 1, 1995 (the "Effective" Date)."
1. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee shall
have the authority to make determinations provided for or permitted to be
made under the Plan, to interpret the Plan, and to promulgate such rules
and regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2. Eligibility and Participation. All members of the Company's Board of
Directors on November, 1994 shall be eligible for participation in the
Plan. Eligible Directors who elect to participate, in accordance with
Section 3, will become "Participants.".
3. Deferred Compensation.
A. Each Participant may make an irrevocable election in writing to defer
up to 100% of Compensation, as defined in Subsection 3B, paid during
the period January 1, 1995 through December 31, 1995 (the "Deferral
Amount"). Such amount shall not be less than $1,000. Deferred
compensation at the deferral percentage will be deducted from all
Compensation payable to the Participant during the deferral period.
B. "Compensation" means director's fees and meeting fees payable by the
Company to the participant.
C. The Company shall establish and maintain a bookkeeping account in the
name of each Participant, which shall be known as the "Deferral
Account." It shall be credited with the Deferral Amount and interest
at the rate established by the Committee compounded annually from
January 1, 1995. As provided in Sections 5 of the Plan, the interest
rate on lump sum payments caused by certain events will differ from
the rate established by the Committee. Amounts paid to the Participant
or his/her Beneficiary pursuant to this Plan, shall be deducted from
the account balance as of the first day of the month in which such
payment is made.
D. The Participant's Deferral Account shall at all times be reflected on
the Employer's books in accordance with generally accepted accounting
practices as a general unsecured and unfunded obligation of the
Employer and the Plan shall not give any person any right or security
interest in any asset of the Employer nor shall it imply any trust or
segregation of assets by the Employer. Payments from the Participant's
Deferral Account shall be made from the general assets of the
Employer.
<PAGE>
4. Time and Manner of Payment. The Participant's Deferral Account shall be
distributed as follows:
A. Installment Payments.
(1) A Participant shall be entitled to fifteen (15) equal annual
installment payments commencing at age sixty-five (65)
(2) A Participant who attained age fifty-five (55) as of January 1,
1995 may elect, at the time of making the deferral election
pursuant to Subsection 3A, to receive ten (10) equal annual
installments commencing at age seventy (70) in lieu of
installment payments under Subsection 4A(1) if he/she becomes
eligible for such payments.
(3) A Participant who attained age fifty-five (55) as of January 1,
1995 and who was a director of the Company on November 7, 1984
may elect, at the time of making the deferral election pursuant
to Subsection 3A, to receive ten (10) equal annual installments
commencing at age seventy-two (72) in lieu of installment
payments under Subsection 4A(1) if he/she becomes eligible for
such payments.
Installment payments shall be calculated to amortize fully the
accumulated value of the Deferral Amount over the payment period.
For purposes of this Subsection A, the interest rate to be
credited in this calculation of the accumulated value of the
Deferral Amount shall be the rate(s) established by the Committee
at its sole discretion prior to the beginning of the deferral
period.
B. Interim Payments. A Participant who is not yet eligible to receive
installment payments under Subsection A shall receive a payment equal
to the Participant's Deferral Amount within a reasonable time after
January 1, 2002. In addition, a payment equal to the Participant's
Deferral Amount shall be paid to the Participant within a reasonable
time after January 1, 2003. These payments shall be charged to the
Participant's Deferral Account as of the first day of the month in
which payment(s) is made. This Subsection does not apply to
Participants terminated under Section 5.
5. Dishonest Conduct. Notwithstanding any other provision of this Plan, if
Participant's directorship with the Company is terminated at any time for
reason of dishonest or fraudulent conduct injurious to the Company, the
sole amount payable to or on behalf of Participant hereunder shall be a
lump sum payment of the accumulated value of the Participant's Deferral
Amount, payable as soon as practicable after such termination. For purposes
of this Section 5, the simple rate of interest to be credited in the
calculation of the accumulated value of the Deferral Amount shall be zero
percent (0%).
6. Payment Upon Death of Participant.
A. If a Participant dies after age sixty-five (65), the Employer shall
pay any unpaid annual Installment Payments due the Participant under
Subsection 4A to the Participant's Beneficiary, commencing with the
next such payment due following the date of Participant's death.
<PAGE>
B. If a Participant dies prior to age sixty-five (65), Installment
Payments described in Subsection 4A(1) shall be payable to the
Participant's Beneficiary, commencing at the time of the Participant's
death. Interim Payments described in Subsection 4B will not be made.
7. Beneficiary Designation. A Participant may, from time to time designate any
legal or natural person or persons (who may be designated contingently or
successively) as his/her Beneficiary to whom payments are to be made if the
Participant dies before receiving payment of all amounts due hereunder, by
signing a form approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with the Committee
while the Participant is alive. A properly filed designation shall cancel
all beneficiary designation forms filed earlier. If a Participant fails to
designate a Beneficiary as provided above, or if all designated
Beneficiaries of a Participant die before the Participant, or before
complete payment of all amounts due hereunder, the Committee, in its
discretion, may direct the Company to pay the unpaid amounts to one or more
of such Participant's relatives by blood, adoption or marriage in any
manner permitted by law which the Committee considers to be appropriate,
including but not limited to payment to the legal representative or
representatives of the estate of the last to die of Participant and
Participant's designated Beneficiaries.
8. Facility of Payment. If, in the Committee's opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or
is in any way incapacitated so as to be unable to manage his/her financial
affairs, then the Committee may, until claim is made by a conservator or
other person legally charged with the care of his/her person or of his/her
estate, direct the Employer to make payment to a relative or friend of such
person for his/her benefit. Thereafter, any benefits under the Plan to
which such Participant or other person is entitled shall be paid to such
conservator or other person legally charged with the care of his/her person
or his/her estate.
9. Insurance. The Company may, in its sole discretion, purchase policy or
policies of insurance on the life of any Participant the cash value, if
any, and proceeds of which may, but need not, be used by the Company to
satisfy part or all of its obligations, hereunder. The Company will be the
owner of any such policies and neither the Participant nor any other person
or entity claiming through the Participant shall have any ownership rights
in such policies or any proceeds thereof. The Participant, as a condition
of receiving any benefits hereunder, on behalf of him/herself of any person
or entity claiming through him/her, shall cooperate with the Company in
obtaining any such insurance that the Company desires to purchase by
submitting to such physical examinations, completing such forms, and making
such records available as may be required by the Company from time to time.
10. Non-Alienation. Neither a Participant nor anyone claiming through him/her
shall have any right to commute, sell, assign, transfer or otherwise convey
the right to receive any payments hereunder, which payments and the rights
thereto hereby are expressly declared to be non-assignable and non-
transferable, nor shall any such right to receive payments hereunder be
subject to the claims of creditors of a Participant or anyone claiming
through him/her to any legal, equitable, or other proceeding or process for
the enforcement of such claims.
11. Tax Withholding. The Company may withhold from any payment made by it under
the Plan such amount or amounts as may be required for purposes of
complying with the tax witholding or other provisions of the Internal
Revenue Code or the Social Security Act or any state or
<PAGE>
local income tax act or for purposes of paying any estate, inheritance or
other tax attributable to any amounts payable hereunder.
12. Non-Secured Promise. The rights under this Plan of a Participant and any
person or entity claiming through him/her shall be solely those of an
unsecured, general creditor of the Company. Any insurance policy or other
asset acquired or held by the Company shall not be deemed to be held by the
Company for or on behalf of a Participant, or any other person, or to be
security for the performance of any obligations hereunder of the Company,
but shall, with respect to this Plan, be and remain a general, unpledged,
unrestricted asset of the Company.
13. Independence of Plan. Except as otherwise expressly provided herein, this
Plan shall be independent of, and in addition to, any other agreement that
may exist from time to time between the parties hereto. This Plan shall not
be deemed to constitute a right to be retained as a member of the Board of
Directors of the Company.
14. Paragraph Headings. The Paragraph headings used in this Plan are for
convenience of reference only and shall not be considered in construing
this Plan.
15. Responsibility for Legal Effect. Neither the Committee nor the Company
makes any representation or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects
of this Plan.
16. Committee Determinations Final. Each determination provided for in this
Plan shall be made in the absolute discretion of the Committee. Any such
determination shall be binding on all persons.
17. Amendment. The Company may in its sole discretion amend the Plan from time
to time. No such amendment shall reduce a Participant's or Beneficiary's
benefits under the Plan to an amount less than an amount that he/she would
have been entitled to under the Plan on the later of the date the amendment
is adopted or made effective if the Plan had been terminated on that date.
18. Termination at the Company's Option. Notwithstanding any other provision of
this Plan, the Company may terminate this Plan at any time if the
Committee, in its sole and absolute discretion, determines that any change
in federal or state law, or judicial or administrative interpretation
thereof, has materially affected the Company's cost of providing the
benefits otherwise payable under this Plan, or for any other reason
whatsoever. Upon such termination, the sole amount payable to Participant
shall be a lump sum payment, as soon as practicable after such termination,
of the accumulated value of the Deferral Amount. For purposes of this
Section, the rate to be credited in the calculation of the accumulated
value of the Deferral Amount shall be the rate specified for Installment
Payments in Subsection 4A.
19. Successors, Acquisitions, Mergers, Consolidations. The terms and conditions
of this Plan and each Deferral Election shall insure to the benefit of and
bind the Company, the Participants, their successors, assigns, and personal
representatives.
20. Controlling Law. The Plan shall be construed in accordance with the laws of
the state of Illinois to the extent not pre-empted by laws of the United
States of America.
<PAGE>
EXHIBIT 10.14B
WALLACE COMPUTER SERVICES, INC.
EMPLOYEE SEVERANCE PAY PLAN
AMENDMENT NO. 1
WHEREAS, Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), has heretofore adopted and maintains a severance pay plan for the
benefit of certain of its employees designated the "Wallace Computer Services,
Inc. Employee Severance Pay Plan" (the "Plan");
WHEREAS, the Company desires to amend the Plan in certain respects;
WHEREAS, Subsection 8.1 of the Plan permits the Company to amend the Plan,
subject to a limitation set forth in Subsection 8.2 of the Plan which prohibits
the amendment of the Plan on or after the occurrence of a "Material Change" (as
defined in the Plan) if such amendment is adverse to the interests of Plan
participants and their beneficiaries; and
WHEREAS, a Material Change has not occurred as of the date of the adoption of
this amendment;
NOW, THEREFORE, pursuant to the power of amendment contained in Subsection 8.1
of the Plan, the Plan is hereby amended in the following respects:
1. Subsection 4.2 of the Plan is amended to add a new paragraph at the end
thereof to read as follows:
Notwithstanding the foregoing, with respect to each Protected Participant
who is listed on Appendix A hereto (such list to be compiled and modified
from time to time by the Compensation Committee of the Board of Directors),
the amount determined in Paragraph (a) above shall in no event be less than
the Protected Participant's Annual Compensation (as defined below)
multiplied by one (1). For purposes of the Plan, the "ANNUAL COMPENSATION"
of a Protected Participant shall be the sum of: (i) the amount of the
annual rate of base salary being paid to the Protected Participant by
Wallace and the Subsidiaries (as defined below) immediately prior to the
date that the Material Change occurs, determined before the reduction or
deduction for his tax obligations and his contributions with respect to
employee benefit plans, including, without limitation, reductions in salary
under any salary reduction agreement relating to the Wallace Computer
Services, Inc. Profit Sharing and Retirement Plan or Wallace's Deferred
Compensation/Capital Accumulation Plans; plus (ii) the aggregate amount of
the bonuses and other incentive compensation (other than stock, stock
options and stock
<PAGE>
appreciation rights) awarded (whether payable currently or deferred) to the
Protected Participant by Wallace or any Subsidiary for the most recently
completed fiscal year for which bonuses have been awarded before the
Material Change occurs. For purposes of the Plan, the term "SUBSIDIARY"
means any corporation in which Wallace owns directly or indirectly, through
an unbroken chain of subsidiary corporations, stock possessing voting power
sufficient to elect a majority of the directors of that corporation.
2. Clause (b) of Subsection 4.6 of the Plan is amended to read as follows:
(b) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; PROVIDED, HOWEVER, that any
individual who becomes a member of the Board of Directors of the Company
subsequent to such date whose election, or nomination for election by the
stockholders of the Company, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed to be
a member of the Incumbent Board; and PROVIDED FURTHER, that no individual
whose election or initial assumption of office as a director of the Company
occurs as a result of an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended) with respect to the election
or removal of directors, or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board of
Directors of the Company, shall be deemed to be a member of the Incumbent
Board; or
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officers this 6th day of September, 1995.
WALLACE COMPUTER SERVICES, INC.
By: /s/ Robert J. Cronin
----------------------
President
ATTEST:
/s/ Michael T. Laudizio
- -------------------------
Secretary
<PAGE>
EXHIBIT 10.16C
ADDENDUM TO
INDEMNIFICATION AGREEMENT WITH OFFICER
(MEMBER OF PROFIT SHARING COMMITTEE)
ADDENDUM made and entered into as of _______________________ between WALLACE
COMPUTER SERVICES, INC., a Delaware Corporation (the "Company"), and
_____________________________ (the "Officer").
W I T N E S S E T H :
WHEREAS, the officer is a valued officer of the Company; and
WHEREAS, under the provisions of the Company's Certificate of Incorporation, as
in effect on the date hereof, the Company is obligated, to the fullest extent
permitted from time to time by applicable law, to hold harmless and indemnify
each person who is or was at any time an officer of the Company from and against
any and all expenses (including attorneys' fees), judgments, fines, amounts paid
in settlement, and other liabilities and claims of any kind, that any such
person may at any time suffer or incur or become subject to as a result of or in
connection with his or her serving or having served at any time as an officer of
the Company (collectively, the "Primary Officer Liabilities"), except that the
Company does not have any affirmative obligation under its Certificate of
Incorporation as in effect on the date hereof to indemnify any person who is or
was an officer with respect to expenses, judgments, fines, amounts paid in
settlement, or other liabilities or claims of any kind based upon or
attributable to (i) any breach of the officer's duty of loyalty to the Company
or its stockholders, (ii) any acts or omissions by the officer which are not in
good faith or which involve intentional misconduct or deliberate dishonesty,
(iii) any improper personal profit or benefit by the officer, or (iv) any income
taxes in respect of compensation received for services as an officer; and
WHEREAS, under the provisions of the Company's Certificate of Incorporation, as
in effect on the date hereof, the Company may, to the extent permitted from time
to time by applicable law, hold harmless and indemnify such persons (including
officers) as the Board of Officers may from time to time determine, from and
against such expenses (including attorneys' fees), judgments, fines, amounts
paid in settlement, and other liabilities and claims of any kind as the Board of
Directors may from time to time determine, that any such person may at any time
suffer or incur or become subject to as a result of or in connection with his or
her serving or having served at any time as an employee or agent or in any other
capacity with the Company, with any predecessor of the Company, or with any
constituent corporation in any merger or consolidation with the Company, or as a
result of or in connection with his or her serving or having served at any time
at the request or an behalf of the Company as a director, officer, employee or
agent or in any other capacity with any other corporation, partnership, joint
venture, trust, or other
<PAGE>
enterprise or entity of any kind, including, without limitation, any subsidiary
or affiliated company or any employee benefit plan or trust (the "Additional
Officer Liabilities").
WHEREAS, the Company has heretofore entered into an Indemnification Agreement
with the Officer pursuant to which the Company has agreed to hold harmless and
indemnify the Officer from and against Primary Officer Liabilities and
Additional Officer Liabilities (collectively, the "Officer Liabilities"); and
WHEREAS, the Officer is a member of the Profit Sharing Committee under the
Company's Profit Sharing and Retirement Plan (the "Profit Sharing Committee");
and
WHEREAS, the Company and the Officer desire to confirm that the obligation of
the Company to hold harmless and indemnify the officer pursuant to the
Indemnification Agreement extends to expenses (including attorneys, fees),
judgments, fines, amounts paid in settlement, and other liabilities and claims
of any kind, that the Officer may at any time suffer or incur or become subject
to as a result of or in connection with his or her serving or having served at
any time as a member of the Profit Sharing Committee (the "Profit Sharing and
Retirement Plan Liabilities").
NOW, THEREFORE, in order to induce the officer to continue to serve as a member
of the Profit Sharing Committee and in consideration of his continued service in
such capacities, the Company hereby agrees with the Officer as follows:
1. Notwithstanding any amendment, modification or repeal of the
indemnification provisions of the Company's Certificate of
Incorporation after the date hereof, the Officer Liabilities shall be
deemed to include the Profit Sharing and Retirement Plan Liabilities,
and the Company shall, to the fullest extent permitted from time to
time by applicable law, hold harmless and indemnify the Officer from
and against any and all Profit Sharing and Retirement Plan Liabilities
to the same extent, and in the same manner, that the officer is
entitled to be held harmless and be indemnified by the Company from
and against any and all Officer Liabilities.
2. Nothing contained in this Addendum is intended to limit or restrict
the right of the Officer to obtain indemnification or advancement of
costs and expenses under the provisions of the Delaware General
Corporation Law as in effect from time to time, under the provisions
of the Company's Certificate of Incorporation as in effect from time
to time, under the provisions of the Indemnification Agreement as in
effect from time to time, or otherwise; and the rights of the Officer
to obtain indemnification and advancement of costs and expenses under
this Addendum are in addition to any and all other rights the Officer
may have from time to time to obtain indemnification or advancement of
costs and expenses from the Company or otherwise.
3. This Addendum shall inure to the benefit of and be enforceable by the
officer and his estate, heirs, legatees and personal representatives
and shall be binding upon and enforceable against the Company and its
successors and assigns (including,
<PAGE>
without limitation, any successor by merger or consolidation and any
transferee of all or substantially all of its assets); and this
Addendum shall survive the termination of the officer's service as an
officer of the Company and/or a member of the Profit Sharing Committee
for any reason.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
WALLACE COMPUTER SERVICES, INC., a
Delaware corporation
BY: _____________________________
TITLE: VICE PRESIDENT - FINANCE
OFFICER:
___________________________________
<PAGE>
WALLACE 1995 ANNUAL REPORT
I N F O R M A T I O N
M A N A G E M E N T
<PAGE>
WALLACE AT A GLANCE
INFORMATION MANAGEMENT
PRODUCTS
SERVICES
SOLUTIONS
<PAGE>
THE MANAGEMENT OF EVER-INCREASING AMOUNTS
AND COMPLEXITY OF INFORMATION IS CRITICAL TO
BUSINESS SUCCESS. WALLACE MANUFACTURES AND
DISTRIBUTES A WIDE RANGE OF INFORMATION MANAGEMENT
PRODUCTS, SERVICES AND SOLUTIONS
THAT HELP COMPANIES MINIMIZE COSTS, IMPROVE
INFORMATION PROCESSING EFFICIENCY,
AND SIMPLIFY AND ACCELERATE
BUSINESS TRANSACTIONS.
2 > FINANCIAL HIGHLIGHTS 3 > LETTER TO SHAREHOLDERS
9 > INFORMATION MANAGEMENT PRODUCTS, SERVICES AND SOLUTIONS 16 > 11-YEAR
FINANCIAL SUMMARY
18 > MANAGEMENT'S DISCUSSION AND ANALYSIS 24 > CONSOLIDATED FINANCIAL
STATEMENTS
28 > NOTES TO CONSOLIDATED STATEMENTS 33 > CORPORATE AND INVESTOR INFORMATION
<PAGE>
<TABLE>
<CAPTION>
PRODUCT SEGMENT SALES MARKET FACTORS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C> <C>
PAPERWORK 39% * The surge in forms paper prices
SYSTEMS + during the year has accelerated
ELECTRONIC customer interest in cost saving
FORMS opportunities and alternative
technologies such as duplex
printing and electronic forms
* The $8 billion in U.S. paper forms
consumption is forecast to decline
3 to 5% per year
* Electronic forms installations are
expected to grow 40 to 50% per
year
* Companies are looking beyond the
acquisition costs of forms,
seeking ways to save on the larger
costs of processing, storage,
distribution and management
* Product mix is changing with
increasing demand for cut sheet
forms, more complex form/label
combinations, and electronic forms
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFICE 24% * Demand for office products is
PRODUCTS expected to grow at 2% per year as
companies continue to spend about
$500 per employee on supplies each
year
* The marketplace continues to
change as the number of smaller
dealers declines, market share of
the superstores increases, and
vertical consolidation/integration
continues
* Larger companies increasingly want
a single vendor that can provide
fast distribution to all company
locations and provide systems to
monitor and control costs
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LABELS 15% * The overall market is expected to
grow at 8 to 10% per year
* The range of applications and the
demand for bar-coded labeling and
product labels is increasing
* Consumer demand and government
labeling requirements are fueling
demand for all types of labels
* New label technologies such as 2-D
barcodes, radio frequency, and
linerless labels are gaining
acceptance
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COLORFORMS- 15% * Direct mail is one of the fastest
REGISTERED TRADEMARK- growing advertising mediums at
DIRECT RESPONSE 9 to 10% per year
PROMOTIONAL PRINTING * Growth of database target
marketing is increasing demand
* New applications for individual
imaging are creating market
opportunities
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WALLACE 7% * Commercial printing shipments are
PRESS growing at 3 to 6% per year
COMMERCIAL PRINTING * Increasing demand for short-run,
quick turnaround printing
* Use of CD-ROMs and other
electronic media for distributing
information is growing
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
WALLACE AT A GLANCE
<TABLE>
<CAPTION>
FISCAL 1995 HIGHLIGHTS STRATEGY
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PAPERWORK * Forms sales grew 16% over fiscal 1994 We will work to increase market
SYSTEMS + * Market demand for the Wallace Information share based on competitive advantages
ELECTRONIC Network-TM- forms management system led including the Wallace Information Network,
FORMS to many new major accounts our distribution system, and single-source
* Rising paper prices narrowed margins for capabilities. These advantages should also
short periods enhance the company's ability to maintain margins if
* Formed strategic alliances to enhance paper prices rise further. We will continue
electronic forms product and service offerings, to innovate new solutions and added-value
and solidified infrastructure to support services to maximize customer value.
customer requirements Wallace is also positioned to deliver
corporate-wide, cross-platform electronic
forms solutions for large organizations, along with the
critical management tools and expertise to
facilitate the transition.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICE * Office products sales grew 31% over In 1995 we put together all the
PRODUCTS fiscal 1994 elements to be a single source to
* Wallace formed an alliance with large companies for the ordering and
United Stationers which tripled the management of office products and
number of items we can offer customers supplies. Our general sales force
* Improved sales and distribution of will focus on developing these large
TOPS-Registered Trademark- brand account relationships. We will
products resulted in additional continue expanding product lines for
market share new office technologies and customer
* Expanded products lines to meet needs, and will focus on extending
growing demand for ink-jet, the efficiency of our manufacturing
thermal transfer and laser printing and distribution systems. Efforts to
supplies expand retail penetration of TOPS
branded products will also continue.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LABELS * Label product sales grew 18% over The label segment is one of the
fiscal 1994 exclusive of acquisitions company's fastest growing areas. The
* Acquired two label companies to company's strategy is to provide a
increase our production capacity and complete range of products and
range of prime label products associated services for any
* Expanded the Wilson, North Carolina labeling application. In fiscal
plant to double manufacturing space 1996, we will fully integrate the
* Formed two marketing alliances to acquired companies to maximize local
expand our range of solutions for service and leverage our nationwide
the healthcare industry manufacturing expertise and
resources. We will also develop
and introduce labeling solutions to
take advantage of new technologies and
materials.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
COLORFORMS- * Colorforms sales grew 14% over Wallace Colorforms will maintain its
REGISTERED TRADEMARK- fiscal 1994 position leading the industry in
DIRECT RESPONSE * Were first in the market to offer a applying new imaging technologies
PROMOTIONAL PRINTING number of new capabilities including which offer solutions and cost
selective inserting, color imaging, options for direct response
duplexing and special mailers marketers. At the same time, we are
finding new applications for imaging and
personalization capabilities which are
opening new markets and which offer
opportunities to reduce the seasonal
tendencies of the direct mail business.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
WALLACE * Commercial printing sales grew 18% The company is well positioned with
PRESS over fiscal 1994 state-of-the-art customer
COMMERCIAL PRINTING * Expanded short-run, quick turnaround communications systems and electronic
capabilities with a new plant in pre-press capabilities. These
Lebanon, Kentucky and the can feed a variety of printing
addition of production capabilities systems and outputs including
in Lodi, California conventional and electronic printing on paper, and CD-
ROMs or diskettes.
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED JULY 31 (in thousands except per share amounts) 1995 1994 CHANGE
<S> <C> <C> <C>
Net sales $ 712,838 $ 588,173 21%
Net income before cumulative effect of accounting changes $ 55,297 $ 47,268 17%
Net income after cumulative effect of accounting changes $ 55,297 $ 47,931 15%
Net income per share $ 2.46 $ 2.16 14%
Dividends per share $ 0.74 $ 0.64 16%
Working capital $ 193,150 $ 183,432 5%
Stockholders' equity $ 456,118 $ 410,139 11%
Stockholders' equity per share $ 20.10 $ 18.32 10%
Average common shares outstanding 22,490 22,193 1%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[Graphs]
<TABLE>
<CAPTION>
- ------------------------------------------------ --------------------------------------- -------------------------------------
SALES EARNINGS PER SHARE DIVIDENDS PER SHARE
(IN THOUSANDS)
2 YEAR CHANGE 30.7% 2 YEAR CHANGE 33.7% 2 YEAR CHANGE 27.6%
5 YEAR CHANGE 58.9% 5 YEAR CHANGE 32.3% 5 YEAR CHANGE 60.9%
- ------------------------------------------------ --------------------------------------- -------------------------------------
91 92 93 94 95 91 92 93 94 95 91 92 93 94 95
- ------------------------------------------------ --------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$458,840 $511,572 $545,315 $588,173 $712,838 $1.63 $1.76 $1.84 $2.16 $2.46 $.50 $.54 $.58 $.64 $.74
- ------------------------------------------------ --------------------------------------- -------------------------------------
</TABLE>
WALLACE - page 02
<PAGE>
INFORMATION MANAGEMENT products.services.solutions.
[Photograph] Bob Cronin Ted Dimitriou
TO OUR SHAREHOLDERS: WALLACE'S RESULTS FOR FISCAL 1995 REFLECT A CONTINUING
ACCELERATION, DEMONSTRATING THAT THE STRATEGIC DIRECTION WE INITIATED TWO YEARS
AGO IS PAYING OFF FOR OUR CUSTOMERS AND SHAREHOLDERS, AND WILL DELIVER EVEN MORE
BENEFITS IN FISCAL 1996.
WALLACE - page 03
<PAGE>
WALLACE EXCEEDED CORPORATE OBJECTIVES For the year ended July 31, 1995, sales
rose 21 percent to $712.8 million compared with the $588.2 million in fiscal
1994. Real unit sales growth provided approximately two thirds of the overall
increase, and higher selling prices from rising paper costs accounted for the
balance. Sales grew 31 percent over the last two years and 59 percent over the
last five.
Net income increased 17 percent to $55.3 million, or $2.46 per share,
compared to $47.3 million or $2.13 per share before the cumulative effect of
accounting changes in fiscal 1994. Net income in 1994 increased by 3 cents per
share due to the adoption of FASB No. 106 "Employers' Accounting for Post-
Retirement Benefits Other Than Pensions," and FASB No. 109 "Accounting for
Income Taxes." Earnings per share grew 34% over the last two years and 32% over
the last five.
The company generated its strong earnings growth despite a LIFO charge of
39 cents per share for the sharply rising paper prices experienced during the
year. Analysts predict fewer paper price increases in the coming year which
should reduce LIFO charges in fiscal 1996. Also for the year, we recorded
incremental development expenses of six cents per share for our electronic forms
segment. We do not expect this operation to reach break-even before the second
half of fiscal 1996.
Operating income grew 40% over the last two years and 53% over the last
five.
[Graph]
<TABLE>
<CAPTION>
- --------------------------------------------------
OPERATING INCOME
2 YEAR CHANGE 39.7%
5 YEAR CHANGE 53.4%
- --------------------------------------------------
91 92 93 94 95
- --------------------------------------------------
<S> <C> <C> <C> <C>
$49,160 $54,837 $60,887 $71,630 $85,030
</TABLE>
Total return on Wallace stock versus proxy peer group, S&P 500 and S&P
Midcap 400.
[Graph]
<TABLE>
<CAPTION>
---------------------------------------------------------
TOTAL RETURN
WALLACE PEERS S&P500 S&P400
---------------------------------------------------------
<S> <C> <C> <C> <C>
FY94 33% 3% 5% 4%
FY95 43% 20% 26% 24%
</TABLE>
WALLACE - page 04
<PAGE>
Key financial measures indicate that the company's performance is growing
at an accelerating rate. The company's return on average equity increased to
12.8 percent, up from 12.3 percent, and the return on average assets rose to
9.8 percent versus 9.4 percent in the prior year. Since fiscal year 1990, net
income increased 40 percent. Fully 90 percent of this gain occurred during the
last two years as the benefits of our strategy and capital investments
accelerated results. Consequently, Wallace's shares have produced consistent
value for stockholders. From August 1, 1994, the beginning of fiscal 1995,
until July 28, 1995 (prior to the unsolicited hostile buyout offer for the
company by Moore) the value of Wallace shares, including reinvested dividends,
rose 43 percent. During the last two fiscal years, the value of Wallace stock
has increased 90 percent.
PROVIDING CUSTOMERS WITH SUPERIOR SERVICE AND VALUE In 1993, we established a
new, two-pronged strategy: to be the total source for an organization's
information management products and services, and to give customers the best
service and added-value in the market. We have aggressively embraced and
leveraged new technologies and ideas, and dramatically increased the company's
focus on customers.
The success achieved in fiscal 1994 and the even stronger results in
fiscal 1995 are evidence that our strategy is working. During the last 24
months, Wallace has become the true industry leader in what really counts: not
mere size, but answering customers' needs and delivering greater value. Every
employee's daily commitment to "the customer is everything" has, and will
continue to increase sales, market share and stockholder value.
W.I.N. AND SELECT SERVICES CUSTOMERS INCREASE The Wallace Information
Network-TM- (W.I.N.-TM-) and Select Services-TM- programs best exemplify how we
are using technology to deliver greater customer value and to increase market
share. W.I.N. and Select Services are the leading forms and supplies management
systems for large organizations. They provide tools to generate dramatic cost
savings and improved management control for customers. To receive W.I.N.,
customers sign multi-year contracts of at least $1 million in annual sales;
Select Services customers exceed $400,000 in annual sales. Our ability to offer
these services, built upon the sophisticated information systems they require,
is the result of years of internal investment at what we believe is twice the
industry's average rate.
We added 61 new W.I.N. and Select Services customers last year, bringing
the total to 157, an increase of 64 percent. These major companies are reaping
substantial cost savings through these unique Wallace services.
Most W.I.N. and Select Services customers are new, having left
competitors. In aggregate, these 157 customers provided more than one third of
our consolidated 1995 sales. The programs were introduced only two and one-half
years ago, and we expect that their growth and impact on market share will
continue.
WALLACE - page 05
<PAGE>
SUPERIOR GROWTH IN ALL PRODUCT SEGMENTS In fiscal 1995, every product group
grew faster than industry averages. This demonstrates the value not only of the
corporate strategy, but of the aggressive growth strategies pursued in every
product area.
Led by the W.I.N. and Select Services programs, sales of business forms
products rose 15.8 percent in an industry that is declining three to five
percent per year. Sales of office products rose 31.2 percent, in comparison to
two percent growth in office products overall.
Label product sales, exclusive of acquisitions, increased 17.6 percent
compared to overall industry growth of eight to 10 percent. Including the
acquisitions, label sales grew 26.7 percent. Colorforms direct response
product sales rose 13.8 percent compared to nine to 10 percent for the
industry. Commercial printing sales increased 18.0 percent over the prior year,
about triple the overall growth rate for that product segment.
Fiscal 1995 sales in every product segment exceeded industry projected growth
rates.
[Graph]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMPARATIVE REVENUE GROWTH
- -------------------------------------------------------------------------------
Wallace Industry Average
- -------------------------------------------------------------------------------
<S> <C> <C>
FORMS 16% -3%
OFFICE PRODUCTS 31% 2%
LABELS 27% 10%
DIRECT RESPONSE 14% 10%
COMMERCIAL PRINTING 18% 6%
</TABLE>
WALLACE - page 06
<PAGE>
INITIATIVES TO ACCELERATE GROWTH We took many aggressive actions last year to
generate future growth. Most of these are only beginning to yield the returns
that we anticipate.
- --> We formed a unique alliance with United Stationers, one of the nation's
largest office supply distributors, to position Wallace as the preferred
contract stationer to corporate America. This joint venture takes a new
approach, giving us a competitive advantage in the office supply market.
- --> In fiscal 1995 we completed two acquisitions that expanded our product
capabilities in the swiftly growing label business. Even without these
acquisitions, our growth has been double the overall industry growth rate
in each of the last few years. The acquisitions should enhance our growth
rate.
- --> We continued to invest in Platforms, our electronic forms business. Today,
the electronic forms market is in its infancy. Following the end of the
fiscal year, we made a key alliance with Delrina Corporation and we are
completing development of the industry's most complete array of products
and services. We have seen significant customer interest and endorsement of
our approach and view Platforms as a key growth opportunity.
- --> In the direct response segment we call Colorforms, we introduced several
important new products and leveraged our leading-edge individual imaging
capabilities for new applications. These initiatives should enhance our
growth and profitability in this product segment and reduce the seasonal
effects of the direct mail business.
- --> The health care market is also a growth opportunity. In fiscal 1995, we
formed alliances with MedPlus and United Ad Label to expand our offerings
to the healthcare industry, and we developed significant contracts with
major group purchasing organizations and health care providers. The
momentum generated in fiscal 1995 suggests that there are more growth
opportunities to come.
- --> Innovations and aggressive review of internal systems promise increasing
efficiency. In fiscal 1995 we began phase 1 installation of the
Manufacturing Information Processing System (MIPS). This software system
was developed by Wallace to generate cost savings for Wallace and its
customers. Phases 2 and 3 are scheduled for roll-out to all plants in
fiscal 1996, and the next level of efficiency-enhancing systems are already
in development, such as a new program we're calling ASPECTS. These programs
will add significant customer value this coming year and beyond.
WALLACE - page 07
<PAGE>
- --> In fiscal 1995 we expanded production capacity for the high-growth segments
of our business. The Lebanon, Kentucky plant started-up in a temporary
building to produce short-run, quick turnaround forms and electronic
printing. The expansion of our Wilson, North Carolina plant was completed,
doubling its capacity for manufacturing pressure-sensitive prime and EDP
labels, and we made an addition to the Brenham, Texas label and imaging
products facility. Expansions were initiated at the Metter, Georgia
(business forms) and the Covington, Tennessee (office products) factories.
We also began the renovation of one of our St. Charles, Illinois buildings
to facilitate further growth of its label production capacity.
These 1995 initiatives were developed to enhance the total service and added-
value Wallace delivers to customers. They all promise future growth.
OUTSTANDING PROSPECTS FOR INCREASING SHAREHOLDER VALUE We begin fiscal 1996
with record backlogs and a high degree of confidence in our prospects. The
volume of information in business is doubling every three to five years,
indicating that the need for Wallace's information management products,
services and solutions is stronger than ever. Combined with the market's
increasing recognition of the company's leadership position, unique competitive
advantages and aggressive growth initiatives, we anticipate another year of
significantly above-industry performance.
We remain committed to building shareholder value by following our
customer-focused strategy. We thank our customers, stockholders, employees and
suppliers for their confidence and support.
/s/TED DIMITRIOU /s/BOB CRONIN
TED DIMITRIOU BOB CRONIN
Chairman of the Board President and CEO
WALLACE - page 08
<PAGE>
- -------------------------------------------------------------------------------
INFORMATION MANAGEMENT products.services.solutions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE QUANTITY AND COMPLEXITY OF INFORMATION IN BUSINESS HAS NEVER STOPPED
GROWING. CURRENT ESTIMATES SAY THAT THE VOLUME OF INFORMATION THAT COMPANIES
MUST PROCESS IS DOUBLING EVERY THREE TO FIVE YEARS. MANAGING IT IS NOT ONLY A
MAJOR EXPENSE FOR BUSINESS, IT CAN BE A KEY COMPONENT OF THE ORGANIZATION'S
SUCCESS. WALLACE'S OBJECTIVE IS TO BE THE COMPLETE SOURCE FOR ALL OUR
CUSTOMERS' INFORMATION MANAGEMENT NEEDS.
- -------------------------------------------------------------------------------
WALLACE - page 09
<PAGE>
- -------------------------------------------------------------------------------
INFORMATION TAKES MANY FORMS. AS A COMPLETE SOURCE, WALLACE SUPPLIES A WIDE
RANGE OF PRODUCTS FROM SIMPLE PAPER CLIPS TO SOPHISTICATED ELECTRONIC FORMS, TO
FACILITATE OUR CUSTOMERS' PROCESSING, COMMUNICATING AND STORING OF INFORMATION.
- - FORMS -
[Photograph] Wallace Forms in Printer
PAPER AND ELECTRONIC
FORMS AND SYSTEMS
- --> Credit card statements
- --> Air freight package forms
- --> Checks
- --> Utility bills
- --> Automated hospital admissions
- --> Automated mortgage applications
- - LABELS -
[Photograph] Airline Baggage tag
PRESSURE-SENSITIVE LABELS FOR
PACKAGING AND ON-DEMAND PRINTING
- --> Food package labels
- --> Bar-coded shipping labels
- --> Shampoo bottle labels
- --> Airline bag tags
- --> Blank stock labels
- --> Label printers & applicators
<PAGE>
- - WALLACE PRESS -
[Photograph] Booklets running on press
PRINTED AND ELECTRONIC CATALOGS,
DIRECTORIES AND BOOKLETS
- --> Healthcare plan directories
- --> Tradeshow exhibitor guides
- --> Employee benefits booklets
- --> Appliance owner manuals
- --> Financial directories on CD-ROM
- --> Association directories
- - COLORFORMS -
[Photograph] Direct Mailing Piece being opened
COLORFORMS DIRECT RESPONSE MARKETING
AND DIRECT MAIL ADVERTISING
- --> Sweepstakes
- --> Credit card offers
- --> Individualized auto service coupons
- --> Retail point-of-sale materials
- --> Subscription offers
- --> Mandated information mailings
- - OFFICE PRODUCTS -
[Photograph] Add rolls. legal pads and pencils
NAME-BRAND OFFICE
PRODUCTS AND SUPPLIES
- --> Legal pads
- --> Computer paper
- --> Ink jet imaging cartridges
- --> Custom paper rolls for ATM systems
- --> Computer supplies
- --> Office supplies
<PAGE>
[Superimposed over picture of computer screen with Wallace Information Network
Software]
PRODUCTS ARE ONLY HALF THE EQUATION. THE COMPETITIVE DIFFERENCE THAT HAS BUILT
WALLACE'S LONG-STANDING RELATIONSHIPS WITH MANY CUSTOMERS IS ADDED-VALUE
OUTSOURCING SERVICES UNMATCHED IN THE INDUSTRY. Customers can choose from a
menu of special services that let them effectively outsource all the functions
of acquiring and managing supplies. The result is cost savings and increased
management control. Wallace sales representatives work with customers to
determine the best mix of services to leverage Wallace's strengths and achieve
the customer's cost management objectives.
<PAGE>
WALLACE INFORMATION NETWORK The cornerstone of outsourcing and service
relationships is Wallace's unique forms/supplies management system that is the
industry benchmark. The Wallace Information Network (W.I.N.) and Select
Services programs let companies retain full control over decision-making and
costs, while outsourcing to Wallace all the work of ordering and managing forms
and other supplies. By pulling data directly from Wallace's corporate-wide
information system, W.I.N. provides critical management information to the
customer. At the end of the fiscal year, 157 major corporations have
implemented W.I.N. or Select Services to manage all their forms, labels, office
products and other consumable supplies.
[Illustration of eight modules]
ORDER WALLACE FORMS
PROCESSING INVENTORY MANAGEMENT
REPORT WRITER OFFICE
QUERY TOOL PRODUCTS
ORDER CUSTOMER ELECTRONIC FORMS
INQUIRY INVENTORY MANAGEMENT
The Wallace Information Network (W.I.N.) software system incorporates eight
modules that help companies quickly and easily organize, manage and report the
purchases, inventories and data for all their consumable information management
products and supplies.
BENEFITS REALIZED BY INDIVIDUAL
CUSTOMERS INCLUDE:
- --> Saved over $750,000 in obsolete
inventory costs
- --> Achieved a 40% reduction in forms
from 2,000 to 1,200
- --> Eliminated eight warehouses
- --> Outsourced material distribution
to 70 regional sites
- --> Eliminated out-of-stock situations
- --> Consolidated or eliminated over
5,000 forms in one year
- --> Eliminated all paper records including
five, five-drawer file cabinets used
for tracking form information
- --> Increased corporate purchasing system
compliance from 80% to 96%
- --> Cut resolution time on user questions
from 5 days to 1.5 days
SERVICES
- --> Forms management
- --> National warehousing and distribution
- --> Inventory management
- --> Location order controls
- --> Order quantity optimization
- --> Custom reporting
- --> Direct order entry options
- --> Forms design
- --> Custom ordering catalogs for users
- --> Process evaluation
- --> Summary billing options
WALLACE - page 13
<PAGE>
[Superimposed over picture of man in front of board showing Wallace/Customer
relationships]
WALLACE'S ABILITY TO DELIVER SOLUTIONS IS BUILT ON TWO FOUNDATIONS: PEOPLE AND
AN ONGOING INVESTMENT IN THE BUSINESS. EVERY PERSON THROUGHOUT THE COMPANY IS
FOCUSED ON LISTENING TO CUSTOMERS, ANALYZING THEIR NEEDS AND DELIVERING
SOLUTIONS. In fiscal 1995, for example, our people helped many customers review
their ordering and inventory systems to assure adequate supplies as the
availability of paper became tight. We also helped companies plan and manage
how their organizations could start integrating electronic and paper-based
systems while maintaining operational and accounting control.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WALLACE HAS AN EXCEPTIONAL FINANCIAL BASE AND A COMMITMENT TO INVESTING IN THE
BUSINESS THAT IS UNMATCHED IN THE INDUSTRY. THE RESULT FOR CUSTOMERS HAS BEEN
THE DEVELOPMENT OF HIGH-VALUE SERVICES SUCH AS W.I.N., LOWER COST MANUFACTURING
SYSTEMS, AND A STREAM OF NEW PRODUCT IDEAS THAT ENHANCE AND EXPAND THE
SOLUTIONS WE CAN BRING TO BEAR. FOR SINGLE ORDERS OR LONG-TERM CONTRACT
RELATIONSHIPS, WALLACE IS THE COMPLETE SOURCE FOR INFORMATION MANAGEMENT
PRODUCTS, SERVICES AND SOLUTIONS FOR BUSINESS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WALLACE - page 15
<PAGE>
11 YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Net sales $712,838 $588,173 $545,315 $511,572
- --------------------------------------------------------------------------------------------------------------
Net income 55,297 47,931 41,170 39,455
- --------------------------------------------------------------------------------------------------------------
Net income per share 2.46 2.16 1.84 1.76
- --------------------------------------------------------------------------------------------------------------
Dividends per share .74 .64 .58 .54
- --------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Total assets $592,702 $538,592 $480,722 $467,142
- --------------------------------------------------------------------------------------------------------------
Long-term debt 25,600 23,500 25,210 25,959
- --------------------------------------------------------------------------------------------------------------
Capital expenditures 51,487 34,228 31,818 33,517
- --------------------------------------------------------------------------------------------------------------
Working capital 193,150 183,432 157,937 152,246
- --------------------------------------------------------------------------------------------------------------
SIGNIFICANT RATIOS
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Net income:
- --------------------------------------------------------------------------------------------------------------
Return on net sales 7.8% 8.1% 7.5% 7.7%
- --------------------------------------------------------------------------------------------------------------
Return on average assets 9.8% 9.4% 8.7% 9.1%
- --------------------------------------------------------------------------------------------------------------
Return on average equity 12.8% 12.3% 11.4% 11.9%
- --------------------------------------------------------------------------------------------------------------
Current ratio 3.9 3.8 3.9 3.9
- --------------------------------------------------------------------------------------------------------------
Long-term debt/debt plus equity 5.3% 5.4% 6.4% 6.8%
- --------------------------------------------------------------------------------------------------------------
Book value per share $ 20.10 $ 18.32 $ 16.69 $ 15.73
- --------------------------------------------------------------------------------------------------------------
Sales per employee* $ 195.4 $ 171.0 $ 161.9 $ 160.4
- --------------------------------------------------------------------------------------------------------------
Net property, plant and equipment per employee* $ 70.3 $ 67.7 $ 67.7 $ 70.7
- --------------------------------------------------------------------------------------------------------------
OTHER
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Number of employees 3,765 3,530 3,350 3,386
- --------------------------------------------------------------------------------------------------------------
Number of stockholders of record 4,383 4,531 4,260 4,435
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
*Based on average number of employees during the fiscal year
NOTES TO 11 YEAR SUMMARY
A. ACQUISITIONS: On April 19, 1995, the company acquired Retterbush and Sauer
Label Corporation. The acquisition price included $10.1 million of cash and a
note payable of $2.0 million. On November 29, 1994, the company acquired Lampro
Graphics, Inc. The acquisition price included $4.6 million of cash, a note
payable of $.3 million, and the assumption of debt totalling $1.9 million. Both
acquisitions were accounted for as purchases, and, accordingly, their results
of operations are included in the consolidated financial statements from their
respective dates of acquisition.
Effective August 1, 1991, the company acquired MGI Industries, Inc. and
subsidiaries and substantially all
[continued on page 17]
WALLACE - page 16
<PAGE>
of the assets of Evergreen Realty (collectively "Colorforms"). The acquisition
price included 608,034 shares of common stock, $13 million of cash and the
assumption of debt totalling $17.5 million. This acquisition was accounted for
as a purchase, and, accordingly, the results of operations for Colorforms are
included in the consolidated financial statements from August 1, 1991.
On December 15, 1988, the company acquired Apollo Labeling Systems for
$900,000. Apollo is a manufacturer of prime pressure sensitive labels. This
acquisition was accounted for as a purchase, and, accordingly, the results of
operations for Apollo are included in the consolidated financial statements
from December 15, 1988.
B. STOCK SPLITS: All share and per share amounts have been adjusted for the 2
for 1 stock split effective August, 1989.
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $458,840 $448,700 $429,008 $383,045 $340,504 $305,044 $274,595
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 35,009 39,555 36,867 31,610 26,027 24,350 22,049
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per share 1.63 1.86 1.76 1.53 1.27 1.20 1.10
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends per share .50 .46 .40 .33 .30 .25 .23
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $399,093 $375,203 $331,830 $291,764 $260,004 $225,349 $195,389
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt 19,790 20,155 20,465 20,830 21,180 14,520 14,840
- -----------------------------------------------------------------------------------------------------------------------------------
Capital expenditures 40,540 49,835 30,677 24,948 30,039 27,531 24,566
- -----------------------------------------------------------------------------------------------------------------------------------
Working capital 141,390 137,598 138,218 117,139 100,128 90,959 80,259
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT RATIOS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net income:
- -----------------------------------------------------------------------------------------------------------------------------------
Return on net sales 7.6% 8.8% 8.6% 8.3% 7.6% 8.0% 8.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Return on average assets 9.0% 11.2% 11.8% 11.5% 10.7% 11.6% 12.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Return on average equity 11.9% 15.1% 16.2% 16.1% 15.3% 16.6% 17.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Current ratio 4.3 3.8 4.4 4.2 3.9 3.7 3.7
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt/debt plus equity 6.0% 6.7% 7.7% 9.0% 10.4% 8.4% 9.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Book value per share $ 14.22 $ 13.04 $ 11.53 $ 10.09 $ 8.83 $ 7.76 $ 6.74
- -----------------------------------------------------------------------------------------------------------------------------------
Sales per employee* $ 154.2 $ 154.4 $ 154.4 $ 145.8 $ 136.3 $ 127.7 $ 121.0
- -----------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment per employee* $ 64.7 $ 59.3 $ 50.3 $ 48.4 $ 46.3 $ 40.4 $ 34.4
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Number of employees 2,993 2,957 2,857 2,700 2,554 2,442 2,335
- -----------------------------------------------------------------------------------------------------------------------------------
Number of stockholders of record 4,347 4,396 4,350 4,038 4,104 4,223 4,023
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
WALLACE - page 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1995 VERSUS FISCAL 1994 Net sales for Fiscal 1995 increased by 21.2% to
$712.8 million. A breakdown by the major product groups for Fiscal 1995 is as
follows:
<TABLE>
<CAPTION>
% TO TOTAL % REVENUE
PRODUCT GROUP REVENUE INCREASE
- -------------------------------------------------------
- -------------------------------------------------------
<S> <C> <C>
Forms 39 16
- -------------------------------------------------------
Office Products 24 31
- -------------------------------------------------------
Direct Response 15 14
- -------------------------------------------------------
Labels 15 27
- -------------------------------------------------------
Commercial Printing 7 18
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
Over the last five years, the company's average annual growth rate in
sales has been 9.7%.
Fiscal 1995 was a very difficult business environment due to the dramatic
increase in paper costs over the past twelve months. Using 20 pound white
uncoated free sheet bond as a proxy for the paper market, we experienced seven
paper price increases for the year which raised the cost of paper by more than
100%. Depending upon the product, paper can represent anywhere from 30 to 80
percent of total cost.
There is usually a 60 to 90 day lag between the time of a paper price
increase and our ability to realize higher selling prices. During this period,
the increased costs put pressure on our operating margins. It was not until the
third and fourth quarters of the year that we were able to recover most of the
paper cost increases. Higher selling prices coupled with increased unit growth
produced sales increases in the third and fourth quarters of 27.3% and 33.0%,
respectively.
While it is difficult to precisely measure the impact of inflation on the
sale of custom products, we estimate unit growth accounted for two thirds of
the year's sales increase. In the third and fourth quarters, unit growth is
estimated to represent one half of the sales increase.
[PIE CHART showing revenue contribution by
product group. Percentages are reflected
in Table on this page.]
During Fiscal 1995, the company continued to add new customers to the
Wallace Information Network (W.I.N.) and the Select Services programs. These
programs allow customers to sole source with Wallace for their business forms,
office products, labels and other information management requirements. These
proprietary software systems allow the customer to use Wallace's nationwide
warehousing, distribution and manufacturing capabilities to reduce their costs,
while still maintaining control over their supply purchases. At July 31, 1995,
one hundred and fifty-seven customers have either a W.I.N. or a Select Services
installation. These customers represented 35% of consolidated sales for the
year.
The Business Forms product group benefited from the increasing number of
W.I.N. and Select Services customers. Most of the accounts added during Fiscal
1995 were new customers for the company. It usually takes six months to a year
to reach the full projected volume for a new account. The variable element is
the amount of inventory from the previous vendor at the time of conversion. New
accounts added in the second half of Fiscal 1995 will reach their projected
sales targets during the first half of Fiscal 1996. A new initiative will be
launched in the coming year to make the company even more competitive when
producing business forms in smaller quantities. Despite industry trends to the
contrary, we expect the Business Forms product group to achieve double digit
sales increases for Fiscal 1996.
The Office Products group had a very good year. This division markets
items purchased for resale, such as computer and office supplies, as well as
items manufactured internally, such as legal pads, standardized business forms,
ribbons and add rolls. Due to the company's good relations with its five major
paper vendors, the office products group was able to meet increased demand for
its paper based products. Part of the increased demand was due to manufacturing
WALLACE - page 18
<PAGE>
problems at a major competitor. A key to the success for this group is the
company's warehousing and distribution systems which allow us to provide value
added services to our customers. The combination of value added services and
secure paper supplies allowed this group to recover all of the paper price
increases during the year.
At the end of the third quarter, the company announced a new strategic
office products alliance which we believe will make us a major participant in
the contract stationers industry. Sales through this alliance in Fiscal 1995
totaled $1.5 million. Based on new orders booked, we expect the contract
stationers business to show significant growth in the coming years.
Direct Response products are sold through our Colorforms division and
include both printing and personalization services. The company believes that
its personalization capabilities are state-of-the-art. During Fiscal 1995,
these capabilities allowed the division to introduce new services such as daily
mailings for regulated industries and weekly signage programs for major retail
customers. In Fiscal 1996, the division will seek to add additional customers
who require consistent and predictable mailings to help offset the seasonal
mailings by our customers in the publishing industry.
The results for the Label Group include two acquisitions during Fiscal
1995 which added $7.4 million in sales. Before the acquisitions, sales for the
Group were up 18%. During the year, the Wilson, North Carolina plant was
doubled in size to accommodate increasing demand for both data processing and
prime labels. The expanding use of bar coded labels plus new government
mandated labeling requirements will continue to be the major drivers of growth
for this product category.
The Commercial Printing Group had its best year in the company's
eighty-seven year history. Increasing demand for quick turnaround documents
such as Preferred Provider Organization directories contributed to the record
results. The company is planning to significantly expand its quick turnaround
capabilities during Fiscal 1996.
We believe that the three core strengths of the company are its 700 person
salesforce, its warehousing and distribution systems and its information
services capabilities. Investments in the training of the salesforce and the
opening of sales offices in new cities are important factors in the company's
continued growth. The office products alliance plus expansions of the Metter,
Georgia and the Covington, Tennessee facilities will strengthen our
distribution capabilities. New features to be added to the W.I.N. and Select
Services software systems will bring additional benefits to our customers. We
are continuing to invest in new equipment and advanced manufacturing processes
to improve our manufacturing efficiencies.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
- ----------------------------------------------------------
NET INCOME
(IN THOUSANDS)
- ----------------------------------------------------------
- ----------------------------------------------------------
2 YEAR CHANGE 34.3%
5 YEAR CHANGE 39.8%
- ----------------------------------------------------------
- ----------------------------------------------------------
<S> <C>
91 $35,009
- ----------------------------------------------------------
92 $39,455
- ----------------------------------------------------------
93 $41,170
- ----------------------------------------------------------
94 $47,931
- ----------------------------------------------------------
95 $55,297
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
Net income before accounting changes increased by $8.0 million to $55.3
million, a 17.0% increase. The after-tax ratio to sales was 7.8%. Fiscal 1994's
results had included $.7 million of income from the adoption of two accounting
changes. Net income after accounting changes for Fiscal 1995 increased by
15.4%. Over the last five years, net income before accounting adjustments has
grown at an average compound rate of 6.9%. Earnings per share for the year were
$2.46 versus $2.13 last year before accounting changes and $2.16 after
accounting changes. The average number of shares outstanding increased by 1.3%
during Fiscal 1995.
Operating income for the year increased by 18.7%. Margins during the year
were negatively impacted by rising raw material costs. During Fiscal 1995, the
LIFO charge was $13.8 million, or 39 cents per share versus $.7 million, or 2
cents per share in Fiscal 1994. $7.1 million of the current year charge was
WALLACE - page 19
<PAGE>
recorded in the fourth quarter. Before the effects of LIFO accounting, cost of
goods sold as a percentage to sales was 62.1% for Fiscal 1995 and 61.7% for
Fiscal 1994.
Selling and administrative expenses increased by 11.4% for the year. As a
percent to sales, they were 18.8% in Fiscal 1995 and 20.4% in Fiscal 1994. The
sales organization did an especially good job of controlling expenses during
the year.
During Fiscal 1995, the Company experienced lower than anticipated
payments under its retiree medical program. This positive experience coupled
with a modification of certain assumptions allowed us to record a fourth
quarter reduction in the retiree medical liability of $1.3 million. Offsetting
this gain was a substantial increase in the value of phantom stock equivalents
during the year. In November, 1994 the twelve executive officers elected to
convert 100% of their deferred cash bonus accounts to stock equivalents. The
stock equivalents will be included when measuring the executives' performance
against stock ownership guidelines established in Fiscal 1995 by the Board of
Directors. The Company's stock price at the time of conversion was $27.00. As
the value of Wallace's stock has increased, an additional charge to
compensation expense has been recorded. During Fiscal 1995, the total charge
for stock equivalents was $1.7 million; $.8 million of this amount occurred on
the last day of the Company's fiscal year when the unsolicited offer by the
Moore Corporation Limited was announced.
Depreciation and amortization expense increased 13.0% to $37.3 million.
Included in this figure is $2.7 million for the amortization of internally
developed software programs. We expect software amortization expenses to
increase over the next few years as additional phases of the Manufacturing
Information Processing System (MIPS) are completed. This additional
amortization expense will be more than offset by improved manufacturing
efficiencies once MIPS is implemented company-wide.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
- ----------------------------------------------------------
BOOK VALUE PER SHARE
- ----------------------------------------------------------
- ----------------------------------------------------------
2 YEAR CHANGE 20.4%
5 YEAR CHANGE 54.1%
- ----------------------------------------------------------
<S> <C>
91 $14.22
- ----------------------------------------------------------
92 $15.73
- ----------------------------------------------------------
93 $16.69
- ----------------------------------------------------------
94 $18.32
- ----------------------------------------------------------
95 $20.10
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
Investment income was comparative between years at $3.6 million. Interest
income from tax-exempt bonds was $2.5 million in 1995 and $2.3 million in 1994.
Interest expense of $1.2 million was slightly below the prior year. During
Fiscal 1995, we paid down $6.1 million of debt from the Colorforms acquisition
in 1991. Interest savings from the retirement of these obligations will be $.4
million for Fiscal 1996.
During Fiscal 1995, the company incurred a net expense of $3.8 million for
the continuing development of electronic forms software, which is marketed
under the name of Platforms. During Fiscal 1994, the net expense had been $1.6
million. We do not expect Platforms to reach break-even before the second half
of Fiscal 1996. As our customers transition from paper based to electronic
forms, the Company will be able to offer them unique products, an effective
management control system, and a solution based approach to information
management needs.
The effective income tax rate for Fiscal 1995 was 36.8% versus 36.0% last
year.
Wallace enters Fiscal 1996 with record backlogs. The continued acceptance
of the W.I.N. and the Select Services programs, coupled with new initiatives
such as the office products alliance, enhanced short-run capabilities, and
state of the art personalization services, combine to make the company's
management confident that we can deliver increased shareholder value in Fiscal
1996 and beyond.
FISCAL 1994 VERSUS FISCAL 1993 Net sales for Fiscal 1994 increased by 7.9% to
$588.2 million. Business forms products accounted for 46% of total sales for
Fiscal years 1994 and 1993. Sales of forms products increased by 8% between
years, with the entire increase coming from unit growth.
Label products had another strong year with a sales
WALLACE - page 20
<PAGE>
increase of 18%, of which approximately 2% came from higher prices and the
balance from unit growth. Prime labels had an especially good year.
Direct response printing and personalization sold through our Colorforms
division showed a sales increase of 13%. Unit growth, as measured by material
usage, exceeded the sales increase due to price deflation in this product line.
Office products accounted for approximately 20% of total sales, with a
sales increase during Fiscal 1994 in line with the consolidated results. Most
of the increase came from new customer contracts added by the direct salesforce.
Two product segments reported sales decreases for the year. Commercial
printing was down 6% because a large order received in Fiscal 1993 did not
repeat in Fiscal 1994. Hardware sales were down 20% due to fewer high speed
printers being sold. These printers use our roll-handling equipment to improve
their throughput.
The Wallace Information Network (W.I.N.) and Select Services programs
allow customers to sole source with Wallace, providing a control tool for their
supply purchases while using Wallace's nationwide warehousing, distribution and
manufacturing capabilities to reduce their costs. At fiscal 1994 year-end, 94
customers had either a W.I.N. or a Select Services installation. Sales for this
customer group increased by 20% during the year, and represented in excess of
20% of consolidated sales.
Net income after taxes increased by 16.4% to $47.9 million, an 8.1% return
on net sales. Included in the year's total is $663,000 representing the
after-tax benefit of adopting FASB No. 106 "Employers' Accounting for
Post-Retirement Benefits Other Than Pensions", and FASB No. 109 "Accounting for
Income Taxes". Earnings per share for the year were $2.16 after accounting
adjustments, a 17.4% increase over the $1.84 reported for Fiscal 1993. Without
the accounting adjustments, we would have reported $2.13 per share. The
effective income tax rates were 36.0% in 1994 and 34.0% in 1993.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
TOTAL CAPITALIZATION
(IN THOUSANDS)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
91 92 93 94 95
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LONG-TERM DEBT $19,790 $25,959 $25,210 $23,500 $25,600
- -------------------------------------------------------------------------
STOCKHOLDERS' EQUITY $308,809 $355,564 $368,146 $410,139 $456,118
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
Operating income in Fiscal 1994 increased by 17.6%. Operating expenses for
the year increased 5.4% versus the sales increase of 7.9%. Cost of goods sold
for Fiscal 1994 was 61.8% of sales, compared to 62.6% in 1993. Approximately
35% of this improvement came from lower material costs with the balance due to
lower labor and overhead expenses. Based on rising paper prices during the
fiscal year, LIFO accounting reduced reported results for Fiscal 1994 by 2
cents per share versus a 5 cent increase in earnings in 1993.
Selling and administrative expenses were 20.4% of Fiscal 1994 sales versus
20.6% in Fiscal 1993. The cost of the company's medical programs benefited
during the year from the expanded use of managed care options by our employees.
Depreciation and amortization expense as a percent to sales remained at 5.6%.
Investment income for Fiscal 1994 was $3.6 million versus $2.7 million the
previous year. The Fiscal 1993 figure included a one-time charge of $2.3
million for a loss on the disposition of some municipal bonds. Lower interest
rates during Fiscal 1994 were the principal reason for the decline in
investment earnings. Interest income from tax-exempt bonds was $2.3 million in
1994 and $2.2 million in 1993. Tax excludable dividends from preferred stocks
were $.1 million in 1994 and $1.3 million in 1993. Interest expense for Fiscal
1994 was $2.3 million versus $2.0 million in 1993.
In November, 1993, the company acquired the technologies of software
developer First Electronic Forms and established the Platforms division to
further develop and market electronic forms solutions. Sales of electronic
forms products in Fiscal 1994 were negligible and start-up expenses for this
operation reduced earnings per share for the year by five cents.
WALLACE - page 21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES Working capital at July 31, 1995 increased by
$9.7 million to $193.1 million, including $41.1 million of cash and short-term
investments. Capital expenditures for the year totaled $51.5 million bringing
the total for the last five years to $191.6 million. $3.0 million of these
expenditures were financed by industrial revenue bonds; the balance was
financed through internally generated funds. Over the last five years, the
company also spent $19.3 million for the development of proprietary software
programs.
The company was engaged in several construction projects at the end of
Fiscal 1995. A new corporate headquarters is being built in Lisle, Illinois.
The existing Hillside, Illinois facility will be retained for use by the
Information Services groups and by Chicago area sales offices. Manufacturing
and distribution expansions in Metter, Georgia and Covington, Tennessee will be
completed during the first half of Fiscal 1996, as will a new short-run plant
in Lebanon, Kentucky. The estimated cost during the next year to complete these
projects is $25 million. Alternative financing arrangements, such as a sale and
leaseback of the new corporate headquarters, are being reviewed. Total capital
expenditures for Fiscal 1996 will be in the range of $50 to $55 million.
Long-term debt at July 31, 1995 was $25.6 million. $23.5 million
represents industrial revenue bonds issued in prior years for the construction
of plants in Lebanon, Kentucky, Manchester, Vermont and Covington, Tennessee.
The balance of $2.1 million represents deferred payments in connection with two
acquisitions made during Fiscal 1995. Under the terms of these purchase
agreements, a portion of the purchase price is being held in escrow pending the
resolution of open contingencies such as final income tax reviews.
Stockholders' equity increased 11.2% to $456.1 million. Return on average
stockholders' equity was 12.8% in 1995 versus 12.3% last year. Book value per
share increased 9.7% to $20.10 at July 31, 1995.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
AND DEPRECIATION
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
91 92 93 94 95
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEPRECIATION $20,610 $26,023 $28,543 $30,934 $33,708
- -------------------------------------------------------------------------
CAPITAL EXPENDITURES $40,540 $33,517 $31,818 $34,228 $51,487
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
During Fiscal 1995, the company re-issued 296,210 shares of treasury stock
as part of its employee benefit programs. These shares had been purchased in
the open market during Fiscal 1993. At July 31, 1995, 106,613 shares remain in
treasury stock. These shares may be used for future acquisitions or for stock
purchases under the employee benefit programs.
Over the last twelve months, the value of the company's inventories
increased by $23.8 million before the effects of LIFO. A majority of the
increase came from finished goods which reflect both higher material costs plus
increased units. As more customers look to Wallace to store inventories for
them, we expect the finished goods balance to continue increasing in the coming
years.
Higher selling prices to recover raw material increases contributed to a
$32.2 million increase in accounts receivable, up 33.8%. This increase was in
line with the fourth quarter sales increase of $49.1 million, or 33.0%.
We do not anticipate a need for additional borrowing during Fiscal 1996 to
cover capital expenditures or working capital requirements for the year.
COMMON STOCK Dividends were raised for the 23rd consecutive year in November,
1994 to $.74 per share, a 15.6% increase over last year's rate. The average
number of shares outstanding for the year was 22.5 million in Fiscal 1995
versus 22.2 million in Fiscal 1994. The increase in shares came entirely from
the exercise of options under the company's 1989 stock option plan and the
Employee Stock Purchase Plan.
The company's stock is traded on the New York Stock Exchange under the
symbol WCS.
WALLACE - page 22
<PAGE>
QUARTERLY RESULTS
<TABLE>
<CAPTION>
(in thousands, except per share amounts) (Unaudited) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
- ---------------------------------------------------------------------------------------------------------------------
Net sales $ 158,353 $ 176,165 $ 180,119 $ 198,201
- ---------------------------------------------------------------------------------------------------------------------
Cost of goods sold (excluding depreciation) 101,620 113,695 112,755 128,729
- ---------------------------------------------------------------------------------------------------------------------
Operating income 17,708 20,497 22,510 24,315
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 18,335 21,160 22,937 25,028
- ---------------------------------------------------------------------------------------------------------------------
Net income 11,643 13,436 14,450 15,768
- ---------------------------------------------------------------------------------------------------------------------
Net income per share $ .52 $ .60 $ .64 $ .70
- ---------------------------------------------------------------------------------------------------------------------
1994
- ---------------------------------------------------------------------------------------------------------------------
Net sales $ 144,510 $ 153,122 $ 141,472 $ 149,069
- ---------------------------------------------------------------------------------------------------------------------
Cost of goods sold (excluding depreciation) 90,635 95,246 85,614 91,993
- ---------------------------------------------------------------------------------------------------------------------
Operating income 16,704 19,524 17,451 17,951
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 17,168 20,053 18,087 18,548
- ---------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 10,988 12,833 11,576 11,871
- ---------------------------------------------------------------------------------------------------------------------
Net income 11,651 12,833 11,576 11,871
- ---------------------------------------------------------------------------------------------------------------------
Net income per share $ .53 $ .58 $ .52 $ .53
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICE PER SHARE DIVIDENDS PAID PER SHARE
FISCAL 1995 FISCAL 1994 FISCAL 1995 FISCAL 1994
- -------------------------------------------------------------------------------------------
QUARTER HIGH LOW HIGH LOW
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $34.25 $26.75 $28.38 $23.13 $ .16 $.145
- -------------------------------------------------------------------------------------------
Second 29.00 25.88 33.88 27.13 .185 .16
- -------------------------------------------------------------------------------------------
Third 33.63 28.88 36.13 32.88 .185 .16
- -------------------------------------------------------------------------------------------
Fourth 60.00 33.13 34.75 31.00 .185 .16
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
WALLACE - page 23
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
(in thousands, except per share amounts) For the years ended July 31, 1995, 1994 and 1993 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 712,838 $ 588,173 $ 545,315
- -----------------------------------------------------------------------------------------------------------------------------------
Cost and expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold 456,799 363,488 341,605
- -----------------------------------------------------------------------------------------------------------------------------------
Selling and administrative expenses 133,713 120,049 112,524
- -----------------------------------------------------------------------------------------------------------------------------------
Provision for depreciation and amortization 37,296 33,006 30,299
- -----------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 627,808 516,543 484,428
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 85,030 71,630 60,887
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income (3,639) (3,551) (2,688)
- -----------------------------------------------------------------------------------------------------------------------------------
Interest expense, net of capitalized interest 1,209 1,325 1,196
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 87,460 73,856 62,379
- -----------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes: (Note 7)
- -----------------------------------------------------------------------------------------------------------------------------------
Current:
- -----------------------------------------------------------------------------------------------------------------------------------
Federal 24,309 21,615 17,485
- -----------------------------------------------------------------------------------------------------------------------------------
State 5,942 5,028 4,261
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred 1,912 (55) (537)
- -----------------------------------------------------------------------------------------------------------------------------------
Total income taxes 32,163 26,588 21,209
- -----------------------------------------------------------------------------------------------------------------------------------
Net income before cumulative effect of accounting changes $ 55,297 $ 47,268 $ 41,170
- -----------------------------------------------------------------------------------------------------------------------------------
Adoption of FASB 109
(Accounting for income taxes) (Note 7) -- 3,955 --
- -----------------------------------------------------------------------------------------------------------------------------------
Adoption of FASB 106, net of $1,853 of tax benefits
(Employers' accounting for postretirement benefits) (Note 8) -- (3,292) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income after cumulative effect of accounting changes $ 55,297 $ 47,931 $ 41,170
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Income (charge) per common share:
- -----------------------------------------------------------------------------------------------------------------------------------
Operations before cumulative effect of accounting changes $ 2.46 $ 2.13 $ 1.84
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting for:
- -----------------------------------------------------------------------------------------------------------------------------------
Postretirement benefits other than pensions
(net of tax benefits) -- (0.15) --
- -----------------------------------------------------------------------------------------------------------------------------------
Income taxes -- 0.18 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income per share $ 2.46 $ 2.16 $ 1.84
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
WALLACE - page 24
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK UNREALIZED
(in thousands, except per share amounts) SHARES PAR PREFERRED SECURITY ADDITIONAL RETAINED
For the years ended July 31, 1995, 1994 and 1993 OUTSTANDING VALUE STOCK GAIN/LOSS CAPITAL EARNINGS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1992 22,606 $ 22,606 $ -- $ -- $ 45,742 $287,216
- ------------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 41,170
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends ($.58 per share) -- -- -- -- -- (12,885)
- ------------------------------------------------------------------------------------------------------------------------------------
Sale of stock under employee
stock purchase plan (Note 5) 252 252 -- -- 5,003 --
- ------------------------------------------------------------------------------------------------------------------------------------
Stock options exercised net of shares
exchanged in lieu of cash (Note 5) 167 167 -- -- 3,072 --
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from early disposition by
employees of stock issued under stock
option plans and exercise of
non-qualified stock options -- -- -- -- 680 --
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury stock purchased (964) (964) -- -- (23,913) --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1993 22,061 22,061 -- -- 30,584 315,501
- ------------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 47,931
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends ($.64 per share) -- -- -- -- -- (14,239)
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury shares issued through sale of
stock under employee stock purchase
plan (Note 5) 236 236 -- -- 5,541 --
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury shares issued through exercise
of stock options net of shares
exchanged in lieu of cash (Note 5) 96 96 -- -- 1,572 --
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from early disposition by
employees of stock issued under stock
option plans and exercise of
non-qualified stock options -- -- -- -- 856 --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1994 22,393 22,393 -- -- 38,553 349,193
- ------------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- -- -- 55,297
- ------------------------------------------------------------------------------------------------------------------------------------
Cash dividends ($.74 per share) -- -- -- -- -- (16,680)
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury shares issued through sale of
stock under employee stock purchase
plan (Note 5) 265 265 -- -- 6,169 --
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury shares issued through exercise
of stock options net of shares
exchanged in lieu of cash (Note 5) 31 31 -- -- 560 --
- ------------------------------------------------------------------------------------------------------------------------------------
Tax benefit from early disposition by
employees of stock issued under stock
option plans and exercise of
non-qualified stock options -- -- -- -- 518 --
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized security gain/loss (Note 9) -- -- -- (181) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 1995 22,689 $ 22,689 $ -- $ (181) $ 45,800 $387,810
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
WALLACE - page 25
<PAGE>
CONSOLIDATED BALANCE SHEETS
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
(dollars in thousands) July 31, 1995 and 1994 1995 1994
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
- -------------------------------------------------------------------------------------------------------
Current Assets:
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 10,815 $ 17,587
- -------------------------------------------------------------------------------------------------------
Short-term investments, at cost 30,242 59,411
- -------------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts
of $2,671 in 1995 and $1,982 in 1994 127,365 95,178
- -------------------------------------------------------------------------------------------------------
Inventories (Note 2) 79,523 69,543
- -------------------------------------------------------------------------------------------------------
Advances and prepaid expenses 10,927 6,507
- -------------------------------------------------------------------------------------------------------
Total current assets 258,872 248,226
- -------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
- -------------------------------------------------------------------------------------------------------
Land and buildings 106,342 100,206
- -------------------------------------------------------------------------------------------------------
Machinery, equipment, furniture and fixtures 380,380 331,630
- -------------------------------------------------------------------------------------------------------
Leasehold improvements 485 408
- -------------------------------------------------------------------------------------------------------
Total property, plant and equipment 487,207 432,244
- -------------------------------------------------------------------------------------------------------
Less-reserves for depreciation and amortization (230,691) (199,382)
- -------------------------------------------------------------------------------------------------------
Net property, plant and equipment 256,516 232,862
- -------------------------------------------------------------------------------------------------------
Intangible assets arising from acquisitions 26,575 15,779
- -------------------------------------------------------------------------------------------------------
Cash surrender value of life insurance 26,836 21,530
- -------------------------------------------------------------------------------------------------------
System development costs* 15,253 9,587
- -------------------------------------------------------------------------------------------------------
Other assets* 8,650 10,608
- -------------------------------------------------------------------------------------------------------
Total Assets $ 592,702 $ 538,592
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------
Current Liabilities:
- -------------------------------------------------------------------------------------------------------
Current maturities of long-term debt $ 205 $ 6,110
- -------------------------------------------------------------------------------------------------------
Accounts payable 24,209 24,009
- -------------------------------------------------------------------------------------------------------
Dividends payable 4,198 3,583
- -------------------------------------------------------------------------------------------------------
Accrued compensation and related expenses 18,450 14,471
- -------------------------------------------------------------------------------------------------------
Other accrued expenses 6,754 4,332
- -------------------------------------------------------------------------------------------------------
Contribution to profit sharing and retirement fund (Note 4) 11,906 10,403
- -------------------------------------------------------------------------------------------------------
Federal and state income taxes -- 1,886
- -------------------------------------------------------------------------------------------------------
Total current liabilities 65,722 64,794
- -------------------------------------------------------------------------------------------------------
Deferred compensation and retirement benefits (Note 8) 21,167 17,976
- -------------------------------------------------------------------------------------------------------
Deferred income taxes (Note 7) 24,095 22,183
- -------------------------------------------------------------------------------------------------------
Long-term debt (Note 3) 25,600 23,500
- -------------------------------------------------------------------------------------------------------
Stockholders' equity:
- -------------------------------------------------------------------------------------------------------
Preferred stock, $50 par value, authorized 500,000 shares -- --
- -------------------------------------------------------------------------------------------------------
Common stock, $1.00 par value, authorized 50,000,000 shares 22,689 22,393
- -------------------------------------------------------------------------------------------------------
Unrealized security gain/loss (Note 9) (181) --
- -------------------------------------------------------------------------------------------------------
Additional capital 45,800 38,553
- -------------------------------------------------------------------------------------------------------
Retained earnings 387,810 349,193
- -------------------------------------------------------------------------------------------------------
Total stockholders' equity 456,118 410,139
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 592,702 $ 538,592
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
*Prior year has been reclassified to conform with current year presentation.
WALLACE - page 26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOW
(Before Cumulative Effect of Accounting Changes)
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
(dollars in thousands) For the years ended July 31, 1995, 1994 and 1993 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
- --------------------------------------------------------------------------------------------------------------------
Net income $ 55,297 $ 47,268 $ 41,170
- --------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating activities:
- --------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 37,296 33,006 30,299
- --------------------------------------------------------------------------------------------------------------------
Deferred taxes 1,375 3,737 (1,023)
- --------------------------------------------------------------------------------------------------------------------
(Gain) loss on disposal of property (399) 57 (141)
- --------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities, net of effects from
the purchase of Lampro Graphics and Retterbush and Sauer
- --------------------------------------------------------------------------------------------------------------------
Accounts receivable (30,538) (2,403) (3,582)
- --------------------------------------------------------------------------------------------------------------------
Inventories (9,213) (853) (12,652)
- --------------------------------------------------------------------------------------------------------------------
Advances and prepaid expenses (2,811) (1,799) 142
- --------------------------------------------------------------------------------------------------------------------
Other assets (14,145) (9,696) (4,907)
- --------------------------------------------------------------------------------------------------------------------
Accounts payable and other liabilities 6,328 5,708 3,684
- --------------------------------------------------------------------------------------------------------------------
Federal and state income taxes (1,886) (1,827) (1,646)
- --------------------------------------------------------------------------------------------------------------------
Deferred compensation and retirement benefits 3,191 2,871 557
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 44,495 76,069 51,901
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
- --------------------------------------------------------------------------------------------------------------------
Capital expenditures (51,487) (34,228) (31,818)
- --------------------------------------------------------------------------------------------------------------------
Short-term investments 29,169 (19,588) 4,777
- --------------------------------------------------------------------------------------------------------------------
Unrealized security gain/loss (181) -- --
- --------------------------------------------------------------------------------------------------------------------
Proceeds from disposal of property 455 262 879
- --------------------------------------------------------------------------------------------------------------------
Other capital investments, including acquisitions (17,017) (2,700) --
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (39,061) (56,254) (26,162)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
- --------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of common stock -- -- 3,919
- --------------------------------------------------------------------------------------------------------------------
Cash dividends paid (16,065) (13,855) (12,738)
- --------------------------------------------------------------------------------------------------------------------
Amounts paid on long-term debt (6,110) (4,849) (709)
- --------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of short-term debt 4,829 -- --
- --------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of long-term debt 2,100 8,500 --
- --------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of treasury stock 7,544 8,301 5,255
- --------------------------------------------------------------------------------------------------------------------
Retirement of short-term and acquired debt (6,474) -- --
- --------------------------------------------------------------------------------------------------------------------
Net construction funds held by trustee 1,970 (7,432) --
- --------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock -- -- (24,877)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (12,206) (9,335) (29,150)
- --------------------------------------------------------------------------------------------------------------------
Net changes in cash and cash equivalents (6,772) 10,480 (3,411)
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 17,587 7,107 10,518
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 10,815 $ 17,587 $ 7,107
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Supplemental disclosure:
- --------------------------------------------------------------------------------------------------------------------
Interest paid (net of interest capitalized) $ (220) $ 339 $ 664
- --------------------------------------------------------------------------------------------------------------------
Income taxes paid 35,520 25,444 22,598
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
WALLACE - page 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1995
1. SUMMARY OF MAJOR ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include the
accounts of the company and its subsidiary, which is wholly owned. All
significant intercompany transactions have been eliminated.
REVENUE RECOGNITION: Revenues from product sales and software licenses are
recorded when the product is shipped to the customer. In some instances,
revenue is not recognized until installation is complete or customer acceptance
is acknowledged.
INVENTORIES:Inventories are stated at cost which does not exceed market and
include material, labor and overhead. Cost is determined on the last-in,
first-out (LIFO) basis for certain inventories, and on the first-in, first-out
(FIFO) basis for other inventories.
DEPRECIATION: Depreciation for financial statement purposes is computed using
the straight-line method over the estimated useful lives of the various classes
of property, plant and equipment.
<TABLE>
<S> <C>
- -------------------------------------------------------------
- -------------------------------------------------------------
Buildings 40 years
- -------------------------------------------------------------
Building equipment 10-15 years
- -------------------------------------------------------------
Machinery and equipment 3-10 years
- -------------------------------------------------------------
Leasehold improvements Lease period
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
INTANGIBLE ASSETS: $1,382,000 of Intangible Assets arising from Acquisitions
represents the excess of cost over net assets of a business purchased in 1962.
This amount is not being amortized since the company does not believe any
reduction of continuing value has occurred. The Company periodically reviews
intangible assets to assess recoverability, and impairments would be recognized
in operating results if a permanent diminution in value were to occur.
The excess of cost over the assigned value of the net tangible assets in
connection with all other acquisitions is being amortized on a straight-line
basis over 40 years. Amortization expense amounted to $491,000 in 1995 and
$389,000 in each of 1994 and 1993. The unamortized balance relating to the
Retterbush and Sauer acquisition was $8,336,000 at July 31, 1995; the Lampro
balance was $2,850,000; the Colorforms balance was $14,008,000. The July 31,
1994 unamortized balance relating to the Colorforms acquisition was $14,397,000.
OTHER ASSETS: $5,462,000 in 1995, and $7,432,000 in 1994 represent the unused
balance of construction funds held for the Lebanon, Kentucky plant. The company
expenses as incurred the cost of maintaining existing computer software.
Purchased software is capitalized and then amortized over periods ranging from
three to seven years. Amortization expense for computer software was $2,866,000
in 1995; $1,595,000 in 1994; and $1,322,000 in 1993. The unamortized balance of
capitalized computer software was $15,253,000 in 1995 and $9,587,000 in 1994.
INCOME TAXES: Effective August 1, 1993, the company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." Under that standard, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying statutory tax rates
applicable to future years to differences between the financial statement
carrying amount and the tax bases of existing assets and liabilities.
Investment tax credits are amortized to income over the lives of the applicable
assets. The unamortized investment tax credit amounted to $401,000 in 1995 and
$598,000 in 1994.
INDUSTRY SEGMENT: The company is engaged primarily in the computer services and
supply industry.
NET INCOME PER SHARE: Net income per share is based on the weighted average
number of shares outstanding during each year. The exercise of outstanding
stock options would not have a significant dilutive effect upon net income per
share.
CASH AND CASH EQUIVALENTS: The company invests excess cash balances in
short-term securities, including commercial paper, money market funds, and
municipal bonds whose original maturities are less than three months.
CAPITALIZED INTEREST COSTS: Interest costs are capitalized based upon the cost
of capital projects in progress during the year. Interest costs capitalized (in
thousands) for the last three years were:
WALLACE - page 28
<PAGE>
<TABLE>
<CAPTION>
INTEREST INTEREST
EXPENSE CAPITALIZED
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C> <C>
1995 $ 2,717 $ 1,508
- --------------------------------------------------------------------------
1994 2,311 986
- --------------------------------------------------------------------------
1993 1,983 787
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
Amortization expense for interest capitalized was $681,000 in 1995; $597,000 in
1994; and $531,000 in 1993.
2. INVENTORIES: Inventories (in thousands) at July 31, were as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 25,981 $ 22,221
- --------------------------------------------------------------------------
Work in process 2,060 1,614
- --------------------------------------------------------------------------
Finished products 51,482 45,708
- --------------------------------------------------------------------------
$ 79,523 $ 69,543
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
At July 31, 1995 and 1994 the cost of inventories aggregating $51,957,000 and
$49,474,000, respectively, was determined on the LIFO method.
Inventories would have been $26,437,000 higher in Fiscal 1995 and
$12,658,000 higher in Fiscal 1994, if the FIFO method had been used for all
inventories.
3. FINANCING ARRANGEMENTS: Long-term debt (in thousands) consisted of the
following at July 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Average 3.83% adjustable industrial
revenue bonds due 2007 $ 7,000 $ 7,000
- ------------------------------------------------------------------------
Average 3.73% adjustable industrial
revenue bonds due 2009 8,000 8,000
- ------------------------------------------------------------------------
Average 3.87% adjustable industrial
revenue bonds due 2019 8,500 8,500
- ------------------------------------------------------------------------
Average 5.55% adjustable promissory
note due 1998 2,000 --
- ------------------------------------------------------------------------
Average 6.45% adjustable promissory note
maturing serially not earlier than 1998 305 --
- ------------------------------------------------------------------------
10.25% promissory note due 1995 -- 3,086
- ------------------------------------------------------------------------
9.75% industrial revenue bond due 1995 -- 3,000
- ------------------------------------------------------------------------
11.25% capital lease due 1994 -- 24
- ------------------------------------------------------------------------
$ 25,805 $ 29,610
Less-current portion 205 6,110
- ------------------------------------------------------------------------
$ 25,600 $ 23,500
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
</TABLE>
Based upon the interest rates currently available to the company for borrowings
with similar terms and maturities, the fair value of the company's debt and
other financial instruments are either carried at fair value or do not
materially differ from fair value.
The industrial revenue bonds due 2007, 2009 and 2019 may be tendered at
the option of the holders on dates specified in the agreements. The company
maintains arrangements with agents to remarket any bonds tendered before the
final maturity dates. The bonds are also supported by letters of credit.
The company's financing arrangements contain certain restrictive financial
covenants. Under the most restrictive of the covenants, the company must
maintain a current ratio of at least 2 to 1, net worth of not less than $297
million and funded debt not greater than 40% of net tangible assets plus funded
debt. The company was in compliance with all debt covenants at July 31, 1995
and 1994.
Principal payments due on long-term debt during the next five years are as
follows: $205,000 in 1996; $0 in 1997; $2,100,000 in 1998; and $0 in each of
1999 through 2000.
At July 31, 1995 the company had $14,000,000 of unused short-term lines of
bank credit at the prime rate of interest. The company has agreed to maintain a
compensating balance equal to 5% for a $1,000,000 line. The balance of the
short-term credit lines are uncommitted and unsecured. There were no borrowings
under these lines in Fiscal 1995 or Fiscal 1994.
4. PROFIT SHARING AND RETIREMENT PLAN: The company has a contributory profit
sharing and retirement plan covering most employees. Company contributions to
the Plan charged to operations were $11,906,000 in Fiscal 1995, $10,403,000 in
Fiscal 1994 and $8,386,000 in Fiscal 1993.
5. STOCK OPTIONS: The company has a 1989 stock option plan, which will expire
on September 12, 1999, under which options may be granted to officers and
others, except for non-employee directors. Two types of options to purchase
common stock may be granted: Incentive Options and Non-Qualified Options. In
the case of Incentive Options, the
WALLACE - page 29
<PAGE>
option price may not be less than 100% of the market value of the stock at the
date of grant. For Non-Qualified Options, the grant price may not be less than
85% of the market value; however, to date no options have been granted at less
than 100% of market value. The option price may be paid in cash or by
exchanging previously acquired company common stock with a market value equal
to the purchase price. Options become exercisable as to 40% of the shares
granted one year after grant and the remaining 60% of the shares granted become
exercisable two years after grant. Options expire 10 years after grant.
The following table summarizes the activity under the stock option plan
for the last two years:
<TABLE>
<CAPTION>
AVERAGE
OPTION
NUMBER PRICE PER
OF SHARES SHARE
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at July 31, 1993 413,201 $ 21.95
- --------------------------------------------------------------------------
Granted 75,500 28.88
- --------------------------------------------------------------------------
Forfeited (5,000) 25.51
- --------------------------------------------------------------------------
Exercised (129,501) 20.36
- --------------------------------------------------------------------------
Outstanding at July 31, 1994 354,200 $ 24.02
- --------------------------------------------------------------------------
Granted 92,900 33.32
- --------------------------------------------------------------------------
Forfeited (2,100) 29.71
- --------------------------------------------------------------------------
Exercised (35,108) 21.10
- --------------------------------------------------------------------------
Outstanding at July 31, 1995 409,892 $ 26.36
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<CAPTION>
JULY 31 JULY 31
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Shares available for future grants 293,076 385,976
- --------------------------------------------------------------------------
Shares exercisable 272,992 241,800
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
</TABLE>
The company also has an Employee Stock Purchase Plan, adopted in 1974 and
expiring December 31, 1996, under which a total of 4,700,000 shares of common
stock have been reserved for purchase by employees through semi-annual
offerings. At the annual meeting of stockholders held on November 9, 1994, the
number of shares of common stock available for future grants under the
company's Stock Option and Employee Stock Purchase Plans was increased by
500,000 which is included in the aforementioned total. The option price is the
lower of 85% of the market price of the shares on the commencement date or the
termination date of each offering period. Employees participate in the plan
through payroll deductions and the plan qualifies for certain tax advantages
under section 423 of the Internal Revenue Code. Options were exercised to
purchase 265,627 shares at $24.23 in Fiscal 1995, and 236,407 shares at $24.44
in Fiscal 1994. Shares issued in Fiscal 1995 and Fiscal 1994 were issued from
the company's Treasury Stock. There were 676,626 shares available at July 31,
1995 and 442,253 shares available at July 31, 1994 for future issuance under
this plan.
6. LEASE COMMITMENTS: Total rent expense for manufacturing facilities, sales
offices and equipment amounted to $5,508,000 in 1995, $4,907,000 in 1994 and
$4,900,000 in 1993. The minimum future rental commitments under non-cancellable
lease arrangements are $2,983,000 in 1996; $1,865,000 in 1997; $955,000 in
1998; and $467,000 in 1999; and $501,000 for 2000 and beyond.
7. INCOME TAXES: Effective August 1, 1993, the company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes."
The significant deferred tax assets and liabilities at July 31, in
thousands of dollars, were as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
- ----------------------------------------------------------------------------
Accelerated depreciation $ 30,124 $ 31,565
- ----------------------------------------------------------------------------
Software development 5,052 2,848
- ----------------------------------------------------------------------------
Other 4,971 4,964
- ----------------------------------------------------------------------------
Total Deferred Liabilities 40,147 39,377
- ----------------------------------------------------------------------------
Deferred tax assets:
- ----------------------------------------------------------------------------
Deferred compensation 5,300 3,662
- ----------------------------------------------------------------------------
Postretirement benefits 1,601 2,151
- ----------------------------------------------------------------------------
Inventory capitalization 2,926 2,433
- ----------------------------------------------------------------------------
Other 7,674 5,495
- ----------------------------------------------------------------------------
Total Deferred Assets 17,501 13,741
- ----------------------------------------------------------------------------
Net Deferred Tax Liabilities $ 22,646 $ 25,636
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
WALLACE - page 30
<PAGE>
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 34.0%
- -------------------------------------------------------------------------
State and local
income taxes 4.4 4.4 4.5
- -------------------------------------------------------------------------
Tax exempt
interest income (1.0) (1.1) (1.2)
- -------------------------------------------------------------------------
Tax credits and other (1.6) (2.3) (3.3)
- -------------------------------------------------------------------------
Effective tax rate 36.8% 36.0% 34.0%
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
8. POSTRETIREMENT BENEFITS: All current retirees; employees at least 55 with 20
or more years of service as of December 31, 1993; and employees between the
ages of 50 and 54 who have at least 20 years of service as of December 31,
1993, and retire before December 31, 1998; are entitled to postretirement
health care coverage. These benefits are subject to the same deductibles and
co-payment provisions which apply to active employees. All other employees who
retire after December 31, 1993 will pay 100% of their retirement medical
coverage. The company may amend or change the plan periodically.
Effective August 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The company elected to
immediately recognize the transition obligation for future benefits to be paid
related to past employee services.
The net-accrual basis expense for postretirement benefits as of July 31
was as follows:
<TABLE>
<CAPTION>
(in thousands of dollars) 1995 1994
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<S> <C> <C>
Components of net periodic postretirement benefit costs:
- ---------------------------------------------------------------------------
Service cost $ 22 $ 40
- ---------------------------------------------------------------------------
Interest cost 308 391
- ---------------------------------------------------------------------------
Amortization of (gain) (985) --
- ---------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ (655) $ 431
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The liability at July 31 (included in Deferred Compensation and Retirement
Benefits on the accompanying Consolidated Balance Sheet, in thousands of
dollars) for postretirement benefits is as follows:
<TABLE>
<CAPTION>
1995 1994
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
- -------------------------------------------------------------------------
Retirees $ 2,580 $ 2,882
- -------------------------------------------------------------------------
Fully eligible active
plan participants 800 1,490
- -------------------------------------------------------------------------
Other active plan
participants 666 992
- -------------------------------------------------------------------------
Actuarial present value
of benefit obligations: $ 4,046 $ 5,364
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
</TABLE>
For financial reporting purposes, the actuarial computations assumed a discount
rate of 8.0% to determine the accumulated postretirement benefit obligation,
and an assumed health care cost trend rate of 10.64% and 9.14% for pre-65 and
post-65 medical coverage, respectively, for 1995, declining gradually to 6.0%
in 2001, to measure the accumulated postretirement benefit obligation. However,
a one percentage point increase in the assumed health care cost trend would
increase the aggregate of the service cost and interest cost components of the
annual postretirement expense by $30,000 and the postretirement benefit
obligation as of July 31, 1995 by $317,000.
9. INVESTMENTS IN DEBT AND EQUITY SECURITIES: Effective August 1, 1994, the
company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115),
"Accounting for Certain Investments in Debt and Equity Securities," which
requires securities that are available-for-sale to be carried at fair value,
with changes in net unrealized gains and losses recorded as a separate
component of shareholders' equity. Previously, fixed income securities
classified as available-for-sale were carried at the lower of amortized cost or
fair value, determined in the aggregate. The adoption of this statement had no
impact on net income, but decreased shareholders' equity by $181,000 at July
31, 1995 (net of tax).
WALLACE - page 31
<PAGE>
The amortized cost and market value of investments as of adoption on August 1,
1994, and as of July 31, 1995 were as follows:
<TABLE>
<CAPTION>
August 1, 1994 AMORTIZED UNREALIZED HOLDING MARKET
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale
- ------------------------------------------------------------------------------------------------------------
State, municipal & other gov't debt $ 22,629,000 $ 42,000 $ 64,000 $ 22,607,000
- ------------------------------------------------------------------------------------------------------------
Corporate debt 1,992,000 7,000 -- 1,999,000
- ------------------------------------------------------------------------------------------------------------
Equity 14,322,000 86,000 795,000 13,613,000
- ------------------------------------------------------------------------------------------------------------
Other 68,000 -- -- 68,000
- ------------------------------------------------------------------------------------------------------------
Held-to-maturity
- ------------------------------------------------------------------------------------------------------------
State, municipal & other gov't debt 20,400,000 -- -- 20,400,000
- ------------------------------------------------------------------------------------------------------------
Total short-term investments $ 59,411,000 $ 135,000 $ 859,000 $ 58,687,000
- ------------------------------------------------------------------------------------------------------------
Long-term available-for-sale
- ------------------------------------------------------------------------------------------------------------
Equity $ 1,992,000 $ -- $ -- $ 1,992,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
JULY 31, 1995 AMORTIZED UNREALIZED HOLDING MARKET
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale
- ------------------------------------------------------------------------------------------------------------
State, municipal & other gov't debt $ 21,293,000 $ 113,000 $ 23,000 $ 21,383,000
- ------------------------------------------------------------------------------------------------------------
Equity 9,251,000 -- 392,000 8,859,000
- ------------------------------------------------------------------------------------------------------------
Held-to-maturity
- ------------------------------------------------------------------------------------------------------------
State, municipal & other gov't debt -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total short-term investments $ 30,544,000 $ 113,000 $ 415,000 $ 30,242,000
- ------------------------------------------------------------------------------------------------------------
Long-term available-for-sale
- ------------------------------------------------------------------------------------------------------------
Equity $ 1,992,000 $ -- $ -- $ 1,992,000
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Short-term investments were carried at amortized cost at July 31, 1994.
Maturities for all debt securities classified as short-term are less than one
year. The long-term investment is included in the "Other Assets" section of the
balance sheet.
For Fiscal 1995, proceeds on the sale of available-for-sale securities
were $8,710,000, with gross realized gains of $144,000. The amortized cost of
these securities was based on specific identification. No securities during the
period were classified as trading securities. There have been no sales of
held-to-maturity securities other than at their maturity date. The net
unrealized loss on available-for-sale securities has decreased by $253,000 (net
of tax) from August 1, 1994 to July 31, 1995.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE STOCKHOLDERS OF WALLACE
COMPUTER SERVICES, INC. We have audited the accompanying consolidated balance
sheets of Wallace Computer Services, Inc., (a Delaware corporation) and
Subsidiary as of July 31, 1995 and 1994 and the related consolidated statements
of income, stockholders' equity and cash flows for each of the three Fiscal
years in the period ended July 31, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wallace Computer Services,
Inc. and Subsidiary as of July 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three Fiscal years in the
period ended July 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in Notes 7, 8 and 9 to the consolidated financial statements,
the company changed its method of accounting for income taxes and post
retirement benefits effective August 1, 1993, and its method of accounting for
certain investments in debt and equity securities effective August 1, 1994.
Arthur Andersen LLP - Chicago, Illinois - August 23, 1995
WALLACE - page 32
<PAGE>
<TABLE>
<CAPTION>
CORPORATE AND INVESTOR INFORMATION
<S> <C> <C> <C>
BOARD OF DIRECTORS BRUCE D'ANGELO MICHAEL D. KEIM DISTRIBUTION CENTERS
Vice President Corporate Vice President Business Lodi, Calif.
THEODORE DIMITRIOU (E) Sales Forms Manufacturing St. Charles, Ill.
Chairman Allentown, Penn.
MICHAEL R. FINGER DAVID M. ROUSSEAU
FRED F. CANNING (C) (E) Vice President, General Vice President MARKETING AND ADMINISTRATIVE
Retired President and Manager Direct Mail Division Information Services Elk Grove Village, Ill.
Chief Operating Officer Hillside, Ill.
Walgreen Co. MICHAEL J. HALLORAN STEVEN F. ARPAIA Hinsdale, Ill.
Vice President, Vice President Colorforms Oak Brook, Ill.
ROBERT J. CRONIN (E) Chief Financial Officer Sales St. Charles, Ill.
President and Chief and Assistant Secretary
Executive Officer JAMES E. KERSTEN RESEARCH AND DEVELOPMENT
DONALD J. HOFFMANN Vice President Direct Sales - Irvine, Calif.
RICHARD F. DOYLE (A) (E) Vice President Engineering West Bellwood, Ill.
Former Senior Vice President and Research Hillside, Ill.
Finance and Administration MARK D. MINDRUM
Texas Oil & Gas Corp. MICHAEL M. MULCAHY Vice President Direct Sales - SALES OFFICES
Vice President, General Midwest Nationwide
R. DARRELL EWERS (A) (C) Manager Colorforms Division
Retired Executive Vice President EDWARD A. RIGUARDI CORPORATE INFORMATION
Wm. Wrigley Jr. Company WAYNE E. RICHTER Vice President Direct Sales -
Vice President, General East GENERAL COUNSEL
WILLIAM N. LANE, III (C) Manager Label Division Butler, Rubin, Saltarelli &
Chairman, President and RONALD D. SEAVEY Boyd Chicago, Ill.
Chief Executive Officer MICHAEL T. QUANE Vice President Direct Sales -
Lane Industries, Inc. Treasurer Southeast TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust
WILLIAM E. OLSEN (C) MICHAEL T. LAUDIZIO FACILITIES Boston, Mass.
Independent Consultant Secretary
HEADQUARTERS AUDITORS
NEELE E. STEARNS, JR. (A) CRAIG T. BOYD Hillside, Ill. Arthur Andersen LLP
Former President and Assistant Secretary Chicago, Ill.
Chief Executive Officer MANUFACTURING PLANTS
CC Industries, Inc. DIVISION MANAGERS Irvine, Calif. (F) COMMON STOCK
Lodi, Calif. (F,O,L,C) The common shares of Wallace
(A) Member of the Audit MICHAEL A. ANDERSON San Luis Obispo, Calif. (F) Computer Services are traded
Committee Vice President, Metter, Ga (F) on the New York Stock
(C) Member of the Compensation General Manager Clinton, Ill. (D) Exchange.
Committee TOPS Division Elk Grove Village, Ill. (D,C)
(E) Member of the Executive Hillside, Ill. (C) Ticker symbol: WCS
Committee DAVID W. BERTRAM St. Charles, Ill. (F,L) Daily newspaper stock table
Vice President, St. Charles, Ill. (F) listing: WallaceCS
OFFICERS Corporate Controller Osage, Iowa (F)
Osage, Iowa (O) ANNUAL REPORT TO THE S.E.C.
THEODORE DIMITRIOU THOMAS G. BROOKER Lebanon, Ky. (F,C) Reports to the S.E.C. on Forms
Chairman of the Board Vice President, Gastonia, N.C. (F) 10-K and 10-Q are available by
General Manager Wilson, N.C. (L) writing to the Corporate Secretary.
ROBERT J. CRONIN Office Products Tonawanda, N.Y. (D)
President and Chief Cincinnati, Ohio (L) PRODUCT INFORMATION
Executive Officer DOUGLAS W. FITZGERALD Streetsboro, Ohio (L) For information on Wallace's
Vice President Marketing Covington, Tenn. (O) information management products,
MICHAEL O. DUFFIELD Brenham, Texas (L,O) services and solutions, or the
Senior Vice President Operations THOMAS W. FRANKE Marlin, Texas (F) number of a Wallace sales office
Vice President, General Luray, Va. (F) in your area, please call or
MICHAEL T. LEATHERMAN Manager Wallace Press Manchester, Vt. (F,D) write to the Marketing Depart-
Senior Vice President ment at corporate headquarters
Chief Information Officer JOSEPH J. JUSZAK (F) Forms in Hillside: 800/323-8447.
Vice President Quality (O) Office products
and Technical Services (L) Labels
(D) Direct response printing
(C) Commercial printing
</TABLE>
<PAGE>
[LOGO] WALLACE
INFORMATION MANAGEMENT PRODUCTS, SERVICES, SOLUTIONS.
WALLACE COMPUTER SERVICES, INC.
CORPORATE OFFICES
4600 WEST ROOSEVELT ROAD, HILLSIDE, IL. 60162
312.626.2000 708.449.8600
<PAGE>
EXHIBIT 21
The Registrant owns 100% of the Stock of Visible Computer Supply Corporation, an
Illinois Corporation.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, dated August 23, 1995, included (or incorporated by reference) in this
Form 10-K, into the Company's previously filed Registration Statements on Form
S-8 (File No. 2-52229, No. 2-52357, No. 2-60252, No. 2-63000, No. 2-70022, No.
2-87821, No. 33-10353, No. 33-32706 and No. 33-86496).
Arthur Andersen LLP
Chicago, Illinois
October 18, 1995
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
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<SECURITIES> 30,242
<RECEIVABLES> 130,036
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0
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<OTHER-SE> 433,429
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