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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
SCHEDULE 14D-9
AMENDMENT NO. 13
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
_______________________
WALLACE COMPUTER SERVICES, INC.
(NAME OF SUBJECT COMPANY)
WALLACE COMPUTER SERVICES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
_______________________
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
932270 10 1
(CUSIP NUMBER OF CLASS SECURITIES)
_______________________
MICHAEL J. HALLORAN
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND ASSISTANT SECRETARY
WALLACE COMPUTER SERVICES, INC.
4600 W. ROOSEVELT ROAD
HILLSIDE, ILLINOIS 60162
(312) 626-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
FREDERICK C. LOWINGER CRAIG T. BOYD
STEVEN SUTHERLAND BUTLER, RUBIN,
SIDLEY & AUSTIN SALTARELLI & BOYD
ONE FIRST NATIONAL PLAZA THREE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60602
(312) 853-7000 (312) 444-9660
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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This Amendment No. 13 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission on August 15, 1995 (as amended, the "Schedule
14D-9") by Wallace Computer Services, Inc., a Delaware corporation (the
"Company"), relating to the tender offer by Moore Corporation Limited, an
Ontario corporation ("Moore"), and FRDK, Inc., a New York corporation (the
"Bidder") and a wholly owned subsidiary of Moore, to purchase all outstanding
shares of the Company's common stock, par value $1.00 per share, including
associated preferred stock purchase rights, at a price per share of $60.00, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase of the Bidder and Moore dated August 2, 1995, the
Supplement dated October 12, 1995 and in the related Letter of Transmittal.
Unless otherwise indicated, all capitalized terms used but not defined herein
shall have the meanings assigned to them in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 of Schedule 14D-9 is hereby amended and supplemented as
follows:
On November 21, 1995, the plaintiffs in Koff v. Dimitriou, et al.
and LaPerriere v. Wallace Computer Services, Inc., et al. filed a Second
Amended Class Action Complaint in the Court of Chancery of the State of
Delaware. A copy of the Second Amended Class Action Complaint is filed as
Exhibit 38 hereto and incorporated herein by reference.
On November 29, 1995, the Company mailed a letter to stockholders
of the Company. A copy of such letter to stockholders is filed as Exhibit 39
hereto and is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 38 Second Amended Class Action Complaint to Koff
v. Dimitriou, et al. and LaPerriere v. Wallace
Computer Services, Inc., et al.
Exhibit 39 Letter to Stockholders of the Company mailed on
November 29, 1995
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ Michael J. Halloran
-------------------------------------
Name: Michael J. Halloran
Title: Vice President, Chief Financial
Officer and Assistant Secretary
Dated: November 29, 1995
-2-
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EXHIBIT INDEX
Exhibit 38 Second Amended Class Action Complaint to Koff v. Dimitriou,
et al. and LaPerriere v. Wallace Computer Services, Inc., et al.
Exhibit 39 Letter to Stockholders of the Company mailed on November 29, 1995
-3-
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ------------------------------------------------------------X
BERNARD KOFF, :
:
Plaintiff, :
:
v. :
:
THEODORE DIMITRIOU, FRED CANNING, : C.A. No. 14448
WILLIAM N. LANE, NEELE E. STEARNS, :
JR., ROBERT J. CRONIN, DARRELL R. :
EWERS, RICHARD F. DOYLE, WILLIAM :
E. OLSEN, and WALLACE COMPUTER :
SERVICES, INC., :
:
Defendants. :
- ------------------------------------------------------------X
KITTY LaPERRIERE, :
:
Plaintiff, :
:
-against- : C.A. No. 14449
:
WALLACE COMPUTER SERVICES INC., :
THEODORE DIMITRIOU, and :
ROBERT J. CRONIN, :
:
Defendants. :
- ------------------------------------------------------------X
SECOND AMENDED CLASS ACTION COMPLAINT
Plaintiffs, by their attorneys, for their Second Amended Complaint
allege, upon information and belief, except as to the allegations contained in
paragraphs 2 and 3, which plaintiffs allege upon knowledge, as follows:
1. Plaintiffs bring this action on behalf of themselves and all
other stockholders of defendant Wallace Computer Services Inc. ("Wallace" or the
"Company")
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similarly situated (the "Class") for declaratory and injunctive relief, and/or
compensatory damages, arising from defendants' breach of their fiduciary duties
to the stockholders of Wallace. As detailed herein, defendants, Wallace's
directors, have acted unreasonably and contrary to the best interests of
Wallace's public stockholders in an effort to thwart the offer by Moore
Corporation Limited ("Moore") to acquire Wallace and the effort by Moore to
elect its designees to Wallace's Board of Directors and unseat the individual
defendants. Defendants failed to investigate properly and fully consider
Moore's offer. Defendants have withheld from Wallace's shareholders information
material to shareholders' response to the Moore offer and the upcoming election
of Wallace directors. Defendants have also employed entrenchment devices such
as compensation and benefit plan amendments to deny shareholders the benefit of
the Moore offer. Defendants have accordingly breached their fiduciary duties of
care, loyalty and candor.
THE PARTIES
2. Plaintiff Kitty LaPerriere is and has been, at all relevant times
the owner of shares of Wallace common stock.
3. Plaintiff Bernard Koff is and has been at all relevant times the
owner of shares of Wallace common stock.
4. Defendant Wallace is a Delaware corporation with its principal
place of business located at 4600 West Roosevelt Road, Hillside, Illinois.
Wallace is a leading provider of computer services and supplies such as business
forms, commercial and
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promotional graphics printing, computer labels, machine ribbons, computer
hardware and software, computer accessories and office products.
5. At all relevant times herein, defendant Theodore Dimitriou
("Dimitriou") has been the Chairman of Wallace's Board of Directors. As of
November 9, 1994, Dimitriou owned or controlled less than 0.6% of Wallace common
stock. For the fiscal year ended July 31, 1994, Dimitriou received total
compensation from Wallace in the amount of approximately $519,546.
6. At all relevant times herein, defendant Robert J. Cronin
("Cronin") has been the President, Chief Executive Officer and a Director of the
Company. As of November 9, 1994, Cronin owned or controlled less than 0.25% of
Wallace common stock. For the fiscal year ended July 31, 1994, Cronin received
total compensation from Wallace in the amount of approximately $568,987.
7. Defendants Fred Canning, William N. Lane, Neele E. Stearns, Jr.,
Darrell Ewers, Richard F. Doyle and William E. Olsen, at all relevant times,
have been Directors of Wallace and, in addition to other compensation, are paid
$19,000 per annum and receive substantial fees for each Board meeting they
attend.
8. The defendants referred to in paragraphs 7-9 above, are
collectively referred to herein as the "Individual Defendants." They have
constituted Wallace's Board of Directors at all times material to the claims
asserted.
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CLASS ACTION ALLEGATIONS
9. Plaintiffs bring this action pursuant to Rule 23 of the Rules of
this Court for declaratory, injunctive and other relief on their own behalf and
as a class action, on behalf of all common stockholders of Wallace (except
defendants herein and any person, firm, trust, corporation or other entity
related to or affiliated with any of the defendants) and their successors in
interest, who are being deprived of the opportunity to maximize the value of
their Wallace shares by the wrongful acts of the defendants described herein,
and who are being denied information material to their votes in the upcoming
annual election of directors and to their decision as to Moore's tender offer.
10. This action is properly maintainable as a class action for the
following reasons:
11. The class of stockholders for whose benefit this action is
brought is so numerous that joinder of all Class members is impracticable.
There are more than 22 million shares of Wallace common stock held by
approximately 3,985 stockholders of record who are members of the Class. The
holders of these shares are geographically dispersed throughout the United
States. Wallace stock is listed and actively traded on the New York Stock
Exchange.
12. There are questions of law and fact which are common to the
members of the Class including, INTER ALIA, the following:
a. whether the defendants, in bad faith and for improper
motives, have prevented members of the Class from receiving the maximum
value achievable for their shares of Wallace common stock;
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b. whether the defendants have failed to consider, investigate
and inform themselves in good faith, as to the adequacy of unsolicited
offers for the Company, including the adequacy of Moore's offer to purchase
all outstanding Wallace shares;
c. whether the defendants have engaged in conduct constituting
unfair dealing to the detriment of the public stockholders of Wallace; and
d. whether the defendants have breached their fiduciary and
common law duties owed by them to plaintiffs and the other members of the
Class, including their duties of care, loyalty and candor.
13. The claims of plaintiffs are typical of the claims of the other
members of the Class, and plaintiffs have no interests that are adverse or
antagonistic to the interests of the Class.
14. Plaintiffs are committed to the vigorous prosecution of this
action and have retained competent counsel experienced in litigation of this
nature. Accordingly, plaintiffs are adequate representatives of the Class and
will fairly and adequately protect the interests of the Class.
15. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class, which would establish incompatible standards
of conduct for defendants.
16. Defendants have acted and are about to act on grounds generally
applicable to the Class, thereby rendering final injunctive or corresponding
declaratory relief appropriate with respect to the Class as a whole.
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SUBSTANTIVE ALLEGATIONS
17. Wallace is a manufacturer and distributor of information
management products, services and solutions. These include paperwork systems
and forms, labeling products and supplies, direct mail printing, and leading
edge electronic forms, products and forms management services. The Company has
manufacturing, distribution and sales facilities throughout the United States.
18. On or about February 24, 1995, representatives of Moore contacted
Wallace to discuss a potential business combination between the two companies.
Moore is a supplier of business forms and related services for tracking
inventory and other corporate data.
19. Wallace's management, including the Individual Defendants, flatly
refused to participate in any discussion concerning a business combination
between the two companies. Wallace did not, and has not to date, even considered
whether any form of combination with Moore would be of value to its
shareholders. Undaunted, Moore's management made six or seven additional
attempts since the initial overtures in February 1995, to open up a dialogue
with Wallace. These efforts, however, proved fruitless as well, because Wallace
adamantly refused even to discuss possibilities for benefitting both companies.
20. During this period, Wallace because increasingly concerned about
Moore's efforts to discuss a business combination. As defendant Ewers described
it in deposition testimony, Moore's expression of interest in the Company served
as a "wake-up call" to Wallace. Desperate to ensure that any takeover attempt by
Moore would not be successful despite the potential benefits to Wallace's
stockholders, the Company's Board enacted various measures to strengthen its
anti-takeover defenses. For example, in June 1995, the Company's
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Board adopted a rule that any business to be presented by a stockholder at an
annual meeting must be presented 60 days before the meeting. Since Wallace's
next annual meeting was then scheduled for November 8, 1995, this provision was
designed to make it extremely difficult for Moore to present any proposal to
Wallace's shareholders at that meeting. In addition, the Board adopted a
"golden parachute" by which defendant Cronin would receive millions of dollars
if his duties were changed as the result of a takeover.
21. The adoption of these anti-takeover measures and the
"stonewalling" of Moore's efforts to discuss a business combination were
accomplished for no legitimate business purpose and were disproportionate to any
"threat" presented by Moore's interest in the Company.
22. On July 30, 1995, as a result of Wallace's continued refusal to
have any discussion with Moore, Moore announced its intention to bring its offer
directly to Wallace's stockholders by commencing a tender offer by a wholly
owned Moore subsidiary, FRDK, Inc. ("FRDK"), for all of Wallace's shares at $56
per share in cash, for a total purchase price of approximately $1.3 billion (the
"Offer"). The $56 per share tender offer price represented an 84% premium over
Wallace's share per price on February 24, 1995, when Moore first contacted the
Company regarding a business combination, and a 42% premium over its then most
recent 30-day average closing price. Moore stated that the tender offer would
be launched within a week and also announced that it would attempt to nominate
three directors to Wallace's Board at the Company's annual stockholders meeting
then scheduled for November, 1995.
7
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23. In reaction to the announcement of the tender offer, the market
price of Wallace shares surged $14 3/8 per share to close at $58 3/8 on July 31,
1995. This closing price, representing a $2 3/8 premium over the tender offer
price, led analysts to conclude that the market expected a higher offer to
surface, either from Moore or another bidder. For example, Burnham Securities
analyst David Liebowitz was reported as saying "given the way the stock opened
this morning, clearly there are a goodly number of investors who suspect a
higher bid is in the offing." Similarly, Martin McDevitt, an analyst at Cleary
Gull Reiland & McDevitt Inc., stated "people seem to be thinking another offer
may be coming, so we'll just have to wait and see."
24. Also, on July 30, Moore sent a letter to Wallace informing it of
the tender offer and conveying Moore's continued willingness and desire to meet
with Wallace's management to discuss the possibility of a mutually agreed upon
transaction. The letter stated, in part:
As you know from our prior communications, the Board of
Directors and management of Moore Corporation believe the
combination of our two companies makes eminent business
sense. Unfortunately, your Board specifically rejected our
proposal to discuss a strategic business combination. We
therefore felt we had no choice but to proceed with an offer
directly to your stockholders. We continue to believe it is
in the best interest of both companies to move expeditiously
toward a mutually-agreed combination of our companies....
In the interim, we have noted your favorable results
and our price reflects both your recent and anticipated
performance. We are confident that your stockholders will
find our offer compelling....
8
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We stand ready to meet with you and the Wallace Board
and management at any time to discuss any aspect of our
proposed combination so that you will share our confidence
and enthusiasm for this transaction -- a transaction that
serves the best interests of both of our companies and our
stockholders, employees, customers and communities.
25. The following day, on July 31, 1995, Moore filed a lawsuit
against Wallace and members of its management in the United States District
Court for the District of Delaware, seeking, INTER ALIA, an injunction to
prevent the Company from exercising its "poison pill". This stockholder rights
plan is triggered when anyone buys 20% or more of the Company's common stock.
When triggered, it allows Wallace stockholders to buy new common stock at half
price, thus rendering a tender offer prohibitively expensive. Moore asserted
that Wallace "should not be allowed to deprive the stockholders of the
opportunity to decide upon the merit of the offer." In addition, Moore alleges
that Wallace's Board created an unreasonable obstacle to Moore's offer when in
June it adopted the 60-day notification rule and golden parachute "in probable
response" to Moore's overtures regarding a merger with Wallace.
26. On August 2, 1995, Moore commenced the Offer and filed a
Premerger Notification and Report Form with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of
1978, as amended (the "HSR Act").
27. Wallace has a Preferred Stockholder Rights Plan (the "Poison
Pill"), adopted in 1990, which effectively allows the Board of Directors to
block unilaterally any acquisition offer, even those providing substantial
benefit to Wallace's stockholders. In 1990,
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pursuant to the Poison Pill, Wallace's Board of Directors declared a dividend of
one preferred stock purchase right per share of common stock (a "Right"). Each
Right entitles the registered holder thereof to purchase from Wallace, following
the Distribution Date (as defined in the Poison Pill), one two-hundredth of a
share of Wallace's Series A Preferred Stock at an exercise price of $115.
Following the occurrence of certain other events, including the acquisition of
20% or more of Wallace's common stock, each holder of a Right will be able to
exercise that Right and purchase common stock of Wallace (or the surviving
company in the event of merger) at half-price. Because any current acquiror of
20% or more of Wallace's common stock would not be entitled to exercise Rights
in its possession, the dilutive effect of the Poison Pill, if implemented, on
the value of such acquiror's common stock is overwhelming. Because of this
prohibitive economic consequence, the Poison Pill effectively precludes
consummation of Moore's offer. Wallace's Board of Directors can redeem the
Rights at a redemption price of $.01 per Right, or alternatively, can amend the
Poison Pill to make the Rights inapplicable to the Moore offer and the proposed
merger. Moore has conditioned its offer on the redemption of a Poison Pill or
upon the Poison Pill otherwise being held inapplicable to the Moore offer.
28. On August 3, 1995, Moore obtained the commitment of The Bank of
Nova Scotia for a $1.1 billion financing to finance the Offer and the Proposed
Merger.
29. On August 10, 1995, FRDK waived the financing condition to the
Offer and Moore and FRDK entered into definitive financing agreements with The
Bank of Nova Scotia, as agent for the lenders for a $1.1 billion loan facility
to finance the Offer and the Proposed Merger.
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30. At the same time that Moore was proceeding with its efforts to
acquire Wallace, Wallace was formulating its response to the Moore offer. As
soon as Wallace learned of Moore's offer, it contacted representatives of
Goldman Sachs & Co. in order to have Goldman Sachs act as the Wallace Board's
financial advisor in connection with the offer.
31. An initial analysis was prepared by one of the senior members of
the Goldman Sachs team of the Moore $56 per share offer. In a one-page document
entitled "Summary Thoughts Regarding Adequacy" under the column listing reasons
why the offer should be deemed "Adequate", the document states in relevant part:
* Price represents significant premium to pre-announcement share
price
* 42% premium over 30 day average
* 84% over price on February 24, 1995
* Price offered is premium to [Wallace's] trading range
* 16.1 x LTM operating income versus 12.5x pre-announcement
* 25.1 x LTM net income versus 19.2 x pre-announcement
* [Wallace's] growth highly dependent on gaining market share
* Recent revenue growth driven by paper prices
* Risk to earnings profile if competitor develops WIN-like
technology
* Absence of real market growth (business forms)
* Ongoing risk of margin pressure
* Significant piece of [Wallace] involves commodity product
* Discounted cash follow analysis does not support value in excess
of $56 per share
* Lack of growth in 1998-1999
* margin contraction
* Although present value of projected share prices provides share
values in excess of $56.00, shortfall in projections would result
in values in low to mid $50s
* Straight recapitalization falls short of $56.00
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* Cash and stock in low $50s
* lack of growth after 1998 limits debt capacity
32. While Goldman Sachs and other investment bankers generally
perform a comparable acquisitions analysis, here Goldman Sachs determined that
there were not any sufficiently comparable acquisitions that could be used to
make comparisons with the Moore offer. It became apparent that the principal
analyses of the Moore offer -- a discounted cash flow analysis ("DCF") and a
present value of future share prices analysis -- would depend almost entirely
upon Wallace management's projections of Wallace's future financial results.
33. Goldman Sachs prepared a book dated August 6, 1995, containing a
preliminary analysis of the Moore offer. This book contained Wallace
management's projected financial information for fiscal years 1996-2002,
including estimates of Wallace's net sales, operating income (EBIT), net income,
earnings per share and other data. Surprisingly, these projections were
substantially higher than the projections that management had recently finalized
in the "Wallace Computer Services Inc. Strategic Plan" dated June 7, 1995 (less
than two months earlier). These revised projections supplied by Wallace
management for use in the August 6 Goldman Sachs book were newly prepared in
response to the Moore offer, a fact known to Goldman Sachs.
34. Goldman Sachs used these projections in the August 6 book in a
"Discounted Cash Flow Analysis" and in a presentation of the "Present Value of
Future Share Prices." Using these projections and applying price earnings
ratios of 9 to 14 and discount rates of 10% to 14%, the DCF analysis generated
per share values for Wallace ranging from $38.58 to $64.89, with the great
majority of the values falling below the $56.00 per share
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offer. Similarly, the Present Value of Future Share Prices analysis, using
discount rates of 11% and 13%, generated per share values of between $45.92 and
$62.75. Again, the great majority of the values generated were below the $56.00
per share offer. Importantly, Goldman Sachs stated in a footnote that the
financial projections used came from Wallace management. The per share values
of Wallace stock that were generated by Goldman Sachs were then purely a
function of mathematical computation based on the Wallace management's numbers
and the assumptions as to ratios and discount rates.
35. The individual defendants have testified they were and are
adamantly opposed to a business combination with Moore. This attitude would
have been clear to Goldman Sachs. It was therefore crucial that the Goldman
Sachs analysis generate values to show that the $56.00 per offer was inadequate.
The values presented in the August 6, 1995 book were apparently unsatisfactory
for this purpose. As Cronin testified, if Goldman Sachs had opined that Moore's
offer was adequate, then he would have felt bound to enter discussions with
Moore about a transaction.
36. Goldman Sachs then prepared another book dated August 9, 1995,
which presented new versions of the DCF and Present Value of Future Share Price
analyses. This book contained the same management projections of future
financial results that were utilized in the Goldman Sachs August 6 book. In
this book, however, Goldman Sachs dramatically lowered the discount rates that
it applied in the DCF and the Present Value of Future Share Prices analyses. For
the DCF analysis, Goldman Sachs used discount rates ranging from 8% to 13%
rather than the discount rates of 10% to 14% used in the August 6 book. The
impact of this change was to increase substantially the per share values
generated by the DCF analysis
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so that now the results were more equally balanced above and below the $56.00
per share offer. There was a similar impact on the values generated by the
Present Value of Future Share Prices analysis.
37. Goldman Sachs presented the August 9 book to Wallace management
(but not to the Wallace Board of Directors) at a meeting on August 9, which
Cronin and Dimitriou attended. A Goldman Sachs team member stated in notes of
that meeting that the DCF analysis is a "Bad page for us" with a further note
that Goldman would further lower the discount rate and change the projections.
38. The Wallace Board of Directors met on August 11, 1995 to consider
the Moore offer and to hear Goldman Sachs' preliminary opinion concerning its
adequacy. Goldman Sachs prepared yet another book for this meeting which was
distributed to the board. It contained another version of the DCF and Present
Value of Future Share Prices analyses based on new projections of Wallace's
future financial results increased from those used in the August 9 book. As a
result of the changed projections, a majority of the per share values generated
by the DCF and Present Value of Future Share Prices analyses were in excess of
the $56.00 per share price of the Moore offer.
39. Neither Goldman Sachs nor any of the Wallace management personnel
who attended the August 9 meeting (defendants Dimitriou, the Wallace Chairman
and defendant Cronin) informed the Board of Directors of the various previous
iterations of the August 11 book and of how the financial projections had been
increased and the discount rates had been adjusted to generate the higher per
share values presented in the August 11 book. Nor were they informed of the
conclusions set forth in the document entitled Summary
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Thoughts Regarding Adequacy (PARA31 above). Indeed, defendant Dimitriou has
denied even attending the August 9 meeting and defendant Cronin has denied
having any foreknowledge of where Goldman Sachs was coming out in its valuation
analysis.
40. The Wallace director defendants who have been deposed have
uniformly testified that there was no discussion at this or any other Board
meeting about what an adequate price for Wallace would be.
41. On August 15, 1995, Wallace issued a press release, filed a
complaint against Moore and FRDK in the United States District Court for the
Southern District of New York (the "Wallace Action"), and filed a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9").
The Wallace Action asserted that the transactions contemplated by the Moore
Offer violate Section 7 of the Clayton Act. 15 U.S.C. Section 18; and that
Moore and FRDK have made false and misleading statements of fact in connection
with the Offer.
42. The Wallace Board recommended in the Schedule 14D-9 that Wallace
stockholders reject the Offer and stated the Board's belief that the interests
of Wallace stockholders would be best served by Wallace's remaining independent
and the Board's intention to continue the business of Wallace as an independent
entity. The Schedule 14D-9 also contained the text of a letter from Cronin to
Moore which stated that the $56 per share offer is "clearly inadequate." The
Schedule 14D-9 also stated that defendants' determination that the offer was
inadequate was principally based on the opinion of Goldman Sachs to that effect.
The director defendants' deposition testimony confirmed that statement and
demonstrated the directors' lack of understanding of the Goldman Sachs analyses.
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43. On August 18, l995, Moore announced that it had jumped another
hurdle in its attempt to acquire Wallace after the takeover was cleared by the
U.S. Justice Department. The Justice Department determines whether proposed
mergers violate federal antitrust laws. On August 17, l995, the waiting period
under the HSR Act expired without further inquiry by the U.S. Department of
Justice, thus satisfying the pre-clearance requirements under the U.S.'s
antitrust laws for Moore's purchase of the Wallace shares pursuant to the Offer
and the Proposed Merger. Despite this announcement, Wallace has decided to
continue its litigation against Moore to obtain a declaration that a
Wallace/Moore merger would violate the antitrust laws. This action by the
Wallace Board is in violation of their fiduciary duties because if Moore does
acquire Wallace (by purchasing all Wallace shares for cash) then any potential
violations of the antitrust laws will be of no concern to Wallace's shareholders
(to whom the Wallace Board owes its fiduciary responsibilities).
44. According to a Schedule 14A filed by Moore and FRDK with the SEC
on September 12, l995 (the "Moore Schedule 14A") on August 21, l995, a
representative from Lazard Freres, on behalf of Moore and FRDK, contacted a
representative from Goldman Sachs & Co. ("Goldman Sachs"), Wallace's financial
advisor in connection with the Offer, to suggest that Lazard Freres and Goldman
Sachs, Wallace, Moore and FRDK or any combination thereof schedule a meeting to
discuss the Offer. On August 26, l995, the Goldman Sachs representative advised
the Lazard Freres representative that the Wallace Board again refused to meet to
discuss the Offer.
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45. On August 28, l995, Moore issued a press release extending the
Offer until Tuesday, September 19, l995 and stating that it remained committed
to its proposed acquisition of Wallace. The press release included the
following:
In a statement released today, Moore Corporation
Limited (NYSE: MCL; TSE, ME) said, "We are very
disappointed to report that the Board of Directors of
Wallace Computer Services rejected outright our suggestion
to meet last week in order to discuss Moor's $56 per share
cash offer. By requesting to meet to discuss the
transaction, we had hoped to allow Wallace to avoid a
prolonged proxy contest that would be disruptive to its
customers and employees, and could result in diminishing
Wallace's value. It seems that Wallace's Board is willing
to expend corporate assets in an effort to deny Wallace
stockholders an opportunity to accept Moore's offer.
We had invited Wallace's Board and advisors to meet
with us to demonstrate why they believe our $56 per share
offer is "inadequate." As we have said many times in public
and in private, we remain open to the possibility that the
Board will elect to sit down with us in the near future and
are ready at any time to discuss ANY ASPECT OF OUR PROPOSED
COMBINATION. In the meantime, Moore will proceed with the
necessary steps to facilitate its effort to acquire Wallace.
(emphasis added)
46. As disclosed in Amendment No. 3 to Wallace's Schedule 14D-9 filed
with the SEC on September 8, l995, on September 6, l995, the Wallace Board met,
approved and adopted amendments to its existing compensation plan (described in
this paragraph and paragraphs 47-48 hereof), the primary purpose of which is to
make it far more difficult, expensive and less attractive for Moore to proceed
with a takeover of Wallace, to make it less likely that Moore or any other party
would pay well in excess of its per share offering price for Wallace and to
further entrench Wallace's management and directors. For example, the Board
adopted Amendment No. 1 to its Employee Severance Pay Plan (the "Employee Plan")
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which provides that the amount of severance payable to certain participants
shall not be less than one year's compensation upon the occurrence of certain
events following a change in control of Wallace. The Compensation Committee of
the Wallace Board designated 37 participants for this purpose.
47. On September 6, l995, the Wallace Board also approved and adopted
Amendment No. 36 to the Wallace Computer Services, Inc. Profit Sharing and
Retirement Plan (the "Profit Sharing Plan") and Amendment No. 6 to the Wallace
Computer Services, Inc. Profit Sharing and Retirement Trust Agreement (the
"Profit Sharing Trust") (collectively, the "Amendments") which provides, among
other things, that the plan participants, who are members of Wallace's
management, are allowed to vote shares held in the Profit Sharing Plan and
Profit Sharing Trust that they have not earned and do not own based on each
participant's proportionate interest in the Profit Sharing Plan and Profit
Sharing Trust, and which also allows plan participants to instruct the trustee
of the Profit Sharing Plan and Profit Sharing Trust how to respond to a tender
offer for the shares they do not own (based on the same formula). The Board of
Directors also authorized certain officers of the Company to appoint, on behalf
of the Company, an independent institutional trustee to replace the current
individual trustees under the Profit Sharing Trust with respect to the Shares
held thereunder.
48. On September 6, l995, the Wallace Board of Directors also
approved and adopted Amendment No. 1 ("Amendment No. 1") to the Wallace Computer
Services, Inc. Long-Term Performance Plan (the "LTP Plan"), which Amendment No.
1 added a provision relating to the treatment of awards in the event of a
"Material Change." Amendment No. 1 provides, among other things, that (i) a
plan participant's accrued bonus balance under the
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LTP Plan will not be reduced below the amount of the plan participant's accrued
bonus balance as calculated after inclusion of the plan participant's accrued
bonus balance as calculated after inclusion of the plan participant's award, if
any, for the Plan Year (as defined in the LTP Plan) immediately preceding the
Plan Year during which the Material Change occurs and (ii) an individual who is
a plan participant immediately prior to the occurrence of a Material Change (a
"Protected Participant") will be entitled to receive payment of such
participant's accrued bonus balance 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 or on account of the
Protected Participant's death or permanent disability.
49. On September 12, l995 Moore filed with the SEC its Schedule 14A,
which states that Moore will solicit proxies from Wallace's stockholders to
elect three Moore nominees to Wallace's Board of Directors at its Annual Meeting
(previously set for November 8, l995 and now scheduled for December 8, l995).
The Moore proxy materials state that Moore's nominees are committed to acting in
the best interest of all Wallace stockholders and will seek to remove barriers
to Moore's consummation of its tender offer. The Moore nominees in the Schedule
14A are Curtis A. Hessler, Albert W. Isenman, III and Robert P. Rittereiser.
50. The Moore Schedule 14A further states that Moore and FRDK are
soliciting the proxies of Wallace stockholders in favor of three stockholders
resolutions (the "Stockholder Resolutions") to be introduced at the Annual
Meeting for the purpose of:
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(i) removing all of the members of the Board of Directors of
Wallace (the "Wallace Board") other than the Moore Nominees,
if then directors of Wallace; (ii) amending the Amended and
Restated Bylaws of Wallace (the "Amended and Restated
Wallace Bylaws") to fix the number of directors at five; and
(iii) repealing each provision of the Amended and Restated
Wallace Bylaws or amendments thereto adopted without
approval of Wallace stockholders subsequent to February 15,
l995 and prior to the Annual Meeting.
51. The Moore Schedule 14A further states that:
Moore intends to continue to seek to negotiate with
Wallace with respect to its acquisition proposal. If such
negotiations result in a definitive merger or other
agreement between Moore and Wallace, such negotiations could
result in, among other things, termination of this proxy
solicitation.
Although Moore does not presently intend to alter the
terms of the Offer, it is possible that, depending on the
facts and circumstances existing at the time, the terms
might be altered in one or more respects.
52. Moore's ability to complete the transaction in the face of
continued opposition from the Wallace Board is seriously affected by a provision
which requires a vote of 80% of Wallace's shares to remove a director from
office. If Moore succeeds in electing its directors (which requires only 50% of
the vote) but fails to get 80% of the vote, it may not end up with control of a
majority of the board.
53. On September 12, 1995, Moore also announced that it had extended
its $56 per share offer for Wallace to November 8, 1995. On September 21, 1995,
Moore publicly stated that it may raise its $56 per share bid for Wallace.
54. On October 12, 1995, Moore announced the sweetening of its bid
for Wallace from $56 to $60 per share for Wallace's 23 million shares. Moore
said that it would
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withdraw its bid unless a significant number of Wallace's shares were tendered
by November 3, 1995. Moore chairman Reto Braun said, "A high tender response
will be a message the Wallace Board cannot ignore. A low response will cause
Moore to terminate its pursuit of Wallace and redirect the resources of Moore's
stockholders to other opportunities..." In making this statement, Moore said it
believed it could win a proxy contest but that it wanted to avoid wasting
resources and urged Wallace's board to negotiate.
55. The Wallace Board has been and continues to be, determined not to
allow Wallace to be sold, as defendants have testified in their depositions. As
set forth more fully below, the deposition testimony also revealed that Goldman
Sachs' purportedly "independent" financial analysis was not really independent,
and that Goldman Sachs' work was to promote the goal of its client -- the
Wallace Board -- to keep Wallace independent.
56. On October 18, 1995, the Wallace Board publicly rejected Moore's
$60 per share bid, calling it adequate. This announcement followed a meeting of
the Wallace Board on October 17. In reaching this conclusion, the Wallace Board
again relied almost entirely on the opinion of Goldman Sachs, which was based on
a new Goldman Sachs book dated October 17, 1995. The opinion of Goldman Sachs
was principally based on a new DCF analysis and a new Present Value of Implied
Future Share Prices analysis, which were set forth in an October 17 book. While
Goldman Sachs utilized the same Wallace management projections that were used in
the August 11 analysis, Goldman Sachs determined that it had made a
"mathematical" error in its calculation of the terminal value aspect of the DCF
analysis. As a result, the per share values generated by the DCF analysis were
substantially increased in the October 17 book. Because the terminal values
were increased, Goldman
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Sachs was able to increase the range of discount rates used in the analysis to
levels that were more appropriate under the circumstances, but which still
yielded per share values which were generally higher than $60.00 per share.
57. Wallace continues to criticize Moore's offer without having taken
any steps to determine what an adequate price would be. At the depositions
conducted to date, defendants have testified unequivocally they did not ask
Goldman Sachs to determine what an adequate price for Wallace would be, that
they do not know what an adequate per share price for Wallace would be, and that
they do not know whether Moore's $60 per share offer is inadequate by $0.01, $10
or some other sum.
58. Rather than disclosing this key fact to Wallace's stockholders,
the Wallace Board broadly condemned and belittled the $60 per share offer in a
letter to Wallace's shareholders, over Cronin's signature. The letter states in
relevant part:
Moore stated in their October 12 letter to you that one of their
justifications for increasing the offer was that they recognize
Wallace's improved results.
Your Board asks, "WHO IS MOORE TRYING TO KID?"
TWO MONTHS ago, Wallace announced record fourth quarter 1995
earnings per share up 33 percent. We can't believe it has taken Moore
and their financial advisors that long to evaluate our results.
Instead, we think they hoped to convince you and other
shareholders to tender into an offer they knew was inadequate from the
start... despite the assertion in their September 12 letter that the
offer was "full, fair, compelling and reflects Wallace's current
performance and future potential."
Shareholders have twice rejected Moore's offer by not tendering.
Only 368,488 shares, 1.6 percent of the total outstanding, were
tendered as of the last extension. We think Moore has finally
realized that Wallace shareholders will not be pressured into
tendering to an inadequate offer. MOORE'S OFFER
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WAS INADEQUATE BEFORE THEIR RECENT AMENDMENT... AND THEIR AMENDED
OFFER CONTINUES TO BE INADEQUATE ESPECIALLY IN LIGHT OF OUR
ANNOUNCEMENT THAT OUR PRIOR INTERNAL FORECAST ANTICIPATES A 50 PERCENT
FIRST QUARTER EARNINGS INCREASE AND A 33 PERCENT INCREASE IN EARNINGS
FOR FISCAL 1996.
MOORE'S HIGH PRESSURE TACTICS
Moore also says in their October 12 letter that they have
shortened the tender period because they do not want to prolonged
process. You should ask yourself why Moore is doing this. We believe
Moore's true reasons for shortening the tender offer was summarized in
an October 13 WALL STREET JOURNAL article:
"...MOORE IS PUTTING SHAREHOLDERS' FEET TO THE FIRE, WHILE KEEPING A
LID ON THE STOCK PRICE."
We believe Moore realizes that your company is increasing in
value with each passing day, and that their offer is growing ever more
inadequate. Your Board thinks you should reject his coercive effort
to acquire your shares.
We ask you to reject the Moore offer as you have in the past and
make the best decision for yourself.
59. Since Moore's announcement of its hostile tender offer, Wallace
management has been on a campaign to convince stockholders not to tender into
the tender offer. Members of management have made trips to meet with large
stockholders for that very purpose.
60. Despite Wallace's efforts to disparage the Moore tender offer,
Wallace announced, on November 6, 1995, that as of 7:00 p.m. on November 3,
1995, 16,698,706 shares (representing 73.54% of the total outstanding shares of
Wallace) had been tendered into Moore's offer. Moore's Reto Braun observed that
the "Wallace stockholders have spoken...it is time for the Wallace Board to sit
down with Moore in a responsible manner and include an
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agreement to effectuate the wishes of the Wallace stockholders." He went on to
say that "Continued refusal to meet and conclude this transaction will only
result in further waste of Wallace assets on needless litigation and proxy
battles." Moore has extended its tender offer until midnight on December 11,
1995.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
61. As described above, Wallace's Directors and management, which as
of the date of the company's last proxy statement collectively owned or
controlled only 1.2% of Wallace's outstanding stock, has shown a pattern of
entrenchment and failure to consider, in good-faith, Moore's offers to purchase
the Company which offers may be in the best interests of Wallace's public
stockholders. Defendants have breached their fiduciary duties to the Wallace
public stockholders in several ways. Since defendants have purposely avoided
learning what is an adequate per share price for Wallace, they have likewise
failed to determine whether or not, or the extent to which, the Moore offer is a
threat to Wallace stockholders. As such, the director defendants are unable to
decide whether their response to the offer is proportionate to the perceived
threat. They have been motivated in these actions by an implacable hostility to
Moore rather than a reasoned judgment that the Moore offer represents a threat
to Wallace or its shareholders.
62. Defendants have also denied Wallace's stockholders information
material to their determination: a) whether they wish to vote their shares for
defendants' re-election as Wallace directors at the December 8, 1995 Annual
Meeting of Shareholders, or vote for Moore's nominees and proposals; and b)
whether to tender their shares to Moore prior to the expiration of the Moore
tender offer.
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63. Defendants have breached their fiduciary duties by: (i)
reflexively and adamantly refusing, without reasoned analysis or becoming fully
informed, to consider a sale of Wallace or any other transaction with Moore;
(ii) failing to undertake an adequate evaluation of Wallace's worth as a
potential merger or acquisition candidate; (iii) failing to give adequate
consideration to the offer for Wallace submitted by Moore; (iv) considering
and/or adopting extreme and unreasonable measures to prevent the sale of the
Company; (v) failing to meet with Moore or its representatives to fully inform
themselves with respect to the Moore offer and the best price that Moore may be
willing to pay; (vi) improperly usurping to themselves and to other members of
Wallace's management the right to vote and control Wallace shares; and/or
(vii) failing to act so that the interests of the public stockholders of Wallace
are protected.
64. Having taken the firm position that Wallace should not be sold to
Moore (as evidenced by their deposition testimony), defendants breached their
fiduciary duties to fully inform themselves as to the adequacy of Moore's offers
and failed to respond to the offers reasonably and in good faith. Defendants
were in no position to know if Moore's highest offer would be fair or adequate
because they intentionally did not obtain or receive an opinion from Goldman
Sachs as to what an adequate price or fair range of values for Wallace would be,
and refused Moore's invitations to discuss the terms of a transaction betwen
Wallace and Moore. At this time, the fact that over 73% of Wallace's shares
have been tendered into the Moore offer demonstrates that Wallace's shareholders
strongly disagree with the directors' view that the shareholders would be best
served by Wallace's remaining independent. In light of this overwhelming vote,
it is clear that Wallace's shareholders do not need to be protected from
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any threat from the Moore offer that defendants perceive. Defendants have
failed to take the necessary steps to create the best value for Wallace
shareholders. Instead, they assert that their present plans for the Company
would deliver the best value to Wallace's stockholders. Defendants' deposition
testimony made clear that they are unable to determine what that value will be.
65. Defendants' failure to fully inform themselves is evidenced by,
INTER ALIA, the following, supported by defendants' deposition testimony.
a. their failure even to consider the appointment of an
independent committee of outside directors to consider the Moore offer;
b. the non-management directors' undue reliance on Goldman
Sachs' suspect determination of inadequacy because of their own lack of
expertise or lack of understanding of Goldman Sachs' analyses;
c. their refusal to determine, or request their advisors to
determine, what a fair or adequate per share price for Wallace would be;
d. their failure to consider whether Wallace could engage in any
transaction with Moore to provide value to Wallace stockholders; and
e. their rejection of Moore's offer based on the recommendation
of Goldman Sachs which
(1) engaged in exclusive communications with defendant
Cronin (the Company's Chief Executive Officer and President), Michael Halloran
(the Company's Chief Financial Officer) and other members of management on
critical issues regarding its analyses to which the rest of the Board was not
privy;
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(2) was almost purely a function of projections of
Wallace's future financial performance provided by Wallace management, without
any independent evaluation by Goldman Sachs;
(3) were accepted by the Board without any discussion as to
whether the management projections were accurate or whether Goldman Sachs should
make its own estimates of Wallace's future financial results; and
(4) recommendation was based on a set of financial
projections for Wallace which were modified at least three times, (August 6,
August 9, and August 11) and based solely on Wallace's management's projections
in order to support opinions that Moore's $56 per share and $60 per share offers
are inadequate.
Wallace's Board has in effect abandoned its fiduciary responsibility to
management directors whose primary incentive is to maintain their lucrative
positions.
66. In breach of their fiduciary duties to Wallace's public
shareholders, defendants have not only failed to fully inform themselves with
respect to Moore's offer, but have concealed the fact that they so failed.
Discovery conducted to date has revealed that while Wallace has used strong
language in its public disclosures to describe the Moore offer, E.G. "clearly
inadequate" to convey the impression that Wallace is worth far more than the
Moore offer, and have urged stockholders not to tender their shares, defendants
failed to disclose to Wallace's public stockholders that:
a. the Wallace Board did not ask Goldman Sachs what an adequate
price for Wallace would be;
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b. the Wallace Board members admittedly have no idea what an
adequate offer for the Wallace shares would be (in fact, they have testified
that they do not know whether the current Moore offer is inadequacy by $0.01,
$10.00 or some other figure);
c. the opinion of Goldman Sachs that the $60 offer is inadequate
is almost purely a function of Wallace managements' projections of Wallace's
future financial results;
d. the financial projections which formed the bases of the key
Goldman Sachs analyses were repeatedly increased during the course of Goldman
Sachs' work in a way that support higher values of Wallace and makes the Moore
offer appear inadequate;
e. Goldman Sachs changed the judgmental portions of its analyses
in ways which support higher values for Wallace and makes the Moore offer appear
inadequate;
f. the Wallace Board was not informed of the changes in
projections, ratios and discount rates used in Goldman Sachs' analyses; and
g. Wallace's directors did not even consider appointing an
independent committee of outside directors to consider the Moore offer.
67. These undisclosed facts are material to the Wallace public
stockholders' decision whether or not to tender into the Moore tender offer and
how to vote at the upcoming Annual Meeting of Shareholders, I.E. in favor of the
Wallace slate of directors or Moore's proposal to reduce the number of directors
to 5. Disclosure of the facts set forth above must be made immediately so that
the Wallace stockholders may cast fully informed votes on December 8, 1995 and
make a fully informed investment decision by December 11, 1995.
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Shareholders should have a fully informed opportunity to install directors
favorably disposed to the Moore offer.
68. Unless enjoined by this Court, defendants will continue to breach
the fiduciary duties they owe to plaintiffs and the other members of the Class,
and aid and abet such breaches, and will not only prevent Wallace's stockholders
from selling their shares to Moore for a fair and adequate price, but also will
prevent other parties from making offers to acquire Wallace, all to the
irreparable harm of the Class.
69. Plaintiffs and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiffs demand judgment and relief in their favor and in
favor of the Class and against defendants, as follows:
A. Declaring that this action be certified as a proper class action
and certifying plaintiffs as Class representatives;
B. Declaring that the defendants and each of them have breached
their fiduciary duties to plaintiffs and other members of the Class;
C. Issuing a preliminary and permanent injunction requiring
defendants to advise the Wallace stockholders, in an amendment to their Schedule
14D-9 and in their Proxy Statement for the upcoming Annual meeting,
that: 1) the Wallace Board never asked Goldman Sachs to determine what an
adequate price would be for the Wallace common stock; 2) the Board's
announcement regarding the inadequacy of the Moore bids were made absent any
knowledge of what an adequate per share price would be; 3) Goldman Sachs
performed no independent analysis of Wallace's future financial performance or
management's projections
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thereof, but relied instead on management's own projections of financial results
in doing its work, which were modified several times during the course of
Goldman Sachs engagement; 4) that Goldman Sachs' principal analyses supporting
per share values in excess of $56 and $60 per share were almost entirely a
function of these projections and formed the basis of its opinions that $56 per
share and $60 per share were inadequate; 5) the directors' failure even to
consider the appointment of an independent committee of outside directors to
consider the Moore offer; 6) Goldman Sachs changed the judgmental portions of
its analyses in ways which support higher values for Wallace and make the Moore
offer appear adequate; and 7) the Wallace Board was not informed of the changes
in projections, ratios, and discount rates used in Goldman Sachs' analyses.
D. Ordering that the defendants take appropriate measures, including
the appointment of an independent committee of outside directors authorized to
consider the adequacy of the Moore offer and to retain any necessary independent
advisor to assist them;
E. Ordering that defendants meet with Moore and its representatives,
or any other offeror, to ensure that such offer(s) for the acquisition of
Wallace are fully considered and evaluated by adequately and in good faith in
order to maximize stockholder value;
F. Preliminarily and permantly enjoining the defendants from
exercising Wallace's stockholder rights plan or adopting other extreme and
unreasonble measures to prevent the sale of the Company;
G. Preliminarily and permanently enjoining Amendment No. 36 to the
profit Sharing Plan and Amendment No. 6 to the Profit Sharing Trust to the
extent that they permit participants to vote Wallace shares that they do not own
or have not yet earned, and to
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the extent that it would cause the appointment of a new trustee to oversee the
Profit Sharing Plan and the Profit Sharing Trust;
H. Awarding compensatory damages in an amount to be determined upon
the proof submitted to the Court;
I. Awarding plaintiffs the costs and disbursements of this action,
including reasonable attorneys' and experts' fees and expenses; and
J. Such other and further relief which the Court may deem just and
proper.
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Dated: November 21, 1995
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/ Norman M. Monhait
-----------------------------------------
Norman M. Monhait
First Federal Plaza, Suite 214
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
BERNSTEIN LITOWITZ BERGER
& GROSSMANN
Vincent R. Cappucci
Douglas M. McKeige
1285 Avenue of the Americas
New York, New York 10019
(212) 554-1400
ABBEY & ELLIS
Jill S. Abrams
Shari H. Lichtman
212 East 39th Street
New York, NY 10016
(212) 889-3700
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[LOGO]
November 28, 1995
Dear Wallace Shareholder:
On behalf of your company's Board of Directors, we thank those shareholders
who have shown their support by voting the WHITE proxy cards.
As we have communicated, your Board of Directors, after consultation with
its financial advisor, Goldman, Sachs & Co., has unanimously rejected the Moore
$60 unsolicited hostile tender offer as INADEQUATE. Your company's outstanding
performance, including the 66 percent increase in year-on-year first quarter net
income which we announced last week, reaffirms our conclusion that the better
value for shareholders is obtained by Wallace continuing as an independent
entity. We urge you to reject Moore's efforts to elect three of its hand-picked
nominees to Wallace's board, who are committed to selling your company to Moore
at a less-than-adequate price.
WE BELIEVE THE CHOICE IS CLEAR: SUPPORT YOUR BOARD OF DIRECTORS BY PROMPTLY
SIGNING, DATING AND MAILING THE WHITE PROXY.
WALLACE IS ACHIEVING EXTRAORDINARY FINANCIAL PERFORMANCE
One independent analyst said last week that Wallace's first quarter results
"blew away" Wall Street's estimates. Despite the distractions of Moore's
unsolicited hostile tender offer, Wallace continues to achieve record growth in
sales and profitability that outstrips its major competitors.
We had previously forecast fiscal 1996 earnings per share of $3.28. In light
of our strong first quarter results, where we exceeded our initial 78 cent
estimate with earnings per share of 85 cents (before takeover expenses),
management is reviewing, and anticipates increasing, its full year forecast. The
average brokerage firm estimate of per share earnings has already been revised
upward to $3.32.
<PAGE>
MOORE'S OFFER IGNORES WALLACE'S VALUE
Since initiating its hostile unsolicited takeover bid in August, Moore has
consistently offered you prices that ignore the value of your company.
Specifically, Moore's amended unsolicited hostile offer of $60 per share:
- Was made prior to our outstanding first quarter results which were
announced on November 20.
- Does not reflect our projected per share earnings for the second quarter.
- Does not address our fiscal 1996 forecast.
Moore's offer gives Wallace shareholders no control premium for Moore
acquiring the best-performing company in its industry.
MOORE'S NOMINEES WILL SERVE MOORE'S INTERESTS . . . NOT YOURS
Today, Wallace's board has a majority of independent, outside directors.
Moore wants to change that, and proposes a slate of three hand-picked directors.
Moore's nominees are committed to removing Wallace's shareholder rights plan
and to selling your company to Moore at an inadequate price. Moore's nominees
have little knowledge about our industry, and no commitment to the continuation
of Wallace's business or to the strategies that have led to the shareholder
value you have enjoyed to date. Their presence on the board would disrupt the
management of your company and divert the board from the continued
implementation of our strategic plan. Moore's nominees have been nominated
solely to represent Moore's interests.
YOUR VOTE IS NECESSARY
Your vote is necessary to ensure that Wallace continues to grow as an
independent company and continues to deliver value to you today and in the
future! To ensure that your management will be able to continue to grow your
company, we urge you to sign, date and return the enclosed WHITE Wallace proxy
card. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE THREE WALLACE
DIRECTOR NOMINEES AND AGAINST ALL MOORE PROPOSALS.
PLEASE SIGN, DATE AND RETURN THE WHITE CARD EVEN IF YOU PREVIOUSLY HAVE
SIGNED AND SENT IN ONE OR MORE WHITE CARDS. We are asking you to return new
WHITE cards to reconfirm your vote and to help us track voting as we get closer
to the annual meeting.
<PAGE>
YOUR VOTE IS CRITICAL!
DO NOT SIGN MOORE'S GOLD CARD. If you have already signed Moore's gold proxy
card, you may revoke that proxy card by signing, dating and returning the WHITE
proxy card.
Thank you for your loyalty and continued support.
Sincerely,
[TED DIMITRIOU SIGNATURE] [BOB CRONIN SIGNATURE]
Ted Dimitriou Bob Cronin
CHAIRMAN OF THE BOARD PRESIDENT AND CEO
SHAREHOLDERS WHO DESIRE ASSISTANCE:
1. SHAREHOLDERS WHO DESIRE ASSISTANCE IN VOTING MAY CONTACT MORROW & CO., INC.
AT THE TELEPHONE NUMBER SET FORTH BELOW.
2. SHAREHOLDERS WHO DESIRE ASSISTANCE IN WITHDRAWING SHARES TENDERED PURSUANT
TO THE MOORE OFFER MAY CONTACT MORROW & CO., INC., WHICH IS ASSISTING
WALLACE, AT THE TELEPHONE NUMBER SET FORTH BELOW.
MORROW & CO., INC.
TOLL FREE: 1-800-662-5200
