SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No.10)
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Wallace Computer Services, Inc.
(Name of Subject Company)
FRDK, INC.
MOORE CORPORATION LIMITED
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS
(Title of Class of Securities)
932270101
(CUSIP Number of Class of Securities)
JOSEPH M. DUANE, ESQ.
FRDK, INC.
1 FIRST CANADIAN PLACE
TORONTO, ONTARIO, CANADA M5X 1GF
(416) 364-2600
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidder)
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COPY TO:
DENNIS J. FRIEDMAN, ESQ.
DAVID M. WILF, ESQ.
DAVID M. SCHWARTZBAUM, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NY 10112
(212) 408-5100
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3
FRDK, Inc. and Moore Corporation Limited hereby amend and
supplement their Tender Offer Statement on Schedule 14D-1 (as amended, the
"Statement"), originally filed on August 2, 1995, as amended by Amendment Nos.
1, 2, 3, 4, 5, 6, 7, 8, and 9 with respect to their offer to purchase all
outstanding shares of Common Stock, par value $1.00 per share, of Wallace
Computer Services, Inc., a Delaware corporation (together with the associated
preferred stock purchase rights), as set forth in this Amendment No. 10.
Capitalized terms not defined herein shall have the meanings assigned thereto in
the Statement.
ITEM 10. ADDITIONAL INFORMATION.
On September 25, 1995, the Company and its directors filed an
Answer and Counterclaim in the Delaware Court in connection with the Moore
Action. The Counterclaim brought against Moore, the Purchaser and Mr. Reto Braun
contains similar allegations and requests similar relief to that contained in
the Wallace Action as modified by the First Amended Complaint referred to in the
immediately following paragraph. A copy of the Answer and Counterclaim is
attached hereto as Exhibit (g)(10) and the foregoing description is qualified in
its entirety by reference to such exhibit.
On September 25, 1995, the Company filed a First Amended
Complaint to the Wallace Action in the United States District Court for the
Southern District of New York. Among other things, the First Amended Complaint
added Mr. Braun as a defendant and asserts that Moore, the Purchaser and Mr.
Braun allegedly have made false and misleading statements of fact in connection
with their preliminary proxy statement. A copy of the First Amended Complaint
is attached hereto as Exhibit (g)(11) and the foregoing description is qualified
in its entirety by reference to such exhibit.
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 (the "Amended Class Action Complaint"), which, among
other things, consolidates the actions the 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. A copy
of the Amended Class Action Complaint is attached hereto as Exhibit (g)(12) and
the foregoing description is qualified in its entirety by reference to such
exhibit.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(g)(10) Answer and Counterclaim in 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 and
Wallace Computer Services, Inc. v. Moore Corporation
Limited, FRDK, Inc. and Reto Braun, filed in the United
States District for the District of Delaware on
September 25, 1995.
(g)(11) First Amended Complaint in Wallace Computer
Services, Inc. v. Moore Corporation Limited, FRDK, Inc.
and Reto Braun, filed in the United States District
Court for the Southern District of New York on
September 25, 1995.
(g)(12) Amended Class Action Complaint to Koff v. Dimitriou,
et al. and LaPerriere v. Wallace Computer Services,
Inc., et al., filed in the Court of Chancery for the
State of Delaware in and for New Castle County on
September 22, 1995.
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SIGNATURE
After due 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.
Dated: September 27, 1995
FRDK, Inc.
By: /s/ Joseph M. Duane
Name: Joseph M. Duane
Title: President
MOORE CORPORATION LIMITED
By: /s/ Joseph M. Duane
Name: Joseph M. Duane
Title: Vice President and
General Counsel
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1
EXHIBIT INDEX
(g)(10) Answer and Counterclaim in 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 and
Wallace Computer Services, Inc. v. Moore Corporation
Limited, FRDK, Inc. and Reto Braun, filed in the United
States District for the District of Delaware on
September 25, 1995.
(g)(11) First Amended Complaint in Wallace Computer
Services, Inc. v. Moore Corporation Limited, FRDK, Inc.
and Reto Braun, filed in the United States District
Court for the Southern District of New York on
September 25, 1995.
(g)(12) Amended Class Action Complaint to Koff v. Dimitriou,
et al. and LaPerriere v. Wallace Computer Services,
Inc., et al., filed in the Court of Chancery for the
State of Delaware in and for New Castle County on
September 22, 1995.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
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)
MOORE CORPORATION LIMITED and FRDK, )
INC., )
)
Plaintiffs, ) C.A. No. 95-472
)
-against- )
)
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, )
)
Defendants. )
- --------------------------------------- )
)
WALLACE COMPUTER SERVICES, INC., )
)
Counterclaim-Plaintiff, )
)
-against- )
)
MOORE CORPORATION LIMITED, FRDK, INC., )
AND RETO BRAUN, )
)
Counterclaim-Defendants. )
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ANSWER AND COUNTERCLAIM
Defendants Wallace Computer Services, Inc. ("Wallace"), 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
(collectively the "Defendants"), answer the Complaint of Plaintiffs Moore
Corporation Limited ("Moore") and FRDK, Inc. ("FRDK") as follows:
NATURE OF THE ACTION
1. Plaintiffs bring this action for injunctive and/or
declaratory relief:
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(a) to prevent the application of defendant Wallace
Computer Services, Inc.'s ("Wallace") anti-takeover devices
and other defensive measures to FRDK's tender offer, proposed
merger and proxy solicitation, in violation of fiduciary
duties owed to Wallace's stockholders; and
(b) to prevent Wallace from otherwise impeding FRDK's
tender offer, proposed merger and proxy solicitation, which
comply with all applicable laws and other obligations.
ANSWER: Defendants admit that Plaintiffs purport to bring this
action for injunctive and/or declaratory relief, but deny that any claim
asserted against them in the Complaint has merit and deny the remaining
allegations in paragraph 1.
2. On July 30, 1995, FRDK announced its intention to commence
an all-cash tender offer for all outstanding shares of common stock of Wallace,
at a price of $56 per share (the "Offer"). The Offer is conditioned on a number
of matters, including the removal or inapplicability of certain of Wallace's
anti-takeover devices. Moore intends, as soon as practicable following
consummation of the Offer, to have Wallace merge with FRDK, or another Moore
subsidiary (the "Proposed Merger"). At the same time as it announced the Offer,
FRDK announced its intention to commence a proxy solicitation to nominate three
individuals to serve as directors of Wallace and to take certain other actions
to facilitate consummation of the Offer and Proposed Merger (the "Proxy
Solicitation").
ANSWER: Defendants admit that on July 30, 1995, Plaintiff
Moore issued a press release that announced that Moore intended to commence a
tender offer for all of the outstanding common stock of Defendant Wallace at a
price of $56 per share; that on August 2, 1995, Plaintiff FRDK offered to
purchase all outstanding shares of Wallace on terms and conditions set forth in
FRDK's Offer to Purchase, dated August 2, 1995 (the "Offer"); and that
Plaintiffs have made other
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public statements relating to the tender offer. Defendants admit that Moore's
July 30, 1995 press release referred to "the proxy solicitation that Moore
intends to pursue" and that Plaintiffs have made other public statements
relating to a proxy solicitation. Defendants are without information sufficient
to form a belief as to the actual intentions of Plaintiffs. Defendants further
state, as alleged in their Counterclaim against Plaintiffs and Reto Braun, that
the Offer and other of the Plaintiffs' and Mr. Braun's public statements contain
false and misleading disclosures. Defendants deny the remaining allegations of
paragraph 2.
3. The Offer is non-coercive and fair to Wallace's
stockholders. The Offer represents a substantial premium over the market price
for Wallace shares prior to announcement of the offer. The Offer, Proposed
Merger and Proxy Solicitation do not pose any threat to the interests of
Wallace's stockholders or to Wallace's corporate policy and effectiveness and
should be approved.
ANSWER: Defendants deny the allegations of paragraph 3.
4. Wallace has available to it a variety of defensive
measures, including a so-called "Poison Pill" (as referred to in Paragraphs
28-30 below), the Delaware Business Combination Statute, 8 Del. C. Sec. 203
("Section 203"), and prohibitions against certain business combinations set
forth in Article Ninth of Wallace's Restated Certificate of Incorporation
("Article Ninth"), which are designed to limit the ability of Wallace's
stockholders' [sic] to consider, accept or approve any tender offer unless
Wallace's Board of Directors agrees.
ANSWER: Defendants admit that (1) the Stockholders Rights Plan
of Wallace (the "Plan"), adopted on March 14, 1990 by the Board of Directors of
Wallace, (2) Article Ninth of the Restated Certificate of Incorporation of
Wallace, and (3)
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Section 203 of the Delaware General Corporation Law, exist. Their terms and
application are determined by reference to applicable law. Defendants deny the
remaining allegations of paragraph 4.
5. Wallace's Board of Directors has expressed its opposition
to being acquired by Moore and has demonstrated an intent to use defensive
measures to block the Offer and Proposed Merger. Since Moore initially
approached Wallace concerning a potential business combination, Wallace's Board
of Directors has taken specific steps to create additional obstacles to any
merger. The Board of Directors may also take steps to block the Proxy
Solicitation.
ANSWER: Defendants deny the allegations of paragraph 5.
Defendants further state that the Board of Directors of Wallace has carefully
evaluated and considered Plaintiffs' tender offer and, as set forth in Wallace's
Schedule 14D-9, dated August 15, 1995, the Board has determined that the offer
is, among other things, inadequate and not in the best interests of Wallace's
shareholders.
6. Given the nature of the Offer and its substantial value to
Wallace's stockholders, the Wallace Board of Directors should not be allowed to
deprive the stockholders of the opportunity to decide upon the merits of the
Offer for themselves. Use of anti-takeover devices or other defensive measures
by Wallace's Board of Directors to obstruct the Offer, Proposed Merger or Proxy
Solicitation represents an unreasonable response, in violation of the Board of
Directors, fiduciary duties owed to Wallace's stockholders, and will cause
plaintiffs and Wallace's stockholders irreparable injury.
ANSWER: Defendants deny the allegations of paragraph 6.
THE PARTIES
7. Plaintiff Moore is an Ontario corporation with its
principal place of business in Toronto, Ontario. Moore is in the business of
delivering information handling products and services that are both paper-based
and electronic-based in
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order to create efficiency and competitiveness for its customers. Its revenues
from consolidated operations in 1994 exceeded $2.4 billion. Moore owns common
stock of Wallace.
ANSWER: Defendants admit that Moore is an Ontario, Canada
corporation with its principal place of business in Toronto, Ontario, Canada,
and that Moore's July 30, 1995 press release claims that Moore "is a global
leader in delivering information handling products and services that create
efficiency and enhance competitiveness for customers." Defendants lack
sufficient knowledge and information to form a belief whether Moore purchased a
de minimus amount of Wallace common stock. Defendants are without information
sufficient to form a belief as to the truth of the remaining allegations of
paragraph 7 and on that basis denies them.
8. Plaintiff FRDK is a New York corporation with its principal
place of business in Toronto, Ontario. It is a wholly-owned subsidiary of Moore
and was incorporated for the purpose of making the Offer and Proxy Solicitation
and acquiring all the stock of Wallace. FRDK owns common stock of Wallace.
ANSWER: Defendants admit that FRDK is a New York Corporation,
with its principal place of business in Toronto, Ontario, Canada, is a wholly
owned subsidiary of Moore, and was incorporated principally for the purpose of
making the Offer and Proxy Solicitation. Defendants lack sufficient knowledge
and information to form a belief whether FRDK purchased a de minimus amount of
Wallace common stock. Defendants are without information sufficient to form a
belief as to the truth of the remaining allegations of paragraph 8 and on that
basis denies them.
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9. Defendant Wallace is a Delaware corporation with its
principal place of business in Illinois. According to its most recent Form 8-K,
Wallace is engaged predominantly in the computer services and supply industry.
Wallace provides its customers with a full 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.
ANSWER: Defendants admit the allegations of paragraph 9.
10. Defendant Robert J. Cronin ("Cronin") is a citizen of
Illinois. Since 1992, he has been President and Chief Executive Officer of
Wallace. Since November 1992, Cronin has been a member of the Board of Directors
of Wallace.
ANSWER: Defendants admit the allegations of paragraph 10.
11. Defendant Theodore Dimitriou is a citizen of Illinois.
Since November 1972, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit the allegations of paragraph 11.
12. Defendant Fred F. Canning is a citizen of Illinois. Since
January 1984, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit the allegations of paragraph 12.
13. Defendant William N. Lane, III is a citizen of Illinois.
Since January 1990, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit the allegations of paragraph 13.
14. Defendant Neele E. Stearns, Jr. is a citizen of Illinois.
Since January 1990, he has been a member of the Board of Directors of Wallace.
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ANSWER: Defendants admit the allegations of paragraph 14.
15. Defendant R. Darrell Ewers is a citizen of Illinois. Since
January 1993, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit the allegations of paragraph 15.
16. Defendant Richard F. Doyle is a citizen of Illinois. Since
October 1971, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit that Richard F. Doyle has been a
member of the Board of Directors of Wallace since October 1971, but deny the
remaining allegations of paragraph 16.
17. Defendant William E. Olsen is a citizen of Illinois. Since
June 1979, he has been a member of the Board of Directors of Wallace.
ANSWER: Defendants admit the allegations of paragraph 17.
JURISDICTION AND VENUE
18. This Court has jurisdiction of the subject matter of this
action pursuant to 28 U.S.C. ss. 1332 in that it is a dispute among citizens of
different states and a foreign state and the matter in controversy exceeds the
sum of $50,000, exclusive of interest and costs.
ANSWER: Paragraph 18 sets forth a conclusion of law to which
no response is necessary, and therefore Defendants neither admit nor deny the
allegations of paragraph 18.
19. Venue is proper in this district pursuant to 28 U.S.C. ss.
1391(a) and (c).
ANSWER: Paragraph 19 sets forth a conclusion of law
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to which no response is necessary, and therefore Defendants neither admit nor
deny the allegations of paragraph 19.
THE OFFER, PROPOSED MERGER, AND PROXY SOLICITATION
20. On July 30, 1995, FRDK announced its intention to commence
a tender offer for all outstanding shares of Wallace common stock (together with
the associated preferred stock purchase rights that were issued in connection
with Wallace's Poison Pill) at the price of $56 per share (and associated right)
net to the seller in cash, making the value of the proposed transaction
approximately $1.3 billion. The Offer is conditioned upon, among other things,
(a) the valid tender of a majority of all outstanding shares of Wallace's common
stock on a fully-diluted basis on the date of purchase; (b) the redemption,
invalidation or inapplicability of the preferred stock purchase rights under
Wallace's Poison Pill; (c) the approval of the acquisition of shares pursuant to
the Offer and the Proposed Merger under Section 203 or the inapplicability of
such Section to the Offer and Proposed Merger; (d) the Proposed Merger having
been approved pursuant to Article Ninth of Wallace's Restated Certificate of
Incorporation or the inapplicability of such Article to the Offer and Proposed
Merger; and (e) availability of sufficient financing to consummate the Offer and
the Proposed Merger.
ANSWER: Defendants admit that on July 30, 1995 Plaintiff Moore
issued a press release that announced that Moore intended to commence a tender
offer for all of the outstanding common stock of Wallace at a price of $56 per
share, and that on August 2, 1995, FRDK offered to purchase all outstanding
shares of Wallace on terms and conditions set forth in the Offer. Defendants
state that the July 30, 1995 press release and the Offer speak for themselves.
Defendants deny the remaining allegations of paragraph 20.
21. Moore intends, as soon as practicable following
consummation of the Offer, to propose and seek to have Wallace consummate a
merger or similar business combination with FRDK or another direct or indirect
wholly-owned subsidiary of Moore. The purpose of the Proposed Merger is to
acquire all shares not tendered and purchased pursuant to the Offer or
otherwise. Pursuant to the Proposed Merger, each such share (other than
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those held by stockholders who perfect appraisal rights relative to same) would
be converted into the right to receive an amount in cash equal to the price per
share paid pursuant to the Offer.
ANSWER: Defendants are without sufficient information to form
a belief as to the truth of the allegations of paragraph 21, which allegations
set forth the Plaintiffs' alleged intention to perform certain acts in the
future, but state that Moore's July 30, 1995 press release, the Offer, and some
of Plaintiffs' other public statements purported to set forth the purpose of the
offer and Plaintiffs' plans in the event that they obtain control of Wallace.
Defendants deny the remaining allegations of paragraph 21.
22. FRDK shortly will deliver a written notice to Wallace (the
"Notice") of its intention to nominate at Wallace's 1995 Annual Meeting of
Stockholders, which Wallace has tentatively scheduled for November 8, 1995
("1995 Annual Meeting"), three individuals to serve as directors of Wallace (the
"Nominees"). In the Notice, FRDK will further indicate its current intent to
introduce business at the 1995 Annual Meeting for the purpose of, among other
things, (i) removing all of the other present members of Wallace's Board of
Directors and (ii) amending Wallace's Amended and Restated Bylaws (the "Bylaws")
to fix the number of directors of Wallace at three. The Nominees intend to (a)
redeem the preferred stock purchase rights under Wallace's Poison Pill or make
it inapplicable to the Offer and Proposed Merger, approve the Offer and Proposed
Merger under Section 203, take any action that is desirable or necessary for the
satisfaction of any requirements of the Article Ninth provision and take such
other actions and seek or grant such other consents or approvals as may be
desirable or necessary to expedite prompt consummation of the Offer and Proposed
Merger, or (b) if any other transaction offering more value to Wallace's
stockholders is proposed, take actions to facilitate such a transaction, in each
case subject to fulfillment of the fiduciary duties they would have as directors
of Wallace.
ANSWER: Defendants admit that on July 31, 1995 Wallace
received a letter entitled "Notification of
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Stockholder's Intent to Nominate Persons Form Election to the Board of
Directors" from Joseph M. Duane of FRDK, dated July 31, 1995, which was attached
as an exhibit to FRDK's August 2, 1995 Schedule 14D-1, and state that any legal
effect of the July 31 letter will be determined by reference to applicable law.
Defendants deny the remaining allegations of paragraph 22.
23. Pursuant to its intentions announced in the Notice, FRDK
will seek to cause to be delivered to all Wallace stockholders Proxy
Solicitation materials relative to the nominations and business to be presented
at the 1995 Annual Meeting.
ANSWER: Defendants are without sufficient information to form
a belief as to the truth of the allegations of paragraph 23, which allegations
set forth Plaintiffs' alleged intention to perform certain acts in the future,
but state that Moore's July 30, 1995 press release, the Offer, and some of the
Plaintiffs' other public statements purported to set forth the purpose of the
offer and Plaintiffs' plans in the event they obtain control of Wallace and that
on September 12, 1995, Moore filed a preliminary Proxy Statement with the
Securities and Exchange Commission ("SEC") and sent a proxy solicitation letter
to Wallace stockholders. Defendants deny the remaining allegations of paragraph
23.
24. FRDK's Offer is clearly in the best interests of Wallace's
stockholders. It is an all-cash offer, available to all Wallace stockholders,
for all outstanding shares. It is not "front-end loaded" or otherwise coercive
in nature. Moreover, it provides Wallace's stockholders with the opportunity to
realize a substantial premium over the market price of their shares prior to
announcement of the Offer. On the last New York Stock Exchange trading day
before
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announcement of FRDK's intention to commence the Offer, the closing price of
Wallace shares was $44 per share. The Offer price represents a premium of $12
per share (or 27%) over the market price of the shares immediately prior to
announcement of FRDK's intention to commence the Offer, or $16.50 per share (or
42%) over the average of the market price of the shares ($39.50 per share) for
the thirty days immediately prior to such announcement.
ANSWER: Defendants admit that Plaintiffs have made an offer to
purchase all of the outstanding common stock of Wallace at a price of $56 per
share. Defendants further admit that the closing price of Wallace's shares on
the New York Stock Exchange on July 28, 1995 was $44 per share. Defendants state
that the $56 per share offer is, among other things, inadequate and not in the
best interests of Wallace's shareholders. Defendants deny the remaining
allegations of paragraph 24.
25. The Offer, Proposed Merger and Proxy Solicitation do not
pose any threat to the interests of Wallace's stockholders or to Wallace's
corporate policy and effectiveness.
ANSWER: Defendants deny the allegations of paragraph 25.
26. The Offer, Proposed Merger and Proxy Solicitation comply
or will comply with all applicable laws and other obligations, including,
without limitation, the securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject. The offering documents will fairly
disclose all information material to the decision of Wallace's stockholders
whether to accept or reject the Offer, in compliance with plaintiffs'
obligations under the securities laws. Plaintiffs will also make any filings
required by the Hart-Scott-Rodino Act. The Offer, Proposed merger and Proxy
Solicitation are lawful under the antitrust laws.
ANSWER: Defendants deny the allegations of paragraph 26. The
Offer, Proposed Merger and Proxy Solicitation have not
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complied with and will not comply with all applicable laws. The Offer, Proposed
Merger and Proxy Solicitation violate Section 7 of the Clayton Act, 15 U.S.C.
ss. 18. For purposes of Section 7, the sale of business forms to large,
forms-intensive customers with multiple locations constitutes a relevant product
market. Within this product market, the relevant geographic market is the United
States of America. For most customers in this market, Wallace, Moore and The
Standard Register Company are the only acceptable vendors within the market. The
Offer and Proposed Merger, if successful, would violate Section 7 by reducing
competition within this relevant product and geographic market from 3 suppliers
to 2 suppliers. Wallace would be eliminated as one of the current three
suppliers. The Proxy Solicitation seeks to accomplish the same result. As a
result, the Offer, Proposed Merger and Proxy Solicitation cannot and will not
comply with the antitrust laws of the United States. The Offer, the Proxy
Solicitation and other public statements of the Plaintiffs and Mr. Braun have
not complied with the securities laws of the United States. Specifically the
Offer, the Proxy Solicitation and other public statements by Plaintiffs and Mr.
Braun have repeatedly contained false and misleading disclosures which violate
Section 14(a), (d) and (e) of the Securities Exchange Act and applicable rules
and regulations.
27. The Offer and Proposed Merger cannot be completed
successfully unless the Wallace Board of Directors agrees to remove or make
inapplicable Wallace's anti-takeover devices or allows the Proxy Solicitation to
produce unhindered.
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The application of such anti-takeover devices to the Offer and Proposed Merger
or the attempt to interfere with such Proxy Solicitation by Wallace's Board of
Directors in the circumstances of the instant case would be an unreasonable,
disproportionate and draconian response, in breach of the Wallace Board of
Directors fiduciary duties.
ANSWER: Defendants admit that the Plan, Article Ninth of the
Restated Certificate of Incorporation of Wallace, and Section 203 of the
Delaware General Corporation Law, exist. Their terms and application are
determined by reference to applicable law. Defendants deny the remaining
allegations of paragraph 27.
WALLACE'S DEFENSIVE MEASURES
A. The Poison Pill
28. On March 14, 1990, Wallace's Board of Directors adopted a
Preferred Stockholder Rights Plan (the "Poison Pill") which effectively allows
the Board of Directors to block unilaterally any acquisition offers, even those
providing substantial benefit to Wallace's stockholders.
ANSWER: Defendants admit that Wallace's Board of Directors
adopted a Stockholder Rights Plan on March 14, 1990, the terms of which are
described in the Plan. Defendants deny the remaining allegations of paragraph
28.
29. By virtue of the Poison Pill, Wallace's Board of Directors
declared a dividend of one preferred stock purchase right per share of common
stock (a "Right"), payable to each of Wallace's stockholders of record as of
March 28, 1990. 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. Furthermore, 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
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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 the Proposed Merger.
ANSWER: Defendants admit that Wallace's Board of Directors
adopted a Stockholder Rights Plan on March 14, 1990, the terms of which are set
forth in the Plan. Plaintiffs deny the remaining allegations of paragraph 29.
30. 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 Offer and the Proposed Merger. Given the
nature and value of the Offer, a proper exercise of the Wallace Board of
Directors' fiduciary duties would require it to redeem the Rights, or amend the
Poison Pill to make the Rights inapplicable to the Offer and Proposed Merger, to
enable stockholders to decide upon the merits of the Offer for themselves.
ANSWER: Defendants admit that Wallace's Board of Directors
adopted a Stockholder Rights Plan on March 14, 1990, the terms of which are set
forth in the Plan. Plaintiffs deny the remaining allegations of paragraph 30.
B. Delaware Business Combination Statute,
Section 203
31. Section 203, entitled "Business Combinations With
Interested Stockholders," applies to any Delaware corporation that has not opted
out of the statute's coverage. Wallace has not opted out of the statute's
coverage.
ANSWER: Defendants state that the terms of Section 203 of the
Delaware General Corporation Law are set forth in Section 203 and that Wallace's
Board of Directors has taken no action that would render Section 203
inapplicable to FRDK's
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tender offer for the outstanding shares of Wallace. Defendants deny the
remaining allegations of paragraph 31.
32. Section 203 was designed to impede coercive and inadequate
tender offers. Section 203 provides that if a person acquires 15% or more of a
corporations voting stock (thereby becoming an "Interested stockholder"), such
interested stockholder may not engage in a "business combination" with the
corporation (defined to include a merger or consolidation) for three years after
the interested Stockholder becomes such, unless: (i) prior to the 15%
acquisition, the corporation's board of directors has approved either the
acquisition or the business combination, (ii) the interested stockholder
acquires 85% of the corporation's voting stock in the same transaction in which
it crosses the 15% threshold, or (iii) on or subsequent to the date of the 15%
acquisition, the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of the corporation's
stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
ANSWER: Defendants state that the terms of Section 203 of the
Delaware General Corporation Law are set forth in Section 203. The effect of
Section 203 will be determined by reference to applicable law.
Defendants deny the remaining allegations of paragraph 32.
33. Because a proper exercise of the Wallace Board of
Directors' fiduciary duties would require it to approve the Offer, Section 203
should not be applicable. Wallace's Board of Directors should not use Section
203 to obstruct the Offer, which is non-coercive, offers Wallace's stockholders
a substantial premium for their shares, and poses no threat to the interests of
Wallace's stockholders or to Wallace's Corporate policy and effectiveness.
ANSWER: Defendants deny the allegations of paragraph 33.
C. Article Ninth of Wallace's Restated Certificate
Of Incorporation
34. Article Ninth of Wallace's Restated Certificate of
Incorporation, entitled "Certain Business Combinations" is designed to impede
coercive and inadequate tender offers.
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ANSWER: Defendants state that the terms of Article Ninth of
the Restated Certificate of Incorporation of Wallace are set forth in Article
Ninth. Defendants deny the remaining allegations of paragraph 34.
35. Article Ninth purports to prohibit certain business
combinations (each, an "Article Ninth Transaction) between Wallace and any
"Interested Shareholder" (defined generally as any person that directly or
indirectly is (i) entitled to exercise or direct the exercise or is the owner of
20% or more of the outstanding voting power of Wallace, or (ii) is an affiliate
of such person and at any time immediately prior to the date in question was
entitled to exercise or direct the exercise of 20% or more of tire outstanding
voting power of Wallace, or (iii) an assignee of any Shares during the two year
period immediately prior to the date in question beneficially owned by an
Interested Shareholder) unless the affirmative vote of at least 80% of the
combined voting power of the then outstanding shares of stock of Wallace
entitled to vote generally in the election of directors is obtained.
ANSWER: Defendants state that the terms of Article Ninth of
the Restated Certificate of Incorporation of Wallace are set forth in Article
Ninth. The effect of Article Ninth will be determined by reference to applicable
law. Defendants deny the remaining allegations of paragraph 35.
36. An Article Ninth Transaction may avoid the 80% stockholder
approval requirement it either (a) the Article Ninth Transaction is approved by
a majority of the Disinterested Directors (as defined in Wallace's Restated
Certificate of Incorporation), or (b) certain "fair price" provisions are
complied with. The Article Ninth restrictions do not apply to an Article Ninth
Transaction if such transaction is approved by a resolution of the Board of
Directors of Wallace adopted prior to the date on which the Interested
Shareholder became an Interested Shareholder.
ANSWER: Defendants state that the terms of Article Ninth of
the Restated Certificate of Incorporation of Wallace are set forth in Article
Ninth. The effect of Article Ninth
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will be determined by reference to applicable law. Defendants deny the
remaining allegations of paragraph 36.
37. Because a proper exercise of the Wallace Board of
Directors' fiduciary duties would require it to approve FRDK's Offer, Article
Ninth's prohibition on certain business combinations should not be applicable.
Article Ninth should not be used by the Wallace Board of Directors to obstruct
the Offer, which is non-coercive, offers Wallace's stockholders a substantial
premium for their shares, and poses no threat to the interests of Wallace's
stockholders or to Wallace's corporate policy and effectiveness.
ANSWER: Defendants deny the allegations of paragraph 37.
WALLACE'S OPPOSITION
38. Wallace's Board of Directors has expressed its opposition
to an acquisition of Wallace by Moore. In February 1995, Moore attempted to
initiate discussions with Wallace regarding a possible business combination
between Moore and Wallace. In response, defendant Cronin, the President and CEO
of Wallace, advised Mr. Reto Braun, Chairman of Moore, that Wallace's Board of
Directors had considered Moore's proposal, was not interested in any such
combination and would not pursue the matter further. All efforts by Moore to
engage in further discussions with Wallace concerning a possible business
combination with Moore since that time have been rebuffed by Wallace.
ANSWER: Defendants deny the allegations of paragraph 38.
Defendants further state as follows: In February 1995, Mr. Braun of Moore write
to Mr. Cronin of Wallace inviting Mr. Cronin to begin discussions about a
possible combination of Wallace and Moore. On March 8, 1995, the Board of
Directors of Wallace discussed Mr. Braun's letter and Moore's interest in
pursuing a possible transaction with Wallace. On March 9, 1995, Mr. Cronin
attempted to speak to Mr. Braun by telephone, but was informed that Mr. Braun
was out of the office. On March 14, Mr. Cronin again called Mr. Braun and this
time was
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able to reach him. During that telephone conversation, Mr. Braun stated that
Moore would only pursue a transaction with Wallace on a friendly basis. Mr.
Cronin informed Mr. Braun that Wallace was not for sale because Wallace was
successfully pursuing its corporate strategy and saw no reason to depart from
that strategy. Mr. Cronin nonetheless offered to meet with Mr. Braun. Mr. Braun
replied that such a meeting was unnecessary and that Wallace should "consider
the situation closed." On April 18, 1995, Mr. Braun and Mr. Cronin met and spoke
to each other at an industry conference in New York City; during the
conversation, Mr. Braun suggested that the two meet for lunch, and Mr. Cronin
replied that he would be willing to do so. In the following weeks, Mr. Braun's
secretary contacted Mr. Cronin's secretary and scheduled an August 8, 1995 lunch
meeting between Mr. Cronin and Mr. Braun. On June 28, 1995, Mr. Braun failed to
appear at a meeting of the International Business Forms Institute, at which Mr.
Braun knew that Mr. Cronin would be in attendance.
39. In addition to its expressed opposition to a business
combination with Moore, Wallace's Board of Directors has taken specific steps
since Moore's initial approach in February 1995 to create additional obstacles
to any merger. Under a Bylaw provision purportedly adopted in June 1995, in
probable response to Moore's previous approaches, and publicly disclosed only
two weeks ago, any business to be raised by a stockholder at the annual meeting
must now be presented sixty (60) days before the meeting. Also in probable
response to Moore's previous approaches, the Board of Directors approved a
"golden parachute" employment contract with defendant Cronin, which among other
things, provides that defendant Cronin will receive millions of dollars from
Wallace, including reimbursement of tax penalties, in the event of a takeover
and a change in his job duties. Such contract is purportedly retroactive to
January 1995.
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ANSWER: Defendants state that the terms of the Bylaws of
Wallace and the Employment Agreement between Wallace and Robert J. Cronin, dated
January 1, 1995, are set forth in the Bylaws and in the Employment Agreement.
The effect of the Bylaws and the Employment Agreement will be determined by
reference to applicable law. Defendants deny the remaining allegations of
paragraph 39.
40. In light of Wallace's expressed opposition to any proposed
business combination with Moore, and its actions since Moore's initial approach
in February 1995 to create additional obstacles to any such merger, unless
enjoined by this Court, Wallace's Board of Directors will use Wallace's numerous
defensive measures to block the Offer and Proposed Merger and may take steps to
block the Proxy Solicitation, all in violation of its fiduciary duties to
Frederick's [sic] stockholders.
ANSWER: Defendants deny the allegations of paragraph 40.
IRREPARABLE INJURY
41. Plaintiffs do not have an adequate remedy at law. Only
through the exercise of the Court's equitable powers will plaintiffs and
Wallace's other stockholders be protected from immediate and irreparable injury.
Unless the Court enjoins the application of Wallace's anti-takeover devices to
FRDK's Offer and enjoins Wallace from impeding the Offer, Proposed Merger and
Proxy Solicitation by any other measures, Wallace's stockholders will be
deprived of the opportunity to decide for themselves whether or not to accept
the Offer. Moreover, FRDK will be precluded from consummating the Offer, which
is conditioned on the removal or inapplicability of Wallace's anti-takeover
devices, will be denied any meaningful access to or control over Wallace, and
will be hindered in or prevented from exercising its fundamental stockholder
rights under Delaware law. Should that occur, plaintiffs will have lost the
unique opportunity to acquire Wallace, and Wallace's other stockholders will
have lost the opportunity to sell their shares for a substantial premium.
ANSWER: Defendants deny the allegations of paragraph 41.
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AS AND FOR A FIRST CLAUSE OF ACTION
(Injunctive Relief)
42. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 41 above, as if fully set forth herein.
ANSWER: Defendants hereby incorporate their responses to all
of Plaintiffs' allegations set forth in paragraphs 1 through 41.
43. FRDK's Offer is non-coercive and non-discriminatory; it is
fair to Wallace's stockholders; and it represents a substantial premium over the
market price of Wallace shares prior to the announcement of FRDK's intention to
commence the Offer. The Offer, Proposed Merger and Proxy Solicitation comply
with all applicable laws and other obligations -- including, without limitation,
the securities laws, the antitrust laws, and all other legal obligations to
which plaintiffs are subject -- and pose no threat to the interests of Wallace's
stockholders or to Wallace's corporate policy or effectiveness. Use of Wallace's
anti-takeover devices or any other defensive measures to prevent Wallace's
stockholders from deciding for themselves whether or not to accept the Offer or
Proxy Solicitation is not proportionate, nor within the range of reasonable
responses to the Offer, Proposed Merger or Proxy Solicitation, and is a breach
of the Board of Director's fiduciary duties to Wallace's stockholders.
ANSWER: Defendants deny the allegations of paragraph 43.
44. Plaintiffs do not have adequate remedy at law.
ANSWER: Defendants deny the allegations of paragraph 44.
AS AND FOR A SECOND CAUSE OF ACTION
(Declaratory Judgment)
45. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 44 above, as if fully set forth herein.
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ANSWER: Defendants hereby incorporate their responses to all
of Plaintiffs allegations set forth in paragraphs 1 through 44.
46. The Offer, Proposed Merger and Proxy Solicitation comply
or will comply with all applicable laws and other obligations, including,
without limitation, the securities laws, the antitrust laws, and all other legal
obligations to which plaintiffs are subject. Given the nature of the Offer and
its benefits, Wallace should assist plaintiffs in obtaining any necessary
regulatory approvals. In any event, Wallace should not be permitted to attempt
to delay consummation of the Offer, Proposed Merger or Proxy Solicitation. To
prevent any unnecessary impediment to consummation of the Offer, Proposed Merger
and Proxy Solicitation, plaintiffs seek a declaratory judgment that the Offer,
Proposed Merger and Proxy Solicitation comply with all applicable laws and other
obligations.
ANSWER: Defendants deny the allegations of paragraph 46. The
Offer, Proposed Merger and Proxy Solicitation have not complied with and will
not comply with all applicable laws. The Offer, Proposed Merger and Proxy
Solicitation violate Section 7 of the Clayton Act, 15 U.S.C. ss. 18. For
purposes of Section 7, the sale of business forms to large, forms-intensive
customers with multiple locations constitutes a relevant product market. Within
this product market, the relevant geographic market is the United States of
America. For most customers in this market, Wallace, Moore and The Standard
Register Company are the only acceptable vendors within the market. The Offer
and Proposed Merger, if successful, would violate Section 7 by reducing
competition within this relevant product and geographic market from 3 suppliers
to 2 suppliers. Wallace would be eliminated as one of the current three
suppliers. The Proxy Solicitation seeks to accomplish the same
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result. As a result, the Offer, Proposed Merger and Proxy Solicitation cannot
and will not comply with the antitrust laws of the United States. The Offer, the
Proxy Solicitation and other public statements of the Plaintiffs and Mr. Braun
have not complied with the securities laws of the United States. Specifically
the Offer, the Proxy Solicitation and other public statements by Plaintiffs and
Mr. Braun have repeatedly contained false and misleading disclosures which
violate Sections 14(a), (d) and (e) of the Securities Exchange Act and
applicable rules and regulations.
47. Plaintiffs do not have an adequate remedy at law.
ANSWER: Defendants deny the allegations of paragraph 47.
AFFIRMATIVE DEFENSES
In further answer to Plaintiffs' Complaint, Defendants state
that Plaintiffs' claims are barred in whole or part by the following.
FIRST DEFENSE
Plaintiffs have failed to state a cause of action upon which
relief can be granted.
SECOND DEFENSE
Plaintiffs' claims are barred by the doctrines of waiver,
estoppel, and unclean hands.
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THIRD DEFENSE
Plaintiffs' proposed conduct, if successful, would violate the
antitrust laws for the reasons more specifically described in Paragraphs 26 and
46 of this Answer.
FOURTH DEFENSE
Plaintiffs' proposed conduct, if successful, would violate the
securities laws for the reasons more specifically described in Paragraphs 26 and
46 of this Answer.
FIFTH DEFENSE
The Complaint is not properly justiciable in this Court
because the Complaint was not ripe when filed and because Plaintiffs' premature
filing of an unripe complaint deprived this case of any priority of treatment
under the "first-filed" rule in view of the pendency of Defendant Wallace
Computer Services, Inc. properly and timely filed complaint against Plaintiffs
filed in the United States District Court for the Southern District of New York.
SIXTH DEFENSE
The Complaint must be dismissed because of Plaintiffs'
inequitable and improper conduct.
WHEREFORE, Defendants request judgment in their favor
dismissing the Complaint in its entirety, together with costs and disbursements,
and such other and further relief as the Court may deem just and proper.
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COUNTERCLAIM
Defendant and Counter-Plaintiff Wallace Computer Services,
Inc. ("Wallace"), for its Counterclaim against Plaintiff and Counter-Defendant
Moore Corporation Limited ("Moore"), Plaintiff and Counter-Defendant FRDK, Inc.
("FRDK"), and additional Counter-Defendant Reto Braun alleges as follows:
NATURE OF THE COUNTERCLAIM
1. Moore and FRDK have launched a hostile $56 per share tender
offer for Wallace, its most successful and tenacious competitor in the business
forms industry. They have also initiated a proxy solicitation to replace
Wallace's Board of Directors at the next annual meeting with directors who have
pledged to accept the $56 offer. Wallace's Board of Directors has rejected this
offer as inadequate because of Wallace's record of exceptional financial
performance, its reputation as a provider of superior products and services and
its position in the industry as a technological leader and innovator, as well as
other factors, including the probability that the offer, if consummated, may
violate the antitrust laws of the United States. This action seeks to do two
things.
2. First, this action seeks a declaration that the tender
offer for Wallace, if consummated, would violate Section 7 of the Clayton Act,
and seeks to preliminarily and permanently enjoin Moore and FRDK from acquiring
any voting securities of Wallace. Moore and Wallace are direct competitors in
the market for the sale of business forms to
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large, forms-intensive customers with multiple locations. In that market, the
effect of an acquisition of Wallace by Moore would be to change a three-firm
market into a two-firm market.
3. Second, this action seeks to enjoin Moore, FRDK and Reto
Braun, Moore's Chairman and Chief Executive Officer, from making manipulative
and misleading disclosures to the press and investors. in their false and
misleading media campaign, Moore, FRDK and Mr. Braun have deliberately
misrepresented the character and significance of prior contacts between the
parties; failed to disclose a pledge only to pursue a friendly business
combination with Wallace; have falsely stated that Wallace enhanced its takeover
defenses in response to earlier contacts with Moore; and have failed to disclose
the substantial antitrust obstacles presented by the proposed merger. In a
flagrant violation of SEC Rule 14a-9, Moore, FRDK and Mr. Braun have also made
false and misleading predictions concerning the future market value of Wallace's
common stock and unlawfully impugned the integrity of Wallace's successful
management team and Board of Directors.
THE PARTIES
4. Wallace is a Delaware corporation with its principal place
of business in Hillside, Illinois. Founded in Chicago in 1908, Wallace is one of
the largest United States manufacturers and distributors in the computer
services and supply industry. More specifically, Wallace sells a broad line of
products and services including business forms, commercial
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and promotional graphics printing, computer labels, machine ribbons, computer
hardware and software, computer accessories, office products and electronic
forms. Wallace has a reputation in the industry as a technological leader and
innovator both in the application of computer applications to traditional paper
business forms and in the area of customer service, delivery and inventory
monitoring systems.
5. Moore is a corporation organized under the laws of the
province of Ontario, Canada with its principal place of business in Toronto,
Ontario, Canada. Moore is direct competitor of Wallace in the sale of business
forms, products and services that are both paper and electronically based. In
recent years, Wallace has beaten Moore in head to head competition to service
numerous large accounts, including ITT Automotive, Rubbermaid, and American
Airlines.
6. FRDK is a New York corporation with its principal place of
business in Toronto, Ontario, Canada. It is a wholly owned subsidiary of Moore
and purportedly was incorporated for the purpose of making the tender offer and
proxy solicitation for Wallace.
7. Reto Braun has been Chairman of Moore's Board of Directors
since April 1995 and Chief Executive Officer of Moore since September 1993. On
information and belief, Mr. Braun is a citizen of Switzerland. In the United
States, Mr. Braun maintains a permanent residence at 101 Pembroke Drive, Lake
Forest, Illinois and an office at 275 Field Drive, Lake
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Forest, Illinois. Mr. Braun is named in this Counterclaim as an additional party
under Rule 13(h) of the Federal Rules of Civil procedure. He is a direct and
primary participant in the wrongful conduct alleged in Counts II and III of this
Counterclaim as well as a "controlling person" of Plaintiffs Moore and FRDK
under Section 20 of the Securities Exchange Act, 15 U.S.C. ss. 78t(a).
8. At all times relevant to this Counterclaim, Mr. Braun
possessed the power to direct the management and policies of Moore and FRDK and
was involved in the composition, review, approval and dissemination of public
statements, including SEC filings, made by Moore and FRDK relating to the tender
offer and proxy solicitation. Throughout the relevant period, on information and
belief, Mr. Braun continuously exercised power and influence to cause Moore and
FRDK to engage in the illegal practices complained of herein, including those
directly undertaken by Mr. Braun himself.
JURISDICTION AND VENUE
9. Jurisdiction over Count I of this action arises under
Section 7 of the Clayton Act, 15 U.S.C. ss.18. This Court has subject matter
jurisdiction of Count I pursuant to 15 U.S.C. ss.26, 28 U.S.C. ss.ss.1331 and
1337. Jurisdiction over Counts II and III of this action arises under Section 27
of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. ss.78aa and
28 U.S.C. ss.ss.1331, 1367 and 2201.
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10. Venue is proper in this District under 28 U.S.C.
ss.1391(b) and with respect to Count I under Section 4 of the Clayton Act, 15
U.S.C. ss.15, and with respect to Counts II and III under Section 27 of the
Exchange Act, 15 U.S.C. ss.78aa.
COUNT ONE
THE THREATENED ANTITRUST VIOLATION
11. In a Tender Offer Statement on Schedule 14D-1 dated August
2, 1995, Moore and FRDK disclosed a tender offer to purchase all outstanding
voting securities of Wallace.
12. Pursuant to this tender offer, Moore, through its
wholly-owned New York subsidiary, FRDK, intends to acquire Wallace.
13. Moore and Wallace compete in a number of businesses,
including the manufacture and sale of business forms (examples of which include
Federal Express shipping forms, brokerage firm trade confirmation forms, and the
printed paper stock on which telephone bills are generated).
14. For antitrust purposes, the sale of business forms to
large, forms-intensive customers with multiple locations constitutes a relevant
product market. Examples of such customers would be Federal Express and K-Mart.
Within this product market, the relevant geographic market is the United States
of America.
15. Large, forms-intensive customers with multiple locations
typically require a forms vendor with the following characteristics:
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a. sufficient forms manufacturing capability across several
regions of the United States to satisfy their needs;
b. distribution capability across several regions of the
United States 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 systems capability to provide centralized
billing, reporting, and control for such shipments.
16. For most customers in the relevant product and geographic
market, the only acceptable vendors are Wallace, Moore, and The Standard
Register Company.
17. For these customers, the effect of an acquisition of
Wallace by Moore would be to change a three-firm market into a two-firm market.
18. The key impediment to entry into this business is the
development of the information services capability needed to support the
required distribution and billing capabilities. Wallace has spent more than a
decade developing its system, and did so internally. A new entrant would be
unable to purchase the required information services capability and would need
to spend a period of years attempting to develop it.
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19. If Moore were to acquire Wallace, the effect of such
acquisition may be substantially to lessen competition in the relevant product
and geographic market, thus violating Section 7 of the Clayton Act, 15 U.S.C.
ss.18.
20. Unless Moore and FRDK are enjoined, Wallace will suffer
irreparable harm as a result of the above stated actions, including, inter alia,
loss of independent decisionmaking authority, loss of trade secrets, loss of
employees, and loss of customers. Wallace has no adequate remedy at law.
COUNT TWO
VIOLATIONS OF THE SECURITIES
LAWS RELATING TO TENDER OFFERS
21. Wallace repeats and realleges its allegations in
paragraphs 1 - 20 as if set forth fully herein.
Preliminary Inquiries Concerning The Possibility
Of Discussions Between Wallace And Moore
22. On or about February 16, 1995, a representative of Lazard
Freres & Co. LLC ("Lazard") contacted Neele E. Stearns, Jr., a member of
Wallace's Board of Directors and a personal acquaintance of the Lazard
representative, and inquired whether a Wallace representative would be willing
to meet with Mr. Braun to discuss a possible business combination on a friendly
basis involving Moore and Wallace. Mr. Stearns replied that he would communicate
with Wallace representatives and then follow up with the Lazard representative.
23. On February 21, 1995, Mr. Stearns contacted the Lazard
representative and informed him that Mr. Braun or a
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representative of Lazard should communicate in writing directly with Robert J.
Cronin, the President and Chief Executive Officer of Wallace, in the event they
wished to raise the possibility of discussing a business combination.
24. On or about February 24, 1995, Mr. Braun sent a letter to
Mr. Cronin, which provided in part as follows:
"As a result of recent discussions between our financial
advisor, Lazard Freres, and Mr. Neele Stearns of your Board of
Directors, it has been suggested that I communicate directly
with you in this manner."
* * * *
"I would welcome to begin discussions with you, on a strictly
confidential basis, to explore the possibility of a
combination of our companies. We are very flexible in our
thinking as to the form such a combination might take. After
you have had a chance to discuss this with your Board, I would
be most happy to meet with you to share our respective views.
. . . I look forward to hearing from you."
25. On or about March 8, 1995, at a regularly scheduled
meeting of Wallace's Board of Directors, the Board discussed the February 24
letter of Mr. Braun and Moore's interest in pursuing a possible transaction with
the Company.
26. On or about March 9, 1995, Mr. Cronin attempted to reach
Mr. Braun by telephone, but was advised that he would be out of his office until
March 14.
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Moore Pledges To Pursue Only A Friendly Transaction
27. During the various communications between representatives
of Wallace and representatives of Moore in February and March 1995, Moore stated
at least three times that it was only interested in pursuing a friendly deal
with Wallace.
28. In the initial February 16 telephone call between the
Lazard representative and Mr. Stearns, the Lazard representative inquired
whether a Wallace representative would be willing to discuss a business
combination on a friendly basis with Moore.
29. On or about March 14, Mr. Cronin contacted Mr. Braun by
telephone. At the outset of the telephone conversation, Mr. Cronin stated that
the telephone call would not have been made if Wallace had not received Lazard's
assurances that Moore would only proceed on a friendly basis. Mr. Braun agreed
completely and stated that Moore would only pursue a transaction on a friendly
basis. Mr. Cronin informed Mr. Braun that Wallace was successfully pursuing its
corporate strategy, saw no reason to depart from it and that, accordingly,
Wallace was not for sale. However, Mr. Cronin stated he was nevertheless
prepared to meet with Mr. Braun if he still desired to do so. Mr. Braun stated
that such a meeting was unnecessary and that Wallace should "consider the
situation closed."
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30. On March 22, Mr. Stearns briefly visited the offices of
the Lazard representative to confirm that the representative was aware of the
March 14th telephone conversation between Mr. Braun and Mr. Cronin. The Lazard
representative once again stated that Moore would only pursue a friendly
transaction.
Mr. Cronin And Mr. Braun Agree To Have Lunch
31. On April 18, 1995, Mr. Cronin and Mr. Braun met each other
at an industry conference in New York City. Mr. Braun suggested that the two
should meet for lunch to discuss certain matters unrelated to a business
combination. Mr. Cronin stated that he would be willing to have lunch and that
Mr. Braun should contact him to set up a date. Both are residents of the Chicago
metropolitan area.
32. In the following weeks, Mr. Braun's secretary contacted
Mr. Cronin's secretary several times to arrange a lunch meeting for Messrs.
Braun and Cronin. Ultimately the secretaries scheduled the lunch between Mr.
Braun and Mr. Cronin for August 8, 1995. When Moore launched its hostile tender
offer, this lunch date was still scheduled.
33. On or about June 28, 1995, Mr. Braun failed at the last
minute to attend a dinner in Itasca, Illinois sponsored by the International
Business Forms Institute. Mr. Braun knew that Mr. Cronin would be in attendance
and if he had wanted to speak with Mr. Cronin on any appropriate subject, Mr.
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Cronin would have been available before, during or after the dinner.
The False And Misleading Media Campaign
Conducted by Mr. Braun, Moore and FRDK
34. On the evening of Sunday, July 30, 1995, Mr. Braun called
Mr. Cronin from New York and left a recorded message on Mr. Cronin's home
answering machine stating that Moore and FRDK were going to make a tender offer
for Wallace.
35. At approximately 10:30 p.m. on Sunday, July 30, 1995, a
messenger slipped a letter from Mr. Braun under the front door at Mr. Cronin's
residence stating that Moore and FRDK were commencing a hostile tender offer to
purchase all of Wallace's common stock at $56 per share and that Moore and FRDK
would solicit proxies for Wallace's annual meeting to replace the existing Board
of Directors with directors who would accept the $56 offer.
36. Sometime earlier on Sunday, July 30, 1995, Moore, FRDK and
Mr. Braun commenced a carefully calculated media campaign, in connection with
the hostile tender offer and proxy campaign, to manipulate and mislead Wallace
investors concerning the character and significance of prior discussions between
the companies with respect to the possibility of a business combination;
Wallace's responses to those discussions; and the facts relating to any
antitrust obstacles to the tender offer.
37. Statements made in the media campaign also falsely
portrayed Wallace as unwilling even to meet with
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Moore's representatives. As the foregoing Paragraphs 22-33 make clear, this
portrayal was directly contrary to the actual facts as Moore, FRDK and Mr. Braun
knew. In fact, at the time Moore, FRDK and Mr. Braun commenced misleading the
press and Wallace's investors, the lunch between Mr. Braun and Mr. Cronin that
had been scheduled was less than nine days away.
38. On July 30, Mr. Braun launched the false and misleading
media campaign on behalf of Moore and FRDK by giving interviews to The Wall
Street Journal, The New York Times and The Globe and Mail, among others. During
these interviews, Mr. Braun knowingly made various false and misleading
statements of fact in connection with the tender offer. Copies of articles based
on these interviews are attached as Exhibit 1 hereto.
39. In his July 30 interview with The Wall Street Journal, Mr.
Braun stated that Moore's unsolicited bid for Wallace came after "six or seven"
attempts to discuss a possible acquisition since February when Mr. Braun
contended that Wallace had rejected a proposal about a possible acquisition. On
information and belief, Mr. Braun deliberately failed to disclose to The Wall
Street Journal: (1) that in the earlier discussions, Mr. Braun and Moore had
pledged at least three times not to launch a hostile offer; (2) that at the
conclusion of the March 14 telephone call, Mr. Braun stated that the situation
was closed; and (3) that almost all of the "attempts" since March to "discuss a
possible business
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combination" were calls from his secretary to Mr. Cronin's secretary trying to
schedule a lunch -- a lunch which in fact, was scheduled to occur on August 8,
1995. All of these facts were necessary to make the actual facts disclosed by
Mr. Braun in The Wall Street Journal interview not misleading.
40. Likewise, in his July 30 interview with The New York
Times, Mr. Braun stated that Wallace had "rejected" Moore's February proposal
that the two companies "meet to discuss a merger." This statement, as Mr. Braun
knew and as the foregoing illustrates, was false and misleading because, among
other things, it was Mr. Braun who had stated at the close of the March 14
telephone call that there was no point in meeting, and in any event a lunch
meeting was scheduled for August 8. All of these facts were necessary to make
the facts disclosed by Mr. Braun in The New York Times interview not misleading.
41. In his July 30 interview with The Globe and Mail, Mr.
Braun stated that, among other things, Wallace had "strengthened" its "poison
pill" following the February discussions between Moore and Wallace. In fact, Mr.
Braun was very familiar with Wallace's takeover defenses and knew that Wallace
had not amended its stockholder rights plan after the February 1995 discussions.
In fact, Wallace's stockholder rights plan has not been amended since its
adoption in March 1990.
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42. On July 31, 1995, Mr. Braun continued his campaign of
false and misleading disclosures to the press and to investors by holding a
conference call to discuss Moore's and FRDK's tender offer with financial
analysts covering the industry. During the call, Mr. Braun made various false
and misleading statements of fact in connection with the tender offer.
43. During the Braun conference call of July 31 with industry
analysts, Mr. Braun falsely stated that Wallace, in rejecting any discussions
over a possible business combination, had refused to specify any reasons. To the
contrary, the true facts were that, as described in Paragraph 29 above, Mr.
Cronin had informed Mr. Braun that Wallace was successfully pursuing its
corporate strategy and saw no reason to depart from it. Moreover, Mr. Braun
failed to disclose to the analysts that he and Moore had pledged in the March 14
discussion and on two other occasions only to pursue a friendly deal and that
following Wallace's expression of no interest he had informed Wallace that the
matter was closed -- all facts which are necessary to make the facts disclosed
in the analysts' conference call not misleading.
44. In the Braun conference call of July 31 with industry
analysts, Mr. Braun continued his false and misleading campaign of media
disclosures by again stating that Moore had tried to "get together" a number of
times with Wallace since February without explaining that nearly all of
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<PAGE>
these contacts involved his secretary calling Mr. Cronin's secretary to schedule
a lunch -- all facts which are necessary to make the facts disclosed not
misleading.
45. In the Braun conference call of July 31 with industry
analysts, Mr. Braun also twice repeated his false statement, made previously in
The Globe and Mail interview, that Wallace, following the earlier discussions,
had "strengthened their position on poison pills" and "strengthened their
arsenal of poison pills." In fact, as heretofore set forth above, Mr. Braun was
very familiar with Wallace's takeover defenses and knew that Wallace has not
amended its stockholder rights plan in response to Moore's overtures.
46. In the Braun conference call of July 31 with industry
analysts, Mr. Braun also falsely stated that antitrust concerns are not "a
problem" or "big issue" which would prevent consummation of the proposed tender
offer. As described more fully above in Paragraphs 11-20, there are basic
material facts concerning relevant markets which give rise to antitrust issues
concerning the tender offer. On information and belief, Mr. Braun, Moore and
FRDK were aware of the basic facts relating to these antitrust issues. The
relative positions of Wallace and Moore and other market conditions in the
industry are so obvious that the probable antitrust violation was clearly
apparent to Moore, FRDK and Mr. Braun at the time of the offer. Failure to
disclose these basic
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material facts and the antitrust issues they create, is false and misleading.
47. On July 31, Moore, FRDK and Mr. Braun caused to be filed
the Complaint in this action against Wallace and its Board of Directors. The
Complaint contains false and misleading statements of fact made in connection
with the tender offer and proxy solicitation. The Complaint is attached to the
Schedule 14D-1 and, as a result, its content was widely disseminated in the
media by Moore and FRDK. The false statements of fact in the Complaint serve to
reinforce the false and misleading statements made in the media campaign
launched in Mr. Braun's interviews with The Wall Street Journal, The New York
Times, The Globe and Mail and in Mr. Braun's conference call with financial
analysts covering the industry.
48. The Complaint states that "in February 1995, Moore
attempted to initiate discussions with Wallace regarding a possible business
combination between Moore and Wallace." Paragraph 38. The Complaint then alleges
that Mr. Cronin informed Mr. Braun in response that "Wallace's Board of
Directors had considered Moore's proposal, was not interested in any such
combination and would not pursue the matter further." Id. The Complaint then
falsely states that "all efforts by Moore to engage in further discussions with
Wallace concerning a possible business combination with Moore since that time
have been rebuffed by Wallace."
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<PAGE>
49. In fact, on the date the Complaint was filed, Mr. Braun
was scheduled to have lunch with Mr. Cronin on August 8. The Complaint also
failed to disclose the following facts: (1) that Moore had pledged in the March
1995 discussion and on two other occasions only to proceed on a friendly basis;
(2) that following Wallace's lack of interest, Moore had stated that the matter
was closed; (3) that almost all of the subsequent contacts between the parties
consisted of Mr. Braun's secretary calling Mr. Cronin's secretary to set up a
lunch; and (4) that Mr. Braun, at the last minute, failed to show up for a small
industry meeting of CEOs where he could have had private discussions with Mr.
Cronin on any appropriate subject -- all facts which under the circumstances
were necessary to make the statements set forth therein and elsewhere concerning
the February and March discussions and subsequent contacts not misleading.
50. The Complaint also falsely states that "Wallace's Board of
Directors has taken specific steps since Moore's initial approach in February
1995 to create additional obstacles to a merger." In fact, as set forth above,
Moore, FRDK and Mr. Braun are very familiar with Wallace's takeover defenses and
know very well that no actions taken since February 1995 present any "obstacle"
to a merger.
51. The Complaint states that the first "obstacle" is a
Wallace bylaw amendment that merely increased the time prior to a stockholder
meeting for submitting
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<PAGE>
stockholder proposals. This amendment presents no "obstacle" to a merger.
52. The Complaint states that the second "obstacle" is the
employment contract between Wallace and Mr. Cronin. This characterization of Mr.
Cronin's employment agreement is false and misleading in that Moore, FRDK and
Mr. Braun affirmatively represented in the Schedule 14D-1 and in other
communications that they had the highest respect for Mr. Cronin and intended him
to stay with the Company. Under these circumstances, Mr. Cronin's contract is no
"obstacle" to Moore's offer whatsoever.
53. The Complaint further falsely alleges that the members of
Wallace's Board of Directors "will" violate their fiduciary duties in
considering Moore's and FRDK's offer. The statement that Wallace's directors
"will" violate the fiduciary duties is false and has no reasonable basis in
fact. At the time the Complaint was filed, the Board had not even received a
Schedule 14D-1 from Moore or FRDK. Moreover, the assumption that Wallace's Board
of Directors, including management members, will violate their fiduciary
obligations to stockholders is flatly inconsistent with Moore's statement in the
letter dated July 30, 1995 from Mr. Braun to Mr. Cronin that "We have the
highest regard for you and your management team," and inconsistent with Moore's
and FRDK's pledge in its Schedule 14D-1 to "retain the Company's management
team" after
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<PAGE>
a merger and assign it "significant responsibility" for the
combined businesses of Moore and Wallace.
54. On or about August 2, 1995, Moore, FRDK and Mr. Braun
caused to be filed, with the Securities and Exchange Commission ("SEC"), a
Schedule 14D-1 in connection with the tender offer.
55. Like the false and misleading statements previously made
to the financial media and industry analysts, the Schedule 14D-1 is misleading
concerning the character and significance of the prior contacts between Moore
and Wallace. A copy of the prior contacts section of the Schedule 14D-1 is
attached hereto as Exhibit 2. The Schedule 14D-1 is misleading in that it fails
to disclose (1) that Moore representatives, including Mr. Braun, had pledged at
least three times to Wallace representatives that Moore was only interested in a
friendly deal, and (2) that when Mr. Braun was informed that Wallace had no
interest in diverting from its business plan, Mr. Braun had stated to Mr. Cronin
that the matter was closed. Disclosure of all these facts is necessary to make
the statements made in the Schedule 14D-1 concerning prior contacts between the
parties not misleading. Moore, FRDK and Mr. Braun never disclose in the Schedule
14D-1 or elsewhere what facts changed between March 1995 when Moore pledged
three times only to pursue a friendly deal and stated that the matter was
closed, and August 1995 when Mr. Braun caused Moore and FRDK to launch the
hostile tender offer.
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<PAGE>
56. Like the false and misleading statements previously made
to financial industry analysts, the Schedule 14D-1 fails to disclose basic
material facts relating to the antitrust issues described more fully above in
Paragraphs 11-20. On information and belief, Mr. Braun, Moore and FRDK were
aware of the basic facts relating to these antitrust issues. The section of the
Schedule 14D-1 discussing issues arising under the antitrust laws is attached as
Exhibit 3 hereto. The failure to disclose the basic facts relating to the
antitrust issues violate applicable SEC rules and regulations and render the
statements made in the Schedule 14D-1 materially false and misleading.
Wallace's Board of Directors Carefully Considers and
Recommends Rejection of Moore's Offer
57. Wallace's Board of Directors held a meeting on August 1,
1995 to consider the July 30, 1995 public announcement by Moore of its intent to
commence the tender offer and held meetings on August 11 and 14, 1995 to
consider the tender offer. At each meeting the Board of Directors carefully
considered Wallace's business, financial condition and prospects and the terms
and conditions of the offer (or in the case of the August 1 meeting, of the
proposed offer).
58. At the August 14 meeting, Wallace's Board of Directors
unanimously concluded that Moore and FRDK's $56 offer is inadequate and not in
the best interests of the company and its stockholders and that, in light of
Wallace's future prospects, the interests of the stockholders will be
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<PAGE>
best served by Wallace remaining an independent entity. Accordingly, the board
unanimously recommended that Wallace's stockholders reject the offer and not
tender their shares pursuant to the offer.
59. In reaching the conclusions referred to in the previous
paragraph, the Board of Directors took into account numerous factors, including
but not limited to the following:
(a) The Board's familiarity with Wallace's business,
financial condition, prospects and current business strategy,
the nature of the business in which the company operates and
the Board's belief that the $56 offer does not reflect the
long-term values inherent in the company.
(b) The opinion of Wallace's management as to the
company's prospects for future growth and profitability, based
on its knowledge of Wallace's businesses, its views as to the
long-term strategic plan, the various strategic initiatives
which have been implemented over the past several years, and
the acquisition and other opportunities that will be available
in the future, its assessment of certain new products in
various stages of development and its opinion concerning
Wallace's financial condition and current conditions in the
businesses in which it operates.
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<PAGE>
(c) The opinion of Goldman Sachs, Wallace's financial
advisor, after reviewing with the Board of Directors many of
the factors referred to herein and other financial criteria
used in assessing an offer, that Moore and FRDK's $56 offer is
inadequate.
(d) Certain legal issues raised by the offer under
the antitrust laws of the United States.
(e) The numerous conditions to which the offer is
subject.
(f) The disruptive effect consummation of the offer
could have on Wallace's employees, suppliers, customers and
the communities where the company operates.
60. On August 15, 1995, Wallace announced the recommendation
of its Board of Directors that the offer be rejected by the company's
stockholders and, at the same time, announced record earnings for the year
ended July 31, 1995.
Moore and FRDK Seek to Replace Wallace's Board of Directors
With Directors Who Will Accept Their $56 Offer
61. On September 12, 1995 Moore and FRDK filed a preliminary
Schedule 14A Proxy Statement with the SEC. At the same time, Moore and FRDK
filed with the SEC and widely disseminated a letter from Mr. Braun to Wallace
stockholders. Mr. Braun's letter furthered the false and misleading media
campaign in connection with the tender offer and the solicitation of proxies for
the annual meeting. A copy of this letter is attached as Exhibit 4 hereto.
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<PAGE>
62. The Braun letter of September 12 falsely states that the
$56 offer "reflects Wallace's current performance and future performance" and
that if it is withdrawn "Wallace's stock price will plummet toward its pre-offer
level in the low $40s." These statements have no reasonable basis in fact and
are false, misleading and coercive of Wallace stockholders. Mr. Braun's letter
fails to disclose that Wallace's record earnings for the year ended July 31,
1995 were announced on August 15, 1995, after Moore's offer was made, and that
those earnings were not anticipated by Moore, facts necessary to make the
statements made not misleading. Moreover, Mr. Braun's and Moore's predictions of
Wallace's future market value flagrantly violates SEC Rule 14a-9 which prohibits
such predictions in proxy solicitations. Such statements are inherently
speculative and misleading, especially when, as here, they have no reasonable
basis in fact and/or fail to disclose any factual basis for the predictions.
Such facts are material and necessary to make the statements made not
misleading.
63. The Braun letter of September 12 also states that the $56
offer represents "an 84% premium over the share price on February 24, 1995, when
we first wrote Wallace regarding a business combination." This statement falsely
states that there is some continuity or relation between the current offer and
the earlier contacts. This statement is false and misleading in that it fails to
disclose fully the
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<PAGE>
nature and character of the February discussions as well as Wallace's financial
performance since February. As described more fully above, in the February
discussions, Moore representatives, including Mr. Braun, stated that Moore was
only interested in a friendly transaction, Moore and Mr. Braun made no specific
proposals, and Mr. Braun stated at the conclusion of those discussions that the
matter was closed. All of these facts are material and necessary to make the
statement made not misleading.
64. The Braun letter of September 12 also reiterates previous
false and misleading statements to the effect that Wallace's bylaw amendment
relating to stockholder proposals at the annual meeting and recent changes in
certain severance arrangements, including Mr. Cronin's employment agreement,
"deny" Wallace's stockholders the right to accept Moore's offer and are designed
to "enrich" and "entrench" Wallace's management and Board of Directors. As
described in paragraphs 50 through 52 above, none of these actions present any
obstacle to Moore's offer. Moreover, it is highly improper and unlawful under
SEC 14a-9 for Moore and Mr. Braun to impugn the integrity of Wallace's
management and Board of Directors. Moreover, it is misleading to characterize
these plans without also disclosing its continuing intention to retain Wallace
management in the proposed new entity and without also disclosing the value that
Moore executives would receive under Moore's severance arrangements under
comparable circumstances.
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<PAGE>
All of these facts are material and necessary to make the statements made not
misleading.
Moore, FRDK And Mr. Braun Have Violated Sections 14(d)
And 14(e) Of The Securities Exchange Act And SEC Rules
And Regulations
65. Section 14(d)(1) of the Securities Exchange Act provides
in pertinent part that:
"It shall be unlawful for any person, directly or indirectly,
by use of the mails or by any means or instrumentalities of
interstate commerce or of any facility of a national
securities exchange or otherwise, to make a tender offer for,
or a request or invitation for tenders of, any class of any
equity security . . . unless at the time copies of the offer
or request or invitation are first published or sent or given
to security holders, such person has filed with the [SEC] a
statement [on Schedule 14D-1 containing the required
information]."
66. The disclosure requirements for tender offers generally
are governed by Rule 14d-6 which dictates the contents of "tender offer
materials." Tender offer materials are defined in Rule 14D-1(b)(5) to include
"all the material terms and conditions of the tender offer."
67. Item 10(f) of Schedule 14D-1 promulgated by the SEC
pursuant to Section 14(d) provides in pertinent part that an offeror must
disclose in its offer to purchase:
"Such additional material information, if any, as may be
necessary to make the required statements, in light of the
circumstances under which they
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<PAGE>
are made, not materially misleading."
68. Section 14(e) of the Securities Exchange Act provides in
part as follows:
"It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any tender
offer."
69. These and other provisions of the Securities Exchange Act
and the rules and regulations promulgated thereunder by the SEC are designed to
provide stockholders with all material information necessary to make informed
investment decisions when faced with a tender offer and to prevent the
manipulation of the market by tender offerors.
70. The false and misleading media campaign conducted by Mr.
Braun and other corporate representatives on behalf of Moore and FRDK, as well
as the offer to purchase, and proxy solicitation materials, described more fully
above, violate Sections 14(d) and 14(e) of the Securities Exchange Act, and the
rules and regulations promulgated thereunder by the SEC, in that they contain
materially false, deceptive, manipulative and misleading statements in that,
among other things, Moore, FRDK and Mr. Braun falsely state, conceal and
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<PAGE>
fail to disclose material facts necessary to make the facts disclosed not
misleading as described more particularly above.
71. All of the false, deceptive, manipulative and misleading
statements and the information and facts omitted as set forth above are material
to each and every Wallace stockholder in deciding whether or not to tender their
shares to Moore at the inadequate price of $56 per share.
72. The false and misleading statements of fact more
specifically described above were each made by Mr. Braun, Moore and FRDK with
knowledge of and/or with reckless disregard for their falsity.
73. By reason of the foregoing, defendants Mr. Braun, Moore
and FRDK have violated and are continuing to violate Sections 14(d) and 14(e) of
the Securities Exchange Act and the rules and regulations promulgated thereunder
by the SEC.
74. Unless the injunctive relief sought under this claim is
granted, Wallace and its stockholders will be irreparably harmed in that Moore
and FRDK will continue to seek control of Wallace without providing Wallace's
shareholders the information necessary to make an informed decision regarding
the disposition of their shares.
75. Wallace has no adequate remedy at law.
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<PAGE>
COUNT THREE
VIOLATIONS OF THE SECURITIES
LAWS RELATING TO PROXY SOLICITATION
76. Wallace repeats and realleges its allegations in
paragraphs 1 - 75 as if set forth fully herein.
Moore, FRDK and Mr. Braun Have Violated Section 14(a)
of the Securities Exchange Act and SEC Rule 14a-9
77. Section 14(a) of the Securities Exchange Act provides in
pertinent part that:
"It shall be unlawful for any person . . . in contravention of
such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the
protection of investors, to solicit or to permit the use of
his name to solicit any proxy or consent or authorization in
respect of any security."
78. SEC Rule 14a-9(a) provides that:
"No solicitation subject to this regulation shall be made by
means of any proxy statement, form of proxy, notice of meeting
or other communication, written or oral, containing any
statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading
with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter
which has become false or misleading."
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<PAGE>
79. These and other provisions of the Securities Exchange Act
and the rules and regulations promulgated thereunder by the SEC are designed to
provide stockholders with all material information necessary to make informed
investment decisions when faced with a proxy solicitation and to prevent the
manipulation of the market during proxy contests.
80. The false and misleading media campaign orchestrated by
Mr. Braun and other corporate representatives on behalf of Moore and FRDK, the
offer to purchase, and proxy solicitation materials described more fully above,
violate Section 14(a) of the Securities Exchange Act, SEC Rule 14a-9 and the
other rules and regulations promulgated thereunder by the SEC, in that they
contain materially false, deceptive, manipulative and misleading statements in
that, among other things, Mr. Braun, Moore and FRDK falsely state, conceal and
fail to disclose material facts necessary to make the facts disclosed not
misleading as described more particularly above.
81. Mr. Braun, Moore and FRDK have attempted to coerce
Wallace's stockholders by making false, improper and unlawful predictions of
Wallace's future market value and by falsely impugning Wallace's management in
flagrant violation of SEC Rule 14a-9. The official note following SEC Rule 14a-9
states in pertinent part that:
"The following are some examples of what, depending upon
particular facts and circumstances, may be misleading
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<PAGE>
within the meaning of this section:
(a) Predictions as to specific future market values.
(b) Material which directly or indirectly impugns character,
integrity or personal reputation, or directly or indirectly
makes charges concerning improper, illegal or immoral conduct
or associations, without factual foundation."
82. All of the false, deceptive, manipulative and misleading
statements and the information and facts omitted as set forth above are material
to each Wallace stockholder in deciding how to respond to Moore's and FRDK's
proxy solicitation in connection with Wallace's annual meeting.
83. The false and misleading statements of fact more
specifically described above were each made with knowledge of and/or with
reckless disregard for their falsity.
84. By reason of the foregoing, defendants Mr. Braun, Moore
and FRDK have violated and are continuing to violate Section 14(a) of the
Exchange Act, SEC Rule 14a-9 and the rules and regulations promulgated
thereunder by the SEC.
85. Unless the injunctive relief sought under this claim is
granted, Wallace and its stockholders will be irreparably harmed because Mr.
Braun, Moore and FRDK will continue to seek proxies for Wallace's annual meeting
without providing Wallace's stockholders the information necessary to make an
informed decision concerning the issues raised in the solicitation.
86. Wallace has no adequate remedy at law.
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<PAGE>
RELIEF
WHEREFORE, Wallace demands judgment against Mr. Braun, Moore
and FRDK, and respectfully prays that this Court enter orders as follows:
(a) Declaring that the tender offer for the outstanding
voting securities of Wallace, if consummated, would violate
Section 7 of the Clayton Act, 15 U.S.C. ss.18;
(b) Preliminarily and permanently enjoining Moore and
FRDK from acquiring any voting securities of Wallace;
(c) Awarding to Wallace its cost of suit, including a
reasonable attorney's fee, as provided by Section 16 of the
Clayton Act, 15 U.S.C. ss.26;
(d) Declaring that Mr. Braun, Moore and FRDK have
violated Sections 14(d) and 14(e) of the Securities Exchange
Act and the rules and regulations promulgated thereunder and
that any solicitation or purchase of Wallace's common stock
pursuant to the offer to purchase is unlawful;
(e) Declaring that Mr. Braun, Moore and FRDK have
violated Section 14(a) of the Securities Exchange Act and SEC
rules and regulations promulgated thereunder, including SEC
Rule 14a-9, and that any proxies solicited by Mr. Braun, Moore
or FRDK be declared unlawful and void;
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<PAGE>
(f) Preliminarily and permanently enjoining Mr. Braun,
Moore and FRDK and their subsidiaries, directors, officers,
representatives, agents, servants and employees, and all other
persons in active concert or participation with them to make
appropriate corrective disclosures and to prohibit them from
soliciting, acquiring or attempting to acquire in any manner
any shares of Wallace stock, any right to acquire such shares,
or any proxies from Wallace stockholders unless and until 60
days after they have fully complied with the Exchange Act;
(g) Awarding Wallace the costs and disbursements of this
action together with reasonable attorneys' fees; and
(h) Awarding such other and further relief as the Court
deems just and proper.
POTTER ANDERSON & CORROON
By /s/ Stephen C. Norman
Michael D. Goldman (#268)
Stephen C. Norman (#2686)
P.O. Box 951
350 Delaware Trust Building
Wilmington, Delaware 19899
(302) 984-6000
Attorneys for Defendants and
Counterclaim-Plaintiff
OF COUNSEL:
Walter C. Carlson
William H. Baumgartner, Jr.
Richard B. Kapnick
Brandon D. Lawniczak
Linda T. Ieleja
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7000
Dated: September 25, 1995
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ROBERT W. HIRTH (RWH 2526)
SIDLEY & AUSTIN
875 Third Avenue
New York, New York 10022
(212) 906-2000
WALTER C. CARLSON (WCC 6356)
WILLIAM H. BAUMGARTNER, JR. (WHB 3409)
RICHARD B. KAPNICK (RBK 1120)
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312) 853-7000
Attorneys for Plaintiff
Wallace Computer Services, Inc.
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
____________________________________ x
:
WALLACE COMPUTER SERVICES, INC., :
:
Plaintiff, :
:
-against- : 95 Civ. 6379 (CSH)
:
MOORE CORPORATION LIMITED, :
FRDK, INC., and RETO BRAUN :
:
Defendants. :
____________________________________ x
FIRST AMENDED COMPLAINT
Plaintiff Wallace Computer Services, Inc. ("Wallace"), for its
First Amended Complaint against Moore Corporation Limited ("Moore"), FRDK, Inc.
("FRDK") and Reto Braun alleges as follows:
<PAGE>
NATURE OF THE ACTION
1. Moore and FRDK have launched a hostile $56 per share tender
offer for Wallace, its most successful and tenacious competitor in the business
forms industry. They have also initiated a proxy solicitation to replace
Wallace's Board of Directors at the next annual meeting with directors who have
pledged to accept the $56 offer. Wallace's Board of Directors has rejected this
offer as inadequate because of Wallace's record of exceptional financial
performance, its reputation as a provider of superior products and services and
its position in the industry as a technological leader and innovator, as well as
other factors, including the probability that the offer, if consummated, may
violate the antitrust laws of the United States. This action seeks to do two
things.
2. First, this action seeks a declaration that the tender
offer for Wallace, if consummated, would violate Section 7 of the Clayton Act,
and seeks to preliminarily and permanently enjoin Moore and FRDK from acquiring
any voting securities of Wallace. Moore and Wallace are direct competitors in
the market for the sale of business forms to large, forms-intensive customers
with multiple locations. In that market, the effect of an acquisition of Wallace
by Moore would be to change a three-firm market into a two-firm market.
3. Second, this action seeks to enjoin Moore, FRDK and Reto
Braun, Moore's Chairman and Chief Executive Officer, from making manipulative
and misleading disclosures to the press and investors. In their false and
misleading media campaign, Moore, FRDK and Mr. Braun have deliberately
misrepresented the character and significance of prior contacts between the
parties; failed to disclose a pledge only to pursue a friendly business
combination with Wallace; have falsely stated that Wallace enhanced its takeover
-2-
<PAGE>
defenses in response to earlier contacts with Moore; and have failed to disclose
the substantial antitrust obstacles presented by the proposed merger. In a
flagrant violation of SEC Rule 14a-9, Moore, FRDK and Mr. Braun have also made
false and misleading predictions concerning the future market value of Wallace's
common stock and unlawfully impugned the integrity of Wallace's successful
management team and Board of Directors.
THE PARTIES
4. Wallace is a Delaware corporation with its principal place
of business in Hillside, Illinois. Founded in Chicago in 1908, Wallace is one of
the largest United States manufacturers and distributors in the computer
services and supply industry. More specifically, 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. Wallace
has a reputation in the industry as a technological leader and innovator both in
the application of computer applications to traditional paper business forms and
in the area of customer service, delivery and inventory monitoring systems.
5. Moore is a corporation organized under the laws of the
Province of Ontario, Canada with its principal place of business in Toronto,
Ontario, Canada. Moore is a direct competitor of Wallace in the sale of business
forms, products and services that are both paper and electronically based. In
recent years, Wallace has beaten Moore in head to head competition to service
numerous large accounts, including ITT Automotive, Rubbermaid, and American
Airlines.
-3-
<PAGE>
6. FRDK is a New York corporation with its principal place of
business in Toronto, Ontario, Canada. It is a wholly owned subsidiary of Moore
and purportedly was incorporated for the purpose of making the tender offer and
proxy solicitation for Wallace.
7. Reto Braun has been Chairman of Moore's Board of Directors
since April 1995 and Chief Executive Officer of Moore since September 1993. On
information and belief, Mr. Braun is a citizen of Switzerland. In the United
States, Mr. Braun maintains a permanent residence at 101 Pembroke Drive, Lake
Forest, Illinois and an office at 275 Field Drive, Lake Forest, Illinois. Mr.
Braun is a direct and primary participant in the wrongful conduct alleged in
Counts II and III of this Complaint as well as a "controlling person" of Moore
and FRDK under Section 20 of the Securities Exchange Act, 15 U.S.C. ss. 78t(a).
8. At all times relevant to this Complaint, Mr. Braun
possessed the power to direct the management and policies of Moore and FRDK and
was involved in the composition, review, approval and dissemination of public
statements, including SEC filings, made by Moore and FRDK relating to the tender
offer and proxy solicitation. Throughout the relevant period, on information and
belief, Mr. Braun continuously exercised power and influence to cause Moore and
FRDK to engage in the illegal practices complained of herein, including those
directly undertaken by Mr. Braun himself.
JURISDICTION AND VENUE
9. Jurisdiction over Count I of this action arises under
Section 7 of the Clayton Act, 15 U.S.C. ss.18. This Court has subject matter
jurisdiction of Count I pursuant to 15 U.S.C. ss.26, 28 U.S.C. ss.ss.1331 and
1337. Jurisdiction over Counts II and III of this action arises under Section 27
of the Securities Exchange Act of 1934 ("Exchange Act"), 15
-4-
<PAGE>
U.S.C. ss.78aa and 28 U.S.C. ss.ss.1331, 1367 and 2201. Moore, FRDK and Mr.
Braun are subject to the personal jurisdiction of this Court because they are
found or transact business in this District and have undertaken specific acts in
this District with respect to the tender offer and proxy solicitation.
10. Venue is proper in this District under 28 U.S.C.
ss.1391(b) and with respect to Count I under Section 4 of the Clayton Act, 15
U.S.C. ss.15, and with respect to Counts II and III under Section 27 of the
Exchange Act, 15 U.S.C. ss.78aa.
COUNT ONE
THE THREATENED ANTITRUST VIOLATION
11. In a Tender Offer Statement on Schedule 14D-1 dated August
2, 1995, Moore and FRDK disclosed a tender offer to purchase all outstanding
voting securities of Wallace.
12. Pursuant to this tender offer, Moore, through its
wholly-owned New York subsidiary, FRDK, intends to acquire Wallace.
13. Moore and Wallace compete in a number of businesses,
including the manufacture and sale of business forms (examples of which include
Federal Express shipping forms, brokerage firm trade confirmation forms, and the
printed paper stock on which telephone bills are generated).
14. For antitrust purposes, the sale of business forms to
large, forms-intensive customers with multiple locations constitutes a relevant
product market. Examples of such customers would be Federal Express and K-Mart.
Within this product market, the relevant geographic market is the United States
of America.
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15. Large, forms-intensive customers with multiple locations
typically require a forms vendor with the following characteristics:
a. sufficient forms manufacturing capability across several
regions of the United States to satisfy their needs;
b. distribution capability across several regions of the
United States 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 systems capability to provide centralized
billing, reporting, and control for such shipments.
16. For most customers in the relevant product and geographic
market, the only acceptable vendors are Wallace, Moore, and The Standard
Register Company.
17. For these customers, the effect of an acquisition of
Wallace by Moore would be to change a three-firm market into a two-firm market.
18. The key impediment to entry into this business is the
development of the information services capability needed to support the
required distribution and billing capabilities. Wallace has spent more than a
decade developing its system, and did so internally. A new entrant would be
unable to purchase the required information services capability and would need
to spend a period of years attempting to develop it.
19. If Moore were to acquire Wallace', the effect of such
acquisition may be substantially to lessen competition in the relevant product
and geographic market, thus violating Section 7 of the Clayton Act, 15 U.S.C.
ss.18.
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20. Unless Moore and FRDK are enjoined, Wallace will suffer
irreparable harm as a result of the above stated actions, including inter alia,
loss of independent decisionmaking authority, loss of trade secrets, loss of
employees, and loss of customers. Wallace has no adequate remedy at law.
COUNT TWO
VIOLATIONS OF THE SECURITIES
LAWS RELATING TO TENDER OFFERS
21. Wallace repeats and realleges its allegations in
paragraphs 1-20 as if set forth fully herein.
Preliminary Inquiries Concerning The Possibility
Of Discussions Between Wallace And Moore
22. On or about February 16, 1995, a representative of Lazard
Freres & Co. LLC ("Lazard") contacted Neele E. Stearns, Jr., a member of
Wallace's Board of Directors and a personal acquaintance of the Lazard
representative, and inquired whether a Wallace representative would be willing
to meet with Mr. Braun to discuss a possible business combination on a friendly
basis involving Moore and Wallace. Mr. Stearns replied that he would communicate
with Wallace representatives and then follow up with the Lazard representative.
23. On February 21, 1995, Mr. Stearns contacted the Lazard
representative and informed him that Mr. Braun or a representative of Lazard
should communicate in writing directly with Robert J. Cronin, the President and
Chief Executive Officer of Wallace, in the event they wished to ralse the
possibility of discussing a business combination.
24. On or about February 24, 1995, Mr. Braun sent a letter to
Mr. Cronin, which provided in part as follows:
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"As a result of recent discussions between our financial
advisor, Lazard Freres, and Mr. Neele Stearns of your Board of
Directors, it has been suggested that I communicate directly
with you in this manner."
* * * *
"I would welcome to begin discussions with you, on a strictly
confidential basis, to explore the possibility of a
combination of our companies. We are very flexible in our
thinking as to the form such a combination might take. After
you have had a chance to discuss this with your Board, I would
be most happy to meet with you to share our respective views.
. . . I look forward to hearing from you."
25. On or about March 8, 1995, at a regularly scheduled
meeting of Wallace's Board of Directors, the Board discussed the February 24
letter of Mr. Braun and Moore's interest in pursuing a possible transaction with
the Company.
26. On or about March 9,1995, Mr. Cronin attempted to reach
Mr. Braun by telephone, but was advised that he would be out of his office until
March 14.
Moore Pledges To Pursue Only A Friendly Transaction
27. During the various communications between representatives
of Wallace and representatives of Moore in February and March 1995, Moore stated
at least three times that it was only interested in pursuing a friendly deal
with Wallace.
28. In the initial February 16 telephone call between the
Lazard representative and Mr. Stearns, the Lazard representative inquired
whether a Wallace representative would be willing to discuss a business
combination on a friendly basis with Moore.
29. On or about March 14, Mr. Cronin contacted Mr. Braun by
telephone. At the outset of the telephone conversation, Mr. Cronin stated that
the telephone call would not have been made if Wallace had not received Lazard's
assurances that Moore would only proceed on a friendly basis. Mr. Braun agreed
completely and stated that Moore would only
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pursue a transaction on a friendly basis. Mr. Cronin informed Mr. Braun that
Wallace was successfully pursuing its corporate strategy, saw no reason to
depart from it and that, accordingly, Wallace was not for sale. However, Mr.
Cronin stated he was nevertheless prepared to meet with Mr. Braun if he still
desired to do so. Mr. Braun stated that such a meeting was unnecessary and that
Wallace should "consider the situation closed."
30. On March 22, Mr. Stearns briefly visited the offices of
the Lazard representative to confirm that the representative was aware of the
March 14th telephone conversation between Mr. Braun and Mr. Cronin. The Lazard
representative once again stated that Moore would only pursue a friendly
transaction.
Mr. Cronin And Mr. Braun Agree To Have Lunch
31. On April 18, 1995, Mr. Cronin and Mr. Braun met each other
at an industry conference in New York City. Mr. Braun suggested that the two
should meet for lunch to discuss certain matters unrelated to a business
combination. Mr. Cronin stated that he would be willing to have lunch and that
Mr. Braun should contact him to set up a date. Both are residents of the Chicago
metropolitan area.
32. In the following weeks, Mr. Braun's secretary contacted
Mr. Cronin's secretary several times to arrange a lunch meeting for Messrs.
Braun and Cronin. Ultimately the secretaries scheduled the lunch between Mr.
Braun and Mr. Cronin for August 8, 1995. When Moore launched its hostile tender
offer, this lunch date was still scheduled.
33. On or about June 28, 1995, Mr. Braun failed at the last
minute to attend a dinner in Itasca, Illinois sponsored by the International
Business Forms Institute. Mr. Braun knew that Mr. Cronin would be in attendance
and if he had wanted to speak with
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Mr. Cronin on any appropriate subject, Mr. Cronin would have been available
before, during or after the dinner.
The False And Misleading Media Campaign
Conducted by Mr. Braun, Moore and FRDK
34. On the evening of Sunday, July 30, 1995, Mr. Braun called
Mr. Cronin from New York and left a recorded message on Mr. Cronin's home
answering machine stating that Moore and FRDK were going to make a tender offer
for Wallace.
35. At approximately 10:30 pm. on Sunday, July 30, 1995, a
messenger slipped a letter from Mr. Braun under the front door at Mr. Cronin's
residence stating that Moore and FRDK were commencing a hostile tender offer to
purchase all of Wallace's common stock at $56 per share and that Moore and FRDK
would solicit proxies for Wallace's annual meeting to replace the existing Board
of Directors with directors who would accept the $56 offer.
36. Sometime earlier on Sunday, July 30, 1995, Moore, FRDK and
Mr. Braun commenced a carefully calculated media campaign, in connection with
the hostile tender offer and proxy campaign, to manipulate and mislead Wallace
investors concerning the character and significance of prior discussions between
the companies with respect to the possibility of a business combination;
Wallace's responses to those discussions; and the facts relating to any
antitrust obstacles to the tender offer.
37. Statements made in the media campaign also falsely
portrayed Wallace as unwilling even to meet with Moore's representatives. As the
foregoing Paragraphs 22-33 make clear, this portrayal was directly contrary to
the actual facts as Moore, FRDK and Mr. Braun knew. In fact, at the time Moore,
FRDK and Mr. Braun commenced misleading the
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press and Wallace's investors, the lunch between Mr. Braun and Mr. Cronin that
had been scheduled was less than nine days away.
38. On July 30, Mr. Braun launched the false and misleading
media campaign on behalf of Moore and FRDK by giving interviews to The Wall
Street Journal, The New York Times and The Globe and Mail, among others. During
these interviews, Mr. Braun knowingly made various false and misleading
statements of fact in connection with the tender offer. Copies of articles based
on these interviews are attached as Exhibit 1 hereto.
39. In his July 30 interview with The Wall Street Journal,
Mr. Braun stated that Moore's unsolicited bid for Wallace came after "six or
seven" attempts to discuss a possible acquisition since February when Mr. Braun
conceded that Wallace had rejected a proposal about a possible acquisition. On
information and belief, Mr. Braun deliberately failed to disclose to The Wall
Street Journal: (1) that in the earlier discussions, Mr. Braun and Moore had
pledged at least three times not to launch a hostile offer; (2) that at the
conclusion of the March 14 telephone call, Mr. Braun stated that the situation
was closed; and (3) that almost all of the "attempts" since March to "discuss a
possible business combination" were calls from his secretary to Mr. Cronin's
secretary trying to schedule a lunch -- a lunch which in fact, was scheduled to
occur on August 8, 1995. All of these facts were necessary to make the actual
facts disclosed by Mr. Braun in The Wall Street Journal interview not
misleading.
40. Likewise, in his July 30 interview with The New York
Times, Mr. Braun stated that Wallace had "rejected" Moore's February proposal
that the two companies "meet to discuss a merger." This statement, as Mr. Braun
knew and as the foregoing illustrates, was false and misleading because, among
other things, it was Mr. Braun who had
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stated at the close of the March 14 telephone call that there was no point in
meeting, and in any event a lunch meeting was scheduled for August 8. All of
these facts were necessary to make the facts disclosed by Mr. Braun in The New
York Times interview not misleading.
41. In his July 30 interview with The Globe and Mail, Mr.
Braun stated that, among other things, Wallace had "strengthened" its "poison
pill" following the February discussions between Moore and Wallace. In fact, Mr.
Braun was very familiar with Wallace's takeover defenses and knew that Wallace
had not amended its stockholder rights plan after the February 1995 discussions.
In fact, Wallace's stockholder rights plan has not been amended since its
adoption in March 1990.
42. On July 31, 1995, Mr. Braun continued his campaign of
false and misleading disclosures to the press and to investors by holding a
conference call to discuss Moore's and FRDK's tender offer with financial
analysts covering the industry. During the call, Mr. Braun made various false
and misleading statements of fact in connection with the tender offer.
43. During the Braun conference call of July 31 with industry
analysts, Mr. Braun falsely stated that Wallace, in rejecting any discussions
over a possible business combination, had refused to specify any reasons. To the
contrary, the true facts were that, as described in Paragraph 29 above, Mr.
Cronin had informed Mr. Braun that Wallace was successfully pursuing its
corporate strategy and saw no reason to depart from it. Moreover, Mr. Braun
failed to disclose to the analysts that he and Moore had pledged in the March 14
discussion and on two other occasions only to pursue a friendly deal and that
the following Wallace's expression of no interest he had informed Wallace that
the matter was closed -- all
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facts which are necessary to make the facts disclosed in the analysts'
conference call not misleading.
44. In the Braun conference call of July 31 with industry
analysts, Mr. Braun continued his false and misleading campaign of media
disclosures by again stating that Moore had tried to "get together" a number of
times with Wallace since February without explaining that nearly all of these
contacts involved his secretary calling Mr. Cronin `s secretary to schedule a
lunch -- all facts which are necessary to make the facts disclosed not
misleading.
45. In the Braun conference call of July 31 with industry
analysts, Mr. Braun also twice repeated his false statement, made previously in
The Globe and Mall interview, that Wallace, following the earlier discussions,
had "strengthened their position on poison pills" and "strengthened their
arsenal of poison pills." In fact, as heretofore set forth above, Mr. Braun was
very familiar with Wallace's takeover defenses and knew that Wallace has not
amended its stockholder rights plan in response to Moore's overtures.
46. In the Braun conference call of July 31 with industry
analysts, Mr. Braun also falsely stated that antitrust concerns are not "a
problem" or "big issue" which would prevent consummation of the proposed tender
offer. As described more fully above in Paragraphs 11-20, there are basic
material facts concerning relevant markets which give rise to antitrust issues
concerning the tender offer. On information and belief, Mr. Braun, Moore and
FRDK were aware of the basic facts relating to these antitrust issues. The
relative positions of Wallace and Moore and other market conditions in the
industry are so obvious that the probable antitrust violation was clearly
apparent to Moore, FRDK and Mr. Braun at
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the time of the offer. Failure to disclose these basic material facts and the
antitrust issues they create, is false and misleading.
47. On July 31, Moore, FRDK and Mr. Braun caused to be filed
the Complaint in the United States District Court for the District of Delaware
against Wallace and its Board of Directors. The Complaint contains false and
misleading statements of fact made in connection with the tender offer and proxy
solicitation. The Complaint is attached to the Schedule 14D- 1 and, as a result,
its content was widely disseminated in the media by Moore and FRDK. The false
statements of fact in the Complaint serve to reinforce the false and misleading
statements made in the media campaign launched in Mr. Braun's interviews with
The Wall Street Journal, The New York Times, The Globe and Mail and in Mr.
Braun's conference call with financial analysts covering the industry.
48. The Complaint states that "in February 1995, Moore
attempted to initiate discussions with Wallace regarding a possible business
combination between Moore and Wallace." Paragraph 38. The Complaint then alleges
that Mr. Cronin informed Mr. Braun in response that "Wallace's Board of
Directors had considered Moore's proposal, was not interested in any such
combination and would not pursue the matter further." Id. The Complaint then
falsely states that "all efforts by Moore to engage in further discussions with
Wallace concerning a possible business combination with Moore since that time
have been rebuffed by Wallace."
49. In fact, on the date the Complaint was filed, Mr. Braun
was scheduled to have lunch with Mr. Cronin on August 8. The Complaint also
failed to disclose the following facts: (1) that Moore had pledged in the March
1995 discussion and on two other occasions only to proceed on a friendly basis;
(2) that following Wallace's lack of interest,
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Moore had stated that the matter was closed; (3) that almost all of the
subsequent contacts between the parties consisted of Mr. Braun's secretary
calling Mr. Cronin's secretary to set up a lunch; and (4) that Mr. Braun, at the
last minute, failed to show up for a small industry meeting of CEOs where he
could have had private discussions with Mr. Cronin on any appropriate subject --
all facts which under the circumstances were necessary to make the statements
set forth therein and elsewhere concerning the February and March discussions
and subsequent contacts not misleading.
50. The Complaint also falsely states that "Wallace's Board of
Directors has taken specific steps since Moore's initial approach in February
1995 to create additional obstacles to a merger." In fact, as set forth above,
Moore, FRDK and Mr. Braun are vary familiar with Wallace's takeover defenses and
know very well that no actions taken since February 1995 present any "obstacle"
to a merger.
51. The Complaint states that the first "obstacle" is a
Wallace bylaw amendment that merely increased the time prior to a stockholder
meeting for submitting stockholder proposals. This amendment presents no
"obstacle" to a merger.
52. The Complaint states that the second "obstacle" is the
employment contract between Wallace and Mr. Cronin. This characterization of Mr.
Cronin's employment agreement is false and misleading in that Moore, FRDK and
Mr. Braun affirmatively represented in the Schedule 14D-1 and in other
communications that they had the highest respect for Mr. Cronin and intended him
to stay with the Company. Under these circumstances, Mr. Cronin's contract is no
"obstacle" to Moore's offer whatsoever.
53. The Complaint further falsely alleges that the members of
Wallace's Board of Directors "will" violate their fiduciary duties in
considering Moore's and FRDK's
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offer. The statement that Wallace's directors "will" violate the fiduciary
duties is false and has no reasonable basis in fact. At the time the Complaint
was filed, the Board had not even received a Schedule 14D-1 from Moore or FRDK.
Moreover, the assumption that Wallace's Board of Directors, including management
members, will violate their fiduciary obligations to stockholders is flatly
inconsistent with Moore's statement in the letter dated July 30, 1995 from Mr.
Braun to Mr. Cronin that "We have the highest regard for you and your management
team," and inconsistent with Moore's and FRDK's pledge in its Schedule 14D-1 to
"retain the Company's management team" after a merger and assign it "significant
responsibility" for the combined businesses of Moore and Wallace.
54. On or about August 2, 1995, Moore, FRDK and Mr. Braun
caused to be filed, with the Securities and Exchange Commission ("SEC"), a
Schedule 14D-1 in connection with the tender offer.
55. Like the false and misleading statements previously made
to the financial media and industry analysts, the Schedule 14D-1 is misleading
concerning the character and significance of the prior contacts between Moore
and Wallace. A copy of the prior contacts section of the Schedule 14D-1 is
attached hereto as Exhibit 2. The Schedule 14D-1 is misleading in that it fails
to disclose (1) that Moore representatives, including Mr. Braun, had pledged at
least three times to Wallace representatives that Moore was only interested in a
friendly deal, and (2) that when Mr. Braun was informed that Wallace had no
interest in diverting from its business plan, Mr. Braun had stated to Mr. Cronin
that the matter was closed. Disclosure of all these facts is necessary to make
the statements made in the Schedule 14D-1 concerning prior contacts between the
parties not misleading. Moore, FRDK and Mr. Braun never disclose in the Schedule
14D-1 or elsewhere what facts changed
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between March 1995 when Moore pledged three times only to pursue a friendly deal
and stated that the matter was closed, and August 1995 when Mr. Braun caused
Moore and FRDK to launch the hostile tender offer.
56. Like the false and misleading statements previously made
to financial industry analysts, the Schedule 14D-1 fails to disclose basic
material facts relating to the antitrust issues described more fully above in
Paragraphs 11-20. On information and belief, Mr. Braun, Moore and FRDK were
aware of the basic facts relating to these antitrust issues. The section of the
Schedule 14D- 1 discussing issues arising under the antitrust laws is attached
as Exhibit 3 hereto. The failure to disclose the basic facts relating to the
antitrust issues violate applicable SEC rules and regulations and render the
statements made in the Schedule 14D-1 materially false and misleading.
Wallace's Board of Directors Carefully Considers and
Recommends Rejection of Moore's Offer
57. Wallace's Board of Directors held a meeting on August 1,
1995 to consider the July 30,1995 public announcement by Moore of its intent to
commence the tender offer and held meetings on August 11 and 14, 1995 to
consider the tender offer. At each meeting the Board of Directors carefully
considered Wallace's business, financial condition and prospects and the terms
and conditions of the offer (or in the case of the August 1 meeting, of the
proposed offer).
58. At the August 14 meeting, Wallace's Board of Directors
unanimously concluded that Moore and FRDK's $56 offer is inadequate and not in
the best interests of the company and its stockholders and that, in light of
Wallace's future prospects, the interests of the stockholders will be best
served by Wallace remaining an independent entity.
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Accordingly, the board unanimously recommended that Wallace's stockholders
reject the offer and not tender their shares pursuant to the offer.
59. In reaching the conclusions referred to in the previous
paragraph, the Board of Directors took into account numerous factors, including
but not limited to the following:
(a) The Board's familiarity with Wallace's business, financial
condition, prospects and current business strategy, the nature of the
business in which the company operates and the Board's belief that the
$56 offer does not reflect the long-term values inherent in the
company.
(b) The opinion of Wallace's management as to the company's
prospects for future growth and profitability, based on its knowledge
of Wallace's businesses, its views as to the long-term strategic plan,
the various strategic initiatives which have been implemented over the
past several years, and the acquisition and other opportunities that
will be available in the future, its assessment of certain new products
in various stages of development and its opinion concerning Wallace's
financial condition and current conditions in the businesses in which
it operates.
(c) The opinion of Goldman Sachs, Wallace's financial advisor,
after reviewing with the Board of Directors many of the factors
referred to herein and other financial criteria used in assessing an
offer, that Moore and FRDK's $56 offer is inadequate.
(d) Certain legal issues raised by the offer under the
antitrust laws of the United States.
(e) The numerous conditions to which the offer is subject.
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(f) The disruptive effect consummation of the offer could have
on Wallace's employees, suppliers, customers and the communities where
the company operates.
60. On August 15, 1995, Wallace announced the recommendation
of its Board of Directors that the offer be rejected by the company's
stockholders and, at the same time, announced record earnings for the year ended
July 31, 1995.
Moore and FRDK Seek to Replace Wallace's Board of Directors
With Directors Who Will Accept Their $56 Offer
61. On September 12, 1995 Moore and FRDK filed a preliminary
Schedule 14A Proxy Statement with the SEC. At the same time, Moore and FRDK
filed with the SEC and widely disseminated a letter from Mr. Braun to Wallace
stockholders. Mr. Braun's letter furthered the false and misleading media
campaign in connection with the tender offer and the solicitation of proxies for
the annual meeting. A copy of this letter is attached as Exhibit 4 hereto.
62. The Braun letter of September 12 falsely states that the
$56 offer "reflects Wallace's current performance and future performance" and
that if it is withdrawn "Wallace's stock price will plummet toward its pre-offer
level in the low $40s." These statements have no reasonable basis in fact and
are false, misleading and coercive of Wallace stockholders. Mr. Braun's letter
fails to disclose that Wallace's record earnings for the year ended July 31,
1995 were announced on August 15, 1995, after Moore's offer was made, and that
those earnings were not anticipated by Moore, facts necessary to make the
statements made not misleading. Moreover, Mr. Braun's and Moore's predictions of
Wallace's future market value flagrantly violates SEC Rule 14a-9 which prohibits
such predictions in proxy solicitations. Such statements are inherently
speculative and misleading, especially when, as here, they have no reasonable
basis in fact and/or fail to
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disclose any factual basis for the predictions. Such facts are material and
necessary to make the statements made not misleading.
63. The Braun letter of September 12 also states that the $56
offer represents "an 84% premium over the share price on February 24, 1995, when
we first wrote Wallace regarding a business combination." This statement falsely
states that there is some continuity or relation between the current offer and
the earlier contacts. This statement is false and misleading in that it fails to
disclose fully the nature and character of the February discussions as well as
Wallace's financial performance since February. As described more fully above,
in the February discussions, Moore representatives, including Mr. Braun, stated
that Moore was only interested in a friendly transaction, Moore and Mr. Braun
made no specific proposals, and Mr. Braun stated at the conclusion of those
discussions that the matter was closed. All of these facts are material and
necessary to make the statement made not misleading.
64. The Braun letter of September 12 also reiterates previous
false and misleading statements to the effect that Wallace's bylaw amendment
relating to stockholder proposals at the annual meeting and recent changes in
certain severance arrangements, including Mr. Cronin's employment agreement,
"deny" Wallace's stockholders the right to accept Moore's offer and are designed
to "enrich" and "entrench" Wallace's management and Board of Directors. As
described in paragraphs 50 through 52 above, none of these actions present any
obstacle to Moore's offer. Moreover, it is highly improper and unlawful under
SEC 14a-9 for Moore and Mr. Braun to impugn the integrity of Wallace's
management and Board of Directors. Moreover, it is misleading to characterize
these plans without also disclosing its continuing intention to retain Wallace
management in the proposed new entity
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and without also disclosing the value that Moore executives would receive under
Moore's severance arrangements under comparable circumstances. All of these
facts are material and necessary to make the statements made not misleading.
Moore, FRDK And Mr. Braun Have Violated Sections 14(d) And
14(e) Of The Securities Exchange Act And SEC Rules And Regulations
65. Section 14(d)(l) of the Securities Exchange Act provides
in pertinent part that:
"It shall be unlawful for any person, directly or indirectly, by use
of the mails or by any means or instrumentalities of interstate
commerce or of any facility of a national securities exchange or
otherwise, to make a tender offer for, or a request or invitation for
tenders of, any class of any equity security...unless at the time
copies of the offer or request or invitation are first published or
sent or given to security holders, such person has filed with the
[SEC] a statement [on Schedule 14D-1 containing the required
information]."
66. The disclosure requirements for tender offers generally
are governed by Rule 14d-6 which dictates the contents of "tender offer
materials." Tender offer materials are defined in Rule 14D-l(b)(5) to include
"all the material terms and conditions of the tender offer."
67. Item 10(f) of Schedule 14D-l promulgated by the SEC
pursuant to Section 14(d) provides in pertinent part that an offeror must
disclose in its offer to purchase:
"Such additional material information, if any, as may be necessary to
make the required statements, in light of the circumstances under which
they are made, not materially misleading."
68. Section 14(e) of the Securities Exchange Act provides in
part as follows:
"It shall be unlawful for any person to make any untrue statement of a
material fact or omit to state any material fact
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necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading, or to engage
in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender offer."
69. These and other provisions of the Securities Exchange Act
and the rules and regulations promulgated thereunder by the SEC are designed to
provide stockholders with all material information necessary to make informed
investment decisions when faced with a tender offer and to prevent the
manipulation of the market by tender offerors.
70. The false and misleading media campaign conducted by Mr.
Braun and other corporate representatives on behalf of Moore and FRDK, as well
as the offer to purchase, and proxy solicitation materials, described more fully
above, violate Sections 14(d) and 14(e) of the Securities Exchange Act, and the
rules and regulations promulgated thereunder by the SEC, in that they contain
materially false, deceptive, manipulative and misleading statements in that,
among other things, Moore, FRDK and Mr. Braun falsely state, conceal and fail to
disclose material facts necessary to make the facts disclosed not misleading as
described more particularly above.
71. All of the false, deceptive, manipulative and misleading
statements and the information and facts omitted as set forth above are material
to each and every Wallace stockholder in deciding whether or not to tender their
shares to Moore at the inadequate price of $56 per share.
72. The false and misleading statements of fact more
specifically described above were each made by Mr. Braun, Moore and FRDK with
knowledge of and/or with reckless disregard for their falsity.
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73. By reason of the foregoing, defendants Mr. Braun, Moore
and FRDK have violated and are continuing to violate Sections 14(d) and 14(e) of
the Securities Exchange Act and the rules and regulations promulgated thereunder
by the SEC.
74. Unless the injunctive relief sought under this claim is
granted, Wallace and its stockholders will be irreparably harmed in that Moore
and FRDK will continue to seek control of Wallace without providing Wallace's
shareholders the information necessary to make an informed decision regarding
the disposition of their shares.
75. Wallace has no adequate remedy at law.
COUNT THREE
VIOLATIONS OF THE SECURITIES
LAWS RELATING TO PROXY SOLICITATION
76. Wallace repeats and realleges its allegations in
paragraphs 1 - 75 as if set forth fully herein.
Moore, FRDK and Mr. Braun Have Violated Section 14(a)
of the Securities Exchange Act and SEC Rule 14a-9
77. Section 14(a) of the Securities Exchange Act provides in
pertinent part that:
"It shall be unlawful for any person . . . in contravention of such
rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors,
to solicit or to permit the use of his name to solicit any proxy or
consent or authorization in respect of any security."
78. SEC Rule l4a-9(a) provides that:
"No solicitation subject to this regulation shall be made by means of
any proxy statement, form of proxy, notice of meeting or other
communication, written or oral, containing any statement which, at the
time and in the light of the
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circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any material fact
necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the same
meeting or subject matter which has become false or misleading."
79. These and other provisions of the Securities Exchange Act
and the rules and regulations promulgated thereunder by the SEC are designed to
provide stockholders with all material information necessary to make informed
investment decisions when faced with a proxy solicitation and to prevent the
manipulation of the market during proxy contests.
80. The false and misleading media campaign orchestrated by
Mr. Braun and other corporate representatives on behalf of Moore and FRDK, the
offer to purchase, and proxy solicitation materials described more fully above,
violate Section 14(a) of the Securities Exchange Act, SEC Rule 14a-9 and the
other rules and regulations promulgated thereunder by the SEC, in that they
contain materially false, deceptive, manipulative and misleading statements in
that, among other things, Mr. Braun, Moore and FRDK falsely state, conceal and
fail to disclose material facts necessary to make the facts disclosed not
misleading as described more particularly above.
81. Mr. Braun, Moore and FRDK have attempted to coerce
Wallace's stockholders by making false, improper and unlawful predictions of
Wallace's future market value and by falsely impugning Wallace's management in
flagrant violation of SEC Rule 14a-9. The official note following SEC Rule 14a-9
states in pertinent part that:
"The following are some examples of what, depending upon particular
facts and circumstances, may be misleading within the meaning of this
section:
(a) Predictions as to specific future market values.
(b)Material which directly or indirectly impugns character, integrity
or personal reputation, or directly or indirectly makes
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<PAGE>
charges concerning improper, illegal or immoral conduct or
associations, without factual foundation."
82. All of the false, deceptive, manipulative and misleading
statements and the information and facts omitted as set forth above are material
to each Wallace stockholder in deciding how to respond to Moore's and FRDK's
proxy solicitation in connection with Wallace's annual meeting.
83. The false and misleading statements of fact more
specifically described above were each made with knowledge of and/or with
reckless disregard for their falsity.
84. By reason of the foregoing, defendants Mr. Braun, Moore
and FRDK have violated and are continuing to violate Section 14(a) of the
Exchange Act, SEC Rule 14a-9 and the rules and regulations promulgated
thereunder by the SEC.
85. Unless the injunctive relief sought under this claim is
granted, Wallace and its stockholders will be irreparably harmed because Mr.
Braun, Moore and FRDK will continue to seek proxies for Wallace's annual
meeting without providing Wallace's stockholders the information necessary to
make an informed decision concerning the issues raised in the solicitation.
86. Wallace has no adequate remedy at law.
RELIEF
WHEREFORE, Wallace demands judgment against Mr. Braun, Moore
and FRDK, and respectfully prays that this Court enter orders as follows:
(a) Declaring that the tender offer for the outstanding
voting securities of Wallace, if consummated, would violate Section 7
of the Clayton Act, 15 U.S.C. ss.18;
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<PAGE>
(b) Preliminarily and permanently enjoining Moore and
FRDK from acquiring any voting securities of Wallace;
(c) Awarding to Wallace its cost of suit, including a
reasonable attorney's fee, as provided by Section 16 of the Clayton
Act, 15 U.S.C. ss.26;
(d) Declaring that Mr. Braun, Moore and FRDK have
violated Sections 14(d) and 14(e) of the Securities Exchange Act and
the rules and regulations promulgated thereunder and that any
solicitation or purchase of Wallace's common stock pursuant to the
offer to purchase is unlawful;
(e) Declaring that Mr. Braun, Moore and FRDK have
violated Section 14(a) of the Securities Exchange Act and SEC rules and
regulations promulgated thereunder, including SEC Rule 14a-9, and that
any proxies solicited by Mr. Braun, Moore or FRDK be declared unlawful
and void;
(f) Preliminarily and permanently enjoining Mr. Braun,
Moore and FRDK and their subsidiaries, directors, officers,
representatives, agents, servants and employees, and all other persons
in active concert or participation with them to make appropriate
corrective disclosures and to prohibit them from soliciting, acquiring
or attempting to acquire in any manner any shares of Wallace stock, any
right to acquire such shares, or any proxies from Wallace stockholders
unless and until 60 days after they have fully complied with the
Exchange Act;
(g) Awarding Wallace the costs and disbursements of this
action together with reasonable attorneys' fees; and
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<PAGE>
(h) Awarding such other and further relief as the Court
deems just and proper.
Dated: September 25, 1995
/s/ Robert W. Hirth
One of the Attorneys for Wallace
Computer Services, Inc.
Of Counsel: Robert W. Hirth (RWH 2526)
SIDLEY & AUSTIN
Walter C. Carlson (WCC 6356) 875 Third Avenue
William H. Baumgartner (WHB 3409) New York, New York 10022
Richard B. Kapnick (RBK 1120) (212)906-2000
SIDLEY & AUSTIN
One First National Plaza
Chicago, Illinois 60603
(312)853-7000
-27-
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
___________________________________x
BERNARD KOFF, :
:
Plaintiff, :
:
v. :
:
THEODORE DIMITROU, 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- :
:
THEODORE DIMITROU, FRED CANNING, : C.A. No. 14449
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
AMENDED CLASS ACTION COMPLAINT
Plaintiffs, by their attorneys, for their 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 shareholders of defendant Wallace Computer Services Inc. ("Wallace" or the
"Company") similarly
<PAGE>
situated (the "Class") for declaratory and injunctive relief, and/or
compensatory damages, arising from defendants' breach of fiduciary duty to the
shareholders of Wallace. As detailed herein, defendants have acted contrary to
the best interests of Wallace's public shareholders by taking unreasonable steps
and failing to take certain steps, in order to thwart an offer by Moore
Corporation Limited ("Moore") to acquire Wallace at $56.00 per share. Defendants
have failed to investigate and fully consider Moore's offer. Defendants have
failed to inform themselves with respect to the terms, including the best
possible price, of a Moore Offer. Defendants have changed the severance
arrangements of Wallace's top executives and other Wallace employees to enrich
management and thereby increase the cost to any potential acquiror of acquiring
Wallace. Defendants have amended certain Wallace benefit plans to enable
Wallace's top executives to unfairly and illegally vote shares of the Company's
stock that they do not own, thereby obstructing the right of Wallace's
shareholders to receive an attractive offer for their shares. Defendants have
taken these unlawful actions in violation of their fiduciary duties for the
purpose of entrenching themselves in lucrative managerial and directorial
positions.
THE PARTIES
2. Plaintiff Kitty LaPerriere is and has been, at all relevant times
the owner of shares of Wallace common stock.
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<PAGE>
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 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") is and was the Chairman of Wallace's Board of Directors. As of
November 9, 1994, Dimitriou owned or controlled less than O.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")
is and was 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,
were and are Directors of Wallace and, in addition to other compensation, are
paid $19,000 per
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<PAGE>
annum and receive substantial fees for each Board meeting they attend.
8. The defendants referred to in paragraphs 5-7, above, are
collectively referred to herein as the "Individual Defendants."
CLASS ACTION ALLEGATIONS
9. Plaintiff 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.
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
shareholders 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 and which predominate over any
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<PAGE>
questions affecting any individual members. The common questions include, 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;
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 and loyalty.
13. The claims of plaintiffs are typical of the claims of the other
members of the Class, and plaintiff 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.
-5-
<PAGE>
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 the party opposing the Class.
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.
17. Plaintiffs anticipate that there will be no difficulty in the
management of this litigation. A class action is superior to other available
methods for the fair and efficient adjudication of this controversy.
SUBSTANTIVE ALLEGATIONS
18. 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.
19. On or about February 24, 1995, Wallace was contacted by
representatives of Moore seeking 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.
-6-
<PAGE>
20. Wallace's management, including the Individual Defendants, flatly
refused to participate in any discussion concerning a business combination
between the two companies. Undaunted, Moore's management made six or seven
additional attempts since the initial overtures in February 1995, to open up a
dialogue with Wallace. However, these efforts proved fruitless as well.
21. During this period, Wallace became wary of Moore's efforts to
discuss a business combination. Desperate to ensure that any takeover attempt
would not be successful despite the potential benefits to Wallace's
shareholders, the Company's Board enacted various measures to strengthen its
anti-takeover defenses. For example, in June, 1995, the Company's 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 is scheduled for November 8, 1995, this provision was designed to make
it extremely difficult for Moore to organize any unsolicited takeover attempt in
time for that meeting. In addition, the Board adopted a "golden parachute" by
which defendant Cronin would receive millions of dollars if his job duties were
changed as the result of a takeover.
22. 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 orchestrated by the
Individual Defendants and other members of the Company's management to ensure
that they could
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<PAGE>
entrench themselves in their lucrative managerial and directorial positions with
the Company, to the detriment of its stockholders.
23. On July 30, 1995, as a result of Wallace's continued failure to
even discuss with Moore a sale of Wallace, Moore announced its intention to
bring its offer directly to Wallace's shareholders by commencing a tender offer
by a wholly owned Moore subsidiary (FRDK, Inc. ("FRDK")) for all Wallace Shares
at $56 per share in cash for a total purchase price of approximately $1.3
billion (the "Offer"). The $56 tender offer price represents an 84% premium over
Wallace's share price on February 24, 1995, when Moore first contacted the
Company regarding a business combination, and 42% 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 shareholders meeting in
November.
24. 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, has led analysts to conclude that the market expects 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
-8-
<PAGE>
Reiland & McDevitt Inc., stated "people seem to be thinking another offer may be
coming, so we'll just have to wait and see."
25. 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 shareholders. 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 shareholders will find our offer compelling. . . .
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
shareholders, employees, customers and communities.
26. 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 shareholder rights plan is
triggered when anyone buys 20% or more of the Company's common stock. When
triggered, it allows Wallace shareholders to buy new common stock at half price,
thus rendering a tender offer
-9-
<PAGE>
prohibitively expensive. Moore thus asserts that Wallace "should not be allowed
to deprive the shareholders of the opportunity to decide upon the merit of the
offer." In addition, Moore alleges in its lawsuit, 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.
27. 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
1976, as amended (the "HSR Act").
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.
30. 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 Board recommended in the Schedule 14D-9 that Wallace stockholders
reject the Offer and stated the belief of the Wallace Board that
-10-
<PAGE>
the interests of Wallace stockholders will be best served by Wallace remaining
independent and the Board's intention to continue the business of Wallace as an
independent entity.
31. As stated in the Schedule 14D-9, the Wallace Action asserts 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.
32. On August 17, 1995, the waiting period under the HSR Act expired
without further inquiry by the U.S. Department of Justice, satisfying the pre-
clearance requirements under the U.S. antitrust laws for Moore's purchase of the
Shares pursuant to the Offer and the Proposed Merger.
33. According to a Schedule 14A filed by Moore and FRDK with the SEC
on September 12, 1995 (the "Moore Schedule 14A") on August 21, 1995, 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 hereof schedule a meeting to
discuss the Offer. On August 26, 1995, the Goldman Sachs representative advised
the Lazard Freres representative that the Wallace Board had rejected Moore's and
FRDKs suggestion to meet in order to discuss the Offer.
34. On August 28, 1995, Moore issued a press release extending the
Offer until Tuesday, September 19, 1995 and stating
-11-
<PAGE>
that it remained committed to its proposed acquisition of Wallace. The press
release included the following:
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)
35. As disclosed in Amendment No. 3 to Wallace's Schedule 14D-9 filed
with the SEC on September 8, 1995, on September 6, 1995, the Wallace Board
approved and adopted Amendment No. 1 to its Employee Severance Pay Plan (the
"Employee Plan") to provide 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. The
primary purposes of this amendment are to make it more expensive and less
attractive for Moore to proceed with a takeover of Wallace, to make it less
likely that Moore or any other party will pay in excess of $56 per share for
Wallace and to further entrench Wallace's management and directors.
36. On September 6, 1995, 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
-12-
<PAGE>
"Profit Sharing Trust") (collectively, the "Amendments") which provide, 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). On September
6, 1995, 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.
37. On September 6, 1995, 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 further provides, among other things, that
(i) a plan participant's accrued bonus balance under the 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 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
-13-
<PAGE>
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. The primary purpose of
this amendment is to make it more expensive and less attractive for Moore to
proceed with a takeover of Wallace, to make it less likely that Moore or any
other party will pay in excess of $56 per share for Wallace and to further
entrench Wallace's management and directors.
38. On September 12, 1995 Moore filed its Schedule 14A, which states
that Moore will solicit proxies from Wallace's shareholders to elect three Moore
nominees to Wallace's Board of Directors. Previously, Wallace set the date of
its Annual Meeting for November 8, 1995. The Moore proxy materials state that
Moore's nominees are committed to acting in the best interest of all Wallace
shareholders 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.
39. The Moore Schedule 14A further states that Moore and FRDK are
soliciting the proxies of Wallace shareholders in favor of three stockholders
resolutions (the "Stockholder
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<PAGE>
Resolutions") to be introduced at the Annual Meeting for the purpose of:
(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, 1995 and prior to the Annual
Meeting.
40. The Moore Schedule 14A, filed on September 12, 1995, 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.
41. On September 12, 1995, Moore also announced that it had extended
its $56 per share offer for Wallace to November 8, 1995.
42. On September 21, 1995, Moore publicly stated that it may raise
its $56 per share bid for Wallace.
CAUSE OF ACTION AGAINST ALL DEFENDANTS
43. As described above, Wallace's 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
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<PAGE>
good-faith Moore's offers to purchase the Company which may be in the best
interests of Wallace's public shareholders. Defendants have failed to fully
inform themselves with respect to the Moore offer and to ascertain whether Moore
would be willing to pay a higher price for Wallace. Since the announcement of
Moore's offer, the trading price of Wallace's common stock has exceeded the $56
Moore Offer, indicating the market's perception that Wallace will be sold and
that Moore or some other party will pay in excess of $56 per share. Wallace's
management and directors have reacted by usurping voting power over Wallace
shares that they do not own and have not earned, thereby diluting the voting
power of the Class and precluding the Class from a fair and legal vote in
connection with the forthcoming proxy contest. Accordingly, there is a
substantial likelihood that, in the absence of this Court's intervention, the
defendants will continue this pattern and refuse to consider in good faith
Moore's tender offer and other acquisition offers that may arise. By virtue of
these acts and conduct, the defendants are carrying out a preconceived plan to
prevent the sale of the Company to any party, including Moore, in violation of
their fiduciary duties and to the detriment of Wallace's public shareholders. As
a result, the public common stockholders of Wallace will be wrongfully deprived
of their ability to avail themselves of the substantial premium included in
Moore's tender offer, and other acquisition offers which may materialize,
thereby depriving them of the maximum value that can be achieved for their
shares.
-16-
<PAGE>
44. The primary objective of defendants' plan to thwart acquisition
offers for the Company is to entrench themselves in managerial and directorial
positions, to the detriment of Wallace's shareholders. Indeed, by their actions,
defendants have acted in a manner to prevent the shareholders of Wallace from
availing themselves of offers for their stock which are substantially higher
than its recent market price.
45. The defendants have committed further breaches of their fiduciary
duty to the public stockholders of Wallace by (i) failing to undertake an
adequate evaluation of Wallace's worth as a potential merger or acquisition
candidate; (ii) failing to give adequate consideration to the offer for Wallace
submitted by Moore; (iii) considering and/or adopting extreme and unreasonable
measures to prevent the sale of the Company; (iv) 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; (v) improperly usurping to
themselves and to other members of Wallace's management the right to vote and
control Wallace shares; and/or (vi) failing to act so that the interests of the
public stockholders of Wallace are protected.
46. Unless enjoined by this Court, defendants will continue to breach
fiduciary duties owed to plaintiffs and the other members of the Class, and aid
and abet such breaches, and will not only prevent Wallace's shareholders 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.
-17-
<PAGE>
47. 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 committed a
gross abuse of trust and have breached their fiduciary duties to plaintiffs and
other members of the Class;
C. Ordering that the defendants take appropriate measures, including
meeting with Moore and its representatives, to assure that the Moore tender
offer and any other offers for the acquisition of Wallace are fully considered
and evaluated by Wallace management adequately and in good faith in order to
maximize shareholder value;
D. Preliminarily and permanently enjoining the defendants from
exercising Wallace's shareholder rights plan or and adopting other extreme and
unreasonable measures to prevent the sale of the Company;
E. Preliminarily and permanently enjoining Amendment No. 36 to the
Profit Sharing Plan and Amendment No. 6 to the Profit Sharing Trust, the
appointment of a new trustee to oversee the Profit Sharing Plan and the Profit
Sharing Trust and otherwise enjoining defendants from voting Wallace shares that
they do not own or have not yet earned;
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<PAGE>
F. Awarding compensatory damages in an amount to be determined upon
the proof submitted to the Court;
G. Awarding the costs and disbursements of this action;
H. Awarding plaintiff's counsel fees; and
I. Awarding such other and further relief which the Court may deem
just and proper.
DATED: September 15, 1995.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/ NORMAN M. MONHAIT
-----------------------
First Federal Plaza,
Suite 214
P.O. Box 1070
Wilmington, DE 19899
(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 Abrams
212 East 39th
New York, NY 10016
(212) 889-3700
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<PAGE>
CERTIFICATE OF SERVICE
I, Norman M. Monhait, do hereby certify on this 22nd day of September,
1995, that I caused two copies of the foregoing Notice Of Filing Of Amended
Class Action Complaint to be served by hand delivery upon:
STEPHEN C. NORMAN, ESQUIRE
POTTER, ANDERSON & CORROON
350 DELAWARE TRUST BUILDING
WILMINGTON, DE 19801
/s/ Norman M. Monhait
-----------------------------
Norman M. Monhait
-20-
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