SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 31, 1995 1-6528
- ---------------------------------------- --------------------------------
For the quarterly period ended Commission file number
WALLACE COMPUTER SERVICES, INC.
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-2515832
- ------------------------------------ ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4600 W. Roosevelt Road, Hillside, Illinois 60162
---------------------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
(312) 626-2000 22,714,511
- ------------------------------------ -------------------------------------
(Registrant's Telephone Number, (Number of Common Shares Outstanding)
Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
------- -------
<PAGE>
Wallace Computer Services, Inc. Page 2
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Part I Financial Information
Item 1. Financial Statements
- ---------------------------------
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results of
operations and financial position for the three months ended
October 31, 1995, subject to year-end audit by independent public
accountants. These adjustments are of a normal, recurring nature.
Wallace Computer Services, Inc. and Subsidiary
Consolidated Income Statement (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
October 31
-----------------------------------------
% %
1995 Sales 1994 Sales
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
Net Sales $214,438,000 100.0 $158,353,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 136,331,000 63.6 101,620,000 64.2
Selling and administrative expenses 36,977,000 17.2 30,261,000 19.1
Provision for depreciation and
amortization 10,555,000 4.9 8,764,000 5.5
Hostile takeover expenses (Note 5) 4,032,000 1.9 0 0.0
------------ ----- ------------ -----
Total costs and expenses $187,895,000 87.6 $140,645,000 88.8
------------ ----- ------------ -----
Operating Income 26,543,000 12.4 17,708,000 11.2
------------ ----- ------------ -----
Interest income (852,000) (0.4) (1,021,000) (0.6)
Interest expense 334,000 0.2 394,000 0.2
------------ ----- ------------ -----
Income before Income Taxes 27,061,000 12.6 18,335,000 11.6
Provision for Income Taxes (Note 4) 10,283,000 4.8 6,692,000 4.2
------------ ----- ------------ -----
Net Income $16,778,000 7.8 $11,643,000 7.4
============ ===== ============ =====
Net Income Per Share $0.74 $0.52
===== =====
Average Common Shares Outstanding 22,706,000 22,396,000
============ ============
Dividends Declared Per Share $0.215 $0.00
====== =====
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 3
Consolidated Balance Sheet
<TABLE>
<CAPTION>
October 31, 1995 July 31, 1995
(Unaudited) (Audited)
---------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $19,546,000 $10,815,000
Short-term Investments (Note 3) 15,112,000 30,242,000
Accounts Receivable 147,904,000 130,036,000
Less-Allowance for Doubtful Accounts 3,215,000 2,671,000
------------ ------------
Net Receivables 144,689,000 127,365,000
Inventories (Note 1) 86,962,000 79,523,000
Advances and Prepaid Expenses 9,524,000 10,927,000
------------ ------------
Total Current Assets 275,833,000 258,872,000
------------ ------------
Property, Plant and Equipment, at Cost 503,114,000 487,207,000
Less-Reserves for Depreciation and Amortization 239,804,000 230,691,000
------------ ------------
Net Property, Plant and Equipment 263,310,000 256,516,000
------------ ------------
Intangible Assets Arising from Acquisitions 26,386,000 26,575,000
Cash Surrender Value of Life Insurance 27,106,000 26,836,000
System Development Costs 17,652,000 15,253,000
Other Assets 6,676,000 8,650,000
------------ ------------
Total Assets $616,963,000 $592,702,000
============ ============
Liabilities and Stockholders' Equity
Current Portion of Long-Term Debt $205,000 $205,000
Accounts Payable 33,320,000 24,209,000
Accrued Salaries, Wages and Profit Sharing 33,952,000 41,308,000
Accrued Income Taxes 8,219,000 0
------------ ------------
Total Current Liabilities 75,696,000 65,722,000
------------ ------------
Long-Term Debt 25,600,000 25,600,000
Deferred Income Taxes 25,214,000 24,095,000
Deferred Compensation and Retirement Benefit 22,019,000 21,167,000
Stockholders' Equity
Common Stock (Note 2)
Outstanding-22,714,511 shares at October 31,
1995 and 22,689,563 shares at July 31, 1995 22,715,000 22,689,000
Additional Capital 46,228,000 45,800,000
Retained Earnings 399,701,000 387,810,000
Unrealized Loss on Securities (Note 3) (210,000) (181,000)
------------ ------------
Total Stockholders' Equity 468,434,000 456,118,000
------------ ------------
Total Liabilities and Stockholders' Equity $616,963,000 $592,702,000
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 4
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
October 31
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income from operations before cumulative
effect of accounting changes $16,778,000 $11,643,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,555,000 8,764,000
Deferred taxes 1,119,000 519,000
(Gain)/loss on disposal of property 8,000 1,000
Changes in assets and liabilities
Accounts receivable (17,324,000) (13,501,000)
Inventories (7,439,000) 2,125,000
Advances and prepaid expenses 1,403,000 154,000
Other assets (3,674,000) (1,811,000)
Accounts payable and other liabilities 1,069,000 7,386,000
Accrued income taxes 8,219,000 3,731,000
Deferred compensation and retirement benefits 852,000 1,261,000
------------ ------------
Net cash provided by operating activities 11,566,000 20,272,000
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures (16,131,000) (11,634,000)
Short-term investments 15,130,000 (16,000)
Proceeds from disposal of property 10,000 24,000
Unrealized loss on securities (Note 3) (29,000) (581,000)
------------ ------------
Net cash used in investing activities (1,020,000) (12,207,000)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of treasury stock 454,000 38,000
Cash dividends paid (4,201,000) (3,583,000)
Amounts paid on long-term debt 0 (104,000)
Proceeds from construction funds held by trustee 1,932,000 0
------------ ------------
Net cash used in financing activities (1,815,000) (3,649,000)
------------ ------------
Net changes in cash and cash equivalents 8,731,000 4,416,000
Cash and cash equivalents at beginning of year 10,815,000 17,587,000
------------ ------------
Cash and cash equivalents at October 31 $19,546,000 $22,003,000
============ ============
Supplemental Disclosure:
Interest paid (net of interest capitalized) $ (41,000) $ 62,000
Income taxes paid (net of refunds received) 952,000 2,548,000
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 5
Notes to Consolidated Financial Statements
October 31, 1995
(Unaudited)
Note 1 - Inventories
Inventories at October 31, 1995 and July 31, 1995 were as follows:
<TABLE>
October 31, 1995 July 31, 1995
---------------- -------------
<S> <C> <C>
Raw materials $25,653,000 $25,981,000
Work in process 4,828,000 2,060,000
Finished products 56,481,000 51,482,000
------------ ------------
$86,962,000 $79,523,000
============ ============
</TABLE>
Certain inventories are stated on the last-in, first-out (LIFO) basis for
their labor and material content, and other inventories are stated on the
first-in, first-out (FIFO) basis.
Because the inventory determination under the LIFO method can only be made
at the end of each fiscal year based on the inventory levels and costs at
that time, interim period LIFO determinations must necessarily be based
upon management's estimates of expected year-end inventory levels and
costs.
Note 2 - Stock Options
As of October 31, 1995, options to purchase 514,533 shares of common stock
were outstanding and 839,102 shares of common stock were available for
future grants under the Company's Stock Option and Employee Stock Purchase
Plans.
The Company has authorized 50,000,000 shares of common stock and has issued
22,796,176. Of these shares, 986,780 have been repurchased and 905,115
have been reissued under the Employee Stock Purchase Plan and through the
exercise of stock options. The number of shares held in treasury at
October 31, 1995 is 81,665. At July 31, 1995, 22,796,176 shares had been
issued of which 986,780 had been repurchased and 880,167 have been
reissued. The number of shares held in treasury at July 31, 1995 was
106,613.
Note 3 - Changes in Accounting
Effective August 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." The adoption of this
statement had no impact on net income, but decreased shareholders'
equity by $181,000 at July 31, 1995 and by $210,000 at October 31, 1995
(net of tax).
<PAGE>
Wallace Computer Services, Inc. Page 6
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Note 3 - Accounting Change (continued)
The amortized cost and market value of investments as of July 31, 1995 and
as of October 31, 1995 were as follows:
<TABLE>
<CAPTION>
July 31, 1995 Amortized Unrealized Holding Market
--------------- Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
State, Municipal & Other Govt Debt $21,293,000 $113,000 $23,000 $21,383,000
Equity 9,251,000 0 392,000 8,859,000
Held-to-Maturity
State, Municipal & Other Govt Debt 0 0 0 0
----------- ----------- ----------- -----------
Total Short-term Investments $30,544,000 $113,000 $415,000 $30,242,000
=========== =========== =========== ===========
Long-term Available-for-Sale
Equity $1,992,000 $0 $0 $1,992,000
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
October 31, 1995 Amortized Unrealized Holding Market
----------------- Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
State, Municipal & Other Govt Debt $6,836,000 $9,000 $23,000 $6,822,000
Equity 8,627,000 0 337,000 8,290,000
Held-to-Maturity
State, Municipal & Other Govt Debt 0 0 0 0
----------- ----------- ----------- -----------
Total Short-term Investments $15,463,000 $9,000 $360,000 $15,112,000
=========== =========== =========== ===========
Long-term Available-for-Sale
Equity $1,992,000 $0 $0 $1,992,000
=========== =========== =========== ===========
</TABLE>
Maturities for all debt securities classified as short-term are less than
one year. The long-term investment is included in the 'Other Assets'
section of the balance sheet.
In the first quarter ended October 31, 1995, proceeds on the sale of
available-for-sale securities were $17,328,000, with gross realized gains
of $23,000. The amortized cost of these securities was based on specific
identification. No securities during the period were classified as trading
securities. The change in net unrealized loss on available-for-sale
securities from July 31, 1995 to October 31, 1995 was $29,000 (net of tax).
There have been no sales of held-to-maturity securities other than at their
maturity date.
<PAGE>
Wallace Computer Services, Inc. Page 7
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Note 4 - Income Taxes
Effective August 1, 1995, the company increased its effective tax rate from
37% to 38%, primarily due to a shift in investments from tax-free to
taxable. The income tax rate in the first quarter of fiscal 1995 was
36.5%.
Note 5 - Hostile Takeover Expense Commitments
Included in hostile takeover expenses is $2,000,000 related to a letter
agreement with Goldman Sachs & Co. ("Goldman Sachs") dated July 30, 1995.
Pursuant to the letter agreement (the "Letter Agreement"), the company has
retained Goldman Sachs as financial advisor with respect to the unsolicited
tender offer from FRDK, Inc., a wholly owned subsidiary of Moore
Corporation Limited, (the "Offer") and certain other possible transactions.
Pursuant to the Letter Agreement, the Company has agreed to pay: (a) a fee
of $500,000, payable on the date of the Letter Agreement (which amount has
been paid and is creditable against any fees payable under clause (b), (c)
or (d) below); (b) if 15% or more of the outstanding stock of the Company
is acquired by Moore or any other person or group (including the Company),
in one or a series of transactions, or if all or substantially all of the
assets of the Company are transferred, in one or a series of transactions,
by way of a sale, distribution or liquidation, a fee equal to 0.62% of the
aggregate value of all such transactions (in the event at least 50% of the
outstanding stock of the Company is acquired by Moore or any other person,
such aggregate value will be determined as if such acquisition were of 100%
of the stock of the Company); (c) if the Company or any entity formed or
owned in substantial part or controlled by the Company or one or more
members of senior management of the Company or any employee benefit plan
of the Company or any of its subsidiaries effects certain recapitalization
transactions, a fee equal to 0.62% of the aggregate value of such
transaction; (d) if the Company sells, distributes or liquidates all of its
assets, or a portion of its assets having an aggregate value of $50 million
or more, and no fee is otherwise payable pursuant to clause (b) or (c)
above, a fee based upon the aggregate value of such transaction pursuant to
a schedule ranging from 2.00% if the aggregate value of the transaction is
$50 million, to 0.75% if the aggregate value of the transaction is $750
million or more; and (e) in the event no transaction of the type described
in clause (b) or (c) above has been consummated by any of the following
dates, a fee of $1.5 million on each such date as of which no transaction
has been consummated: October 31, 1995, January 31, 1996, April 30, 1996,
July 31, 1996 and October 31, 1996. Any fee paid pursuant to clause (e)
shall be creditable against any fee payable under clause (b), (c) or (d)
above. Any fee paid under clause (b) above shall be creditable against any
fee subsequently paid under clause (c) above, and vice versa.
Goldman Sachs acted as the Company's financial advisor with regard to the
Moore proxy solicitation. No additional fee was or will be paid to Goldman
Sachs in connection therewith.
The Letter Agreement may be terminated at any time by either party thereto,
with or without cause, effective upon receipt of written notice to that
effect. Goldman Sachs will be entitled to the transaction fee set forth
above if at any time prior to the expiration of eighteen months after such
termination a transaction of the type contemplated by clause (b), (c) or
(d) above is consummated and, in the case of a transaction contemplated by
clause (b) or (d), there was contact with the acquiring party, or any
affiliate thereof, regarding such a transaction during the period of
Goldman Sachs' engagement. Any fee paid under clause (e) shall, however,
be credited against any such transaction fee.
<PAGE>
Wallace Computer Services, Inc. Page 8
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Report of Independent Public Accountants
----------------------------------------
To the Stockholders of Wallace Computer Services, Inc.
We have reviewed the consolidated balance sheet of Wallace Computer Services,
Inc., (a Delaware Corporation) and subsidiary as of October 31, 1995, and the
related consolidated statements of income and cash flows for the three-month
periods ended October 31, 1995, and 1994. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
November 16, 1995
<PAGE>
Wallace Computer Services, Inc. Page 9
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
- ----------------------------------------------------------------------
Results of Operations
---------------------
There have been no material changes in financial condition since our
preceding fiscal year which ended July 31, 1995.
For the three month period ended October 31, 1995, net sales increased
35.4% to $214,438,000. Net income for the first quarter increased 44.1% to
$16,778,000 or 74 cents per share, from $11,643,000 or 52 cents per share
in fiscal 1995. The after tax impact of expenses related to the hostile
takeover attempt by Moore Corporation Limited was $2,500,000 or 11 cents
per share.
Cost of goods sold represented 63.6% of sales versus 64.2% in the first
quarter of fiscal 1995. The first quarter of fiscal 1996 includes a LIFO
charge of approximately $235,000 or 0.6 cents per share as a result of
higher finished goods inventory anticipated by year-end as a result of
distribution services provided under our growing number of WIN contracts.
The LIFO provision made in the first quarter of fiscal 1995 was $1,272,000
or 3.6 cents per share.
Selling and administrative expenses were 17.2% of sales versus 19.1% in the
first quarter last year. This drop can be attributed to maintaining fixed
costs while increasing sales.
The provision for depreciation and amortization is up 20.4% in the first
quarter from fiscal 1995. This increase is the result of the Company's
continued reinvestment in capital resources and system development.
Interest income for the first quarter decreased by $169,000 or 16.6% from
the same period one year ago. The reduction is due to the decrease in cash
and short-term investments attributable to reinvestment in the Company
through capital expenditures and acquisitions. Interest expense, which is
shown net of capitalized interest, decreased $60,000 or 15.2% between
years. The reduction of interest expense is due to the retirement of
$6,110,000 of debt during fiscal 1995.
Operating income for the quarter was up $8,835,000 or 49.9%. For fiscal
1996 this represents 12.4% to sales versus 11.2% for fiscal 1995.
Liquidity and Capital Resources
-------------------------------
Working capital increased by $6,987,000 from July 31, 1995, with a current
ratio of 3.6 at October 31, 1995. Long-term debt includes $23,500,000 of
industrial revenue bonds at rates ranging from 3.95% to 4.1%, as well as
$2,100,000 related to acquisitions made in the prior fiscal year.
Long-term debt currently represents 5.2% of total capitalization.
Capital expenditures for the first quarter totaled $16,131,000. For the
full fiscal year, we project expenditures of $60.0 million, which will be
financed through internally generated funds and by the Industrial Revenue
Bond for our Lebanon plant.
Stockholders' equity increased by 2.7% to $468.4 million at
October 31, 1995.
<PAGE>
Wallace Computer Services, Inc. Page 10
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
- ---------------------------------------------------------------------
Liquidity and Capital Resources (continued)
-------------------------------------------
Cash balances remain adequate to fund current operations. We do not
anticipate a need to borrow funds in the near future.
Current inventory levels are in-line with the inventory levels necessary
to satisfy customer demand. We anticipate having adequate sources of
supply of raw materials to meet the future requirements of our business.
Common Stock
------------
On September 7, 1995, the Board of Directors voted to increase the
annualized dividend rate to $.86 per share, a 16.2% increase from fiscal
1995.
Part II Other Information
--------------------------
Item 1. Legal Proceedings
- ---------------------------
THE MOORE ACTION. On July 31, 1995, Moore Corporation Limited ("Moore")
and FRDK, Inc. ("FRDK") commenced an action in the United States District
Court for the District of Delaware by filing a complaint (the "Moore
Action") against the Company and each of the directors of the Company,
entitled MOORE CORPORATION LIMITED AND FRDK, INC. V. WALLACE COMPUTER
SERVICES, INC., ROBERT J. CRONIN, THEODORE DIMITRIOU, FRED F. CANNING,
WILLIAM N. LANE, III, NEELE E. STEARNS, JR., R. DARRELL EWERS, RICHARD F.
DOYLE AND WILLIAM E. OLSEN. The Moore Action, as amended by the Amended
and Supplemental Complaint filed on October 17, 1995, asserts, among other
things, that the use of certain anti-takeover devices and other defensive
measures by the Company is not proportionate nor within the range of
reasonable responses to the tender offer made by FRDK, a wholly owned
subsidiary of Moore, to purchase all outstanding shares of common stock of
the Company, together with associated preferred stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of March 14,
1990 (the "Rights Agreement"), at a price of $60.00 net to the seller in
cash (the "Offer"), and is in breach of the directors' fiduciary duties to
the Company's stockholders. The Moore Action also asserts that the Offer
and a merger with FRDK or another wholly owned subsidiary of Moore (the
"Proposed Merger") and proxy solicitation comply or will comply with all
applicable laws and other obligations and seeks a declaratory judgment that
the Offer and the Proposed Merger and proxy solicitation comply with all
applicable laws and other obligations. The Moore Action seeks: (i)
preliminary and permanent injunctive relief prohibiting the Company, its
directors, officers and certain other related parties from taking steps to
impede the ability of the Company's stockholders to consider and make their
own determination as to whether to accept the terms of the Offer or give or
withhold consent to the terms of the proxy solicitation, or taking any
other
<PAGE>
Wallace Computer Services, Inc. Page 11
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Item 1 Legal Proceedings (continued)
- ---------------------------------------
action to thwart or interfere with the Offer, the Proposed Merger or the
proxy solicitation; (ii)(a) to compel the Company's directors to redeem
the Rights or amend the Rights Agreement to make the Rights inapplicable
to the Offer and the Proposed Merger, and (b) preliminary and permanent
injunctive relief enjoining the Company, its directors, officers and
certain other related parties from taking any action to implement and
distribute the Rights and from taking actions pursuant to the Rights
Agreement; (iii)(a) to compel the Company's directors to approve the Offer
and the Proposed Merger for the purposes of Section 203 of the Delaware
General Corporation Law ("Section 203"), and (b) preliminary and permanent
injunctive relief enjoining the Company, its directors, officers and
certain other related parties from taking any actions to enforce or apply
Section 203 that would interfere with the Offer; and (iv)(a) to compel the
Company's directors to approve the Offer and the Proposed Merger for
purposes of Article Ninth of the Restated Certificate of Incorporation of
the Company ("Article Ninth"), and (b) preliminary and permanent injunctive
relief enjoining the Company, its directors, officers and certain other
related parties from taking any actions to enforce or apply Article Ninth
that would interfere with the Offer. On August 15, 1995, the Company and
each of the directors of the Company filed a Motion to Dismiss the Moore
Action. On September 19, 1995, the United States District Court for the
District of Delaware denied the Motion to Dismiss. On September 25, 1995,
the Company and its directors filed an Answer and Counterclaim in the
United States District Court for the District of Delaware in connection
with the Moore Action. The counterclaim brought against Moore, Bidder and
Reto Braun, Chairman of the Board and Chief Executive Officer of Moore,
asserts (i) that the effect of the transactions contemplated by the Offer
to Purchase may be substantially to lessen competition in a relevant market
and therefore violate Section 7 of the Clayton Act, 15 U.S.C. 18; and (ii)
that Moore, the Bidder, and Mr. Braun have made false and misleading
statements of fact in connection with the Offer and their proxy
solicitation materials. The counterclaim seeks declaratory and injunctive
relief (i) enjoining Moore and the Bidder from acquiring any voting
securities of the Company and (ii) enjoining Moore, the Bidder and Mr.
Braun from acquiring any shares of Common Stock of the Company until 60
days after they have fully complied with the Securities Exchange Act of
1934, as amended. On December 4, 1995, the United States District Court
for the District of Delaware issued an Order and an Opinion. Pursuant to
the Order and Opinion, the Court denied Moore and the Bidder's motion for
a preliminary injunction with respect to the breach of fiduciary claim. In
addition, the Court granted Moore and the Bidder's motion to dismiss the
Company's antitrust counterclaim.
STOCKHOLDER ACTIONS. The Company and its directors have been named as
defendants in three purported class actions filed between July 31, 1995 and
August 3, 1995 on behalf of the public stockholders of the Company in the
Court of Chancery of the State of Delaware in and for New Castle County.
These actions are entitled: BERNARD KOFF V. THEODORE DIMITRIOU, FRED
CANNING, WILLIAM N. LANE, NEELE E. STEARNS, JR., ROBERT J. CRONIN, DARRELL
R. EWERS, RICHARD F. DOYLE, WILLIAM E. OLSEN, AND WALLACE COMPUTER
SERVICES, INC.; KITTY LAPERRIERE V. WALLACE COMPUTER SERVICES, INC.,
THEODORE DIMITRIOU AND ROBERT J. CRONIN; and ROBIN K. PITTMAN V. THEODORE
DIMITRIOU, FRED F. CANNING, WILLIAM N. LANE, III, NEELE E. STEARNS, JR.,
ROBERT J. CRONIN, DARRELL R. EWERS, RICHARD F. DOYLE, WILLIAM E. OLSEN, AND
WALLACE COMPUTER SERVICES, INC. (collectively, the "Stockholder Actions").
The complaints in the Stockholder Actions contain substantially similar
allegations, and allege breach of fiduciary duty claims arising out of the
proposal by FRDK to acquire the Company. The complaints in the Stockholder
Actions also seek substantially similar relief, including declaratory and
injunctive relief barring defendants from
<PAGE>
Wallace Computer Services, Inc. Page 12
FORM 10-Q
For Quarterly Period Ended October 31, 1995
Item 1 Legal Proceedings (continued)
- ---------------------------------------
breaching their fiduciary duties to plaintiffs and the putative class
members and taking steps to impede any offer to acquire the Company, as
well as damages in an unspecified amount. On September 22, 1995, the
plaintiffs in KOFF V. DIMITRIOU, ET AL. and LAPERRIERE V. WALLACE COMPUTER
SERVICES, INC. ET AL. filed an Amended Class Action Complaint, which, among
other things, consolidates the actions such plaintiffs filed in the Court
of Chancery of the State of Delaware. The Amended Class Action Complaint,
among other things, seeks injunctive relief with respect to enforcement of
certain amendments to the Company's Profit Sharing Plan and Profit Sharing
Trust. On November 21, 1995, the plaintiffs in KOFF V. DIMITRIOU, ET AL.
and LAPERRIERE V. WALLACE COMPUTER SERVICES, INC., ET AL. filed a Second
Amended Class Action Complaint in the Court of Chancery of the State of
Delaware.
Items 2 through 5. None
- ------------------
Item 6 Exhibits
- ------------------
10. Material Contracts
------------------
10.1 Second Amendment to Fourth Amended and Restated Agreement made and
entered into as of January 1, 1993 between the Registrant and
Theodore Dimitriou
10.2 1996 Deferred Compensation/Capital Accumulation Plan of the
Registrant
10.3 1996 Deferred Compensation/Capital Accumulation Plan for Directors
of the Registrant
<PAGE>
Page 13
Wallace Computer Services, Inc.
FORM 10-Q
For Quarterly Period Ended October 31, 1995
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WALLACE COMPUTER SERVICES, INC.
December 13, 1995 /s/ ROBERT J. CRONIN
----------------------- --------------------------------------
Date Robert J. Cronin
President and Chief Executive Officer
December 13, 1995 /s/ MICHAEL J. HALLORAN
----------------------- --------------------------------------
Date Michael J. Halloran
Vice President, Chief Financial Officer
and Assistant Secretary
(principal accounting officer)
Exhibit 10.1
SECOND AMENDMENT TO
FOURTH AMENDED AND RESTATED AGREEMENT
SECOND AMENDMENT entered into on November 30, 1995 and effective as of
January 1, 1993 to FOURTH AMENDED AND RESTATED AGREEMENT made and entered into
as of January 1, 1993, as amended by a FIRST AMENDMENT effective as of
January 1, 1993, by and between WALLACE COMPUTER SERVICES, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and THEODORE DIMITRIOU
of Mettawa, Illinois (hereinafter referred to as "Dimitriou").
RECITALS
The Company and Dimitriou have previously entered into a Fourth Amended and
Restated Agreement dated as of January 1, 1993, as amended by a First Amendment
effective as of January 1, 1993 (the "Agreement"), pursuant to which Dimitriou
has been serving the Company as its Chairman of the Board and a consultant.
Through inadvertence and oversight, the provisions of Section F.3 did not
accurately reflect the understanding of the parties when the Fourth Amended and
Restated Agreement was signed. Instead of referring to Dimitriou's 72nd
birthday (as is the case in Section C.1 (i)), Section F.3 refers to Dimitriou's
70th birthday, notwithstanding the intent to refer therein to his 72nd birthday
(such intent being clearly expressed in the fourth sentence of Section F.3).
The Company and Dimitriou now wish to enter into this Amendment so that the
Agreement will properly and accurately reflect their understanding.
AGREEMENT
The foregoing, the Company and Dimitriou hereby amend Section F.3 of the
Agreement so that each of the references to "70th" in Section F.3 shall be
changed to "72nd".
The Company and Dimitriou hereby acknowledge and agree that, in all other
respects, the Agreement shall remain in full force and effect in accordance
with its terms.
In Witness Whereof, the Company has caused this Amendment to be executed on its
behalf by the Chairman of the Compensation Committee of its Board of Directors
and Dimitriou has executed this Agreement, all on the day and year first above
written.
WALLACE COMPUTER SERVICES, INC.
ATTEST
/s/ Michael T. Laudizio By: /s/ F. F. Canning
--------------------------- -----------------------------------
Its Secretary Chairman of the Compensation Committee
of the Board of Directors
Exhibit 10.2
1996 Deferred Compensation/Capital Accumulation Plan
Plan Document
Wallace Computer Services, Inc. (the "Company") and its subsidiaries hereby
establish a non-qualified deferred compensation program for certain of their
employees as described herein. The following shall constitute the terms and
conditions of the Wallace Computer Services, Inc. 1996 Deferred Compensation/
Capital Accumulation Plan (the "Plan"), effective January 1, 1996 (the
"Effective" Date). The Company and its subsidiaries are referred to below
collectively as the "Employers" and individually as an "Employer."
1. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee shall
have the authority to make determinations provided for or permitted to be
made under the Plan, to interpret the Plan, and to promulgate such rules
and regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2. Eligibility and Participation. The Committee, in its sole discretion, shall
establish eligibility qualifications for participation in the Plan.
Participation shall be limited to key executives and a select group of
highly compensated employees of the Employers.
3. Deferred Compensation.
A. Each Participant may make an irrevocable election in writing to defer
up to 20% of Compensation, as defined in Subsection 3B, paid during the
period January 1, 1996 through December 31, 1996 (the "Deferral
Amount"). Such amount shall not be less than $1,000. Deferred
compensation at the deferral percentage will be deducted from all
Compensation payable to the Participant during the deferral period.
B. "Compensation" means salary, bonuses, and commission of the Participant
before reduction pursuant to this or any other employee benefit plan.
C. The Employer shall establish and maintain a bookkeeping account in the
name of each Participant, which shall be known as the "Deferral
Account." It shall be credited with the Deferral Amount and interest at
the rate established by the Committee compounded annually from
January 1, 1996. As provided in Sections 4, 5, 6 and 7 of the Plan, the
interest rate on lump sum payments caused by certain events will differ
from the rate established by the Committee. Amounts paid to the
Participant or his/her Beneficiary pursuant to this Plan, shall be
deducted from the account balance as of the first day of the month in
which such payment is made.
D. The Participant's Deferral Account shall at all times be reflected on
the Employer's books in accordance with generally accepted accounting
practices as a general unsecured and unfunded obligation of the Employer
and the Plan shall not give any person any right or security interest
in any asset of the Employer nor shall it imply any trust or segregation
of assets by the Employer. Payments from the Participant's Deferral
Account shall be made from the general assets of the Employer.
<PAGE>
4. Time and Manner of Payment. The Participant's Deferral Account shall be
distributed as follows:
A. Installment Payments.
(1) A Participant shall be entitled to fifteen (15) equal annual
installment payments commencing at age sixty-five (65) if one of
the following conditions is met:
a. the Participant remains in the continuous employ of the
Employers during the period from January 1, 1996 until the
Participant reaches age sixty-five (65); or
b. after a period of continuous employment with the Employers
beginning on or before January 1, 1996 the Participant retires
as defined in Subsection 4D.
(2) A Participant who attained age fifty-five (55) as of
January 1, 1996 may elect, at the time of making the deferral
election pursuant to Subsection 3A, to receive ten (10) equal
annual installments commencing at age seventy (70) in lieu of
installment payments under Subsection 4A(1) if he/she becomes
eligible for such payments.
Installment payments shall be calculated to amortize fully the
accumulated value of the Deferral Amount over the payment period.
For purposes of this Subsection A, the interest rate to be credited
in this calculation of the accumulated value of the Deferral
Amount shall be the rate(s) established by the Committee at its
sole discretion prior to the beginning of the deferral period.
B. Interim Payments. A payment equal to the Participant's Deferral Amount
shall be paid to the Participant within a reasonable time after
January 1, 2003 if installment payments under Subsection A have not
then commenced and will not commence during the 2003 calendar year. In
addition, a payment equal to the Participant's Deferral Amount shall be
paid to the Participant within a reasonable time after January 1, 2004
if installment payments under Subsection A have not then commenced and
will not commence during the 2004 calendar year. These payments shall
be charged to the Participant's Deferral Account as of the first day of
the month in which the payment is made. This Subsection does not apply
to Participants terminated under Subsection C or Sections 5, 6, or 7B.
C. Payment Upon Termination. A Participant whose employment with the
Employers is voluntarily or involuntarily terminated prior to the
Participant's Retirement for reasons other than those described in
Sections 5 and 6 below, shall receive, as soon as practicable after
such termination, a lump sum payment in the amount of the accumulated
value of the Deferral Amount. For purposes of this Subsection C, the
rate to be credited in the calculation of the accumulated value of the
Deferral Amount shall be six percent (6%).
D. Retirement. Retirement shall mean leaving the active employ of the
Employer at or after age sixty (60) or age fifty-five (55) with at
least twenty (20) years of service.
<PAGE>
5. Non-Competition. Notwithstanding any other provision of this Plan, if the
Committee at any time determines that a Participant, without having obtained
the prior written consent of the Committee or its designee, has engaged in
Competition with an Employer, as defined below, the sole amount payable to
Participant hereunder shall be a lump sum payment of the accumulated value
of the Deferral Amount, payable as soon as practicable after such
determination. For purposes of this Section 5, the simple rate of interest
applied to determine the accumulated value of the Deferral Amount shall be
two percent (2%) annually, without compounding. A Participant shall be
considered to have engaged in "Competition with an Employer" if, while
employed by an Employer or within twenty-four (24) months of Participant's
termination of employment with an Employer: (a) if the Participant is or
has been employed by an Employer in a sales capacity, the Participant sells
to, contacts, or deals with customers of an Employer that the Participant
called upon, or whose account(s) the Participant directly or indirectly
supervised on behalf of an Employer with respect to products or services
of an Employer; (b) if the Participant is or has been employed by an
Employer in a nonsales capacity, the Participant renders services for a
new or existing competitor of an Employer with respect to products or
services that are competitive with those of an Employer within the
geographical area in which an Employer does business, except that the
Participant may accept employment with a competitor of an Employer whose
business is diversified and which part of its business is not a competitor
of an Employer provided that prior to accepting such employment, the
Participant provides and obtains for the Employers from such competitor,
separate written assurances satisfactory to the Employers that the
Participant will not render services directly or indirectly in connection
with one or more products or services that are competitive with those of an
Employer; and (c) the Participant hires, solicits, induces or attempts to
induce any employee of an Employer to leave its employ, engage in any
competing business, or to otherwise aid or assist any person or company
that is or intends to be in competition with an Employer.
The foregoing provision shall be deemed in addition to and not in lieu of
any rights or remedies that an Employer might otherwise have with respect
to the conduct of a Participant during or after employment that breaches
any other contractual or common law duty to the Employer; this Section shall
not preclude Employer from seeking injunctive relief or actual or punitive
monetary damages, or both such relief and damages, with respect to any
wrongful conduct of a Participant, either during or subsequent to his/her
employment with an Employer.
6. Dishonest Conduct. Notwithstanding any other provision of this Plan, if
Participant's employment with an Employer is terminated at any time for
reason of dishonest or fraudulent conduct injurious to the Employer, the
sole amount payable to or on behalf of Participant hereunder shall be a
lump sum payment of the accumulated value of the Participant's Deferral
Amount, payable as soon as practicable after such termination of employment.
For purposes of this Section 6, the simple rate of interest to be credited
in the calculation of the accumulated value of the Deferral Amount shall be
zero percent (0%).
7. Payment Upon Death of Participant.
A. If a Participant dies after age sixty-five (65), the Employer shall pay
any unpaid annual Installment Payments due the Participant under
<PAGE>
Subsection 4A to the Participant's Beneficiary, commencing with the next
such payment due following the date of Participant's death.
B. If a Participant dies prior to age sixty-five (65), Installment Payments
described in Subsection 4A(1) shall be payable to the Participant's
Beneficiary, commencing at the time of the Participant's death. Interim
Payments described in Subsection 4B will not be made.
8. Beneficiary Designation. A Participant may, from time to time designate any
legal or natural person or persons (who may be designated contingently or
successively) as his/her Beneficiary to whom payments are to be made if the
Participant dies before receiving payment of all amounts due hereunder, by
signing a form approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with the Committee
while the Participant is alive. A properly filed designation shall cancel
all beneficiary designation forms filed earlier. If a Participant fails to
designate a Beneficiary as provided above, or if all designated
Beneficiaries of a Participant die before the Participant, or before
complete payment of all amounts due hereunder, the Committee, in its
discretion, may direct the Employers to pay the unpaid amounts to one or
more of such Participant's relatives by blood, adoption or marriage in any
manner permitted by law which the Committee considers to be appropriate,
including but not limited to payment to the legal representative or
representatives of the estate of the last to die of Participant and
Participant's designated Beneficiaries.
9. Disability. If Participant's employment with the Employers is terminated
prior to Participant's Retirement by reason of Participant's Disability,
Participant's employment with the Employers, for purposes of the Plan,
shall be deemed to continue until the earliest of his/her death, the date
his/her Disability ceases, or the date the Participant would have first
been eligible for Retirement and the provisions of the Plan shall be
applicable to such Participant to the same extent as if Participant were,
in fact, employed by the Employers during that period. However, if such
termination of employment occurs prior to January 1, 1996, the Participant's
benefit will be determined taking into account only the amount actually
deferred by the Participant during the Deferral Period. A Participant shall
be deemed to incur a Disability if, in the opinion of a physician selected
by the Committee, the Participant is no longer capable of performing a
substantial portion of the duties of his/her employment because of a
physical or mental disability which is likely to be permanent and continuous
during the remainder of the Participant's lifetime.
10. Payment Upon a Material Change of Control.
A. For purposes of this paragraph 10, a "Material Change" shall be deemed
to have occurred if any of the following should occur:
(1) the acquisition (in one or more transactions) of beneficial
ownership of twenty percent (20%) or more of the outstanding
shares of Common Stock of the Company by any person or entity (or
by any group of persons or entities acting in concert for the
purpose of acquiring, voting, holding or disposing of shares of
the Company's Common Stock). The Board of Directors may reduce
the ownership threshold to a percentage not less than ten percent
(10%);
<PAGE>
(2) individuals who, as of September 6, 1995, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided,
however, that any individual who becomes a member of the Board of
Directors of the Company subsequent to such date whose election,
or nomination for election by the stockholders of the Company, was
approved by a vote of at least the majority of the directors then
comprising the Incumbent Board shall be deemed to be a member of
the Incumbent Board; and provided further, that no individual
whose election or initial assumption of office as a director of
the Company occurs as a result of an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended)
with respect to the election or removal of directors, or any other
actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors of the
Company, shall be deemed to be a member of the Incumbent Board; or
(3) the occurrence of any other event or state of facts that the Board
of Directors of the Company may determine (by the adoption of a
resolution) has, does, or would constitute a Material Change for
the purposes of this paragraph 10.
B. At the time of a Material Change, the Company shall remit to an
independent Trustee, an amount equal to the lump sum payment, payable
upon the termination of a Participant, determined in accordance with
Section 10(e).
At all times after the Material Change occurs, the exercise of
authority and responsibility in the administration of the Plan with
respect to each individual who was a Participant in the Plan immediately
prior to the date that the Material Change occurs (a "Protected
Participant"), or with respect to the Beneficiary of a Protected
Participant, shall be subject to a de novo standard of review by a
court in any action brought under Title I of ERISA. At all times after
the Material Change occurs, a bank that is organized under the laws of
the United States of America or one of its States, that has a combined
capital and surplus in excess of $250,000,000, and that is otherwise
independent of and has no material business relationships with the
Company or Related Company (as defined in paragraph 10C) shall be the
Trustee of the Trust and the authority to manage, acquire, and dispose
of all assets of the Trust shall be vested in that Trustee to the
extent not vested in one or more investment managers (as defined in
Section 3(38) of ERISA) who are selected by that Trustee and otherwise
independent of, and have no material business relationships with, the
Company or a Related Company.
C. The term "Related Company" means any corporation, trade, or business
during any period that it is, along with the Company, a member of a
controlled group of corporations, a controlled group of trades or
businesses, or an affiliated service group, as described in Section
414(b), 414(c), or 414(m), respectively, of the Internal Revenue Code.
D. Any Protected Participant (or a Beneficiary of a Protected Participant)
who brings any legal action after a Material Change to enforce the
provisions of this paragraph 10 or any other provisions of the Plan
or the Trust shall be entitled to recover from the Company any and
all attorneys' fees and other costs and expenses incurred in enforcing
<PAGE>
such provisions for his/her benefit or for the benefit of any or all
Protected Participants (or Beneficiaries of Protected Participants).
E. Notwithstanding any other Section except Section 6, if the Participant's
employment with the Employer terminates, for any reason other than
death, within the two-year (2) period beginning on the date that a
Material Change of Control of the Company (as described above) occurs,
payment shall be made to the Participant as soon as practical after
termination in a single lump sum in lieu of any other subsequent
payment under the Plan. The lump sum payment shall be equal to the sum
of the amounts determined by discounting, at an 8% rate of interest,
to the lump sum payment date, each payment that the Participant would
have received under the Plan (determined without regard to Sections 5
and 6) after the date of such termination if employment had continued
without change through the date that the Participant would have first
been eligible for Retirement. Such amount shall be determined by the
Trustee (described in Section 10B), who in his/her own discretion may
use an independent third party to calculate such amount. If the
Participant dies after termination of employment but before payment of
any amount under this Section, then such amount shall be paid to the
Beneficiary as soon as practical after the Participant's death.
F. Notwithstanding any other provision of the Plan, except as may otherwise
be provided in a resolution of the Board of Directors of the Company
adopted prior to the occurrence of a Material Change, the provisions
of this paragraph 10 may not be amended and shall continue to apply,
without amendment, in any successor plan.
11. Facility of Payment. If, in the Committee's opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or
is in any way incapacitated so as to be unable to manage his/her financial
affairs, then the Committee may, until claim is made by a conservator or
other person legally charged with the care of his/her person or of his/her
estate, direct the Employer to make payment to a relative or friend of such
person for his/her benefit. Thereafter, any benefits under the Plan to
which such Participant or other person is entitled shall be paid to such
conservator or other person legally charged with the care of his/her
person or his/her estate.
12. Insurance. An Employer may, in its sole discretion, purchase policy or
policies of insurance on the life of any Participant or disability
insurance with respect to any Participant, the cash value, if any, and
proceeds of which may, but need not, be used by the Employer to satisfy
part or all of its obligations, hereunder. The Employer will be the owner
of any such policies and neither the Participant nor any other person or
entity claiming through the Participant shall have any ownership rights
in such policies or any proceeds thereof. The Participant, as a condition
of receiving any benefits hereunder, on behalf of him/herself of any
person or entity claiming through him/her, shall cooperate with the
Employer in obtaining any such insurance that the Employer desires to
purchase by submitting to such physical examinations, completing such
forms, and making such records available as may be required by the
Employer from time to time.
13. Effect on Other Benefits. The Deferral Amount of a Participant shall be
included in the Participant's 1995 compensation for purposes of calculating
the Participant's bonuses and awards under any incentive or similar
compensation plan or program of the Employer, insurance, and other
employee benefits, except that in accordance with the terms of any plan
<PAGE>
qualified under Section 401 or Section 423(b) of the Internal Revenue
Code maintained by an Employer, the amount deferred under Section 3 shall
not be included as 1995 calendar year compensation in calculating the
Participant's benefits or contributions by or on behalf of the Participant
under such plan or plans. Payment under the Plan shall be excluded from
compensation in years paid for purposes of calculating a Participant's
bonuses and awards under any incentive or similar compensation plan or
program of an Employer, insurance, and other employee benefits, except
that in accordance with the terms of any plan qualified under Section 401
or Section 423(b) of the Internal Revenue Code maintained by an Employer,
payments made while the Participant is an employee of an Employer shall
be included as compensation in the year paid.
14. Non-Alienation. Neither a Participant nor anyone claiming through him/her
shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the
rights thereto hereby are expressly declared to be non-assignable and
non-transferable, nor shall any such right to receive payments hereunder
be subject to the claims of creditors of a Participant or anyone claiming
through him/her to any legal, equitable, or other proceeding or process
for the enforcement of such claims.
15. Tax Withholding. Notwithstanding the provisions of Section 13, an Employer
may withhold from any payment made by it under the Plan such amount or
amounts as may be required for purposes of complying with the tax
witholding or other provisions of the Internal Revenue Code or the Social
Security Act or any state or local income tax act or for purposes of
paying any estate, inheritance or other tax attributable to any amounts
payable hereunder.
16. Non-Secured Promise. The rights under this Plan of a Participant and any
person or entity claiming through him/her shall be solely those of an
unsecured, general creditor of the Employer. Any insurance policy or other
asset acquired or held by an Employer shall not be deemed to be held by
the Employer for or on behalf of a Participant, or any other person, or
to be security for the performance of any obligations hereunder of the
Employer, but shall, with respect to this Plan, be and remain a general,
unpledged, unrestricted asset of the Employer.
17. Independence of Plan. Except as otherwise expressly provided herein, this
Plan shall be independent of, and in addition to, any other employment
agreement or employment benefit agreement or plan or rights that may
exist from time to time between the parties hereto. This Plan shall not
be deemed to constitute a contract of employment between an Employer and
a Participant, nor shall any provision hereof restrict the right of an
Employer to discharge a Participant, or restrict the right of a
Participant to terminate his/her employment with an Employer.
18. Paragraph Headings. The Paragraph headings used in this Plan are for
convenience of reference only and shall not be considered in construing
this Plan.
19. Responsibility for Legal Effect. Neither the Committee nor any Employer
makes any representation or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects
of this Plan.
<PAGE>
20. Committee Determinations Final. Each determination provided for in this
Plan shall be made in the absolute discretion of the Committee. Any such
determination shall be binding on all persons.
21. Amendment. The Company may in its sole discretion amend the Plan from
time to time. No such amendment shall reduce a Participant's or
Beneficiary's benefits under the Plan to an amount less than an amount
that he/she would have been entitled to under the Plan on the later of
the date the amendment is adopted or made effective if the Plan had been
terminated on that date.
22. Termination at the Employer's Option. Notwithstanding any other provision
of this Plan, the Company may terminate this Plan at any time if the
Committee, in its sole and absolute discretion, determines that any change
in federal or state law, or judicial or administrative interpretation
thereof, has materially affected the Employer's cost of providing the
benefits otherwise payable under this Plan, or for any other reason
whatsoever. Upon such termination, the sole amount payable to Participant
shall be a lump sum payment, as soon as practicable after such termination,
of the accumulated value of the Deferral Amount. For purposes of this
Section, the rate to be credited in the calculation of the accumulated
value of the Deferral Amount shall be the rate specified for Installment
Payments in Subsection 4A.
23. Binding on Successors. The provisions of this Plan shall be binding upon
and shall inure to the benefit of the Company, any Related Company that
adopts the Plan, the Participants, and their respective successors in
interest and assigns, including, without limitation, the surviving
corporation in any merger or consolidation with the Company or such
Related Company and, to the extent provided in the Plan, the Beneficiaries
of the Participants. After a Material Change, except as may otherwise be
determined by a resolution of the Board of Directors of the Company
adopted prior to the occurrence of the Material Change, a successor in
interest to the Company or a Related Company that adopts the Plan shall
be deemed to have adopted the Plan and shall have all of the liabilities
and obligations of the Company or that Related Company under the Plan.
Except as may otherwise be determined by a resolution of the Board of
Directors of the Company adopted prior to the occurrence of a Material
Change, the Company shall require any person or entity that becomes a
successor in interest to the Company or a Related Company that adopts the
plan to expressly assume the Plan and agree to perform all of the
obligations of the Company or that Related Company, as the case may be,
under the plan. For purposes of this paragraph 23, following a Material
Change, a successor in interest to the Company or a Related Company that
adopts the Plan shall include, without limitation, any person or entity
(or group of related or affiliated persons or entities) that acquires (in
a single transaction or a series of related transactions) any businesses
or assets of the Company or such Related Company representing twenty-five
percent (25%) or more of the Company's or such Related Company's sales,
operating profits, or operating assets.
24. Controlling Law. The Plan shall be construed in accordance with the laws
of the state of Illinois to the extent not pre-empted by laws of the
United States of America.
Exhibit 10.3
1996 Deferred Compensation/Capital Accumulation Plan for
Directors
Plan Document
Wallace Computer Services, Inc. (the "Company") hereby establishes a
non-qualified deferred compensation program for the members of its Board of
Directors, who are eligible under, and elect to participate in the Plan. The
following shall constitute the terms and conditions of the Wallace Computer
Services, Inc. 1996 Deferred Compensation/Capital Accumulation Plan for
Directors (the "Plan"), effective January 1, 1996 (the "Effective" Date)."
1. Administration. Full power and authority to construe, interpret and
administer the Plan shall be vested in the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee shall
have the authority to make determinations provided for or permitted to be
made under the Plan, to interpret the Plan, and to promulgate such rules
and regulations, if any, as the Committee considers necessary and
appropriate for the implementation of the Plan.
2. Eligibility and Participation. All members of the Company's Board of
Directors on November, 1995 shall be eligible for participation in the
Plan. Eligible Directors who elect to participate, in accordance with
Section 3, will become "Participants.".
3. Deferred Compensation.
A. Each Participant may make an irrevocable election in writing to defer
up to 100% of Compensation, as defined in Subsection 3B, paid during
the period January 1, 1996 through December 31, 1996 (the "Deferral
Amount"). Such amount shall not be less than $1,000. Deferred
compensation at the deferral percentage will be deducted from all
Compensation payable to the Participant during the deferral period.
B. "Compensation" means director's fees and meeting fees payable by the
Company to the participant.
C. The Company shall establish and maintain a bookkeeping account in the
name of each Participant, which shall be known as the "Deferral
Account." It shall be credited with the Deferral Amount and interest
at the rate established by the Committee compounded annually from
January 1, 1996. As provided in Sections 5 of the Plan, the interest
rate on lump sum payments caused by certain events will differ from
the rate established by the Committee. Amounts paid to the Participant
or his/her Beneficiary pursuant to this Plan, shall be deducted from
the account balance as of the first day of the month in which such
payment is made.
D. The Participant's Deferral Account shall at all times be reflected on
the Employer's books in accordance with generally accepted accounting
practices as a general unsecured and unfunded obligation of the
Employer and the Plan shall not give any person any right or security
interest in any asset of the Employer nor shall it imply any trust or
segregation of assets by the Employer. Payments from the Participant's
Deferral Account shall be made from the general assets of the Employer.
<PAGE>
4. Time and Manner of Payment. The Participant's Deferral Account shall be
distributed as follows:
A. Installment Payments.
(1) A Participant shall be entitled to fifteen (15) equal annual
installment payments commencing at age sixty-five (65)
(2) A Participant who attained age fifty-five (55) as of
January 1, 1996 may elect, at the time of making the deferral
election pursuant to Subsection 3A, to receive ten (10) equal
annual installments commencing at age seventy (70) in lieu of
installment payments under Subsection 4A(1) if he/she becomes
eligible for such payments.
(3) A Participant who attained age fifty-five (55) as of
January 1, 1996 and who was a director of the Company on
November 7, 1984 may elect, at the time of making the deferral
election pursuant to Subsection 3A, to receive ten (10) equal
annual installments commencing at age seventy-two (72) in lieu
of installment payments under Subsection 4A(1) if he/she becomes
eligible for such payments.
Installment payments shall be calculated to amortize fully the
accumulated value of the Deferral Amount over the payment period.
For purposes of this Subsection A, the interest rate to be
credited in this calculation of the accumulated value of the
Deferral Amount shall be the rate(s) established by the Committee
at its sole discretion prior to the beginning of the deferral
period.
B. Interim Payments. A Participant who is not yet eligible to receive
installment payments under Subsection A shall receive a payment equal
to the Participant's Deferral Amount within a reasonable time after
January 1, 2003. In addition, a payment equal to the Participant's
Deferral Amount shall be paid to the Participant within a reasonable
time after January 1, 2004. These payments shall be charged to the
Participant's Deferral Account as of the first day of the month in
which payment(s) is made. This Subsection does not apply to
Participants terminated under Section 5.
5. Dishonest Conduct. Notwithstanding any other provision of this Plan, if
Participant's directorship with the Company is terminated at any time for
reason of dishonest or fraudulent conduct injurious to the Company, the
sole amount payable to or on behalf of Participant hereunder shall be a
lump sum payment of the accumulated value of the Participant's Deferral
Amount, payable as soon as practicable after such termination. For purposes
of this Section 5, the simple rate of interest to be credited in the
calculation of the accumulated value of the Deferral Amount shall be zero
percent (0%).
6. Payment Upon Death of Participant.
A. If a Participant dies after age sixty-five (65), the Employer shall
pay any unpaid annual Installment Payments due the Participant under
Subsection 4A to the Participant's Beneficiary, commencing with the
next such payment due following the date of Participant's death.
<PAGE>
B. If a Participant dies prior to age sixty-five (65), Installment
Payments described in Subsection 4A(1) shall be payable to the
Participant's Beneficiary, commencing at the time of the Participant's
death. Interim Payments described in Subsection 4B will not be made.
7. Beneficiary Designation. A Participant may, from time to time designate
any legal or natural person or persons (who may be designated contingently
or successively) as his/her Beneficiary to whom payments are to be made if
the Participant dies before receiving payment of all amounts due hereunder,
by signing a form approved by the Committee. A beneficiary designation form
shall be effective only after the signed form is filed with the Committee
while the Participant is alive. A properly filed designation shall cancel
all beneficiary designation forms filed earlier. If a Participant fails
to designate a Beneficiary as provided above, or if all designated
Beneficiaries of a Participant die before the Participant, or before
complete payment of all amounts due hereunder, the Committee, in its
discretion, may direct the Company to pay the unpaid amounts to one or
more of such Participant's relatives by blood, adoption or marriage in any
manner permitted by law which the Committee considers to be appropriate,
including but not limited to payment to the legal representative or
representatives of the estate of the last to die of Participant and
Participant's designated Beneficiaries.
8. Facility of Payment. If, in the Committee's opinion, a Participant or other
person entitled to benefits under the Plan is under a legal disability or
is in any way incapacitated so as to be unable to manage his/her financial
affairs, then the Committee may, until claim is made by a conservator or
other person legally charged with the care of his/her person or of his/her
estate, direct the Employer to make payment to a relative or friend of such
person for his/her benefit. Thereafter, any benefits under the Plan to
which such Participant or other person is entitled shall be paid to such
conservator or other person legally charged with the care of his/her person
or his/her estate.
9. Insurance. The Company may, in its sole discretion, purchase policy or
policies of insurance on the life of any Participant the cash value, if
any, and proceeds of which may, but need not, be used by the Company to
satisfy part or all of its obligations, hereunder. The Company will be the
owner of any such policies and neither the Participant nor any other
person or entity claiming through the Participant shall have any ownership
rights in such policies or any proceeds thereof. The Participant, as a
condition of receiving any benefits hereunder, on behalf of him/herself of
any person or entity claiming through him/her, shall cooperate with the
Company in obtaining any such insurance that the Company desires to
purchase by submitting to such physical examinations, completing such
forms, and making such records available as may be required by the Company
from time to time.
10. Non-Alienation. Neither a Participant nor anyone claiming through him/her
shall have any right to commute, sell, assign, transfer or otherwise
convey the right to receive any payments hereunder, which payments and the
rights thereto hereby are expressly declared to be non-assignable and
non-transferable, nor shall any such right to receive payments hereunder
be subject to the claims of creditors of a Participant or anyone claiming
through him/her to any legal, equitable, or other proceeding or process
for the enforcement of such claims.
<PAGE>
11. Tax Withholding. The Company may withhold from any payment made by it
under the Plan such amount or amounts as may be required for purposes of
complying with the tax witholding or other provisions of the Internal
Revenue Code or the Social Security Act or any state or local income tax
act or for purposes of paying any estate, inheritance or other tax
attributable to any amounts payable hereunder.
12. Non-Secured Promise. The rights under this Plan of a Participant and any
person or entity claiming through him/her shall be solely those of an
unsecured, general creditor of the Company. Any insurance policy or other
asset acquired or held by the Company shall not be deemed to be held by
the Company for or on behalf of a Participant, or any other person, or to
be security for the performance of any obligations hereunder of the Company,
but shall, with respect to this Plan, be and remain a general, unpledged,
unrestricted asset of the Company.
13. Independence of Plan. Except as otherwise expressly provided herein, this
Plan shall be independent of, and in addition to, any other agreement that
may exist from time to time between the parties hereto. This Plan shall
not be deemed to constitute a right to be retained as a member of the
Board of Directors of the Company.
14. Paragraph Headings. The Paragraph headings used in this Plan are for
convenience of reference only and shall not be considered in construing
this Plan.
15. Responsibility for Legal Effect. Neither the Committee nor the Company
makes any representation or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects
of this Plan.
16. Committee Determinations Final. Each determination provided for in this
Plan shall be made in the absolute discretion of the Committee. Any such
determination shall be binding on all persons.
17. Amendment. The Company may in its sole discretion amend the Plan from time
to time. No such amendment shall reduce a Participant's or Beneficiary's
benefits under the Plan to an amount less than an amount that he/she would
have been entitled to under the Plan on the later of the date the amendment
is adopted or made effective if the Plan had been terminated on that date.
18. Termination at the Company's Option. Notwithstanding any other provision
of this Plan, the Company may terminate this Plan at any time if the
Committee, in its sole and absolute discretion, determines that any change
in federal or state law, or judicial or administrative interpretation
thereof, has materially affected the Company's cost of providing the
benefits otherwise payable under this Plan, or for any other reason
whatsoever. Upon such termination, the sole amount payable to Participant
shall be a lump sum payment, as soon as practicable after such termination,
of the accumulated value of the Deferral Amount. For purposes of this
Section, the rate to be credited in the calculation of the accumulated
value of the Deferral Amount shall be the rate specified for Installment
Payments in Subsection 4A.
<PAGE>
19. Successors, Acquisitions, Mergers, Consolidations. The terms and conditions
of this Plan and each Deferral Election shall insure to the benefit of and
bind the Company, the Participants, their successors, assigns, and
personal representatives.
20. Controlling Law. The Plan shall be construed in accordance with the laws
of the state of Illinois to the extent not pre-empted by laws of the
United States of America.
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-1-1995
<PERIOD-END> OCT-31-1995
<CASH> 19,546
<SECURITIES> 15,112
<RECEIVABLES> 147,904
<ALLOWANCES> (3,215)
<INVENTORY> 86,962
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<DEPRECIATION> (239,804)
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0
0
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<SALES> 214,438
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