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
January 31, 1996 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 22,860,175
--------------------------------- ----------------------------------------
(Registrant's Telephone Number, Number of Common Shares Outstanding
Including Area Code) as of February 29,1996)
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 January 31, 1996
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 six months ended
January 31, 1996, 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 Six Months Ended
January 31
-----------------------------------------
% %
1996 Sales 1995 Sales
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
Net Sales $433,983,000 100.0 $334,518,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 272,866,000 62.9 215,315,000 64.4
Selling and administrative expenses 74,683,000 17.2 63,174,000 18.9
Provision for depreciation and
amortization 21,499,000 5.0 17,824,000 5.3
Hostile takeover expenses (Note 5) 6,911,000 1.6 0 0.0
------------- ----- ------------ -----
Total costs and expenses $375,959,000 86.6 $296,313,000 88.6
------------- ----- ------------ ------
Operating Income 58,024,000 13.4 38,205,000 11.4
------------- ----- ------------ -----
Interest income (1,413,000) (0.3) (1,984,000) (0.6)
Interest expense 553,000 0.1 694,000 0.2
------------- ----- ------------ ------
Income before Income Taxes 58,884,000 13.6 39,495,000 11.8
Provision for Income Taxes (Note 4) 22,535,000 5.2 14,416,000 4.3
------------- ----- ------------ -----
Net Income $36,349,000 8.4 $25,079,000 7.5
============= ===== ============ =====
Net Income per Share $1.60 $1.12
==== ====
Average Common Shares Outstanding 22,731,000 22,419,000
========== ==========
Dividends Declared Per Share $0.43 $0.37
===== =====
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. Page 3
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Wallace Computer Services, Inc. and Subsidiary
Consolidated Income Statement (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
January 31
----------------------------------------
% %
1996 Sales 1995 Sales
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
Net Sales $219,545,000 100.0 $176,165,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 136,535,000 62.2 113,695,000 64.5
Selling and administrative expenses 37,706,000 17.2 32,913,000 18.7
Provision for depreciation and
amortization 10,944,000 5.0 9,060,000 5.1
Hostile takeover expenses (Note 5) 2,879,000 1.3 0 0.0
------------ ----- ------------ -----
Total costs and expenses $188,064,000 85.7 $155,668,000 88.4
------------ ----- ------------ -----
Operating Income 31,481,000 14.3 20,497,000 11.6
------------ ----- ------------ -----
Interest income (561,000) (0.3) (963,000) (0.5)
Interest expense 219,000 0.1 300,000 0.2
------------ ----- ------------ -----
Income before Income Taxes 31,823,000 14.5 21,160,000 12.0
Provision for Income Taxes (Note 4) 12,252,000 5.6 7,724,000 4.4
------------ ----- ------------ -----
Net Income $19,571,000 8.9 $13,436,000 7.6
============ ===== ============ =====
Net Income per Share $0.86 $0.60
===== =====
Average Common Shares Outstanding 22,756,000 22,443,000
========== =========
Dividends Declared Per Share $0.215 $0.37
====== =====
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Page 4
Wallace Computer Services, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
January 31, 1996 July 31, 1995
(Unaudited) (Audited)
----------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $27,671,000 $10,815,000
Short-term Investments (Note 3) 2,884,000 30,242,000
Accounts Receivable 153,287,000 130,036,000
Less-Allowance for Doubtful Accounts 3,292,000 2,671,000
------------ ------------
Net Receivables 149,995,000 127,365,000
Inventories (Note 1) 91,907,000 79,523,000
Advances and Prepaid Expenses 16,114,000 10,927,000
------------ ------------
Total Current Assets 288,571,000 258,872,000
------------ ------------
Property, Plant and Equipment, at Cost 519,616,000 487,207,000
Less-Reserves for Depreciation and Amortization 249,278,000 230,691,000
------------ ------------
Net Property, Plant and Equipment 270,338,000 256,516,000
------------ ------------
Intangible Assets Arising from Acquisitions 26,201,000 26,575,000
Cash Surrender Value of Life Insurance 31,583,000 26,836,000
Systems Development Costs 19,073,000 15,253,000
Other Assets 5,377,000 8,650,000
------------ ------------
Total Assets $641,143,000 $592,702,000
============ ============
Liabilities and Stockholders' Equity
Current Portion of Long-Term Debt $150,000 $205,000
Accounts Payable 39,668,000 24,209,000
Accrued Salaries, Wages, Profit Sharing and Other 40,136,000 41,308,000
------------ ------------
Total Current Liabilities 79,954,000 65,722,000
------------ ------------
Long-Term Debt 25,600,000 25,600,000
Deferred Income Taxes 26,326,000 24,095,000
Deferred Compensation and Retirement Benefits 22,325,000 21,167,000
Stockholders' Equity
Common Stock (Note 2) Outstanding-22,834,772
shares at January 31, 1996 and
22,689,563 shares at July 31, 1995 22,835,000 22,689,000
Additional Capital 49,978,000 45,800,000
Retained Earnings 414,361,000 387,810,000
Unrealized Loss on Securities (Note 3) (236,000) (181,000)
------------ ------------
Total Stockholders' Equity 486,938,000 456,118,000
------------ ------------
Total Liabilities and Stockholders' Equity $641,143,000 $592,702,000
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 5
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
January 31
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income from operations $36,349,000 $25,079,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,499,000 17,824,000
Deferred taxes 2,231,000 (1,306,000)
(Gain)/loss on disposal of property (47,000) 10,000
Changes in assets and liabilities
Accounts receivable (22,630,000) (26,353,000)
Inventories (12,384,000) (3,915,000)
Advances and prepaid expenses (5,187,000) (737,000)
Other assets (10,714,000) (4,022,000)
Accounts payable and other liabilities 13,576,000 2,706,000
Accrued income taxes 0 (560,000)
Deferred compensation and retirement benefits 1,158,000 1,971,000
------------- ------------
Net cash provided by operating activities 23,851,000 10,697,000
------------- ------------
Cash Flows from Investing Activities:
Capital expenditures (32,792,000) (25,087,000)
Short-term investments 27,358,000 16,849,000
Long-term investments 38,000 0
Proceeds from disposal of property 77,000 26,000
Unrealized loss on securities (Note 3) (55,000) (594,000)
Purchase of Lampro Graphics 0 (4,911,000)
-------------- -------------
Net cash used in investing activities (5,374,000) (13,717,000)
-------------- -------------
Cash Flows from Financing Activities:
Proceeds from issuance of common and
treasury stock 4,324,000 3,318,000
Cash dividends paid (9,085,000) (7,727,000)
Amounts paid on long-term debt (55,000) (3,129,000)
Proceeds from issuance of short-term debt 0 4,829,000
Proceeds from issuance of long-term debt 0 100,000
Retirement of short-term and acquired debt 0 (6,474,000)
Proceeds from construction funds held by trustee 3,195,000 838,000
------------- -------------
Net cash used in financing activities (1,621,000) (8,245,000)
------------- -------------
Net changes in cash and cash equivalents 16,856,000 (11,265,000)
Cash and cash equivalents at beginning of year 10,815,000 17,587,000
------------- -------------
Cash and cash equivalents at January 31 $27,671,000 $6,322,000
============= =============
Supplemental Disclosure:
Interest paid (net of interest capitalized) $ (108,000) $ (53,000)
Income taxes paid (net of refunds received) 25,547,000 16,711,000
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 6
Notes to Consolidated Financial Statements
January 31, 1996
(Unaudited)
Note 1 - Inventories
Inventories at January 31, 1996, and July 31, 1995,
were as follows:
<TABLE>
<CAPTION>
January 31, 1996 July 31, 1995
---------------- -------------
<S> <C> <C>
Raw materials $24,090,000 $25,981,000
Work in process 1,588,000 2,060,000
Finished products 66,229,000 51,482,000
---------------- -------------
$91,907,000 $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 January 31, 1996, options to purchase 506,833 shares of common
stock were outstanding and 726,541 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 22,834,772 as of January 31, 1996. Of these shares, 986,780 have
been repurchased and been reissued under the Employee Stock Purchase
Plan and through the exercise of stock options. The number of shares
held in treasury at January 31, 1996 is 0. 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 $236,000 at January 31, 1996
(net of tax).
<PAGE>
Wallace Computer Services, Inc. Page 7
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Note 3 - Accounting Change (continued)
The amortized cost and market value of investments as of July 31, 1995,
and as of January 31, 1996 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>
January 31, 1996 Amortized Unrealized Holding Market
--------------------- Cost Gains Losses Value
------------ --------- ------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
State, Municipal &
Other Govt Debt $67,000 0 $15,000 $52,000
Equity 3,210,000 0 378,000 2,832,000
Held-to-Maturity
State, Municipal &
Other Govt Debt 0 0 0 0
---------- --------- -------- ----------
Total Short-term
Investments $3,277,000 0 $393,000 $2,884,000
========== ========= ======== ==========
Long-term Available
-for-Sale Equity $1,955,000 $0 $0 $1,955,000
========== ========= ======== ==========
</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 six months ended January 31, 1996, proceeds on the sale of
available-for-sale securities were $23,323,000, with gross realized
losses of $107,000. 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 January 31, 1996
was $55,000 (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 8
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Note 4 - Income Taxes
Effective August 1, 1995, the Company increased its effective tax rate
from 37% to 38%. Effective November 1, 1995, the Company again increased
its effective tax rate from 38% to 38.5%. These changes were primarily
due to a reduction in tax-free investment income. The income tax rate
for the first half of fiscal 1995 was 36.5%.
Note 5 - Hostile Takeover Expense Commitments
Included in hostile takeover expenses is $3,000,000 for the quarter
and $5,000,000 for the six months ended January 31, 1996 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 9
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Report of Independent Public Accountants
------------------------------------------------------------
To the Stockholders of Wallace Computer Services, Inc.
We have reviewed the accompanying consolidated balance sheet of Wallace Computer
Services, Inc., (a Delaware Corporation) and subsidiary as of January 31,
1996, and the related consolidated statements of income for the three-month and
six-month periods ended January 31, 1996 and 1995, and the consolidated
statements of cash flows for the six-month periods ended January 31, 1996,
and 1995. 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
February 20, 1996
<PAGE>
Wallace Computer Services, Inc. Page 10
FORM 10-Q
For Quarterly Period Ended January 31, 1996
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 the
preceding fiscal year which ended July 31, 1995.
For the three month period ended January 31, 1996, net sales increased
24.6% to $219,545,000. Net income for the second quarter increased
45.7% to $19,571,000 or 86 cents per share, from $13,436,000 or 60 cents
per share in fiscal 1995. Pretax income for the quarter was up by
$10,663,000 or 50.4%. The after tax impact of expenses related to the
hostile takeover attempt by Moore Corporation Limited was $1,770,000 or
8 cents per share. The second quarter includes the recognition of an
additional $1,500,000 of expense relating to the Goldman Sachs letter
agreement. The impact of the Goldman Sachs fees pursuant to the letter
agreement will be fully recognized in the fiscal year ended July 31, 1996.
For the six month period ended January 31, 1996, net sales increased
29.7% to $433,983,000. Net income for the first half increased 44.9% to
$36,349,000 or $1.60 per share, from $25,079,000 or $1.12 per share in
fiscal 1995. Pretax income for the half was up by $19,389,000 or 49.1%.
The after tax impact of hostile takeover expenses was $4,270,000 or
19 cents per share.
Cost of goods sold represented 62.2% of sales versus 64.5% in the second
quarter of fiscal 1995. The second quarter of fiscal 1996 includes a
LIFO credit of approximately $1.2 million or 3.4 cents per share. The
credit is due to a decrease in paper prices offset by higher finished
goods inventory levels anticipated by year-end. Cost of goods sold for
the first half was 62.9% in fiscal 1996 versus 64.4% in fiscal 1995.
Total LIFO credits for the first half were $1.0 million or 2.8 cents per
share. The LIFO provision for the first half of 1995 was $3.6 million
or 10.3 cents per share.
Selling and administrative expenses were 17.2% of sales versus 18.7% in
the second quarter last year. For the first half of fiscal 1996,
expenses are 17.2% of sales versus 18.9% in fiscal 1995. These
decreases are attributable to maintaining fixed costs while increasing
sales.
The provision for depreciation and amortization is up 20.6% in the first
half 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 half decreased by $571,000 or 28.8% 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 $141,000
or 20.3% 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 $10,984,000 or 53.6%. For the
first half, operating income was up $19,819,000 or 51.9%. For fiscal
1996 this represents 13.4% to sales versus 11.4% for fiscal 1995.
<PAGE>
Wallace Computer Services, Inc. Page 11
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
- -------------------------------------------------------------------------
Liquidity and Capital Resources
------------------------------------------
Working capital increased by $15,467,000 from July 31, 1995, with a
current ratio of 3.6 at January 31, 1996. Long-term debt includes
$23,500,000 of industrial revenue bonds at rates ranging from 3.3% to
3.45%, as well as $2,100,000 related to acquisitions made in the prior
fiscal year. Long-term debt currently represents 5.0% of total
capitalization.
Capital expenditures for the first six months totaled $32,792,000. For
the full fiscal year, capital expenditures are expected to be $60.0
million, which are expected to be financed through internally generated
funds and by the Industrial Revenue Bond for our Lebanon facility.
Stockholders' equity increased by 6.8% to $486.9 million at January 31,
1996.
Cash balances remain adequate to fund current operations. There have
been no borrowings under short- term lines of bank credit thus far in
this fiscal year.
Current inventory levels are believed to be in-line with the inventory
levels necessary to satisfy customer demand. The company anticipates
having adequate sources of supply of raw materials to meet future
business requirements.
Common Stock
-------------------
On September 7, 1995, the Board of Directors increased the annualized
dividend rate to $.86 per share, a 16.2% increase from fiscal 1995.
Other
-------
Effective February 1, 1996, the Company sold the Lasermax division to
Stralfors A.B. of Ljungby, Sweden in a cash transaction which
approximates book value. It is not anticipated that the sale will
affect the earnings forecast for fiscal 1996.
On February 8, 1996 the Company completed the acquisition of Forms
Engineering Company. The acquisition was a cash transaction and will be
accounted for using the purchase method. Though the acquisition is
anticipated to be additive to fiscal 1996 earnings, it is not expected to
have a material impact.
<PAGE>
Wallace Computer Services, Inc. Page 12
FORM 10-Q
For Quarterly Period Ended January 31, 1996
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 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. Section 18; and (ii) that Moore, the Bidder, and Mr. Braun
have made false and misleading statements of fact in connection with the
<PAGE>
Wallace Computer Services, Inc. Page 13
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Item 1 Legal Proceedings (continued)
- ---------------------------------------
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 State 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. On January 23, 1996, the Court entered a final judgment
dismissing all claims in the action with prejudice. On January 29,
1996, the Company filed a notice of appeal with the District Court in
order to appeal the Court's dismissal of the Company's antitrust
counterclaim described above.
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 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 LAPERRIER V.
WALLACE COMPUTER SERVICES, INC., et al. filed a Second Amended Class Action
Complaint in the Court of Chancery of the State of Delaware. The
plaintiffs' counsel in the Stockholders Actions has extended the time in
which the Company must answer or otherwise respond to the complaint
until ten days from the date plaintiffs' counsel requests such a response.
Items 2 and 3 None
- -------------------
<PAGE>
Wallace Computer Services, Inc. Page 14
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Item 4 Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
The Company held its annual meeting of stockholders on December 8, 1995.
The annual meeting was adjourned and reconvened on January 5, 1996. At
the reconvened annual meeting, the Inspectors of Election submitted
the final results of the meeting. The results are as follows:
1) Election of three directors for the class of directors whose
terms are expiring at the 1995 Annual Meeting.
<TABLE>
<CAPTION>
For Withhold
---------- --------
<S> <C> <C>
Robert J. Cronin 6,007,763 553,743
R. Darrell Ewers 6,008,643 552,863
Neele E. Stearns, Jr. 6,009,788 551,718
Albert W. Isenman III 12,768,938 131,484
Curtis A. Hessler 12,769,278 131,144
Robert P. Rittereiser 12,769,378 131,044
</TABLE>
2) Moore's proposal to remove all members of the Board of Directors of
the Company, other than Moore's director nominees if they are then
directors of the Company.
<TABLE>
For Against Abstain
---------- --------- -------
<S> <C> <C>
13,573,971 5,571,564 316,973
</TABLE>
3) Moore's proposal to amend the company's By-laws to fix the number of
directors of the Company at five.
<TABLE>
For Against Abstain
---------- --------- --------
<S> <C> <C>
13,574,701 5,569,027 317,400
</TABLE>
4) Moore's proposal to repeal each provision of the Company's By-laws
or amendment thereto adopted without stockholder approval
subsequent to February 15, 1995 and prior to the 1995 Annual Meeting.
<TABLE>
For Against Abstain
---------- --------- -------
<S> <C> <C>
13,508,342 5,632,629 315,157
</TABLE>
5) Ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 1996.
<TABLE>
For Against Abstain
---------- ------- ---------
<S> <C> <C>
14,239,747 183,627 5,039,052
</TABLE>
At the reconvened annual meeting, Albert W. Isenman III, Curtis A.
Hessler and Robert P. Rittereiser were elected directors of the Company.
They joined Richard F. Doyle, William E. Olsen, Theodore Dimitriou, Fred F.
Canning and William N. Lane III on the Board of Directors. Proposals 2 and
3 failed to obtain the affirmative vote of 80% of the outstanding shares
<PAGE>
Wallace Computer Services, Inc. Page 15
FORM 10-Q
For Quarterly Period Ended January 31, 1996
Item 4 Submission of Matters to a Vote of Security Holders (continued)
- -------------------------------------------------------------------------
and consequently were not adopted. Proposal 4 obtained the affirmative
vote of a majority of the shares represented and entitled to vote at the
annual meeting and consequently was adopted. Proposal 5 obtained the
affirmative vote of stockholders holding a majority of the shares
entitled to vote and consequently was adopted. On January 5, 1996, the
Board of Directors increased the size of the Board from eight to nine
members and elected Mr. Cronin to fill the resulting vacancy.
Item 5 None
- -------------------
Item 6 Exhibits
- -----------------------
(a) Exhibits
3.1 Amended & Restated By-Laws of Registrant effective as of
January 5, 1996.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
quarter ended January 31, 1996.
<PAGE>
Page 16
Wallace Computer Services, Inc.
FORM 10-Q
For Quarterly Period Ended January 31, 1996
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.
March 6, 1996 /s/ ROBERT J. CRONIN
-------------------- -------------------------------------
Date Robert J. Cronin
President and Chief Executive Officer
March 6, 1996 /s/ MICHAEL J. HALLORAN
------------------- ---------------------------------------
Date Michael J. Halloran
Vice President,Chief Financial Officer,
and Assistant Secretary
(Principal Accounting Officer)
Exhibit 3.1
Amended And Restated Bylaws
of
Wallace Computer Services, Inc.
(Effective as of January 5, 1996)
ARTICLE I
OFFICES AND BOOKS AND RECORDS
Section 1.1. Offices.
The corporation may have such offices as the Board of Directors may from time
to time designate and the business of the corporation may from time to time
require.
Section 1.2. Books and Records.
The corporation may keep its books and records at such places as the Board of
Directors may from time to time designate and the business of the corporation
may from time to time require.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting.
An annual meeting of stockholders for the purpose of electing directors and
the transaction of any other proper business shall be held each year on such
date and at suchtime as may be fixed by the Board of Directors. If, by the
tenth day preceding the first Wednesday in November of any year, the Board of
Directors shall not have fixed a date and time for an annual meeting of
stockholders for such year, the annual meeting shall be held on the first
Wednesday in November in such year at the hour of 10:00 a.m. in the place
where such meeting is to be held. If the date so fixed for the annual
meeting shall be a legal holiday in the place where such meeting is to be
held, such meeting shall be held on the next succeeding business day.
<PAGE>
Section 2.2. Special Meetings.
Special meetings of stockholders may be called at any time by the Board of
Directors pursuant to a resolution approved by a majority of the entire Board
of Directors. *
Section 2.3. Place of Meeting.
The Board of Directors may designate the place of meeting for any meeting of
stockholders. If no designation is made by the Board of Directors, the place of
meeting shall be the principal business office of the corporation.
Section 2.4. Notice of Meeting.
Written or printed notice stating the place, day and hour of meeting and the
purpose or purposes for which the meeting is called shall be given not less
than 10 days nor more than 60 days before the date of each meeting of
stockholders, either personally or by mail, to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid,
addressed to the stockholder at his address as it appears on the stock
transfer books of the corporation.
Section 2.5. Fixing of Record Date.
Except as may be provided otherwise by law:
(a) For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend or other distribution,
or in order to make a determination of stockholders for any other proper
purpose, the Board of Directors may fix in advance a date as the record date
for any such determination of stockholders, which record date shall be not
less than 10 days nor more than 60 days prior to the date of the meeting or
of the payment of a dividend or other event for which such record date is
being fixed.
<PAGE>
(b) If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or of
stockholders entitled to receive payment of a dividend or other distribution,
or in order to make a determination of stockholders for any other purpose,
the record date for such determination of stockholders shall be (i) in the
case of a meeting of stockholders, the close of business on the day next
preceding the date on which notice of the meeting is given, or (ii) in the
case of a dividend or other distribution, the close of business on the date
on which the Board of Directors adopts the resolution declaring such dividend
or other distribution, or (iii) for any other purpose, the date on which the
Board of Directors adopts the resolution relating thereto.
(c) A determination of stockholders entitled to notice of or to vote at any
meeting of stockholders shall apply to any adjournment of such meeting,
unless the Board of Directors fixes a new record date for the adjourned meeting.
Section 2.6. Voting Lists.
The officer who has charge of the stock transfer books of the corporation
shall prepare and make, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such
list shall be available at either the place where the meeting is to be held
or at another place, specified in the notice of meeting, in the city where the
meeting is to be held, for a period of 10 days prior to the meeting and shall be
open to examination by any stockholder at any time during ordinary business
hours during such 10-day period, for any purpose germane to the meeting. Such
list shall also be produced and kept open at the time and place of the
meeting during the whole time thereof and shall be subject to inspection by
any stockholder who is present at the meeting. The original or duplicate
stock transfer books shall be the only evidence as to the identity of the
stockholders entitled to examine any such list or the stock transfer books of
the corporation and to vote in person or by proxy at any meeting of
stockholders.
Section 2.7. Quorum and Voting.
Except as may be provided otherwise in the Certificate of Incorporation:
<PAGE>
(a) Stockholders holding a majority of the outstanding shares of stock of
the corporation, present in person or represented by proxy, at the meeting
and entitled to vote on the subject matter shall constitute a quorum at a
meeting of stockholders, except that, when any matter is to be voted on by a
class or by a series voting as a class, the holders of a majority of the
shares of such class or series, present in person or represented by proxy,
shall constitute a quorum of such class or series for a vote on such matter.
(b) In all matters other than the election of directors, the affirmative
vote of stockholders holding a majority of the shares of stock of the
corporation entitled to vote, present in person or represented by proxy,
shall be the act of the stockholders, except that, when any matter is to be
voted on by a class or by a series voting as a class, the affirmative vote of
the holders of a majority of the shares of such class or series, present in
person or represented by proxy, shall be the act of such class or series.
(c) Directors shall be elected by a plurality of the votes cast by
stockholders holding shares of stock of the corporation entitled to vote in
the election of directors, present in person or represented by proxy, except
that, when any directors are to be elected by a class or by a series voting
as a class, the directors to be elected by such class or series shall be
elected by a plurality of the votes cast by holders of the shares of such
class or series, present in person or represented by proxy.
(d) If less than a majority of the outstanding shares of stock is
represented at a meeting of stockholders, or if less than a majority of the
outstanding shares of any class or series is represented at a meeting of
stockholders where a matter is to be voted on by a class or by a series voting
as a class, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be represented, any business may be transacted that might have
been transacted at the meeting as originally notified.
(e) The stockholders represented at a duly organized meeting may continue to
transact business at such meeting, notwithstanding the withdrawal from the
meeting of a number of stockholders leaving less than a quorum at such meeting.
Section 2.8. Proxies.
(a) Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after 3 years from its date, unless the
proxy provides for a longer period.
<PAGE>
(b) Without limiting the manner in which a stockholder may authorize another
person or persons to act for him as proxy pursuant to subsection (a) of this
Section, the following shall constitute a valid means by which a stockholder may
grant such authority:
(1) A stockholder may execute a writing authorizing another person or
persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent
signing such writing or causing his signature to be affixed to such
writing by any reasonable means including, but not limited to, facsimile
signature.
(2) A stockholder may execute a writing authorizing another person or
persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person or persons who will be the holder of the
proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person or persons who
will be the holder of the proxy to receive such transmission, provided
that any such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with information from
which it can be determined that the telegram, cablegram or other
electronic transmission was authorized by the stockholder. If it is
determined that such a telegram, cablegram or other electronic
transmission is valid, the inspectors of election or, if there are no
inspectors of election, such other persons making such determination
shall specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to subsection (b) of this
Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission.
(d) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation
generally.
Section 2.9. Inspectors of Election.
(a) The corporation shall, in advance of any meeting of stockholders,
appoint one or more inspectors of election to act at the meeting and make a
written report thereof. The corporation may designate one or more persons as
alternate inspectors of election to replace any inspector of election who
<PAGE>
fails to act. If no inspector of election or alternate inspector of election
is able to act at a meeting of stockholders, the person presiding at the
meeting shall appoint one or more inspectors of election to act at the
meeting. Each inspector of election, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector of election with strict impartiality and according to the best of
his ability. The decision of a majority of the inspectors of election as to
the results of any vote of stockholders shall be binding upon the corporation
and its stockholders. Any competent person over the age of 21 may be
appointed as an inspector of election.
(b) Inspectors of election shall have the following responsibilities:
(i) to ascertain the number of shares outstanding and the voting power
of each;
(ii) to determine the shares represented at a meeting and the validity
of proxies and ballots;
(iii)to count all votes and ballots;
(iv) to determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the
inspectors;
(v) to certify their determination of the number of shares represented
at the meeting and their count of all votes and ballots;
(vi) to determine whether the meeting itself is legally constituted for
the purpose of the actions to be taken by the stockholders; and
(vii)to do all other acts and make all other determinations necessary or
appropriate in connection with conducting the vote of stockholders
and deciding the results thereof.
(c) In carrying out their responsibilities, inspectors of election shall not
have any obligation to do any of the following:
(i) to determine the names or addresses of the stockholders entitled to
vote (inspectors of election may rely on a list of stockholders as of
the record date for the meeting certified by either the transfer agent
or the Secretary of the corporation), or
<PAGE>
(ii) to determine the date of mailing of the notice of meeting or the
persons to whom the notice of meeting was sent (inspectors of election
may rely on a certificate of either the transfer agent or the Secretary
of the corporation for such information).
(d) In carrying out their responsibilities, inspectors of election shall
have the authority, but not the obligation, to appoint or retain agents,
including, but not limited to, accountants, attorneys and custodians, to
assist the inspectors of election in the performance of their duties as the
inspectors of election. Any such agent so appointed by any inspector of
election shall be responsible only to the inspectors of election.
(e) Inspectors of election shall be entitled to possession of all proxies
and all ballots cast by stockholders or their proxies until they have
determined the results of the vote of stockholders, at which time they shall
deliver such proxies and ballots to the secretary of the meeting.
(f) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced
at the meeting. No ballot, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the inspectors of election after the
closing of the polls unless the Court of Chancery of the State of Delaware
upon application by a stockholder shall determine otherwise.
(g) In determining the validity and counting of proxies and ballots, the
inspectors of election shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, any information provided in
accordance with Section 212(c)(2) of the General Corporation Law of the State of
Delaware, ballots and the regular books and records of the corporation,
except that the inspectors of election may consider other reliable
information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized
by the record owner to cast or more votes than the stockholder holds of
record. If the inspectors of election consider other reliable information
for the limited purpose permitted in this subsection (g), the inspectors of
election shall, at the time they make their certification pursuant to
subsection (b)(v) of this Section, specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for their belief that such information
is accurate and reliable.
(h) Inspectors of election shall be entitled to reimbursement from the
corporation for all expenses reasonably incurred by them in connection with
the discharge of their responsibilities, including the fees and expenses of
any agents appointed by them. In addition, the corporation shall pay
inspectors of election a fee commensurate with the services rendered and the
responsibilities undertaken by them.
<PAGE>
Section 2.10. Stockholder Action.
Any action required or permitted to be taken by any stockholders of the
corporation must be effected at a duly called annual or special meeting of
such stockholders and may not be effected by any consent in writing by such
stockholders. Except as otherwise required by law and subject to any special
rights of holders of preferred stock with respect to calling meetings of
preferred stockholders, special meetings of stockholders of the corporation
may be called only by the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors. *
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers.
The business and affairs of the corporation shall be managed by or under the
direction of the Board of Directors, except as may be otherwise required by
law, by the Certificate of Incorporation or by these by-laws.
Section 3.2. Number, Election, Tenure and Qualifications; Stockholder
Nominations; Vacancies; Removal; Resignation.
(a) Number, Election, Tenure and Qualifications. Subject to any special
rights of the holders of preferred stock to elect additional directors, the
number of directors of the corporation shall be fixed from time to time by a
majority of the entire Board of Directors. The directors (other than
directors elected by the holders of preferred stock voting as a class or
series) shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, as determined by the Board of Directors, one class to be originally
elected for a term expiring at the annual meeting of stockholders to be held
in 1986, another class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1987, and another class to be
originally elected for a term expiring at the annual meeting of stockholders
to be held in 1988, with each director in each class to hold office until
his successor is elected and qualified. At each annual meeting of
stockholders, the successors of the class of directors whose term expires at
the meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election. Directors need not be residents of the State of Delaware or
stockholders of the corporation. *
<PAGE>
(b) Stockholder Nomination of Director Candidates. Advance notice of
stockholder nominations for directors shall be given in the manner provided
in Section 3.3 of these by-laws. *
(c) Newly Created Directorships and Vacancies. Subject to any special
rights of the holders of preferred stock with respect to filling vacancies
in directorships elected by preferred stockholders voting as a class, newly
created directorships resulting from any increase in the number of directors
and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other reason shall be filled by the
affirmative vote of a majority of the remaining directors then in office, or
the sole remaining director, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred
and until his successor is elected and qualified. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director. *
(d) Removal. Subject to any special rights of the holders of preferred
stock with respect to the removal of directors elected by preferred
stockholders voting as a class, any director may be removed from office, at
any time, with or without cause, but only by the affirmative vote of the
holders of at least 80% of the combined voting power of the then outstanding
shares of stock of the corporation entitled to vote generally in the election
of directors, voting together as a single class. *
(e) Resignation. Any director may resign at any time upon written notice to
the corporation directed to the Board of Directors and the Secretary. Such
resignation shall take effect at the time specified therein, and, unless
otherwise specified therein, no acceptance of such resignation shall be
necessary to make it effective. *
Section 3.3. Notification of Nominations.
Subject to any special rights of the holders of preferred stock with respect
to the nomination of directors to be elected by preferred stockholders voting
as a class, nominations for the election of directors may be made by the
Board of Directors, or by a nominating committee appointed by the Board of
Directors, or by any stockholder entitled to vote generally in the election
of directors. However, a stockholder may nominate persons for directors at a
<PAGE>
meeting of stockholders only if written notice of such stockholder's intent
to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary not
later than (i) with respect to an election to be held at an annual meeting of
stockholders, 90 days in advance of such meeting, and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders. Each such
notice must set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated
for director; (b) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a director of the corporation if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure. *
Section 3.4. Annual and Regular Meetings.
An annual meeting of the Board of Directors shall be held, without any notice
other than this by-law, immediately after each annual meeting of stockholders
at the same place as such annual meeting of stockholders. The Board of
Directors may, by resolution, fix the time and place for the holding of
regular meetings without notice other than the resolution fixing the time and
place for the meeting.
Section 3.5. Special Meetings.
Special meetings of the Board of Directors may be called by or at the request
of the Chairman of the Board or any two directors. The person or persons
calling a special meeting of the Board of Directors may fix the date and
place of such meeting and may fix any time within regular business hours as
the time for such meeting.
<PAGE>
Section 3.6. Notice of Special Meetings.
Notice of any special meeting of directors shall be given to each director by
mail at his business or residence address at least 5 days prior to the
meeting, or by courier, telegram or telex at his business address at least one
business day prior to the meeting, or by telephone at least 12 hours prior to
the meeting. If given by mail, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, addressed to the
director at his business or residence address. If given by telegram, such
notice shall be deemed to be given when the telegram is delivered to the
telegraph company. Neither the business to be transacted at, nor the purpose
of, any special meeting of the Board of Directors need be specified in the
notice of such meeting.
Section 3.7. Quorum; Vote Required for Action.
Unless otherwise provided by law or in the Certificate of Incorporation, the
presence of a majority of the directors shall constitute a quorum for the
transaction of business. Except as otherwise provided by law, in the
Certificate of Incorporation or in these by-laws, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. In the event a quorum shall not be present at any
meeting of the Board of Directors, the directors who are present may by
majority vote adjourn the meeting from time to time until a quorum is present.
Section 3.8. Committees.
(a) The Board of Directors shall appoint the committees provided for in
Sections 3.9, 3.10, and 3.11 of these by-laws and may, by resolution passed
by a majority of the whole of the Board of Directors, establish and appoint
other standing or temporary committees and invest such committees with such
duties and powers as the Board of Directors may from time to time determine,
subject to such conditions and restrictions as may be imposed by law, in the
Certificate of Incorporation, or in these by-laws.
(b) The Board of Directors may designate one or more alternate members of
any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event that an alternate member designated
by the Board of Directors is not available to replace an absent or
disqualified member, the member or members of a committee who are present at
any meeting of such committee and not disqualified from voting, whether or not
representing a quorum, may unanimously appoint another member of the Board of
Directors to act as a member of such committee at such meeting in the place of
such absent or disqualified member.
<PAGE>
(c) Each committee shall keep minutes of its meetings and records of its
actions, shall cause the minutes of its meetings and records of its actions
to be filed in the minutes books of the corporation and shall distribute
copies of the minutes of its meetings and records of its actions to the Board
of Directors.
(d) Unless specified otherwise at the time of his appointment, the term of
each member of each committee shall be from the date of his appointment until
the next succeeding annual meeting of the Board of Directors or until his
successor shall have been duly appointed, provided, however, that the Board
of Directors may at any time in its sole discretion and for any reason remove
any member of a committee.
(e) Unless otherwise provided by law, in the Certificate of Incorporation,
in these by-laws, or in the resolution establishing or appointing the
committee, the presence of a majority of the members of a committee shall
constitute a quorum for the transaction of business. Except as otherwise
provided by law, in the Certificate of Incorporation, in these by-laws, or in
the resolution establishing or appointing the committee, the vote of a
majority of the members of a committee present at a meeting at which a quorum
is present shall be the act of the committee. In the event a quorum shall
not be present at any meeting of a committee, the members of the committee
who are present may by majority vote adjourn the meeting from time to time
until a quorum is present.
Section 3.9. Executive Committee.
(a) At each annual meeting of the Board of Directors, the Board of Directors
shall, by a resolution adopted by a majority vote of the entire Board of
Directors, designate and appoint from its members an Executive Committee
consisting of three or more directors.
(b) The Executive Committee shall have and may exercise, to the fullest
extent permitted by law, all of the powers and authority of the Board of
Directors in the management and direction of the business and affairs of the
corporation and may authorize the corporate seal to be affixed to any
document or instrument; provided, however, that, except as otherwise
expressly authorized from time to time by the Board of Directors and as
permitted by the Delaware General Corporation Law, the Executive Committee
shall not have any power or authority to:
(1) make, adopt, amend, alter or repeal any by-law;
(2) elect or appoint any director or elect, appoint or remove any officer;
<PAGE>
(3) recommend or submit to the stockholders any action that requires
approval of stockholders, including an amendment of the Certificate of
Incorporation, the sale, lease, or exchange of all or substantially
all of the corporation's property and assets, or the dissolution or
the revocation of a dissolution of the corporation;
(4) adopt an agreement of merger or consolidation under Section 251 or 252
of the Delaware General Corporation Law with; approve any merger or
consolidation with; or approve any acquisition of the stock or the
business and assets of; any party other than a subsidiary of the
corporation, except that, in the case of an acquisition previously
approved by the Board of Directors, the Executive Committee shall
have the power and authority to modify the amount of consideration
for such acquisition by an amount not in excess of 25% of the
previously approved consideration or $500,000, whichever is less;
(5) declare a dividend or authorize the issuance of any stock;
(6) create any new committee or dissolve, alter the responsibilities
of, or fill any vacancy on any existing committee appointed by the
Board of Directors;
(7) make any substantive changes in or awards under the corporation's
employee benefit and compensation benefit plans;
(8) incur or guarantee any long-term debt (over 12 months) or incur any
short-term debt in excess of $500,000 at any time outstanding; or
(9) make any capital commitment or expenditure in excess of $500,000
that could not otherwise be made without the prior approval of the
Board of Directors.
(c) Notwithstanding the provisions of Section 3.9(b)(2) of these by-laws,
in the event of the death, inability or refusal to act of the Chairman of the
Board and the President, the Executive Committee may determine who shall
perform the duties of the chief executive officer pending the election of
successors to the offices of Chairman of the Board and President.
<PAGE>
Section 3.10. Audit Committee.
(a) At each annual meeting of the Board of Directors, the Board of Directors
shall, by a resolution adopted by a majority vote of the entire Board of
Directors, designate and appoint from its members an Audit Committee
consisting of three or more directors, none of whom is an officer or employee
of the corporation.
(b) The Audit Committee shall have the powers and responsibilities set forth
in the Audit Committee charter adopted by the Board of Directors on
January 12, 1989, as the same may be amended, modified and supplemented from
time to time by the Board of Directors.
Section 3.11. Compensation Committee.
(a) At each annual meeting of the Board of Directors, the Board of Directors
shall, by a resolution adopted by a majority vote of the entire Board of
Directors, designate and appoint from its members a Compensation Committee
consisting of three or more directors, each of whom shall be a "disinterested"
person within the meaning of Reg. Section 240. 16b-3 issued under the Securities
Exchange Act of 1934 (hereinafter "1934 Act"), as from time to time modified
or amended, (hereinafter "Rule 16b-3"), and none of whom is subject to the
disclosure requirements set forth in Reg. Section 229.402 (j) of the 1934 Act
(hereinafter "Disinterested Director").
(b) The Compensation Committee shall have the following powers and
responsibilities:
(1) To review and recommend to the Board of Directors compensation
levels, bonus amounts and stock option grants of officers and key
managers;
(2) To request and review reports from the corporation's
management on the scope, competence, performance, and motivation
of management employees;
(3) To develop, review and recommend to the Board of Directors
incentive, bonus, stock option and similar incentive plans or
programs and retirement and welfare plans or programs for officers
and key managers;
(4) To review and recommend to the Board of Directors compensation
levels of persons hired from "outside" the corporation to the
positions of Corporate Officer, Divisional Officer or General
Manager and all persons hired who are covered by an employment
contract;
<PAGE>
(5) To interpret incentive, bonus, stock option and similar
incentive plans; and
(6) To develop, review and recommend to the Board of Directors
changes of major benefit and perquisite programs.
(c) Action taken by the Compensation Committee or at meetings duly called
shall require the affirmative vote of at least a majority of its members.
(d) Action taken by the Board of Directors with regard to officer and key
manager compensation levels and Plans or programs, which are not subject to
subparagraph (e) below, shall be voted upon only by the Disinterested
Directors and shall require the affirmative vote of at least a majority of
those Directors eligible to vote.
(e) Any action taken with regard to officer and key manager compensation
levels and Plans or programs, which involve the grant or award of an equity
security, including any derivative security, for which an exemption is claimed
under Rule 16b-3, shall be made by the Board of Directors, if each member
thereof is a Disinterested Director. In the event that the Board of
Directors is not comprised solely of Disinterested Directors, then the
Compensation Committee shall have full power to act with respect to such
grant or award.
ARTICLE IV
OFFICERS
Section 4.1. Number.
The officers of the corporation shall include a Chairman of the Board, a
President, one or more Vice-Presidents (one or more of whom may be designated
as an Executive Vice President or a Senior Vice President), a Secretary, a
Treasurer, one or more Assistant Secretaries, and one or more Assistant
Treasurers. Any two or more offices may be held by the same person, except
the offices of President and Secretary. Except for the Chairman of the
Board, no officer needs to be a director of the corporation.
<PAGE>
Section 4.2. Election and Term of Office.
The officers of the corporation shall be elected annually by the Board of
Directors at each annual meeting of the Board of Directors. Each officer
shall hold office until his successor shall have been duly elected and shall
have qualified or until his earlier death, resignation or removal.
Section 4.3. Resignation.
Any officer may resign at any time upon written notice to the Board of
Directors and the Secretary. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, no acceptance of
such resignation shall be necessary to make it effective.
Section 4.4. Removal.
Any officer may be removed by the Board of Directors whenever in its judgment
the best interests of the corporation would be served thereby.
Section 4.5. Vacancies.
A vacancy in any office caused by death, resignation, removal,
disqualification or otherwise may be filled by the Board of Directors
whenever in its judgment the best interests of the corporation would be
served thereby.
Section 4.6. Chairman of the Board.
The Chairman of the Board shall be elected from the members of the Board of
Directors. The Chairman of the Board shall preside at all meetings of the
Board of Directors and at all meetings of stockholders. The Chairman of the
Board may sign or countersign certificates, contracts, agreements and other
documents and instruments in the name and on behalf of the corporation,
unless and except to the extent that any document or instrument is required
by law or by the Board of Directors to be signed or countersigned by another
officer of the corporation. The Chairman of the Board shall make such
reports to the Board of Directors and the stockholders as the Board of
Directors may from time to time request and shall perform all such other
duties as are incident to his office or are properly requested by the Board
of Directors.
<PAGE>
Section 4.7. President.
The President shall be the chief executive officer of the corporation and
shall be responsible for the general supervision and control of the business
and affairs of the corporation, subject to the direction of the Board of
Directors. The President may sign or countersign certificates, contracts,
agreements and other documents and instruments in the name and on behalf of
the corporation, unless and except to the extent that any document or
instrument is required by law or by the Board of Directors to be signed or
countersigned by another officer of the corporation. The President shall
make such reports to the Chairman of the Board, the Board of Directors and the
stockholders as the Chairman of the Board or the Board of Directors may from
time to time request and shall perform all such other duties as are incident
to his office or are properly requested by the Chairman of the Board or the
Board of Directors. During the absence or disability of the Chairman of the
Board, the President shall have and may exercise all of the powers and shall
discharge all of the duties of the Chairman of the Board.
Section 4.8. Executive Vice-President.
Should one Vice-President be designated by the Board of Directors as
Executive Vice-President (or in the event there be more than one Executive
Vice-President, the Executive Vice-Presidents in the order of their
election), he shall, in the absence or disability of the Chairman of the Board
and the President and subject to the control of the Board of Directors and
the provisions of Section 3.9(c) hereof, perform the duties and exercise the
powers of the President, and shall perform such other duties as shall, from
time to time, be assigned to him by the Board of Directors.
Section 4.9. Vice-Presidents.
Each Vice-President shall make such reports to the chief executive officer,
the Board of Directors and the stockholders as the chief executive officer or
the Board of Directors may from time to time request and shall perform all
such other duties as are incident to his office or are properly requested by
the chief executive officer or the Board of Directors.
Section 4.10. Secretary.
The Secretary shall be custodian of the corporate records and of the
corporate seal and shall be responsible for: (a) keeping minutes of all
meetings of the Board of Directors and its committees and minutes of all
meetings of stockholders in one or more books provided for that purpose;
(b) ensuring that all notices are duly given to directors and stockholders in
<PAGE>
accordance with the provisions of these by-laws and as required by law;
(c) ensuring that the corporate seal is properly affixed to all documents and
instruments to which the corporate seal is required to be affixed;
(d) ensuring that the corporation's transfer agent keeps a register of all
stockholders and a record of all stock transfers; and (e) performing all such
other duties as are incident to his office or are properly requested by the
chief executive officer or the Board of Directors.
Section 4.11. Treasurer.
The Treasurer shall be responsible for: (a) making appropriate arrangements
for the safe keeping of all funds and securities of the corporation,
(b) ensuring that proper records are maintained of all cash receipts and
disbursements by the corporation, and (c) performing all such other duties
as are incident to his office or are properly requested by the chief
executive officer or the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 4.12. Assistant Secretaries.
During the absence or disability of the Secretary, the Assistant Secretary
(or, if there is more than one Assistant Secretary, the Assistant Secretary
designated by the chief executive officer to assume the powers and duties of
the Secretary) shall have and may exercise all of the powers and shall
discharge all of the duties of the Secretary. Each Assistant Secretary shall
also perform all such other duties as are incident to his office or are
properly requested by the chief executive officer, the Secretary or the Board of
Directors.
Section 4.13. Assistant Treasurers.
During the absence or disability of the Treasurer, the Assistant Treasurer
(or, if there is more than one Assistant Treasurer, the Assistant Treasurer
designated by the chief executive officer to assume the powers and duties of
the Treasurer) shall have and may exercise all of the powers and shall
discharge all of the duties of the Treasurer. Each Assistant Treasurer shall
also perform all such other duties as are incident to his office or are
properly requested by the chief executive officer, the Treasurer or the Board of
Directors.
<PAGE>
Section 4.14. Divisional Officers.
The chief executive officer and the Board of Directors may appoint divisional
officers with such powers and duties as the chief executive officer or the
Board of Directors may from time to time assign to such divisional officers.
Section 4.15. Compensation of Officers.
The salaries, bonuses and other compensation of officers and divisional
officers shall be determined by the Board of Directors or, if and to the
extent these by-laws or the Board of Directors so authorizes or directs, by a
committee of the Board of Directors or, in the case of divisional officers,
the chief executive officer. No officer or divisional officer shall be
prevented from receiving any salary, bonus or other compensation that is
determined by the Board of Directors or, if the Board of Directors so
authorizes or directs, by a committee of the Board of Directors or, in the
case of a divisional officer, the chief executive officers, by reason of the
fact that such officer or divisional officer is also a director of the
corporation.
Section 4.16. No Contractual Rights.
No officer or divisional officer shall be deemed to have any rights or claims
against the corporation or be entitled to receive any compensation or
benefits by virtue of his election as an officer or appointment as a
divisional officer, except to the extent provided by law, in a contract
authorized or approved by the Board of Directors or, if the Board of
Directors so authorizes or directs, by a committee of the Board of Directors
or, in the case of a divisional officer, the chief executive officer, or in a
plan, program or arrangement authorized or approved by the Board of Directors
or, if the Board of Directors so authorizes or directs, by a committee of the
Board of Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
Section 5.1. Stock Certificates.
Certificates representing shares of stock of the corporation shall be in such
form as shall be determined by the Board of Directors. Each certificate
shall be signed by the Chairman of the Board, the President or a
<PAGE>
Vice-President and by the Secretary or an Assistant Secretary and sealed
with the corporate seal. In the event that an officer who has signed a
certificate should cease to hold the office in which he signed such
certificate, such certificate may nevertheless be issued by the corporation
with the same effect as if he had continued to serve in such office. All
certificates shall be consecutively numbered or otherwise identified. The
name and address of the person to whom shares of stock are issued, together
with the certificate number, the number of shares and the date of issuance,
shall be entered in the stock transfer records of the corporation. All
certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that, in case of a mutilated certificate or a certificate that is alleged to
have been lost, stolen or destroyed, a new certificate may be issued therefor
upon such indemnity to the corporation and other terms and conditions as the
chief executive officer, the chief financial officer or the Board of
Directors may prescribe. The Board of Directors may appoint an independent
transfer agent or registrar, or both, for any class or series of stock of the
corporation, and, in the event that the Board of Directors should appoint an
independent transfer agent or registrar, or both, for any class or series of
stock of the corporation, the Board of Directors may authorize the use of
facsimile signatures and a facsimile corporate seal on any certificates
representing shares of such class or series.
Section 5.2. Transfer of Shares.
The transfer of shares of stock of the corporation shall be made on the stock
transfer books of the corporation by the holder of record thereof (or by his
legal representative or attorney-in-fact, who shall furnish proper evidence of
authority to transfer), upon surrender for cancellation of the certificate
for such shares. The person in whose name shares stand in the stock transfer
records of the corporation may be deemed by the corporation to be the
absolute owner thereof for all purposes.
ARTICLE VI
BANK ACCOUNTS
Section 6.1. Deposits.
Funds of the corporation shall be deposited to the credit of the corporation
with such banks, trust companies and other depositories as either (i) the
chief executive officer together with either the chief financial officer or
the Treasurer, jointly, or (ii) the Board of Directors shall from time to
time determine.
<PAGE>
Section 6.2. Checks and Drafts.
Checks, drafts and other orders for the payment of money issued in the name
of the corporation shall be signed by such officers, employees and agents and in
such manner as shall from time to time be determined by either (i) the Board
of Directors, or (ii) the chief executive officer together with either the
chief financial officer or the Treasurer, jointly, provided that such action
shall be reported by the Secretary to the Board of Directors at the next
succeeding meeting of the Board of Directors, except that such report of the
Secretary shall not be required if an authorized signatory is a plant manager,
plant superintendent or plant accountant and the checks, drafts and other
orders for the payment of money are drawn on a local disbursement bank
account that is maintained on an imprest basis.
Section 6.3. Banking Resolutions.
The Board of Directors shall be deemed to have approved and adopted, and the
Secretary and any Assistant Secretary shall be authorized to certify the
approval and adoption by the Board of Directors of, any standard form of
resolutions necessary to enable the corporation to open and maintain accounts
with such banks, trust companies and other depositories, and to have checks,
drafts and other orders for the payment of money signed by such officers,
employees and agents and in such manner as either (i) the chief executive
officer together with either the chief financial officer or the Treasurer,
jointly, or (ii) the Board of Directors shall from time to time determine,
provided that a certified copy of such resolutions shall be placed in the
minute books in which proceedings of meetings of the Board of Directors are
recorded, and provided further that the Board of Directors is notified of the
opening of each such account, except if an authorized signatory is a plant
manager, plant superintendent or plant accountant and the checks, drafts and
other orders for the payment of money are drawn on a local disbursement bank
account that is maintained on an imprest basis.
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Amendment of By-laws.
Except as otherwise provided in the Certificate of Incorporation, these
by-laws may be amended or repealed at any annual meeting of stockholders (or
at any special meeting of stockholders duly called and noticed for that
purpose) by a majority vote of the shares of stock represented and entitled
to vote at any such meeting at which a quorum is present. Except as
otherwise provided by law, in the Certificate of Incorporation or in these
by-laws, the Board of Directors may by a vote of a majority of the entire
Board of Directors alter, amend or repeal these by-laws and adopt such other
by-laws as in their judgment may be advisable for the regulation of the
conduct of the affairs of the corporation. *
Section 7.2. Seal.
The corporate seal shall have inscribed thereon the words "Corporate Seal"
and around the margin thereof the words "Wallace Computer Services, Inc.
Delaware".
Section 7.3. Fiscal Year.
The fiscal year of the corporation shall begin on the first day of August of
each year and end on the thirty-first day of July of the following year.
Section 7.4. Audits.
The accounts, books and records of the corporation shall be audited promptly
following the conclusion of each fiscal year by one or more disinterested
certified public accountants selected by the Board of Directors and it shall
be the duty of the Board of Directors to cause such audit to be made promptly
following the conclusion of each fiscal year.
Section 7.5. Waiver of Notice.
Whenever any notice is required to be given to any stockholder or any
director pursuant to the provisions of these by-laws, the Certificate of
Incorporation, or the General Corporation Law of the State of Delaware, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether signed before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of the
stockholders or the Board of Directors need be specified in any waiver of
notice of such meeting.
<PAGE>
Section 7.6. Issuance of Stock, Etc.
The issuance of any stock or other voting securities of the corporation, the
creation of any class or series of stock of the corporation, and the fixing
and determination of the number of shares, dividends, redemption rights,
conversion rights, voting rights, liquidation preferences, and other
preferences and relative, participating, optional and other special rights of
any class or series of stock of the corporation, and the qualifications,
limitations and restrictions thereof, shall require the approval and
authorization of a majority of the entire Board of Directors.
____________________________________
* Pursuant to Section 1 of Article TENTH of the Certificate of Incorporation,
Sections 2.2, 2.10, 3.2, 3.3 and 7.1 of the bylaws may not be altered,
amended or repealed, and no provision inconsistent with any such by-law may
be adopted, without the affirmative vote of the holders of at least 80% of
the combined voting power of the then outstanding shares of stock of the
corporation entitled to vote generally in the election of directors,
voting together as a single class.
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