<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WALLACE COMPUTER SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
October 8, 1996
------------------------
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 6, 1996
------------------------
Dear Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
Wallace Computer Services, Inc. scheduled to be held on Wednesday, November 6,
1996. The meeting will be held at the Company's corporate headquarters, 2275
Cabot Drive, Lisle, Illinois 60532 at 9:00 a.m., local time. Your Board of
Directors and management look forward to greeting those stockholders able to be
present.
Enclosed with this letter is Wallace's notice of meeting and proxy statement
and a WHITE proxy card. You should read these materials for a more complete
description of the matters to be considered at the annual meeting. Then, take a
moment to sign, date and mail your WHITE proxy card in the postage prepaid
envelope provided.
For this year's annual meeting, Mr. Guy P. Wyser-Pratte, a takeover stock
speculator, has given notice to Wallace of his intention to nominate himself and
a father-son team of West Virginia lawyers for election as directors. In
addition, based upon publicly available information, Wallace believes that Mr.
Wyser-Pratte may propose two amendments to the Wallace Bylaws that would limit
Wallace's ability to defend against unfair or coercive acquisition attempts. In
the unanimous view of your Board of Directors, these nominations and possible
Bylaw amendments are not in the best interests of stockholders. YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE WALLACE NOMINEES TO THE BOARD
AND "AGAINST" MR. WYSER-PRATTE'S POSSIBLE PROPOSALS.
On behalf of everyone at Wallace, we thank you for your support during this
past year. We remain committed to acting in the best interests of you, our
stockholders, and our Company. Please feel free to call us or our proxy
solicitor, Morrow & Co., Inc., if you have any questions. Our phone number is
(630) 588-5000, and the phone number of Morrow & Co., Inc. is (800) 662-5200.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
TED DIMITRIOU BOB CRONIN
CHAIRMAN OF THE BOARD PRESIDENT AND CEO
</TABLE>
IMPORTANT
Your vote is important. Please take a moment to sign, date and promptly mail
your WHITE proxy card in the postage prepaid envelope provided. REMEMBER, DO NOT
RETURN ANY PROXY CARD SENT TO YOU BY MR. WYSER-PRATTE, NOT EVEN AS A VOTE OF
PROTEST.
If your shares are registered in the name of a broker, only your broker can
execute a proxy and vote your shares and only after receiving your specific
instructions. Please contact the person responsible for your account and direct
him or her to execute a proxy on your behalf today. If you have any questions or
need further assistance in voting, please contact the firm assisting us in the
solicitation of proxies:
MORROW & CO., INC.
Call toll free at (800) 662-5200
<PAGE>
[LOGO]
------------------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO THE STOCKHOLDERS OF
WALLACE COMPUTER SERVICES, INC.:
Notice is hereby given that the 1996 Annual Meeting of Stockholders of
Wallace Computer Services, Inc., a Delaware corporation, will be held at the
Company's corporate headquarters, 2275 Cabot Drive, Lisle, Illinois 60532 on
Wednesday, November 6, 1996, at 9:00 a.m., for the following purposes:
1. To elect three directors for the class of directors whose terms are
expiring at the 1996 Annual Meeting.
2. To consider and vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for fiscal
year 1997.
3. To consider and vote upon possible proposals by Mr. Guy P. Wyser-Pratte
to: (i) amend the Company's Bylaws to elect not to be governed by Section
203 of the Delaware General Corporation Law; and (ii) amend the Company's
Bylaws to require the Wallace Board to terminate defensive actions
following a cash tender offer for all of the outstanding capital stock of
the Company unless approved by a stockholder vote.
4. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on September 17, 1996
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the 1996 Annual Meeting and at any adjournment or postponement
thereof.
It is important that your shares be voted at the 1996 Annual Meeting.
Whether or not you expect to attend, you are urged to sign and date the
accompanying WHITE proxy card and promptly return it to the Company in the
accompanying postage prepaid envelope.
By Order of the Board of Directors
[SIGNATURE]
MICHAEL T. LAUDIZIO
SECRETARY
Lisle, Illinois
October 8, 1996
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY URGES YOU TO REJECT THE PROXY
SOLICITATION OF MR. WYSER-PRATTE AND NOT SIGN OR RETURN ANY GOLD PROXY CARD SENT
TO YOU BY MR. WYSER-PRATTE.
TO SUPPORT YOUR BOARD, PLEASE SIGN, DATE AND PROMPTLY RETURN YOUR WHITE PROXY
CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. IF YOU HAVE ANY QUESTIONS OR NEED
ASSISTANCE, PLEASE CALL THE COMPANY AT (630) 588-5000 OR MORROW & CO., INC. ,
WHICH IS ASSISTING US, TOLL FREE AT (800) 662-5200.
<PAGE>
WALLACE COMPUTER SERVICES, INC.
2275 CABOT DRIVE
LISLE, ILLINOIS 60532
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 6, 1996
------------------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Wallace Computer Services, Inc. (the
"Company") to be voted at the Annual Meeting of Stockholders of the Company to
be held on November 6, 1996, and at any and all adjournments or postponements
thereof (the "Annual Meeting"). The Board of Directors has fixed the close of
business on September 17, 1996 as the record date for determining the
stockholders entitled to notice of, and to vote at, the Annual Meeting. This
Proxy Statement and the accompanying WHITE proxy card are first being mailed to
stockholders on or about October 8, 1996.
At the Annual Meeting, stockholders will consider and vote upon the election
of three directors to hold office for three years. At the Annual Meeting, the
stockholders will also consider and vote upon the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for fiscal year 1997 and any other business that may properly come
before the Annual Meeting.
At the Annual Meeting, stockholders may also be asked to consider and vote
upon certain proposals that may be advanced by Mr. Guy P. Wyser-Pratte, a
takeover stock speculator. Based upon publicly available information, the
Company believes Mr. Wyser-Pratte may ask stockholders to consider and vote upon
proposals: (i) to amend the Company's Bylaws to elect not to be governed by
Section 203 of the Delaware General Corporation Law (the "Business Combination
Proposal"); and (ii) to amend the Company's Bylaws to require the Wallace Board
to terminate defensive actions following a cash tender offer for all of the
outstanding capital stock of the Company unless approved by a stockholder vote
(the "Tender Offer Proposal"). Mr. Wyser-Pratte's possible proposals are
collectively referred to herein as the "Wyser-Pratte Proposals."
YOUR BOARD OF DIRECTORS UNANIMOUSLY OPPOSES MR. WYSER-PRATTE'S SOLICITATION
OF PROXIES AND URGES YOU NOT TO SIGN OR RETURN ANY GOLD PROXY CARD SENT TO YOU
BY MR. WYSER-PRATTE. WE RECOMMEND THAT YOU SUPPORT YOUR BOARD BY VOTING "FOR"
THE BOARD'S NOMINEES, "FOR" RATIFICATION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS AND "AGAINST" THE WYSER-PRATTE PROPOSALS.
Your vote is important, regardless of how many shares you own. Please sign
and date the accompanying WHITE proxy card and mail it in the enclosed postage
prepaid envelope as promptly as possible, whether or not you expect to attend
the meeting.
Whether or not you have previously signed a proxy card sent by Mr.
Wyser-Pratte, your Board urges you to show your support for the Board by
signing, dating and promptly mailing the enclosed WHITE proxy card. By signing
and dating the WHITE proxy card, you will revoke any earlier dated proxy card
solicited by Mr. Wyser-Pratte which you may have signed. Remember, it will not
help your Board to return Mr. Wyser-Pratte's Gold proxy card voting to "Withhold
Authority." Do not return any Gold proxy card sent to you by Mr. Wyser-Pratte.
The only way to support your Board's nominees and determinations is to vote
"FOR" the Board's nominees and "AGAINST" the Wyser-Pratte Proposals on the WHITE
proxy card.
1
<PAGE>
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE
URGE YOU TO CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR HER
TO VOTE "FOR" YOUR BOARD'S NOMINEES AND "AGAINST" THE WYSER-PRATTE PROPOSALS ON
THE COMPANY'S WHITE PROXY CARD.
BACKGROUND OF RECENT EVENTS
On July 30, 1995, the Chairman of Moore Corporation Limited ("Moore") left a
message for Mr. Robert J. Cronin, the President and Chief Executive Officer of
Wallace, informing Mr. Cronin that Moore intended to launch an unsolicited
tender offer for all outstanding shares of the Company's common stock, par value
$1.00 per share (the "Common Stock"), at $28 per share (adjusted to reflect the
two-for-one stock split declared June 6, 1996). Later that evening, Moore
informed Mr. Cronin that it intended to nominate three individuals for election
to the Company's Board of Directors at the Company's 1995 annual meeting of
stockholders. On July 31, 1995, Moore commenced litigation against the Company
and its directors to, among other things, enjoin the Company from taking action
to implement and enforce certain takeover defenses of the Company and to compel
the Company to take action with respect to such takeover defenses, including,
but not limited to, the redemption of the Company's preferred stock purchase
rights (the "Rights"). On August 2, 1995, Moore commenced its tender offer.
After carefully considering in a number of meetings the Company's business,
financial condition and prospects, the terms and conditions of Moore's offer and
other matters, on August 14, 1995 the Board of Directors of the Company
unanimously concluded that Moore's offer was inadequate and not in the best
interests of the Company and the stockholders and that, in light of the
Company's future prospects, the interests of the stockholders would be best
served by the Company remaining an independent entity. Accordingly, the Board
unanimously recommended that the stockholders reject Moore's offer and not
tender their shares of Common Stock pursuant to such offer.
On August 15, 1995, the Company commenced litigation against Moore to enjoin
the tender offer under the federal antitrust laws and to enjoin Moore from
violations of the federal securities laws.
On August 28, 1995, Moore extended its tender offer and disclosed that less
than 1% of the shares of Common Stock had been tendered to it as of the initial
expiration date. Moore also announced that it intended to present at the 1995
annual meeting of stockholders certain proposals relating to (i) the removal of
all of the directors of the Company, other than Moore's nominees if they were
then directors, (ii) the amendment of the Company's Bylaws to fix the number of
directors at five and (iii) the repeal of any amendment of the Company's Bylaws
adopted between February 15, 1995 and the date of the 1995 annual meeting.
On September 18, 1995, Moore further extended its tender offer and disclosed
that approximately 1.6% of the shares of Common Stock had been tendered to it as
of September 18, 1995.
On October 12, 1995, Moore amended its tender offer to increase the cash
price offered for the Company's Common Stock from $28 to $30 per share (the
"Moore Offer") (adjusted to reflect the two-for-one stock split declared June 6,
1996). In connection with its increased offer, Moore indicated that it would
terminate the Moore Offer and all other efforts to acquire the Company unless a
significant number of shares of Common Stock were tendered on or prior to the
expiration date.
On October 17, 1995, the Board of Directors of the Company unanimously
concluded that the Moore Offer was inadequate and not in the best interest of
the Company and the stockholders and that, in light of the Company's future
prospects, the interests of the stockholders would be best served by the Company
remaining an independent entity. Accordingly, the Board unanimously recommended
that the stockholders reject the Moore Offer and not tender their shares of
Common Stock pursuant to the Moore Offer.
On November 6, 1995, Moore extended the Moore Offer until December 11, 1995
and announced that approximately 73.5% of the shares of Common Stock had been
tendered to it as of November 3, 1995.
On November 20, 1995, the Company announced that its earnings (before
takeover expenses) for its first fiscal quarter had increased 65.6% compared to
the same period in the prior fiscal year.
2
<PAGE>
On December 4, 1995, following three days of hearings and the consideration
of extensive briefing, the United States District Court for the District of
Delaware issued its opinion in the litigation between Moore and Wallace. The
federal court held, among other things, that "...Moore's tender offer pose[d] a
THREAT to Wallace that shareholders, because they are uninformed, will cash out
before realizing the fruits of the substantial technological innovations
achieved by Wallace."(emphasis added) The court further concluded that
"[s]hareholders, at the time of the Moore offer, were unable to appreciate the
upward trend in Wallace's earnings... Given this situation, the Wallace board's
response can HARDLY BE DEEMED UNREASONABLE."(emphasis added) The court found
that the Company's directors reasonably concluded that the Moore Offer was a
"low ball" offer. The court further held that the retention of the Rights was a
reasonable action of the Company's board in view of the threat posed by Moore.
In addition, the court dismissed the Company's antitrust counterclaim against
Moore. A copy of the court's opinion is available from the Company upon request.
At the 1995 annual meeting of stockholders held on December 8, 1995, the
three Moore nominees were elected by a vote of approximately 56% of the
outstanding shares. Moore did not succeed in attaining the 80% vote required to
remove the other Company directors. The stockholders adopted a Bylaw amendment
which had the effect of eliminating a provision requiring advance notification
of proposals to be presented at the Company's annual meetings.
On December 12, 1995, Moore announced that 62.9% of the outstanding Common
Stock had been tendered as of December 11. On December 20, 1995, Moore announced
that it was permitting its tender offer to expire, but it stated that it was
still interested in acquiring the Company.
On January 5, 1996, in view of the importance Mr. Cronin had played as chief
executive officer of the Company, following the election of the Moore nominees,
the Company's Board increased the number of directors of the Company by one, as
permitted by the Company's Bylaws, and elected Mr. Cronin to fill the resulting
vacancy with a one-year term of office.
On February 21, 1996, the Company reported record sales and earnings for its
second fiscal quarter. Earnings before takeover expenses increased 58.8% over
the year earlier period while revenues rose 24.6%.
On May 21, 1996, the Company reported that both revenues and earnings
continued at record levels during the third fiscal quarter. Additionally, an
unusually high number of new W.I.N.-TM- and office products contracts were
signed and will begin generating revenues in fiscal 1997. A total of 26 new
W.I.N. and Select Services-Registered Trademark- contracts were added during the
third quarter, nearly double the usual number. The Company also reported that
its partnership with United Stationers gained momentum with the signing of 16
new office product contracts.
On June 6, 1996, the Board of Directors approved a two-for-one split of the
Company's Common Stock, with one additional share distributed to stockholders of
record on July 15. This was the sixth stock split since the Company became
publicly held in 1961. The Board of Directors also authorized the repurchase in
the open market of up to $100 million of the Company's Common Stock with shares
to be repurchased from time to time at the discretion of the Company at prices
prevailing at the time of repurchase.
On August 6, 1996, Moore announced that it was abandoning its efforts to
acquire the Company.
On August 8, 1996, the Company received a letter from Mr. Wyser-Pratte,
giving notice of his intention to nominate three individuals for director at the
Company's 1996 Annual Meeting.
On September 4, 1996, the Company announced record sales and earnings for
the fiscal year ended July 31, 1996. Results exceeded the expectations of
securities analysts who follow the Company as well as the Company's own
forecasts. Earnings before takeover expenses rose 43.3% to $79.2 million from
$55.3 million in fiscal 1995. Earnings for fiscal 1996 were $73.0 million after
taking into consideration the $10.1 million in expenses incurred by the Company
in connection with Moore's attempt to acquire the Company. Sales increased 21.0%
to $862.3 million from $712.8 million. For the fourth fiscal quarter, sales were
$214.5 million, up 8.2% from the same period in the prior fiscal year, and
earnings before takeover expenses were $20.1 million, up 27.4% from the same
period in the prior fiscal year. Demand for the Company's supplies management
programs continued
3
<PAGE>
to accelerate during the year with a total of 86 new W.I.N. and Select Services
programs signed. This represented a 41% gain over the 61 contracts recorded in
the previous year and gave the Company a total of 243 such customers at fiscal
year-end.
On September 4, 1996, the Board of Directors also voted to increase the
annual dividend payment to 56 cents per share, an increase of 30% over the 43
cents per share paid previously. The increase marked the 25th consecutive year
in which the dividend has been raised. In addition, as of September 4, 1996, the
Company had repurchased approximately $40.6 million of its Common Stock in
connection with its previously announced share repurchase program.
On September 5, 1996, the Wallace Board sent to Mr. Wyser-Pratte a letter
stating that the Wallace Board, including the three directors nominated by
Moore, had unanimously concluded that neither the election of
Mr. Wyser-Pratte's purported nominees nor the adoption of his possible proposals
would be in the best interests of Wallace or its stockholders.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes and currently consists
of nine directors, seven of whom are not, and have not been, officers or
employees of the Company. The terms of three directors currently expire at this
year's Annual Meeting, the terms of three directors currently expire at the 1997
Annual Meeting and the terms of three directors currently expire at the 1998
Annual Meeting. At this year's Annual Meeting, three directors will be elected
for a term expiring at the 1999 Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the WHITE proxies
received by them "FOR" the election of your Board's three nominees named below.
If, for any reason, any of the Board's nominees listed below should cease to be
a candidate for election, it is intended that all properly signed proxies in the
form enclosed will be voted for a substitute nominee designated by the Board of
Directors. Each of your Board's nominees below has consented to serve as a
director, and the Board of Directors has no reason to believe that any nominee
will be unwilling or unable to serve if elected.
THE BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE "FOR" THE BOARD'S
NOMINEES AS DIRECTORS OF THE COMPANY
The Board has unanimously nominated Robert J. Cronin, Richard F. Doyle and
Neele E. Stearns, Jr. for election as directors at the Annual Meeting. All of
the Board's nominees for director have substantial experience serving as
directors or executive officers of public companies. All of the Board's nominees
have demonstrated leadership abilities and outstanding achievements in the
companies in which they have served as executives and directors. The Board's
nominees have experience in a broad range of industries and bring to the Wallace
Board substantial business experience and knowledge. Each of the Board's
director nominees has served on the Wallace Board for over three years and has
extensive knowledge about the Company and the information management industry.
Despite the distractions of the Moore unsolicited tender offer and
litigation, the Company's fiscal 1996 results exceeded analysts' and the
Company's own forecasts. Sales in the fiscal year ended July 31, 1996 rose 21%
to $862.3 million compared to $712.8 million in fiscal 1995. Sales have grown a
total of 47% during the last two fiscal years.
Before takeover expenses, net income increased 43% to $79.2 million, or
$1.74 per share, compared to $55.3 million or $1.23 per share in fiscal 1995. On
the same basis, earnings per share grew 61% during the last two years. Even
after takeover expenses, return on average assets was 11.3% and return on
average equity was 15.1%, the Company's best results in six years. Reflecting
these strong results, on September 4, 1996 the Company increased its annual
dividend payment 30%, to 56 cents per share.
4
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SALES (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
2 YEAR CHANGE 46.6%
5 YEAR CHANGE 87.9%
92 93 94 95 96
$511,572 $545,315 $588,173 $712,838 $862,287
EARNINGS PER SHARE BEFORE TAKEOVER EXPENSES
2 YEAR CHANGE 61.1%
5 YEAR CHANGE 114.8%
92 93 94 95 96
$0.88 $0.92 $1.08 $1.23 $1.74
DIVIDENDS PER SHARE
2 YEAR CHANGE 34.4%
5 YEAR CHANGE 72.0%
92 93 94 95 96
$0.27 $0.29 $0.32 $0.37 $0.43
</TABLE>
Your Board unanimously opposes the election of Mr. Wyser-Pratte's nominees.
In addition to nominating himself, Mr. Wyser-Pratte is asking the stockholders
to elect Mr. William M. Frazier and Mr. W. Michael Frazier, both of whom are
lawyers in the West Virginia law firm of Frazier and Oxley. Mr. W. Michael
Frazier is the son of Mr. William M. Frazier. Although Mr. William M. Frazier
served for a number of months as a director of Van Dorn Company as an ally of
Mr. Wyser-Pratte, to Wallace's knowledge, none of Mr. Wyser-Pratte's nominees
has any substantial experience as a director or executive officer of a public
company, and none has any experience in Wallace's industry. In the view of your
Board of Directors, none of Mr. Wyser-Pratte's nominees is qualified by
background or experience to become a director of Wallace.
Mr. Wyser-Pratte and his nominees are committed to a sale of the Company or
the adoption of some plan to attempt to maximize its short-term value (such as
the incurrence by the Company of substantial debt to implement a large share
repurchase plan). The Wallace Board of Directors believes that committing the
Company to a sale is short-sighted in light of the Company's recent record
financial results and in light of the Company's future prospects. The Company
currently has in place a $100 million open market share repurchase program.
Wallace evaluates from time to time the size, structure and duration of its
repurchase plan and may modify its plan if such changes are appropriate and in
the best interests of the Company and the stockholders. By contrast, Mr.
Wyser-Pratte and his nominees desire to commit Wallace to incur substantial
amounts of debt immediately and use the proceeds to repurchase stock through a
tender offer or other plan that distributes the cash in a short period of time.
Your Board of Directors believes that the objectives of Mr. Wyser-Pratte's
nominees principally advance the narrow interests of takeover stock speculators
and professional traders rather than the long-term interests of the Company and
the stockholders. Moreover, because the proposals of Mr. Wyser-Pratte's nominees
are contrary to the current long-term strategy your Board has established, and
because the terms of only three of the nine
5
<PAGE>
Wallace directors expire at the Annual Meeting, the Board believes that the
election of Mr. Wyser-Pratte's nominees would serve only to create a minority
contingent on the Wallace Board that would distract your Board from continuing
to deliver to the stockholders superior financial performance.
The election of two or more of Mr. Wyser-Pratte's nominees to the Board may
be deemed to constitute a change in control under certain of the Company's
employee benefit plans and agreements. See "COMPENSATION OF EXECUTIVE OFFICERS
- -- Employment Contracts and Termination, Severance and Change-of-Control
Arrangements" for a description of the amounts that would become payable, vested
or funded in the event of a change of control of the Company.
THE BOARD'S NOMINEES
The following sets forth information on your Board's nominees for election
as directors at the Annual Meeting.
<TABLE>
<CAPTION>
BOARD COMMITTEE
NAME AND AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS DIRECTOR SINCE MEMBERSHIP
- ------------------------ ----------------------------------------------- ----------------- -------------------
<S> <C> <C> <C>
DIRECTOR NOMINEES AT THIS YEAR'S ANNUAL MEETING
Robert J. Cronin (51) President and Chief Executive Officer of the November 11, 1992 Executive
Company since November 11, 1992. President and
Chief Operating Officer of the Company from
June 1, 1992 until November 11, 1992. Senior
Vice President -- Sales of the Company from
November 14, 1990 until June 1, 1992, and Vice
President -- Sales of the Company from November
16, 1988 until November 14, 1990. Previously
held various sales management positions within
the Company's Business Forms Division.
Richard F. Doyle (68) Retired Senior Vice President -- Finance & October 26, 1971 Audit (Chairman)
Administration of Texas Oil & Gas Corp., a and Executive
developer of oil and gas interests.
Neele E. Stearns, Jr. Former President and Chief Executive Officer of
(60) CC Industries, Inc., a holding company with
operations in envelope manufacturing, home
furnishings and casual furniture, and real
estate development and management. Director of
Wallace from 1990 to 1995. (1)
DIRECTORS WITH TERMS EXPIRING AT THE 1997 ANNUAL MEETING
John C. Pope (47) Chairman of MK Rail Corporation, a manufacturer July 8, 1996
of locomotives and locomotive components. From
January 1988 to July 1994, Mr. Pope held
various positions with UAL Co. and its
subsidiary, United Airlines, most recently as
President, Chief Operating Officer and
Director. (2)
Theodore Dimitriou (70) Chairman of the Board of the Company. Chief November 1, 1972 Executive
Executive Officer of the Company until November (Chairman)
11, 1992, and President of the Company until
April 3, 1990. Interim President of the Company
from January 15, 1992 to June 1, 1992. (3)
William N. Lane, III Chairman, President and Chief Executive Officer January 17, 1990 Compensation
(53) of Lane Industries, Inc., a holding company (Chairman)
with operations in office machines, hotels,
ranching and radio broadcasting. (4)
DIRECTORS WITH TERMS EXPIRING AT THE 1998 ANNUAL MEETING
Curtis A. Hessler (52) Chairman of I-NET, Inc., a computer network January 5, 1996 Audit
company owned by Wang Laboratories, Inc., since
September 1996. Former Executive Vice President
of the Times Mirror Company, a publisher of
books, magazines and newspapers from February
1991 until January 1996. (5)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
BOARD COMMITTEE
NAME AND AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS DIRECTOR SINCE MEMBERSHIP
- ------------------------ ----------------------------------------------- ----------------- -------------------
<S> <C> <C> <C>
Albert W. Isenman, III Professor of Management at the Kellogg Graduate January 5, 1996 Compensation
(48) School of Management at Northwestern University
since 1988.
Robert P. Rittereiser Chairman and Chief Executive Officer of Gruntal January 5, 1996
(58) Financial Corp., a national full-service
securities brokerage firm, since 1996. Chairman
of Yorkville Associates Corp., a private
investment and financial advisory concern
formed in April 1989. Trustee of The DBL
Liquidating Trust from April 1992 until April
1996. Chairman since November 1992, a Director
since 1990 and President and Chief Executive
Officer from March 1993 until February 1995 of
Nationar, Inc., a banking services corporation.
President and Chief Executive Officer of E.F.
Hutton & Company from 1985 until 1989. (6)
</TABLE>
- ------------------------------
(1) Mr. Stearns is also a director of Maytag Corporation.
(2) Mr. Pope is also a director of Federal-Mogul Corp.
(3) Mr. Dimitriou is also a director of Walgreen Co. and General Binding
Corporation.
(4) Mr. Lane is also a director of General Binding Corporation.
(5) Mr. Hessler is also a director of Legacy Software, Inc.
(6) Mr. Rittereiser is also a Director of Ferrofluidics Corporation, Interchange
Financial Services, Corp. and CUC International Inc. On February 6, 1995,
the Acting Superintendent of Banks, State of New York, filed a Petition in
the New York Supreme Court to take over the business of Nationar.
It is the policy of the Company that no person may serve as a director past
the month in which he reaches age 70, except that any person who was a director
on November 7, 1984 (which includes Messrs. Dimitriou and Doyle), may serve as a
director through the month in which he reaches age 72. The Board of Directors
may, in its discretion, allow a director to continue to serve after the month in
which he reaches age 70 or 72, as the case may be, until the next Annual
Meeting.
The Company's Bylaws permit nominations for election of directors to be made
by the Board of Directors, by a nominating committee of the Board of Directors
(there currently is no such committee) or by any stockholder having the right to
vote generally in the election of directors. However, the Bylaws provide that,
in the case of any nomination by a stockholder at an annual meeting, written
notice (satisfying certain requirements specified in the Bylaws) of the
stockholder's intention to make the nomination must be given to the Secretary of
the Company not later than 90 days prior to the annual meeting. The chairman of
an annual meeting may refuse to acknowledge the nomination of any person that is
not made in compliance with the procedures set forth in the Bylaws.
MEETINGS OF THE BOARD AND ITS COMMITTEES
During fiscal year 1996, the Board of Directors met 26 times, the Audit
Committee met 5 times, the Compensation Committee met 12 times and the Executive
Committee met 5 times. There is no nominating committee. Each of the incumbent
directors attended at least 75% of the meetings of the Board of Directors and
its Committees on which he served during fiscal year 1996.
The Audit Committee, consisting of three non-employee directors, is
responsible for recommending to the Board of Directors the appointment of
independent public accountants (subject to ratification by the stockholders);
reviewing the fees charged by the Company's independent public accountants;
reviewing the Company's annual financial statements prior to submission to the
Board of Directors; reviewing the scope and results of the Company's annual
audits; and certain other matters concerning the Company's accounting and
financial affairs as specified in the Company's Bylaws.
The Compensation Committee, consisting of three non-employee directors, is
responsible for reviewing and recommending to the Board of Directors the
salaries of officers and key managers of the Company; reviewing and recommending
incentive bonus, stock option, stock incentive, retirement, and welfare plans
and programs for officers and key managers of the Company; and certain other
matters concerning the performance
7
<PAGE>
and compensation of the Company's management employees as specified in the
Company's Bylaws. Qualified members of the Compensation Committee also serve as
the Salary, Bonus and Option Committee under the Company's Executive Incentive
Plan and as the committee of the Company's Board of Directors that administers
the Company's 1989 Stock Option Plan.
The Executive Committee is authorized, subject to certain limitations
imposed by law and in the Company's Bylaws, to exercise the powers and authority
of, and act in lieu of, the Board of Directors in the management and direction
of the Company's business affairs.
COMPENSATION OF DIRECTORS
Each director receives an annual director's fee of $20,000. Each director
also receives a fee of $800 plus expenses for each meeting of the Board of
Directors and its Committees that he attends. The Chairman of a Board Committee
will receive an additional $1,500 per year. Effective November 1, 1996, the
amount each director receives for each meeting of the Board of Directors and its
Committees that he attends will be increased to $1,000.
The Company maintains the Wallace Computer Services, Inc. Retirement Plan
for Outside Directors (the "Retirement Plan") pursuant to which outside
directors (which include all directors other than Mr. Cronin and Mr. Dimitriou)
will be eligible to receive benefits when they complete five years of service as
outside directors. Messrs. Doyle and Lane have completed five years of service
as outside directors and are participants in the Retirement Plan. The annual
retirement benefit payable to each participating director is equal to the annual
director's fee in effect on his retirement date. Retirement benefits commence
upon the retirement of a participating director, continue for the lesser of ten
years or the number of years of service as an outside director, and cease upon
the death of the participating director. Because the actual retirement benefits
to be received by each participating director will be based upon the annual
director's fee in effect on his retirement date and the period of time during
which he serves as an outside director, the amount of the retirement benefits to
be paid to participating outside directors cannot be calculated prior to
retirement. As of the end of fiscal year 1996, the Company has accrued the
estimated amount of retirement benefits under the Retirement Plan. Mr. Stearns
is presently receiving retirement benefits under the Retirement Plan. Under the
Retirement Plan, retirement benefits to Mr. Stearns would be suspended if he is
elected as a director at this year's Annual Meeting.
The Company established a Deferred Compensation/Capital Accumulation Plan
for Directors for each of calendar years 1988, 1993, 1994, 1995 and 1996 in
which all incumbent directors were eligible to participate. For the 1996 Plan
and the 1995 Plan, Messrs. Dimitriou and Doyle elected to participate. For the
1994 Plan and the 1993 Plan, Mr. Doyle elected to participate. Each
participating director was allowed to elect to defer up to 100% of his
director's and meeting fees. Subject to certain conditions, the amount of fees
deferred bears interest, compounded annually at 12% per annum for amounts
deferred under the 1993, 1994, 1995 and 1996 Plans and 16% per annum for amounts
deferred under the 1988 Plan. A participating director is entitled to receive
payment of the undistributed amount of his deferral account in either fifteen
annual installments beginning at age 65 or, if a participating director so
elects, in ten annual installments beginning at age 70 or age 72. If a
participating director has not previously begun to receive installment payments
from his deferral account, he will receive an interim distribution from his
deferral account in both the seventh and the eighth years following the deferral
year in an amount equal to the amount of fees that he deferred.
At its meeting on September 4, 1996, the Board adopted the Wallace Computer
Services, Inc. 1997 Stock Incentive Plan (the "1997 Stock Incentive Plan"),
subject to future stockholder approval. Pursuant to the 1997 Stock Incentive
Plan, at the Annual Meeting or, if later, on the date on which a person is first
elected or begins to serve as a non-employee Director, and on the date of each
annual meeting of stockholders thereafter, each Non-Employee Director will be
granted an option to purchase 2,000 shares of Common Stock (which number will be
prorated if such non-employee Director is first elected or begins to serve as a
non-employee Director on a date other than the date of an annual meeting of
stockholders) at a purchase price per share equal to the fair market value of a
share of Common Stock on the date of grant of such option. In addition, pursuant
to the 1997 Stock Incentive Plan, each non-employee Director may from time to
time elect, in lieu of all or any portion of the cash retainer fee that would
otherwise be payable to such non-employee Director, to be granted on the date of
the meeting of the Compensation Committee next following the date of the annual
meeting and each subsequent annual meeting of stockholders, the number of
options ("Retainer Fee Options") to purchase shares of Common
8
<PAGE>
Stock which is equal to four times the amount of the retainer fee subject to
such election divided by the fair market value of a share of Common Stock on the
date of such grant. The purchase price of the shares of Common Stock subject to
a Retainer Fee Option will be equal to the fair market value of a share of
Common Stock on the date of grant of such Retainer Fee Option. Each option
granted to a non-employee Director will become exercisable for one-fourth of the
shares of Common Stock subject to such option on the first day of February, and
an additional one-fourth thereof will become exercisable on the first day of
May, August and November, next following its date of grant, provided that such
option shall become fully exercisable in the event of a Material Change (as such
term is defined in the 1997 Stock Incentive Plan). A "Material Change" as
defined in the 1997 Stock Incentive Plan includes the acquisition of beneficial
ownership of 35% or more of the outstanding shares of the Company's Common
Stock, the election of directors representing 30% or more of the Company's Board
of Directors of persons who were not nominated or recommended by the incumbent
Board of Directors, or the occurrence of any other event or state of facts that
the Board of Directors determines to constitute a "Material Change" for purposes
of the Plan. The election of all of Mr. Wyser-Pratte's nominees to the Board may
constitute a Material Change under the 1997 Stock Incentive Plan.
ITEM 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders, the Board of Directors has appointed Arthur Andersen LLP as
independent public accountants for the Company for fiscal year 1997.
Arthur Andersen LLP has served as the Company's independent public
accountants since fiscal year 1960. Representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they so desire, and such representatives will be available to
respond to appropriate questions from the stockholders.
ITEM 3
THE WYSER-PRATTE PROPOSALS
Based upon publicly available information, the Company believes that Mr.
Wyser-Pratte may ask the Wallace stockholders to consider and vote upon the
following proposals:
THE BUSINESS COMBINATION PROPOSAL
Mr. Wyser-Pratte may propose the following resolution for stockholder vote
at the Annual Meeting:
"RESOLVED, that pursuant to Section 203(b)(3) of the Delaware General
Corporation Law, the Shareholders hereby amend the Company's By-laws by
adding a new Section 7.7 which shall read as follows:
'The corporation shall not be governed by Section 203 of the Delaware
General Corporation Law."'
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE "AGAINST" THIS
PROPOSAL.
By virtue of being incorporated in Delaware, the Company is subject to the
provisions of Section 203 of the Delaware General Corporation Law. Section 203
prohibits the Company from engaging in a business combination, such as a merger
or consolidation, with any person who acquires 15% or more of the Common Stock
(an "interested stockholder") for three years, unless the Company's Board of
Directors approves the proposed business combination before the interested
stockholder reaches the 15% threshold. However, this three year ban will not
apply if the interested stockholder acquires 85% of the stock in the same
transaction that the stockholder acquires 15% of the stock (excluding shares
owned by officers and directors and certain employee stock plans). Nor will the
ban apply if the business combination is approved by the Board and holders of at
least two-thirds of stock not owned by the interested stockholder. Section 203
permits stockholders to "opt-out" of its provisions by voting to amend the
Company's Bylaws to provide that the Company elects not to be governed by
Section 203.
9
<PAGE>
The General Assembly of Delaware adopted Section 203 after an extensive
period of study and public comment by representatives of stockholders, public
corporations, employees, committees, and other constituencies. The General
Assembly declared, in the official synopsis, that Section 203 is designed "to
strike a balance between the benefits of an unfettered market for corporate
shares and the well documented and judicially recognized need to limit abusive
takeover tactics" and "to encourage a full and fair offer to stockholders."
Section 203 is a compromise that provides greater protection to stockholders
against abusive offers, without inappropriately limiting the ability of
acquirors to make and stockholders to receive fully priced bids. Contrary to Mr.
Wyser-Pratte's assertions that Section 203 is an impediment to "maximizing"
stockholder value, Section 203 is intended to discourage inadequate offers and
provide for the fair treatment of all stockholders.
Under Delaware law, Board approval has traditionally been a prerequisite of
most business combinations. Section 203 did not create this requirement.
Instead, Section 203 enhances the likelihood that stockholders will receive the
benefit of Board consideration of a takeover proposal and that any takeover
proposal presented to stockholders will be on the best terms available.
Under Delaware law, directors have a duty to act on behalf of the
stockholders to oppose inadequate or coercive offers. Section 203 underscores
this duty by giving potential acquirors an incentive to deal with the Board.
Section 203 enhances the likelihood that stockholders will receive the benefit
of Board consideration and evaluation of a takeover proposal and that any
takeover proposal presented to stockholders will be favorable to all
stockholders. If a prospective acquiror seeks Board approval of a proposed
business combination, the Board members have a fiduciary duty to act in the best
interests of stockholders in evaluating such an offer. Board negotiation
protects stockholders against inadequate offers or abusive takeover tactics. The
stockholders of the Company benefit from the Board's evaluation of the
opportunity to negotiate a takeover proposal, and from any improved terms
resulting from negotiations.
Section 203 does not prevent stockholders from accepting a tender offer for
their shares, whether or not the Board has approved the offer, and does not ban
all business combinations. As indicated above, if 85 percent or more of the
outstanding Common Stock of the Company is tendered, the prospective acquiror
may effect its proposed business combination without Board approval. This
encourages an interested stockholder to make an all-cash tender offer for all
shares at a price that is attractive enough to obtain the general support of
holders of at least 85 percent of the stock.
Accordingly, the Board of Directors believes that "opting out" of Section
203 could expose stockholders to coercive takeover tactics and would not be in
the best interest of the stockholders or the Company.
THE TENDER OFFER PROPOSAL
Mr. Wyser-Pratte may propose the following resolution for stockholder vote
at the Annual Meeting:
"RESOLVED, that the Shareholders hereby amend the Company's By-laws by
adding a new Section 7.8, which shall read as follows:
'If a fully financed tender offer is made to purchase all the Company's
outstanding shares of Common Stock for cash at a price that is at least 25%
greater than the average closing price of such shares on the New York Stock
Exchange during the 30 days prior to the date on which such offer is first
published or sent to security holders and the Board of Directors opposes such
offer, the Board of Directors shall terminate all defensive measures against
such offer at the end of the ninetieth day after such offer is first published
or sent to security holders unless the Board of Directors' policy of opposition
to such offer is approved by a vote of a majority of the shares of Common Stock
present and entitled to vote on the subject matter at a meeting of shareholders
which is held on or before such ninetieth day and at which a quorum is present;
provided, however, that the Board of Directors shall not be required to
terminate defensive measures against such offer at the end of such ninetieth day
unless at such time the offer has an expiration date which is at least ten
business days thereafter. Notwithstanding anything to the contrary contained in
Section 2.5 of the by-laws, unless the record date for such shareholders meeting
was set prior to the date on which such offer was first published or sent to
security holders, the record date for such meeting shall be at least five
business days after the date on which the Company files its statement of
position with respect to such offer in accordance with Rule 14e-2 of the
Securities Exchange Act of 1934, as amended. At such time as it is required,
pursuant to the first sentence of this by-law, to terminate
10
<PAGE>
defensive measures against such offer the Board of Directors shall redeem the
outstanding Rights under the Rights Agreement dated as of March 14, 1990 between
the Company and Harris Trust and Savings Bank, as Rights Agent, or any successor
agreement. Prior to the end of such ninetieth day, unless the Board's policy of
opposition to such offer has been approved by a shareholder vote as provided in
this by-law, the Board of Directors shall take such reasonable actions as are
necessary to preserve the possibility of satisfying the conditions to such offer
after such ninetieth day. This Section 7.8 may only be amended or repealed by a
shareholder vote pursuant to Section 7.1 of the By-laws.' "
YOUR BOARD OF DIRECTORS UNANIMOUSLY URGES YOU TO VOTE "AGAINST" THIS
PROPOSAL.
Wallace has received the written opinion of its Delaware legal counsel that
this proposal is invalid as a matter of Delaware law. According to the opinion,
Mr. Wyser-Pratte's proposal may not be adopted as a Bylaw amendment, because
under Delaware law, except as provided in a company's certificate of
incorporation, a company's business and affairs must be managed by or under the
direction of the Board of Directors. The Wallace Board believes that it has the
affirmative legal duty under Delaware law to respond to and resist takeover
attempts that it determines in good faith to be against the best interests of
the Company and the stockholders, such as the Moore Offer. Such a duty has been
set forth in a line of Delaware cases, including UNOCAL CORP. V. MESA PETROLEUM
CO., 493 A.2d 946 (1985), and IVANHOE PARTNERS V. NEWMONT MINING CORP., 535 A.2d
1334 (1987). Mr. Wyser-Pratte's scheme would, by a Bylaw amendment, attempt to
remove this legal obligation from the Board of Directors. Based upon the
opinion, the Wallace Board believes that such a restriction of statutory and
fiduciary responsibility may not be effected through a Bylaw amendment under
Delaware law. In addition to the foregoing, according to the legal opinion, the
proposed Bylaw amendment is also invalid because it is inconsistent with
Wallace's charter. The Restated Certificate of Incorporation of Wallace provides
that special stockholder meetings may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors. The charter thus vests in the Wallace Board the exclusive,
discretionary authority to determine whether to call a special meeting of
stockholders. Under Mr. Wyser-Pratte's proposal, the Bylaws would require the
Wallace Board to call a special meeting if the Board determined that resisting a
takeover threat was in the best interests of Wallace and its stockholders. Under
Section 109 of the Delaware General Corporation Law, a Bylaw provision may not
be inconsistent with the company's certificate of incorporation. Moreover, under
Wallace's charter, any provision inconsistent with the provisions of the charter
relating to special stockholder meetings requires an amendment to the Wallace
charter adopted by at least 80% of the outstanding shares.
Apart from its belief in the legal invalidity of Mr. Wyser-Pratte's
proposal, the Wallace Board also believes that the proposed Bylaw amendment is
ill-advised and against the best interests of the Wallace stockholders. As a
general matter, Wallace believes that a corporation's board of directors is the
proper body to evaluate the merits of takeover proposals. As the Delaware
federal court concluded in the case of the Moore Offer, stockholders may not
have all the information possessed by the board of directors regarding a
company's business, financial condition and future prospects, or such
information may not be readily or easily understood. Moreover, it may not be in
the best interests of the stockholders for a company publicly to disclose
confidential and competitive information in order to equip stockholders to vote
knowledgeably with respect to a takeover proposal. In addition, if a board
determines that a sale is in the best interests of the company and the
stockholders, Wallace believes that it is the board, rather than the
stockholders as a whole, that is better able to negotiate and conclude a
transaction in a timely manner.
Mr. Wyser-Pratte's proposal also contains a number of a specific terms that
the Board believes are not in the best interests of Wallace stockholders. His
proposal imposes a limitation on the Wallace Board whenever a fully financed
offer at a 25% premium is made. Accordingly, highly conditional offers (for
example, conditioned on further due diligence) that may not be bona fide
acquisition proposals nonetheless require a proxy solicitation and a stockholder
meeting if the board determines to reject the offer. Moreover, even Mr.
Wyser-Pratte has conceded in his public disclosures that the average acquisition
premium in Wallace's industry is higher than his 25% threshold. In Wallace's
view, Mr. Wyser-Pratte's proposal not only would require a stockholder vote on
11
<PAGE>
offers that the Wallace Board may determine to be inadequate in its good faith
reasonable judgment, but such a Bylaw amendment may limit the Wallace Board's
ability to obtain the best price for the stockholders in the event that the
Wallace Board determines that a sale is in the best interests of the
stockholders.
Mr. Wyser-Pratte has commenced litigation against the Company, seeking to
have this proposed Bylaw amendment declared valid as a matter of Delaware law.
See "CERTAIN LITIGATION." The Wallace Board believes this litigation is without
merit and intends to vigorously defend the litigation. Unless and until there is
a final judgment declaring the purported Bylaw amendment lawful, the Bylaw
amendment will not be given any effect by the Company. While the Board strongly
believes that it will be successful in the litigation, the validity of the
Tender Offer Proposal or any similar proposal under Delaware law has not been
considered or conclusively resolved by the Delaware courts, and as such, there
is a possibility that the Company's position that the Tender Offer Proposal is
invalid would not survive a court challenge.
ITEM 4
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented at the
Annual Meeting other than those listed in the notice of the meeting. However, if
any other matters do come before the Annual Meeting, it is intended that the
holders of proxies solicited by the Board of Directors will vote on such other
matters at their discretion in accordance with their best judgment.
VOTING PROCEDURES
The Board of Directors has fixed the close of business on September 17, 1996
as the record date (the "Record Date") for determining the stockholders entitled
to notice of, and to vote at, the Annual Meeting. On the Record Date, there were
43,972,859 shares of Common Stock outstanding. The holders of the Common Stock
are entitled to one vote per share on each matter submitted to a vote at the
Annual Meeting. Stockholders do not have the right to cumulate votes in the
election of directors. A majority of the outstanding shares of Common Stock
entitled to vote, present in person or represented by proxy, shall constitute a
quorum. Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum at the Annual Meeting for the transaction of
business.
Whether or not you plan to attend the meeting, you are urged to vote by
proxy. Duly executed and unrevoked proxies received by the Company prior to the
Annual Meeting will be voted in accordance with the stockholder's specifications
marked thereon. If no specifications are marked thereon, the WHITE proxies
distributed by your Board will be voted "FOR" the election of your Board's
nominees and "FOR" the ratification of the appointment of Arthur Andersen LLP as
independent public accountants and "AGAINST" the Wyser-Pratte Proposals. Any
stockholder giving a proxy may revoke it at any time prior to voting at the
Annual Meeting by filing with the Secretary of the Company a duly executed
revocation, by submitting a later dated proxy with respect to the same shares or
by attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute a revocation of your proxy).
A stockholder may, with respect to the election of directors, (i) vote for
the election of all three director nominees proposed by your Board, (ii)
withhold authority to vote for all such director nominees or (iii) withhold
authority to vote for any of such director nominees by so indicating in the
appropriate space on the proxy. The Company's Bylaws provide that directors
shall be elected by a plurality of the votes cast by stockholders holding shares
of stock of the Company entitled to vote for the election of directors.
Consequently, votes that are withheld in the election of directors and broker
non-votes will have no effect on the election.
With respect to the Wyser-Pratte Proposals and the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants, a stockholder may vote for or against such matters or abstain from
voting. Pursuant to the Company's Bylaws and Delaware law, approval of Mr.
Wyser-Pratte's Business Combination Proposal and the ratification of the
appointment of Arthur Andersen LLP as the Company's independent public
accountants require the affirmative vote of stockholders holding a majority of
the outstanding shares of Common Stock entitled to vote. Consequently, an
abstention or a broker non-vote on
12
<PAGE>
Mr. Wyser-Pratte's Business Combination Proposal or the ratification of
accountants will have the effect of a negative vote. As described above, Wallace
believes that Mr. Wyser-Pratte's Tender Offer Proposal is invalid as a matter of
Delaware law, and accordingly, Wallace believes that such proposal may not be
adopted by the stockholders. Mr. Wyser-Pratte's preliminary proxy statement
states that the approval of the Tender Offer Proposal requires an affirmative
vote of a majority of the shares represented and entitled to vote at the Annual
Meeting and that abstentions and broker non-votes will have the same effect as
votes against the proposal.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation and certain other
components of compensation for fiscal years 1996, 1995 and 1994 for the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company for the fiscal year ended July 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY (1) BONUS (1) OPTIONS (2) (3)(4)
- ------------------------------------- ----------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin 1996 $ 392,375 $ 216,810 33,500 $ 101,174
President and Chief 1995 355,000 262,000 19,000 71,149
Executive Officer 1994 318,750 194,077 10,000 56,160
Michael O. Duffield 1996 218,800 78,365 15,100 35,231
Senior Vice President/ 1995 200,125 113,960 11,400 17,316
Operations 1994 182,750 101,079 4,900 15,411
Michael J. Halloran 1996 208,925 63,720 12,600 35,593
Vice President/Chief 1995 195,625 83,370 7,900 27,151
Financial Officer/ 1994 185,250 91,960 4,400 19,222
Assistant Secretary
Michael T. Leatherman 1996 199,975 71,155 15,100 26,327
Senior Vice President/ 1995 175,583 71,400 12,900 19,215
Chief Information Officer 1994 157,000 77,661 4,500 13,816
Bruce D'Angelo 1996 191,526 58,410 12,600 24,880
Vice President/Sales 1995 179,000 76,440 7,900 18,834
1994 162,500 69,347 4,000 14,467
</TABLE>
- ------------------------
(1) Compensation deferred at the election of the executive officer pursuant to
Deferred Compensation/Capital Accumulation Plans established by the Company
for the calendar years 1996, 1995 and 1994 is included in the relevant
salary and bonus columns.
(2) Represents the number of shares of the Company's Common Stock for which
options were granted to each executive officer for fiscal years 1996, 1995
and 1994 under the Company's 1989 Stock Option Plan. Stock options granted
to each executive officer for fiscal year 1996 were approved and granted by
the Compensation Committee on September 4, 1996.
13
<PAGE>
(3) All Other Compensation includes (a) Company contributions under the
Company's Profit Sharing and Retirement Plan, (b) Company contributions
under the Company's Supplemental Profit Sharing Plan and (c) above-market
accrued interest on compensation deferred under the Company's Deferred
Compensation/Capital Accumulation Plan to the extent that such accrued
interest exceeds interest that would have accrued on such deferred
compensation at market interest rates. The amounts of All Other Compensation
for each of the three components above were as follows:
<TABLE>
<CAPTION>
PROFIT SHARING SUPPLEMENTAL ABOVE-MARKET
AND RETIREMENT PROFIT SHARING ACCRUED
FISCAL YEAR 1996 PLAN PLAN INTEREST
----------------- ------------------ ---------------
<S> <C> <C> <C>
Mr. Cronin $ 16,009 $ 28,576 $ 12,589
Mr. Duffield 13,939 17,117 4,175
Mr. Halloran 16,009 12,665 6,919
Mr. Leatherman 13,939 5,077 7,311
Mr. D'Angelo 13,939 7,006 3,935
</TABLE>
<TABLE>
<CAPTION>
PROFIT SHARING SUPPLEMENTAL ABOVE-MARKET
AND RETIREMENT PROFIT SHARING ACCRUED
FISCAL YEAR 1995 PLAN PLAN INTEREST
----------------- ------------------ ---------------
<S> <C> <C> <C>
Mr. Cronin $ 15,047 $ 24,367 $ 8,385
Mr. Duffield 13,107 1,879 2,330
Mr. Halloran 15,046 6,946 5,159
Mr. Leatherman 13,107 1,361 4,747
Mr. D'Angelo 13,107 3,368 2,359
</TABLE>
<TABLE>
<CAPTION>
PROFIT SHARING SUPPLEMENTAL ABOVE-MARKET
AND RETIREMENT PROFIT SHARING ACCRUED
FISCAL YEAR 1994 PLAN PLAN INTEREST
----------------- ------------------ ---------------
<S> <C> <C> <C>
Mr. Cronin $ 18,874 $ 10,407 $ 5,679
Mr. Duffield 13,879 -- 1,532
Mr. Halloran 15,407 -- 3,815
Mr. Leatherman 11,040 -- 2,776
Mr. D'Angelo 13,113 -- 1,354
</TABLE>
(4) Director and meeting fees earned by Mr. Cronin as a director of the Company
are $44,000, $23,350 and $21,200 for calendar years 1996, 1995 and 1994,
respectively, and are included in All Other Compensation.
14
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1996
The following table sets forth information with respect to options granted
for fiscal year 1996 to purchase shares of the Company's Common Stock under the
Company's 1989 Stock Option Plan to the five executive officers listed in the
Summary Compensation Table.
OPTION GRANTS FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME GRANTED (1) YEAR ($/SH.) (1) DATE (1) VALUE (2)
- -------------------------- ----------- --------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin 33,500 12.9% $ 26.875 9/04/06 $ 302,170
Michael O. Duffield 15,100 5.8% 26.875 9/04/06 136,202
Michael J. Halloran 12,600 4.8% 26.875 9/04/06 113,652
Michael T. Leatherman 15,100 5.8% 26.875 9/04/06 136,202
Bruce D'Angelo 12,600 4.8% 26.875 9/04/06 113,652
</TABLE>
- ------------------------
(1) Under the terms of the Company's 1989 Stock Option Plan, options can be
either tax-favored incentive stock options or non-qualified stock options.
Tax favored incentive stock options must have an option price not less than
100% of the market value on the date of grant. Non-qualified stock options
may have an option price not less than 85% of market value on the date of
grant; however, no options have been granted to date at an option price less
than 100% of market value on the grant date. Options become exercisable as
to 40% of the shares one year after the grant date and as to the remaining
60% of the shares two years after the grant date; however, the Compensation
Committee has the authority to accelerate the exercisability of an option.
All options granted to date have had an exercise period of ten years from
the grant date.
(2) The Black-Scholes option pricing model has been used to calculate the
present value of options as of the date of grant. The model assumptions
include: (a) an option term of 5.84 years, which represents the weighted
average (by number of option shares) over the past ten years of the length
of time between the grant date of options and the exercise date of such
options for the listed executive officers; (b) an interest rate equal to the
interest rate on a U.S. Treasury Bond with a maturity date corresponding to
that of the option term; (c) a volatility factor calculated using monthly
stock prices for the Company's Common Stock for the 3 years (36 months)
prior to the grant date; and (d) a dividend rate of $.415 per share, which
was the total amount of dividends paid with respect to a share of the
Company's Common Stock in fiscal year 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the exercise in
fiscal year 1996 of options to purchase shares of the Company's Common Stock
granted under the Company's 1989 Stock Option Plan by the five executive
officers named in the Summary Compensation Table. In addition, this table
includes the fiscal year-end number and value of unexercised options held by
each named executive officer.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY OPTIONS AT
NUMBER OF OPTIONS AT 7/31/96 7/31/96 (2)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cronin 4,318 $ 85,550 110,000 50,000 $ 1,946,500 $ 175,106
Michael O. Duffield 2,022 38,987 44,098 28,680 763,506 88,151
Michael J. Halloran -- -- 25,520 21,080 421,725 76,530
Michael T. Leatherman -- -- 26,400 27,200 418,550 156,442
Bruce D'Angelo -- -- 20,200 20,600 323,313 70,380
</TABLE>
- ------------------------
(1) Value realized equals the aggregate amount of the excess of the fair market
value on the date of exercise over the relevant exercise price(s).
(2) Value of unexercised in-the-money options is calculated as the aggregate
difference between the fair market value of $29.50 per share (which was the
closing price of the Company's Common Stock as reported in the New York
Stock Exchange Composite Transactions for July 31, 1996) over the relevant
exercise price(s).
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL YEAR 1996
The following table sets forth information with respect to awards made for
fiscal year 1996 under the Company's Long-Term Performance Plan to the five
executive officers named in the Summary Compensation Table.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD ESTIMATED FUTURE
SHARES, UNTIL PAYOUTS UNDER NON-STOCK
UNITS OR MATURATION OR PRICE- BASED PLANS
NAME OTHER RIGHTS PAYOUT (1) MAXIMUM
- ----------------------------- ------------ --------------- -----------------------
<S> <C> <C> <C>
Robert J. Cronin -- 11/01/98 $ 234,000
Michael O. Duffield -- 11/01/98 176,000
Michael J. Halloran -- 11/01/98 118,000
Michael T. Leatherman -- 11/01/98 176,000
Bruce D'Angelo -- 11/01/98 118,000
</TABLE>
- ------------------------
(1) Pursuant to the Long-Term Performance Plan, payouts for 1996 awards (as
adjusted to reflect the results of fiscal years 1997 and 1998) must occur
prior to December 1, 1998; however, based on past practice, the Company
anticipates that such payouts will occur on or about November 1, 1998.
In fiscal year 1995, the Company introduced a Long-Term Performance Plan,
the purpose of which is to provide incentive compensation to certain key
employees in a form which relates the financial reward to an increase in the
value of the Company to its stockholders. In general, the Company's net
operating profit after taxes (with the cost of inventories determined on a
first-in, first-out ("FIFO") basis) is reduced by a capital charge, which is
intended to represent the return expected by stockholders and debt holders of
the Company. The participants in the plan are awarded a predefined percentage of
the excess or deficit of the net operating profit after taxes (with the cost of
inventories determined on a FIFO basis) less the capital charge. Each
participant's award is deferred for a period of two years during which the
Company's results for each of such two years are added to or subtracted from the
amount awarded. After the completion of the second year following the award
year, the participant is paid the lesser of the initial award or the adjusted
amount. The Plan does not provide for any threshold or target award amounts.
For the awards made for fiscal year 1996, as reflected in the table above,
the participant will receive the full award amount shown in cash following the
Company's fiscal year 1998, provided that the results of fiscal years 1997 and
1998 do not cause a net reduction to the fiscal year 1996 award. A plan
participant immediately prior to the occurrence of a Material Change (as defined
in the Long-Term Performance Plan) will be entitled to receive
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<PAGE>
payment of such participant's accrued award under the Long-Term Performance Plan
if, at any time during the two-year period beginning with the date that the
Material Change occurs, such participant's employment with the Company
terminates for any reason other than cause. A "Material Change" as defined in
the Long-Term Performance Plan includes the acquisition of beneficial ownership
of 35% or more of the outstanding shares of the Company's Common Stock, the
election of directors representing one-half or more of the Company's Board of
Directors of persons who were not nominated or recommended by, the incumbent
Board of Directors, or the occurrence of any other event or state of facts that
the Board of Directors determines to constitute a "Material Change" for purposes
of the Plan. The election of two or more of Mr. Wyser-Pratte's nominees to the
board may constitute a Material Change under the Long-Term Performance Plan.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL
ARRANGEMENTS
The Company has entered into an Employment Agreement, dated as of January 1,
1995, with Mr. Cronin pursuant to which Mr. Cronin will be employed as the
Company's President and Chief Executive Officer until December 31, 1999. The
employment agreement provides for Mr. Cronin to be paid a base salary of at
least $365,000 per year and, at the Company's discretion, annual bonuses may be
awarded to Mr. Cronin under the Company's Annual Bonus Plan or otherwise. In the
event of a Material Change (as defined in such agreement), Mr. Cronin, for his
continued employment, will be paid for each fiscal year during the remainder of
the term of the employment agreement an annual bonus equal to an amount not less
than the average annual bonus awarded to Mr. Cronin for the last two fiscal
years preceding the fiscal year in which the Material Change occurs. A "Material
Change" as defined in Mr. Cronin's agreement includes the acquisition of
beneficial ownership of 50% or more of the outstanding shares of the Company's
Common Stock, the election as directors representing one-half or more of the
Company's Board of Directors of persons who were not nominated or recommended by
the incumbent Board of Directors, or the occurrence of any other event or state
of facts that the Board of Directors determines to be a "Material Change" for
purposes of the employment agreement. The election of two or more of Mr.
Wyser-Pratte's nominees to the Board may constitute a Material Change under the
employment agreement. At the election of Mr. Cronin, his annual bonus for any
fiscal year may be deferred and paid, with interest (based on the rate paid on
90-day bank certificates of deposit), in 120 equal monthly installments
following the termination of his employment. The employment agreement also
provides that, if Mr. Cronin should become disabled during the term of his
employment, he will be paid 50% of his base salary then in effect for the
remainder of the employment term or until his death, whichever occurs first. In
the event of a Material Change, Mr. Cronin may elect to terminate his services
if (i) the Company fails to continue to employ Mr. Cronin in the same capacity
in which he was employed immediately prior to the Material Change, (ii) the
Company impedes or otherwise fails to permit Mr. Cronin to exercise fully and
properly his duties and responsibilities or (iii) the Company fails to pay Mr.
Cronin's base salary or award to him an annual bonus when due. In the event Mr.
Cronin elects to terminate his services pursuant to the preceding sentence, Mr.
Cronin will be entitled to a termination payment equal to the present value of
the minimum base salary, bonuses and other compensation to which he would have
been entitled if he had continued in the employ of the Company through the last
day of the term of the employment agreement. In the event that, in connection
with a Material Change, the termination payment or any other amounts payable to
Mr. Cronin or certain of his beneficiaries is subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended, or any
similar tax or assessment (collectively, "Excise Taxes"), the Company shall pay
the amount necessary to reimburse Mr. Cronin or his beneficiaries, as the case
may be, for (i) all Excise Taxes that may be imposed and (ii) any and all income
and other taxes that may be imposed on Mr. Cronin or his beneficiaries under
clause (i) above or under this clause (ii). Subject to certain limitations,
during the term of the employment agreement, Mr. Cronin and his dependents will
receive all benefits, and may participate in other plans and programs, which
executive employees of the Company are entitled to receive or in which they are
entitled to participate. In addition, subject to certain limitations, Mr. Cronin
and his wife will be entitled to reimbursement of all medical expenses they may
incur during Mr. Cronin's lifetime. The employment agreement also provides for
Mr. Cronin to receive a monthly supplemental retirement benefit in an amount up
to 50% of his average monthly compensation from the Company for the last sixty
months of his full-time employment, reduced by his monthly Social Security
retirement benefits and the monthly amount payable under a single life annuity
equal to the value of all other amounts payable under any retirement plan or
program of the Company (other than amounts attributable to his contributions).
Subject to certain limitations, during the term of the employment agreement and
for a period of
17
<PAGE>
two years after the later to occur of (i) the end of the term of the employment
agreement and (ii) the termination of Mr. Cronin's employment for any reason,
Mr. Cronin has agreed not to, directly or indirectly, own, manage, operate,
control, be employed by, participate in or be connected with the ownership,
management, operation or control of, any entity that is directly engaged in any
business or activity directly competitive with any business of the Company.
The Company has entered into an agreement with Mr. Dimitriou pursuant to
which Mr. Dimitriou shall serve the Company, and the Company shall employ Mr.
Dimitriou, as a consultant until August 31, 1998, or such earlier date (subject
to certain conditions) as Mr. Dimitriou may elect. Mr. Dimitriou is required to
devote at least 20% of his business time and energies to the Company and its
subsidiaries. Pursuant to such agreement, Mr. Dimitriou is paid a consulting fee
at a rate of not less than $100,000 per annum. In addition, the agreement
provides for Mr. Dimitriou to receive a supplemental retirement benefit which
supplements retirement benefits provided under Social Security and the Company's
Profit Sharing and Retirement Plan and Supplemental Profit Sharing Plan so that
he can anticipate receiving a retirement income equal to 50% of the average
monthly compensation he received during the last sixty months of his full-time
employment. The supplemental retirement benefit for Mr. Dimitriou is $130,560
per year. Mr. Dimitriou may (as a result of interference with the performance of
his duties and responsibilities, or failure to be paid compensation or receive
benefits) elect to terminate his services and receive a termination payment in
an amount equal to the discounted present value of the minimum compensation he
would have been entitled to receive under the agreement until his 72nd birthday,
as well as lump sum distributions of his deferred bonuses (and related interest)
and his supplemental retirement benefit.
The Company has adopted an Executive Severance Pay Plan, in which Mr.
Cronin, Mr. Duffield, Mr. Halloran, Mr. D'Angelo and Mr. Leatherman are Level II
Participants and certain other executive employees are either Level I
Participants or Level II Participants. The Executive Severance Pay Plan provides
for each participant to receive a severance benefit of either one (in the case
of Level I Participants) or two (in the case of Level II Participants) times the
participant's annual compensation if the participant's employment with the
Company and its subsidiaries voluntarily (subject to certain conditions) or
involuntarily terminates at any time during the two-year period after the
occurrence of a Material Change (as defined in the Executive Severance Pay Plan)
for any reason other than Cause (as defined in the Executive Severance Pay
Plan). A "Material Change" as defined in the Executive Severance Pay Plan
includes the acquisition of beneficial ownership of 35% or more of the
outstanding shares of the Company's Common Stock, the election as directors
representing one-half or more of the Company's Board of Directors of persons who
were not nominated or recommended by, the incumbent Board of Directors, or the
occurrence of any other event or state of facts that the Board of Directors
determines to be a "Material Change" for the purposes of the Executive Severance
Pay Plan. The election of two or more of Mr. Wyser-Pratte's nominees to the
Board may constitute a Material Change under the Executive Severance Pay Plan.
Participants in the Company's Executive Severance Pay Plan may also be entitled
to receive a severance benefit under the Company's Employee Severance Pay Plan,
which provides a severance benefit to non-union employees of the Company and its
subsidiaries based upon length of service in the event that a participant's
employment is involuntarily terminated without Cause within a period of two
years after the occurrence of a Material Change (as such terms are defined in
the Executive Severance Pay Plan); however, any severance benefit provided under
the Company's Employee Severance Pay Plan is reduced by any severance benefit
under the Executive Severance Pay Plan, and, in most cases, the severance
benefit provided under the Executive Severance Pay Plan would exceed the
severance benefit provided under the Company's Employee Severance Pay Plan.
Severance amounts may become payable to approximately 125 officers and
senior managers under the Company's Executive Severance Pay Plan, and under
agreements with Messrs. Cronin and Dimitriou, in the aggregate amount of
approximately $33 million in the event of a change of control of the Company and
the termination of employment of all such persons. Upon any such change of
control, (i) the Board of Directors of the Company may accelerate the vesting of
all outstanding unvested options to purchase shares of the Company's Common
Stock, (ii) approximately $12 million of earned benefits would vest early under
the Company's Long-Term Performance Plan, Executive Incentive Plan and Annual
Bonus Plan and (iii) earnings would be preserved on benefits accrued under the
Company's Deferred Compensation/Capital Accumulation Plans. The Company's
18
<PAGE>
Profit Sharing and Retirement Plan, which covers all full-time employees of the
Company (other than employees covered by collective bargaining agreements) who
have completed one year of service, has a provision that is intended to preserve
and protect the plan assets for the benefit of participants in the event of a
change in control or other similar material change with respect to the Company.
The election of two or more of Mr. Wyser-Pratte's nominees to the Board may
constitute a change of control for purposes of the Company's Profit Sharing and
Retirement Plan.
In 1996, the Company established the Wallace Computer Services, Inc. Benefit
Trust (the "Trust") to provide for the funding of certain plans and arrangements
in the event of the occurrence of a "Material Change" (as defined in the Trust).
Under the Trust, a "Material Change" includes the acquisition of beneficial
ownership of 35% of more of the outstanding shares of the Common Stock, the
election of directors representing one-half or more of the Company's Board of
Directors of persons who were not nominated or recommended by the incumbent
Board of Directors, or the occurrence of any other event or state of facts that
the Board of Directors determines to constitute a "Material Change" for purposes
of the Trust. The election of two or more of
Mr. Wyser -Pratte's nominees to the Board may constitute a Material Change under
the Trust. The following plans and arrangements of the Company are subject to
the Trust: the 1988, 1989, 1990, 1991, 1993, 1994, 1995, and 1996 Deferred
Compensation/Capital Accumulation Plans, the Supplemental Profit Sharing Plan,
the Supplemental Retirement Plan, the Executive Incentive Plan, the Long-Term
Performance Plan, individual pension arrangements for certain executive officers
and directors and benefits payable to retired directors under the Retirement
Plan for Outside Directors. In the event of a change of control, the Company
would be required to fund under the Trust approximately $26 million of vested
benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dimitriou, the Chairman of the Board of the Company, serves on the Board
of Directors of General Binding Corporation. Mr. Lane, who is the Chairman of
the Board of General Binding Corporation, serves on the Compensation Committee
of the Company. Mr. Dimitriou does not serve on the Compensation Committee of
General Binding Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") consists of three non-employee
members of the Board of Directors. The Committee is responsible for reviewing
and recommending to the Board of Directors the compensation of officers and key
management personnel of the Company. The Committee, in consultation with the
Chairman of the Board and the Chief Executive Officer, define the Company's
compensation philosophy and objectives and develop compensation plans to achieve
those objectives. The Company's compensation philosophy and objectives as they
relate to executives are: (a) to include in the Company's incentive plans those
individuals who are officers or are in other key management positions that have
a direct effect on profits, (b) to adequately compensate those individuals at
levels that are competitive with similar positions in other companies and (c) to
provide methods of compensation that both retain executives long term and offer
incentives in a manner that enhances stockholder value.
COMPENSATION OF EXECUTIVE OFFICERS
In the case of Mr. Cronin, compensation is governed by the terms described
below and as set forth in his employment agreement with the Company (which is
described above under the heading "Employment Contracts and Termination,
Severance and Change-of-Control Arrangements"). Compensation of executive
officers for fiscal year 1996 was structured to consist of the following
elements:
BASE SALARY -- Base salary is intended to provide a sufficient level of
compensation to attract and retain qualified management. Base salary ranges are
determined and reviewed through comparative compensation surveys supplied by
professional compensation consultants. The surveys compare the evaluated
position to positions of equal responsibilities at companies of similar size and
complexity. Base salary increases are determined based on the incumbent's
performance in the position as measured by performance objectives established at
the beginning of the fiscal year. The Company's salaries generally fall at
median levels of the established range. Salary increases for executive officers
generally range from four to seven percent depending on the evaluation of the
executive's performance and the executive's salary relative to the established
salary
19
<PAGE>
range. The Committee believes that the Company's direct competitors for
executive talent are not limited to the companies that would be included in a
peer group. Thus, the survey comparison group is not the same as the peer group
used in the performance graph under the heading "Performance Graph" below.
INCENTIVE BONUSES -- The Company's incentive bonus plans were developed to
provide incentive compensation in a form that aligns the employee's financial
reward to the financial results of the Company. The two incentive bonus plans
are the Annual Bonus Plan and the Long-Term Performance Plan.
ANNUAL BONUS PLAN -- The Annual Bonus Plan is a cash bonus plan pursuant to
which the payout is determined based upon a matrix that measures the level of
the Company's return on investment ("ROI") and the percentage of completion an
executive achieves on predefined individual performance objectives. In the
Annual Bonus Plan, executives are targeted to receive a bonus of 25% to 45% of
base salary (Mr. Cronin is targeted at 45%). The targeted bonus is achieved if
the Company's ROI is equal to the budgeted ROI established at the beginning of
the year and the executive achieves 75% of the executive's individual
performance objectives. Individual performance objectives generally relate to
financial goals and operational goals that relate to the executives' specific
responsibilities. Objectives are assigned point values. The percentage of points
achieved to total points available determines the percentage of achievement.
Generally, financial goals include such measures as the level of sales, the
level of operating expenses and the utilization/turnover of assets. Operational
objectives generally relate to the development and implementation of major
products, programs or projects. An executive's bonus can be increased or
decreased from target depending on the Company's ROI and the executive's
individual performance objective achievements. The maximum bonus can be 160% of
target, provided the actual ROI exceeds 110% of targeted ROI and the executive
achieves at least 90% of the individual performance objective points. The
minimum bonus can be 20% of target, provided the actual ROI is 90% of targeted
ROI and the executive achieves 45% of the individual performance objective
points. No bonus will be earned if either the actual ROI is less than 90% of
targeted ROI or the executive achieves less than 45% of the individual
performance objective points. Bonus awards for 1996 ranged from 40% to 120% of
targeted bonuses. The Company's actual ROI for fiscal year 1996 was 101% of
targeted ROI.
LONG-TERM PERFORMANCE PLAN -- The Long-Term Performance Plan is a rolling
three year plan that compensates executives for Company performance in excess of
the Company's weighted cost of capital. The Company's weighted cost of capital
is intended to equal the theoretical return expected by stockholders and debt
holders of the Company. In general, the Company's net operating profit after
taxes (with the cost of inventories determined on a FIFO basis) is reduced by a
capital charge (the company's average investment multiplied by the Company's
weighted cost of capital). The net result is an excess or deficit of net
operating profit after taxes. The participants in the plan receive an award
equal to a predefined percentage of the excess or deficit of the net operating
profit after taxes. Mr. Cronin's percentage for fiscal year 1996 equaled two
percent. The aggregate percentage for all participants (including Mr. Cronin)
approximated 10% in fiscal year 1996. Participant award amounts are banked for a
period of two years during which the results of the following two fiscal years
are added to or subtracted from the amount banked. After the completion of the
second year following the award year, the participant is paid the lesser of the
award (assuming the award was positive), or the amount banked. For awards made
in fiscal year 1996, the participant will receive the full award amount in cash
following the Company's fiscal year 1998, provided that the results of fiscal
years 1997 and 1998 do not result in a net reduction of the fiscal year 1996
award.
DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN -- The Deferred
Compensation/Capital Accumulation Plan ("CAP") is intended to motivate executive
officers and employees in certain key management positions to remain in the
employment of the Company, thus providing the Company with a qualified and
stable executive team to achieve its long term goals. The CAP allows
participants to elect to defer up to 20% of their salary and cash bonus. A CAP
has been in effect for each calendar year since 1988, with the exception of
1992. The deferred amount bears interest at a rate determined by the Committee
and has ranged between 12% and 16% per annum. The Committee elected 12% for the
1996 Plan. If a participant remains in the continuous employment of the Company
for a period of seven years after the year of deferral, an interim distribution
equal to the amount deferred will be made from the participant's deferral
account. A second interim distribution equal to the first interim distribution
will be made to each participant who remains in the continuous employment of the
Company for a period of eight years after the year of deferral. Most
participants will also receive additional
20
<PAGE>
distributions beginning at age 65. A participant whose employment terminates
prior to retirement receives a lump sum distribution equal to the amount
deferred plus interest between 6% and 8%, less the amount of any interim
distributions. The Company has purchased for its account life insurance on the
participants, which is expected to be sufficient to fund distributions under the
Plan.
STOCK COMPENSATION -- Stock compensation is intended to provide a longer
term reward to executives for sound Company performance and to align the
interests of the executives more closely with those of the stockholders by
increasing management stock ownership. For fiscal year 1996, the Company
provided stock compensation via two plans, the 1989 Stock Option Plan ("Option
Plan") and the Employee Stock Purchase Plan ("ESP"). The Committee administers
the Option Plan pursuant to which options to purchase shares of the Company's
Common Stock are granted to executive officers and other key members of
management. Options under the Plan become exercisable as to 40% of the shares
one year after grant and the remaining 60% of the shares become exercisable two
years after grant; however, the Committee has the authority to accelerate the
exercisability of any option. The Committee determines the number of options to
be granted based upon a matrix similar to the annual bonus matrix that utilizes
the same performance measures. The Committee also considers comparative
information, including the number of stock option grants made by similar
companies. The ESP is available to all employees of the Company who have
completed at least one year of service. Under the Plan, employees electing to
participate may purchase shares of the Company's Common Stock at an exercise
price equal to the lower of (a) 85% of the mean market value on the first day of
the offering period or (b) 85% of the mean market value on the last day of the
offering period. The offering period is a six month period beginning on January
1 and July 1 of each year. Participating employees may purchase stock equal to
the lesser of (a) shares having a market value of no more than 10% of the
participant's base salary or (b) shares having a market value of $25,000 (market
value is determined using the market price of the stock as of the first day of
the offering period). Subject to stockholder approval, the Committee recommended
and the Board of Directors approved the 1997 Stock Incentive Plan to further
align the interests of directors, executives and key management personnel with
stockholders and to provide a means for directors, executives and key management
personnel to increase their ownership in the Company's Common Stock. Stock
options granted under the plan may provide for performance vesting whereby the
performance measures correspond with the Company's five year strategic plan
developed in June, 1995. As described under "ELECTION OF DIRECTORS --
Compensation of Directors," the plan also provides for directors to receive
stock options annually and to elect to receive stock options in lieu of cash for
director fees. The plan will be presented to the stockholders for their approval
in the near future.
STOCK OWNERSHIP GUIDELINES -- The Committee and the Board of Directors have
established stock ownership guidelines for the executives of the Company. The
guidelines recommend that officers and other key management personnel own a
minimum of one to three times their base salary in Common Stock or stock
equivalents of the Company (Mr. Cronin is recommended to own a minimum of three
times his base salary). The guidelines suggest that ownership levels in the
Company's Common Stock or stock equivalents should be achieved by August 1,
2001. As of July 31, 1996, all but three of the twelve executives subject to the
ownership guidelines have achieved the guidelines recommended (Mr. Cronin has
met the ownership guidelines).
OTHER COMPENSATION ELEMENTS -- The Company provides a Profit Sharing and
Retirement Plan ("P.S. Plan") in which executive officers participate on the
same terms as non-executive employees subject to limits on the amounts that may
be contributed. In addition, a Supplemental Profit Sharing Plan provides to
executives and other highly compensated participants additional contributions to
compensate them for contributions not allowed under the P.S. Plan due to
contribution limitations. This supplemental plan is designed to place executives
in the same relative position as non-highly compensated participants in the P.S.
Plan. The Company also provides each executive officer with split-dollar life
insurance (up to $200,000 of coverage) and an automobile for which the Company
makes the lease and insurance payments. In fiscal year 1996 the Company began
phasing out the leasing of automobiles for executives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The fiscal year 1996 compensation for Mr. Cronin, the Chief Executive
Officer, was established following the same philosophy and objectives as
discussed in this report. As reported in the Summary Compensation Table, total
fiscal year 1996 annual compensation of Mr. Cronin was $710,359, the significant
elements of which
21
<PAGE>
were base salary and the annual bonus. In addition, Mr. Cronin was awarded
$234,000 from the Long-Term Performance Plan that is deferred, contingent upon
the results of fiscal years 1997 and 1998, and payable in fiscal year 1999. Mr.
Cronin also was granted 33,500 stock options under the Company's 1989 Stock
Option Plan. Mr. Cronin's base salary as of July 31, 1996, of $401,500 was
determined based upon the Company's established salary range for the Chief
Executive Officer. Mr. Cronin's base salary as of July 31, 1996, is
approximately 22% below competitive pay for base salary compensation as
determined in a 1996 survey of mid-cap size companies. Effective November 1,
1996, Mr. Cronin's base salary will be increased to $450,000. The Committee
believes that Mr. Cronin's salary is within an acceptable range. Mr. Cronin's
fiscal 1996 annual bonus was $216,810 (54% of his base salary and 120% of his
targeted bonus). The annual bonus award was determined by the Company's actual
ROI as compared to targeted ROI and his level of achievement against his
individual performance objectives established at the beginning of the year. The
Company's actual ROI was 101% of its targeted ROI. Individual performance
objectives included, among others, the level of sales, the level of operating
expenses, various asset management ratios, the continued development and
penetration of the Company's W.I.N. systems, and the development and
implementation of several strategic products and services. For fiscal year 1996,
Mr. Cronin achieved in excess of 90% of his individual performance objectives.
The Committee believes Mr. Cronin's incentive bonuses are reasonable as compared
to the Company's performance. In summary, the Committee views Mr. Cronin's total
fiscal 1996 compensation as an appropriate amount, given the Company's record
financial performance in fiscal year 1996, his individual achievements and the
competitive standards for Chief Executive Officer talent.
Submitted by the Compensation Committee of the Board of Directors of the
Company.
William N. Lane, III Chairman
Albert W. Isenman, III
William E. Olsen
22
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Company's Common Stock for the five year period from July 31, 1991
to July 31, 1996, with the cumulative total return for the same period of the
Standard & Poor's ("S&P") 500 stock index, the S&P MIDCAP 400 index and a stock
index composed of a group of five publicly traded companies, consisting of
American Business Products, Ennis Business Forms, Moore Corporation, New England
Business Service and The Standard Register Company (the "Peer Group Index").
Duplex Products, which was included in last year's performance graph, has been
removed from the Peer Group Index since it was acquired during the last fiscal
year and has ceased to be publicly traded. Comparisons are based on the
assumption that the value of an investment on July 31, 1991, in the Company's
Common Stock, the S&P 500 stock index, the S&P MIDCAP 400 index and the Peer
Group Index was $100 and that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WALLACE COMPUTER SERVICES INC. PEER GROUP S&P MIDCAP 400 S&P 500 INDEX
<S> <C> <C> <C> <C>
7/31/91 100 100 100 100
1/31/92 111 89 118 107
7/31/92 110 91 117 113
1/29/93 135 95 131 118
7/30/93 113 99 137 123
1/31/94 157 113 151 134
7/29/94 151 104 142 129
1/31/95 139 100 144 134
7/31/95 285 125 178 162
1/31/96 272 121 189 186
7/31/96 292 126 190 189
</TABLE>
INDEMNIFICATION ARRANGEMENTS AND LIMITATION ON LIABILITY
Pursuant to the provisions of the Company's Restated Certificate of
Incorporation, as amended, and the provisions of indemnification agreements
between the Company and each of its directors and officers, the Company is
obligated (subject to certain conditions) to hold harmless and indemnify its
directors and officers, to the fullest extent permitted from time to time by
applicable law, from and against expenses (including attorney's fees),
judgments, fines, amounts paid in settlement, and other liabilities and claims
that its directors and officers may incur or become subject to as a result of or
in connection with serving or having served at any time as a director or officer
of the Company (including liabilities relating to service as a trustee or
otherwise in connection with employee benefit plans) and, in the case of
officers, as an employee or agent of the Company or as a director, officer,
employee or agent or in any other capacity at the request of the Company with
any subsidiary or other entity. The Company's indemnification obligations under
its Restated Certificate of Incorporation and under indemnification agreements
with its directors and officers do not extend to liabilities or claims based
upon or attributable to any breach of duty of loyalty to the Company or its
stockholders, any acts or omissions that are not in good faith or that involve
intentional misconduct or deliberate dishonesty, any improper personal profit or
benefit, or any income taxes in respect of compensation. Directors and officers
also have indemnification rights against the Company under Section 145 of the
Delaware General Corporation Law, and the Company maintains director and officer
liability insurance coverage for its directors and officers.
Pursuant to the above indemnification agreements, subject to certain
limitations, the Company must advance any and all defense costs (including
attorney's fees) of investigating, defending or otherwise contesting
23
<PAGE>
any claim made against the director with respect to any alleged act or omission
by him as a director of the Company, provided that the director gives the
Company a written undertaking to repay all such advances if and to the extent it
is ultimately determined that the director is not entitled to indemnification
with respect to such claim.
Under the provisions of the Company's Restated Certificate of Incorporation,
no director of the Company shall have any personal liability to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that, unless and except to the extent otherwise
permitted from time to time by applicable law, the liability of a director for
monetary damages is not eliminated or limited for any breach of duty of loyalty
to the Company or its stockholders, for acts or omissions that are not in good
faith or that involve intentional misconduct, deliberate dishonesty, or a
knowing violation of law, for any dividends or redemptions or repurchases of
stock that are unlawful under the Delaware General Corporation Law, or for any
act or omission that occurred prior to November 12, 1986.
CERTAIN LITIGATION
On September 20, 1996, Mr. Wyser-Pratte filed a complaint against the
Company in the United States District Court for the Northern District of
Illinois, Case No. 96 C 6087 (the "Litigation"). In that complaint, Mr.
Wyser-Pratte alleges that a preliminary version of this proxy statement, which
was filed with the Securities and Exchange Commission but not distributed by
Wallace to its stockholders, was misleading because (i) it did not properly
disclose the issues with respect to the legality of Mr. Wyser-Pratte's Tender
Offer Proposal under Delaware law and the Company's Certificate of
Incorporation, and (ii) it did not indicate that the proxy statement issued by
Moore in connection with the 1995 Annual Meeting of Stockholders of the Company
contained the following statement: "The Moore Nominees are committed, SUBJECT TO
THE FULFILLMENT OF THE FIDUCIARY DUTIES THEY WOULD HAVE AS DIRECTORS OF WALLACE,
to giving each Wallace stockholder the opportunity to receive not less than $60
per Share for all of their Shares and to take such steps as are necessary to
permit the [Moore] Offer and [Moore's proposed merger] to proceed." (emphasis
added) Mr. Wyser-Pratte further alleges that such preliminary version of this
proxy statement was misleading because it did not state the reasons why Messrs.
Hessler, Isenman and Rittereiser (the three Wallace directors nominated by
Moore), in fulfilling their fiduciary duties as directors of the Company, joined
with the other directors of Wallace in unanimously recommending that the
stockholders of the Company vote in favor of the Board's nominees and against
Mr. Wyser-Pratte's proposals. The complaint also seeks a declaration that the
purported Bylaw amendment reflected in Mr. Wyser-Pratte's Tender Offer Proposal
is lawful under Delaware law.
The Company believes the Litigation is without merit, and intends to
vigorously defend the Litigation.
VOTING SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 17, 1996, the only person known to the Board of Directors
(based on a review of public filings) to be the beneficial owner of more than
five percent (5%) of the outstanding shares of the Company's Common Stock is the
following:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED CLASS
- ------------------------------ ----------------- -----------
<S> <C> <C>
AIM Management Group 2,500,200(1) 5.7%
11 Greenway Plaza
Suite 1919
Houston, Texas 77046
</TABLE>
- ------------------------
(1) Holdings as of June 30, 1996 as reported to the Securities and Exchange
Commission pursuant to Rule 13(f).
24
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES AND OFFICERS
The following table lists the beneficial ownership, as of September 17,
1996, of the Company's Common Stock by each director, the Board's nominees, the
five executive officers listed in the Summary Compensation Table, and all
directors, director nominees and executive officers as a group. Unless otherwise
noted, the listed director, nominee or executive officer has sole power to vote
and sole power to dispose of or direct the disposition of all shares listed
opposite such person's name.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- --------------------------- ------------------ -----------
<S> <C> <C>
Robert J. Cronin 143,420(1) *
Theodore Dimitriou 203,990(2) *
Richard F. Doyle 7,600 *
Curtis A. Hessler -- *
Albert W. Isenman, III 200 *
William N. Lane, III 231,148(3) *
William E. Olsen 800 *
John C. Pope 2,000 *
Robert P. Rittereiser 1,600
Neele E. Stearns, Jr. 2,400
Michael O. Duffield 63,034(4) *
Michael J. Halloran 45,944(5) *
Michael T. Leatherman 38,120(6) *
Bruce D'Angelo 33,690(7) *
All Directors, Director 863,404(8) 2.0 %
Nominees and Executive
Officers as a group
(19 persons)
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Includes 113,046 shares that Mr. Cronin has the right to acquire through the
exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days. Excludes 26,526 share equivalents held by Mr. Cronin as a
result of Mr. Cronin converting his deferred bonus amount into stock
equivalents during fiscal year 1995.
(2) Includes 33,394 shares that Mr. Dimitriou has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days.
(3) Includes 181,148 shares held in trusts for which Mr. Lane acts as a
co-trustee. Mr. Lane has shared powers to vote and dispose of the shares
held by such trusts.
(4) Includes 59,098 shares that Mr. Duffield has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days. Excludes 8,601 share equivalents held by Mr. Duffield as
a result of Mr. Duffield converting his deferred bonus amount into stock
equivalents during fiscal year 1995.
(5) Includes 37,120 shares that Mr. Halloran has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days. Excludes 9,840 share equivalents held by Mr. Halloran as
a result of Mr. Halloran converting his deferred bonus amount into stock
equivalents during fiscal year 1995.
(6) Includes 19,320 shares that Mr. Leatherman has the right to acquire through
the exercise of options granted under the Company's 1989 Stock Option Plan
that are presently exercisable or will become exercisable within a period of
60 days. Excludes 6,592 share equivalents held by Mr. Leatherman as a result
of Mr. Leatherman converting his deferred bonus amount into stock
equivalents during fiscal year 1995.
25
<PAGE>
(7) Includes 31,320 shares that Mr. D'Angelo has the right to acquire through
the exercise of options granted to him under the Company's 1989 Stock Option
Plan that are presently exercisable or will become exercisable within a
period of 60 days. Excludes 5,089 share equivalents held by Mr. D'Angelo as
a result of Mr. D'Angelo converting his deferred bonus amount into stock
equivalents during fiscal year 1995.
(8) Includes 361,889 shares that all executive officers as a group have the
right to acquire through the exercise of options granted under the Company's
1989 Stock Option Plan that are presently exercisable or will become
exercisable within a period of 60 days. Excludes 81,338 share equivalents
held by all executive officers as a group as a result of executive officers
converting their deferred bonus amounts into stock equivalents during fiscal
year 1995.
COMPLIANCE WITH SECTION 16(A)(2) OF THE SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and executive officers are required to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission and the New York Stock Exchange. Whenever a director or
executive officer files a Form 3, 4 or 5, a copy of the Form is required to be
furnished to the Company.
Based solely upon a review of the Form 3, 4 and 5 filings received by the
Company since the beginning of fiscal year 1996, the Company has not identified
any failure on the part of any of its directors and executive officers to file
on a timely basis any Form 3, 4 or 5 during fiscal year 1996.
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone or other methods
and in person. Solicitations may be made by directors, officers, investor
relations personnel and other employees of the Company, none of whom will
receive additional compensation for such solicitations. The Company will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all of its solicitation materials to the beneficial owners of the shares
of Common Stock they hold of record. The Company will reimburse these record
holders for customary clerical and mailing expenses incurred by them in
forwarding these materials to their customers.
The Company has retained Morrow & Co., Inc. ("Morrow") for solicitation and
advisory services in connection with the solicitation, for which Morrow is to
receive a fee estimated at $200,000, together with reimbursement for its
reasonable out-of-pocket expenses. The Company has also agreed to indemnify
Morrow against certain liabilities and expenses. It is anticipated that Morrow
will employ approximately 75 persons to solicit stockholders for the Annual
Meeting.
Pursuant to a letter agreement dated July 30, 1995 (the "Letter Agreement"),
the Company retained Goldman Sachs as financial advisor with respect to the
Moore Offer and certain other possible transactions. Pursuant to the Letter
Agreement, the Company 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 on a one
time basis 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:
26
<PAGE>
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 on a one time
basis against any fee payable under clause (b), (c) or (d) above. Any fee paid
under clause (b) above shall be in certain instances creditable on a one time
basis against any fee subsequently paid under clause (c) above, and vice versa.
The Company also agreed to reimburse Goldman Sachs periodically for their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of their attorneys, plus any sales, use or similar taxes
(including additions to such taxes, if any) arising in connection with any
matter referred to in the Letter Agreement. In addition, the Company agreed to
indemnify Goldman Sachs against certain liabilities, including liabilities under
federal securities laws. Pursuant to a separate letter dated July 30, 1995,
Goldman Sachs agreed, subject to limited exceptions, to use confidential
information supplied by the Company only for the engagement contemplated by the
Letter Agreement and not to disclose such information.
In the case of public offerings or private placements of securities of the
Company that are related to a transaction contemplated by the Letter Agreement,
the Company agreed to offer Goldman Sachs the right to act as lead manager or
agent on such transactions. In such case, Goldman Sachs would charge customary
fees pursuant to a separate agreement.
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 18 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.
The cost of soliciting proxies on behalf of the Board of Directors for the
Annual Meeting is being borne by the Company. Costs incidental to these
solicitations of proxies include expenditures for printing, postage, legal,
accounting, public relations, soliciting, advertising and related expenses and
are expected to be approximately $250,000 in addition to the fees of Morrow
described above (excluding the amount normally expended by the Company for the
solicitation of proxies at its annual meetings). Total costs incurred to date
for, in furtherance of , or in connection with these solicitations of proxies
are approximately $100,000.
Certain information about the directors, director nominees and executive
officers of the Company and certain employees and other representatives of the
Company who may also solicit proxies is set forth in the attached Schedule I.
Schedule II sets forth certain information relating to shares of Common Stock
owned by such parties and certain transactions between any of them and the
Company. Schedule III sets forth certain information with respect to Goldman
Sachs. Schedule IV sets forth certain transactions by Goldman Sachs with respect
to securities of the Company.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Stockholder proposals intended for inclusion in the proxy statement for the
1997 Annual Meeting must be received at the Company's corporate headquarters,
2275 Cabot Drive, Lisle, Illinois 60532, not later than July 8, 1997.
Stockholder proposals should be addressed to the attention of the Company's
Secretary.
27
<PAGE>
In addition, the Company's Bylaws require that there be furnished to the
Secretary of the Company written notice with respect to the nomination of a
person for election as a director (other than nominations submitted at the
direction of the Board) at an annual meeting of stockholders. In order for any
such nomination to be proper, the notice must contain certain information
concerning the nomination or proposing stockholder and the nominee, and must be
furnished to the Company not later than 90 days before the annual meeting.
Copies of the applicable Bylaw provisions may be obtained, without charge, upon
written request to the Secretary of the Company at its principal executive
offices.
By Order of the Board of Directors
[SIG]
T. DIMITRIOU
CHAIRMAN OF THE BOARD OF DIRECTORS
Lisle, Illinois
October 8, 1996
28
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS, DIRECTOR NOMINEES,
EXECUTIVE OFFICERS AND CERTAIN EMPLOYEES OF THE COMPANY
The following table sets forth the name and the present principal occupation
or employment (except with respect to the directors, whose principal occupation
is set forth in the Proxy Statement), and the name, principal business and
address of any corporation or other organization in which such employment is
carried on, of (1) the directors, director nominees and executive officers of
the Company and (2) certain employees of the Company who may assist in
soliciting proxies from stockholders of the Company. Unless otherwise indicated
below, the principal business address of each such person is 2275 Cabot Drive,
Lisle, Illinois 60532 and such person is an employee of the Company. Directors
are indicated with a single asterisk.
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Robert J. Cronin* .................................
Theodore Dimitriou* ...............................
Richard F. Doyle* .................................
2436 Hansens Mountain Road
Charlottesville, VA 22911
Curtis A. Hessler* ................................
I-NET, Inc.
6700 Rockledge Drive
Bethesda, MD 20817
Albert W. Isenman, III* ...........................
Kellogg Graduate School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
William N. Lane III* ..............................
Lane Industries, Inc.
One Lane Center
1200 Shermer Road
Northbrook, IL 60062
William E. Olsen* .................................
275 Oak Creek Dr., Unit 210
Wheeling, IL 60090
John C. Pope* .....................................
810 South Ridge Road
Lake Forest, IL 60045
Robert P. Rittereiser* ............................
Gruntal Financial Corp.
14 Wall Street
New York, NY 10005
Neele E. Stearns, Jr.* ............................
260 Chestnut Street
Winnetka, IL 60093
Michael O. Duffield ............................... Senior Vice President/Operations
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Michael T. Leatherman ............................. Senior Vice President/Chief Information Officer
Michael J. Halloran ............................... Vice President/Chief Financial Officer/Assistant
Secretary
Bruce D'Angelo .................................... Vice President/Sales
Michael T. Laudizio ............................... Divisional Vice President/Secretary/Director of
Taxation
Wayne E. Richter .................................. Vice President/General Manager -- Label Division
Donald J. Hoffmann ................................ Vice President/Engineering and Research
Michael M. Mulcahy ................................ Vice President/General Manager -- Colorforms
Division
Thomas G. Brooker ................................. Vice President/General Manager -- Office Products
Division
</TABLE>
CERTAIN EMPLOYEES OF THE
COMPANY WHO MAY ALSO SOLICIT PROXIES
<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Bradley P. Samson.................................. Director of Investor Relations and Public Relations
Teresa A. Sorrentino............................... Public Relations Specialist
</TABLE>
I-2
<PAGE>
SCHEDULE II
SHARES HELD BY DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS
AND CERTAIN EMPLOYEES OF THE COMPANY AND
CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND THE COMPANY
The shares of Common Stock held by directors, director nominees and Michael
O. Duffield, Michael J. Halloran, Michael T. Leatherman and Bruce D'Angelo are
set forth in the Proxy Statement. The following employees of the Company own the
following shares as of September 17, 1996:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
NAME OF BENEFICIALLY
BENEFICIAL OWNER OWNED (1)
-------------------------- -----------------
<S> <C>
Michael T. Laudizio.................................... 1,626
Wayne E. Richter....................................... 31,766
Donald J. Hoffmann..................................... 15,359
Michael M. Mulcahy..................................... 31,470
Thomas G. Brooker...................................... 13,312
Bradley P. Samson...................................... 240
</TABLE>
- ------------------------
(1) Amounts include shares acquirable within 60 days of September 13, 1996
pursuant to the exercise of currently outstanding options as follows: Mr.
Laudizio (1,400); Mr. Richter (25,040); Mr. Hoffmann (6,826); Mr. Mulcahy
(26,840); and Mr. Brooker (12,560).
PURCHASES AND SALES OF SECURITIES
The following table sets forth information concerning all purchases and
sales of securities of the Company by directors, officers and certain employees
since September 17, 1994:
<TABLE>
<CAPTION>
DATE OF NATURE OF NUMBER OF SHARES
NAME TRANSACTION TRANSACTION OF COMMON STOCK*
- ----------------------------------- ----------- ----------- ----------------
<S> <C> <C> <C>
DIRECTORS AND DIRECTOR NOMINEES:
Robert J. Cronin................... 1/18/95 (1) 1,018
7/18/95 (1) 690
10/16/95 (2) 4,318
1/19/96 (1) 780
7/10/96 (1) 432
9/9/96 (2) 24,154
9/9/96 (5) 8,700
Theodore Dimitriou(4).............. 1/18/95 (1) 636
2/27/96 (2) 42,606
2/27/96 (3) 42,606
Richard F. Doyle................... 5/13/96 Purchase 2,000
Albert W. Isenman, III............. 7/11/96 Purchase 200
William N. Lane, III............... 9/9/96 Purchase 10,000
John C. Pope....................... 7/12/96 Purchase 2,000
Robert P. Rittereiser.............. 7/12/96 Purchase 1,600
Neale E. Stearns, Jr............... 12/5/94 Purchase 1,400
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
DATE OF NATURE OF NUMBER OF SHARES
NAME TRANSACTION TRANSACTION OF COMMON STOCK*
- ----------------------------------- ----------- ----------- ----------------
<S> <C> <C> <C>
OFFICERS:
Michael J. Halloran................ 1/18/95 (1) 558
7/18/95 (1) 442
1/19/96 (1) 510
7/10/96 (1) 544
Michael O. Duffield................ 7/18/95 (1) 756
1/19/96 (1) 730
5/1/96 (2) 2,022
5/1/96 (5) 712
7/10/96 (1) 428
Bruce D'Angelo..................... 1/18/95 (1) 472
7/18/95 (1) 396
1/19/96 (1) 916
7/10/96 (1) 184
Michael T. Leatherman.............. 9/9/96 (2) 18,800
Michael T. Laudizio................ 1/18/95 (1) 232
2/14/95 Sale 232
4/2/96 (2) 1,400
4/2/96 (3) 1,400
7/10/96 (1) 226
Wayne E. Richter................... 1/18/95 (1) 580
7/18/95 (1) 510
7/18/95 (2) 2,000
7/18/95 (3) 2,000
1/19/96 (1) 652
5/1/96 (2) 3,000
5/1/96 (5) 536
7/10/96 (1) 280
7/11/96 Sale 838
Donald J. Hoffmann................. 1/18/95 (1) 148
7/18/95 (1) 320
8/3/95 (2) 4,000
8/3/95 (5) 1,862
1/19/96 (1) 642
2/22/96 (2) 6,200
2/22/96 Sale 6,200
7/10/96 (1) 330
9/11/96 (2) 7,694
9/11/96 (5) 4,627
Michael M. Mulcahy................. 1/18/95 (1) 678
7/18/95 (1) 622
1/19/96 (1) 528
7/10/96 (1) 432
Thomas G. Brooker.................. 1/18/95 (1) 298
7/18/95 (1) 294
1/19/96 (1) 422
1/23/96 (2) 2,000
1/23/96 (3) 2,000
5/22/96 Sale 422
7/10/96 (1) 32
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
DATE OF NATURE OF NUMBER OF SHARES
NAME TRANSACTION TRANSACTION OF COMMON STOCK*
- ----------------------------------- ----------- ----------- ----------------
<S> <C> <C> <C>
CERTAIN EMPLOYEES:
Bradley P. Samson.................. 7/18/95 (1) 48
1/19/96 (1) 116
7/10/96 (1) 76
</TABLE>
- ------------------------
* Adjusted to reflect two-for-one split declared June 6, 1996.
(1) Purchase made pursuant to the Employee Stock Purchase Plan.
(2) Purchase made pursuant to the Incentive Stock Option Plan.
(3) Sale of shares purchased pursuant to the exercise of Incentive Stock
Options.
(4) Transactions made for the benefit of the Theodore Dimitriou Trust.
(5) Disposition for the purpose of paying option exercise price.
Theodore Dimitriou and William N. Lane, III have agreed to serve as the
proxies on the Company's WHITE Annual Meeting proxy card.
Except as disclosed in this Schedule or in the Proxy Statement, none of the
Company, any of its directors, director nominees, executive officers or the
employees of the Company named in Schedule I owns any securities of the Company
or any subsidiary of the Company, beneficially or of record, has purchased or
sold any of such securities within the past two years or is or was within the
past year a party to any contract, arrangement or understanding with any person
with respect to any such securities. Except as disclosed in this Schedule or in
the Proxy Statement, to the best knowledge of the Company, its directors,
director nominees, executive officers or the employees of the Company named in
Schedule I, none of their associates beneficially owns, directly or indirectly,
any securities of the Company. The Company owns all of the capital stock of its
subsidiary, Visible Computer Supply Corporation, an Illinois corporation.
Other than as disclosed in this Schedule and in the Proxy Statement, to the
knowledge of the Company, none of the Company, any of its directors, director
nominees, executive officers or the employees of the Company named in Schedule I
has any substantial interest, direct or indirect, by security holdings or
otherwise, in any matter to be acted upon at the Annual Meeting.
Other than as disclosed in this Schedule and in the Proxy Statement, to the
knowledge of the Company, none of the Company, any of its directors, director
nominees, executive officers or the employees of the Company named in Schedule I
is, or has been within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
Other than as set forth in this Schedule or in the Proxy Statement, to the
knowledge of the Company, none of the Company, any of its directors, director
nominees, executive officers or the employees of the Company named in Schedule
I, or any of their associates, has had or will have a direct or indirect
material interest in any transaction or series of similar transactions since the
beginning of the Company's last fiscal year or any currently proposed
transactions, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party in which the amount involved exceeds
$60,000.
Other than as set forth in this Schedule and in the Proxy Statement, to the
knowledge of the Company, none of the Company, any of its directors, director
nominees, executive officers or the employees of the Company named in Schedule
I, or any of their associates, has any arrangements or understandings with any
person with respect to any future employment by the Company or its affiliates or
with respect to any future transactions to which the Company or any of its
affiliates will or may be a party.
II-3
<PAGE>
SCHEDULE III
INFORMATION CONCERNING GOLDMAN, SACHS & CO.
The Company has retained Goldman Sachs to act as its financial advisor in
connection with the transactions described in the Proxy Statement. Goldman Sachs
from time to time also execute routine brokerage transactions for the account of
the Company's Profit Sharing and Retirement Trust.
Goldman Sachs are principally engaged as a partnership in furnishing a full
range of investment banking and brokerage services for institutional and
individual clients. Goldman Sachs do not admit that they or any of their
partners, directors, officers or employees is a "participant," as defined in
Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended,
by the Securities and Exchange Commission ("Schedule 14A"), in the solicitation
to which the Proxy Statement relates or that such Schedule 14A requires the
disclosure in the Proxy Statement or this Schedule of certain information
concerning Goldman Sachs.
The following partners and employees (the "Individuals") of Goldman Sachs
may engage in solicitation activities in connection with the solicitation to
which the Proxy Statement relates (and to the extent that any such Individual
does, in fact, engage in such solicitation activities, any such Individual would
thereby become a "participant," as defined in Schedule 14A):
<TABLE>
<CAPTION>
NAME POSITION
- ----------------------- ----------------
<S> <C>
Cody J Smith Partner
Mark F. Dzialga Vice President
Frederick P. Wich, Jr. Vice President
</TABLE>
Each of the Individuals is engaged in the investment banking business at
Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 other than
Frederick P. Wich, Jr., who engages in the business at Goldman, Sachs & Co.,
4900 Sears Tower, Chicago, Illinois 60606, and is either a general partner or is
employed by Goldman Sachs in the capacity listed beside his or her name.
As of September 13, 1996, Goldman Sachs did not beneficially own any shares
of Common Stock, and owned of record 2,050,570 shares of Common Stock for
customer accounts. In the normal course of their business, Goldman Sachs
regularly buy and sell securities, including the Company's securities, for their
own account and for the accounts of their customers, which transactions may
result from time to time in Goldman Sachs having a net "long" or net "short"
position in the Company's securities or option contracts in the Company's
securities. A list of all securities of the Company bought and sold by Goldman
Sachs for their own account over the last two years is set forth on Schedule IV.
It is impracticable, however, owing to the volume of such transactions, to list
each transaction for the accounts of customers involving the Company's
securities for the past two years for the purpose of the Proxy Statement.
None of the Individuals owned of record or beneficially any of the Company's
securities at September 13, 1996. None of the Individuals purchased or sold for
their own account securities of any class of the Company within the past two
years.
To the knowledge of the Company, none of the Individuals own of record any
securities of the Company which are not also beneficially owned by them nor do
they beneficially own, directly or indirectly, any securities of any parent or
subsidiary of the Company.
In the normal course of their business, Goldman Sachs finance the securities
positions of Goldman Sachs by bank and other borrowings and repurchase and
securities borrowing transactions. To the knowledge of the Company, none of such
borrowings were intended specifically for the purpose of purchasing securities
of the Company.
Except as set forth below or as disclosed elsewhere in this Schedule or the
Proxy Statement, and except for customary arrangements with respect to
securities of the Company held by Goldman Sachs for the accounts of their
customers, to the knowledge of the Company, none of the Individuals, Goldman
Sachs or any associate of such persons is or has been, within the past year, a
party to any contract, arrangement or understanding with any person with respect
to any securities of the Company, including, but not limited to, joint ventures,
loan or option
III-1
<PAGE>
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies. Except
as set forth below or as disclosed elsewhere in this Schedule or the Proxy
Statement, to the knowledge of the Company, none of the Individuals, Goldman
Sachs or any associate of such persons has any arrangement or understanding with
any person with respect to any future employment by the Company or its
affiliates or any future transactions to which the Company or any of its
affiliates will or may be a party, nor any material interest, direct or
indirect, in any transaction which has occurred since August 1, 1995 or any
currently proposed transaction, or series of similar transactions, to which the
Company or any of its affiliates was or is to be a party and in which the amount
involved exceeds $60,000.
III-2
<PAGE>
SCHEDULE IV
TRADING HISTORY OF GOLDMAN, SACHS & CO. (FOR THEIR OWN ACCOUNT)*
COMMON SHARES
Shares Purchased (Trade Date)
1996: 9700 (6/19)
1995: 16800 (1/17); 1100 (3/16); 42400 (3/20); 3200 (7/11); 600 (7/28); 300
(8/02); 500 (8/21); 500 (9/11); 4200 (10/18)
1994: 9400 (3/18); 1300 (6/15); 14750 (10/06); 523 (10/07); 377 (12/01); 5900
(12/06)
Shares Sold (Trade Date)
1996: 300 (6/21); 1000 (6/24); 1800 (6/28); 4800 (7/2); 1800 (7/3)
1995: 200 (1/11); 200 (1/13); 400 (1/16); 2000 (1/23); 2200 (1/30); 500 (2/08);
1400 (2/21); 500 (3/02); 900 (3/06); 2200 (3/09); 3300 (3/10); 24600 (4/13);
3100 (4/17); 3200 (6/26); 6100 (7/25)
1994: 400 (1/18); 300 (1/19); 900 (1/28); 200 (3/15); 9400 (3/18); 800 (4/28);
800 (5/06); 100 (6/17); 3200 (9/30); 5132 (10/07); 2277 (10/10); 377 (12/01);
400 (12/16); 100 (12/22); 700 (12/27); 200 (12/28); 1200 (12/29); 500 (12/30)
OPTIONS
Options Purchased (Trade Date)
1996: 400 (6/28)
1995: none
1994: 322 (6/15); 4000 (9/09); 3000 (9/12)
Options Sold (Trade Date)
1996: 400 (6/28)
1995: none
1994: 3100 (6/15); 3000 (6/16); 600 (6/17); 300 (9/16)
- ------------------------
*Transactions not adjusted to reflect two-for-one stock split distributed on
July 26, 1996.
IV-1
<PAGE>
IMPORTANT
Your proxy is important. No matter how many shares of Common Stock you own,
please give the Company your proxy "FOR" the election of your Board's nominees
for director and "AGAINST" the Wyser-Pratte Proposals by signing, dating and
returning the Company's WHITE proxy card today in the postage prepaid envelope
provided.
DO NOT RETURN ANY GOLD PROXY CARDS
THAT YOU MAY HAVE RECEIVED FROM MR. WYSER-PRATTE.
If you have already submitted a proxy to Mr. Wyser-Pratte for the Annual
Meeting, you may change your vote to a vote "FOR" the election of your Board's
nominees and "AGAINST" the Wyser-Pratte Proposals by signing, dating and
returning the Company's WHITE proxy card, which must be dated after any proxy
you may have submitted to Mr. Wyser-Pratte. Only your latest dated proxy for the
Annual Meeting will count at the meeting.
If any of your shares of Common Stock are held in the name of a brokerage
firm, bank, bank nominee or other institution, only it can vote such shares and
only upon receipt of your specific instructions. Accordingly, please contact the
person responsible for your account and instruct that person to execute the
Company's WHITE proxy card as soon as possible.
If you have any questions or require any additional information or
assistance, please contact our proxy solicitor:
MORROW & CO., INC.
CALL TOLL FREE: (800) 662-5200
<PAGE>
[LOGO]
WALLACE COMPUTER SERVICES, INC.
PROXY CARD
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 6, 1996.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints T. Dimitriou and W. N. Lane III,
and each of them, true and lawful agents and proxies of the undersigned, with
full power of substitution, to represent the undersigned and to vote all shares
of stock which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of WALLACE COMPUTER SERVICES, INC. (the "Company") to be held on
November 6, 1996, and at any and all adjournments and postponements thereof, on
all matters before such meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. HOWEVER, IF NO
VOTE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION AS DIRECTORS
OF THE NOMINEES LISTED ON THE REVERSE SIDE; "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS;
"AGAINST" MR. WYSER-PRATTE'S PROPOSAL TO AMEND THE COMPANY'S BYLAWS TO ELECT
NOT TO BE GOVERNED BY SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
(THE "BUSINESS COMBINATION PROPOSAL"); AND "AGAINST" MR. WYSER-PRATTE'S
PROPOSAL TO AMEND THE COMPANY'S BYLAWS TO REQUIRE THE WALLACE BOARD TO
TERMINATE DEFENSIVE ACTIONS FOLLOWING A CASH TENDER OFFER FOR ALL OF THE
OUTSTANDING CAPITAL STOCK OF THE COMPANY UNLESS APPROVED BY A STOCKHOLDER
VOTE (THE "TENDER OFFER PROPOSAL"); ALL OF WHICH MATTERS ARE MORE FULLY
DESCRIBED IN THE ANNUAL MEETING PROXY STATEMENT OF WHICH THE UNDERSIGNED
STOCKHOLDER ACKNOWLEDGES RECEIPT.
THIS PROXY GRANTS DISCRETIONARY AUTHORITY (1) TO VOTE FOR A SUBSTITUTE NOMINEE
OF THE BOARD OF DIRECTORS IF ANY NOMINEE FOR DIRECTOR LISTED ON THE REVERSE SIDE
IS UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE AS A DIRECTOR (UNLESS
AUTHORITY TO VOTE FOR ALL NOMINEES OR FOR THE PARTICULAR NOMINEE WHO HAS CEASED
TO BE A CANDIDATE IS WITHHELD), AND (2) TO VOTE IN ACCORDANCE WITH THE BEST
JUDGMENT OF THE NAMED PROXIES ON OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
PLEASE VOTE, SIGN AND DATE THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF WALLACE COMPUTER
SERVICES, INC.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND "AGAINST" PROPOSALS 3 AND 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
FOR ALL
FOR WITHHELD EXCEPT
1. Election of Directors: / / / / / /
Robert J. Cronin,
Richard F. Doyle and
Neele E. Stearns, Jr.
If you do not wish your shares voted "FOR" a particular nominee or nominees,
mark the "For All Except" box and strike a line through the nominee's name(s).
Your shares will be voted for the remaining nominee(s).
FOR AGAINST ABSTAIN
2. Ratification of Appointment of Arthur / / / / / /
Andersen LLP as Independent Public
Accountants
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSALS 3 AND 4.
FOR AGAINST ABSTAIN
3. Mr. Wyser-Pratte's Business / / / / / /
Combination Proposal
4. Mr. Wyser-Pratte's Tender Offer
Proposal / / / / / /
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature ___________________________Title___________________Date______________
Signature ___________________________Title___________________Date______________
Please sign this proxy exactly as your name appears hereon. Joint owners should
each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign, and where more than one name appears, a majority
should sign. If a corporation, the signature should be that of an authorized
officer who should state his or her title.
- --------------------------------------------------------------------------------
