<PAGE> 1
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 (AMENDMENT NO. )
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.
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(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
- --------------------------------------------------------------------------------
[ ] 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:
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(4) Date filed:
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<PAGE> 2
[WALLACE LOGO]
October 8, 1999
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 3, 1999
------------------------------
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 3,
1999. The meeting will be held at the Company's corporate headquarters, 2275
Cabot Drive, Lisle, Illinois 60532 at 10:00 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 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 proxy card in the postage prepaid envelope
provided.
At the Annual Meeting, stockholders will consider and vote upon (i) the
election of three directors to hold office for a three year term, (ii) to
approve an amendment to the 1997 Stock Incentive Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 2,000,000 shares,
(iii) the ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 2000, and (iv) any
other business that may properly come before the Annual Meeting. Your Board of
Directors unanimously recommends a vote "FOR" each of these proposals.
We remain committed to acting in the best interests of you, our
stockholders, and your Company. Please feel free to call us or our proxy
solicitor, Morrow & Co., Inc., if you have any questions. Our phone number is
(630) 588-5395, and the phone number of Morrow & Co., Inc. is (800) 662-5200.
Sincerely,
/s/ BOB CRONIN /s/ MIKE DUFFIELD
BOB CRONIN MIKE DUFFIELD
Chairman and CEO President and COO
IMPORTANT
Your vote is important. Please take a moment to sign, date and promptly
mail your proxy card in the postage prepaid envelope provided. 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> 3
[WALLACE LOGO]
------------------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
------------------------------
TO THE STOCKHOLDERS OF
WALLACE COMPUTER SERVICES, INC.:
Notice is hereby given that the 1999 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 3, 1999, at 10:00 a.m., for the following purposes:
1. To elect three directors to hold office for a three year term;
2. To approve an amendment to the 1997 Stock Incentive Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by
2,000,000 shares;
3. 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 2000; and
4. To transact such other business as may properly come before such Annual
Meeting.
The Board of Directors has fixed the close of business on September 20,
1999 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the 1999 Annual Meeting and at any adjournment or
postponement thereof.
It is important that your shares be voted at the 1999 Annual Meeting.
Whether or not you expect to attend, you are urged to sign and date the
accompanying proxy card and promptly return it to the Company in the
accompanying postage prepaid envelope.
By Order of the Board of Directors
/s/ Steve Carson
STEVE CARSON
Secretary
Lisle, Illinois
October 8, 1999
<PAGE> 4
WALLACE COMPUTER SERVICES, INC.
2275 CABOT DRIVE
LISLE, ILLINOIS 60532
------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 3, 1999
------------------------------
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 3, 1999, and at any and all adjournments or postponements
thereof (the "Annual Meeting"). The Board of Directors has fixed the close of
business on September 20, 1999 as the record date (the "Record Date") for
determining the stockholders entitled to notice of, and to vote at, the Annual
Meeting. This Proxy Statement and the accompanying proxy card are first being
mailed to stockholders on or about October 8, 1999.
At the Annual Meeting, stockholders will consider and vote upon (i) the
election of three directors to hold office for a three year term, (ii) to
approve an amendment to the 1997 Stock Incentive Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 2,000,000 shares,
(iii) the ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 2000, and (iv) any
other business that may properly come before the Annual Meeting.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF
THE PROPOSALS.
Your vote is important, regardless of how many shares you own. Please sign
and date the accompanying proxy card and mail it in the enclosed postage prepaid
envelope as promptly as possible, whether or not you expect to attend the
meeting.
VOTING PROCEDURES AND SOLICITATION
On the Record Date, there were 42,423,421 shares of Common Stock
outstanding. The holders of 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 proxies distributed
by your Board will be voted "FOR" each of the 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).
With respect to the election of directors, a stockholder may vote for one
or all of the nominees or withhold authority with respect to any or all of the
nominees. The Company's By-laws 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.
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With respect to the proposals to amend the 1997 Stock Incentive Plan and to
ratify the appointment of Arthur Andersen LLP, a stockholder may vote for or
against the proposal or abstain from voting. Pursuant to the Company's By-laws
and Delaware law, approval of this proposal requires the affirmative vote of
stockholders holding a majority of the shares of Common Stock that are present
in person or represented by proxy and entitled to vote on the subject matter.
Consequently, an abstention or a broker non-vote on the proposal will have the
effect of a negative vote.
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. for solicitation and advisory services in connection with the
solicitation, for which Morrow is to receive a fee estimated at $7,500, together
with reimbursement for its reasonable out-of-pocket expenses. The Company has
also agreed to indemnify Morrow against certain liabilities and expenses. The
cost of soliciting proxies on behalf of the Board of Directors for the Annual
Meeting is being borne by the Company.
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 properly 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 in their discretion in accordance with their best judgment.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes and effective November
3, 1999 will consist of seven directors, six 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 two directors currently
expire at the 2000 Annual Meeting and the terms of two directors currently
expire at the 2001 Annual Meeting. At this year's Annual Meeting, three
directors will be elected for a term expiring at the 2002 Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the 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, Neele E. Stearns,
Jr., and Michael T. Riordan for election as directors at the Annual Meeting to
serve as directors until the 2002 Annual Meeting. Each of the Board's nominees
for director has substantial experience serving as directors and executive
officers. Each of the Board's nominees has 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. Additionally, the Board has voted to increase the size of the Board
to eight members with the additional vacancy being in the class expiring at the
2001 Annual Meeting. No candidate is being nominated at this time to fill this
newly created vacancy.
Pursuant to the Company's director age policy, Mr. Doyle, who will reach
age 72 on February 4, 2000, will serve as a director only until the 1999 Annual
Meeting.
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THE BOARD'S NOMINEES
The following sets forth information on your Board's nominees for election
as directors at the Annual Meeting:
<TABLE>
<CAPTION>
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 (54) Chairman and CEO of the Company since November 11, 1992 Executive (Chairman)
August 1, 1998. President and Chief
Executive Officer of the Company from
November 11, 1992 until August 1, 1998.
Previously held various sales management
positions within the Company. (1)
Neele E. Stearns, Jr. Former President and Chief Executive November 6, 1996 Audit, Executive and
(63) Officer of CC Industries, Inc., a Governance &
holding company with operations in Nominating (Chairman)
envelope manufacturing, home furnishings
and casual furniture, and real estate
development and management. Director of
Wallace from 1990 to 1995.(2)
Michael T. Riordan (49) Former President and COO of Fort James
Corporation, a manufacturer of paper and
paper products, from August 1997 to
August 1998. Previously held various
management positions, including
Chairman, President and CEO, with Fort
Howard Corporation.(3)
DIRECTORS WITH TERMS EXPIRING AT THE 2000 ANNUAL MEETING
William N. Lane III (56) Chairman, President and Chief Executive January 17, 1990 Compensation
Officer of Lane Industries, Inc., a (Chairman) and
holding company with operations in Executive
office machines, hotels, ranching and
radio broadcasting. (4)
John C. Pope (50) Chairman of MotivePower Industries, July 8, 1996 Compensation and
Inc., a manufacturer of locomotives and Governance &
locomotive components, since 1995.(5) Nominating
DIRECTORS WITH TERMS EXPIRING AT THE 2001 ANNUAL MEETING
Bettye Martin Musham President and Chief Executive Officer of November 4, 1998 Audit and Governance
(66) Gear Holdings, Inc., a designer and & Nominating
distributor of apparel and related
products, since 1977.(6)
Andrew J. McKenna, Jr. President and Chief Operating Officer of November 4, 1998 Compensation
(42) Schwarz Paper Company, Inc., a provider
of packaging products and distribution
services, since May 1996. Vice President
of Marketing with Schwarz from 1988 to
1996.
</TABLE>
- ------------------------------
(1) Mr. Cronin is also a director of Landauer Corporation.
(2) Mr. Stearns is also a director of Maytag Corporation.
(3) Mr. Riordan is also a director of The Dial Corporation and American Medical
Security Group, Inc.
(4) Mr. Lane is also a director of General Binding Corporation.
(5) Mr. Pope is also a director of Air Canada, Dollar Thrifty Automotive Group,
Inc., Federal-Mogul Corp. Per Se Technologies, Inc., MotivePower Industries,
Inc., and Waste Management, Inc.
(6) Ms. Martin Musham is also a director of Brunswick Corporation and Footstar,
Inc.
It is the policy of the Company that no person may serve as a director past
the month in which he or she reaches age 70, except that any person who was a
director on November 7, 1984 (which includes Mr. Doyle), may serve as a director
through the month in which he reaches age 72. The Board of Directors may, in its
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discretion, allow a director to continue to serve after the month in which he or
she reaches age 70 or 72, as the case may be, until the next Annual Meeting.
The Company's By-laws permit nominations for election of directors to be
made by the Board of Directors, by a nominating committee of the Board of
Directors or by any stockholder having the right to vote generally in the
election of directors. However, the Company's By-laws provide that, in the case
of any nomination by a stockholder at an annual meeting, written notice
(satisfying certain requirements specified in the Company's By-laws) 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 Company's By-laws.
MEETINGS OF THE BOARD AND ITS COMMITTEES
During fiscal year 1999, the Board of Directors met thirteen times, the
Audit Committee met two times, the Compensation Committee met two times and the
Governance and Nominating Committee met three times. The Executive Committee did
not meet during fiscal year 1999. Each of the incumbent directors attended at
least 75% of the aggregate of all meetings of the Board of Directors and its
Committees on which such director served during fiscal year 1999.
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 By-laws.
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 and compensation of the Company's management
employees as specified in the Company's By-laws. Members of the Compensation
Committee also serve as the Salary, Bonus and Option Committee under the
Company's executive incentive plans and as the committee of the Company's Board
of Directors that administers the Company's 1997 Stock Incentive Plan.
The Governance and Nominating Committee, consisting of three non-employee
directors, is responsible for recommending to the Board of Directors nominees
for election at the annual meetings or to fill vacancies on the Board;
succession planning with respect to executive management; and certain other
matters concerning the governance of the Company.
The Executive Committee is authorized, subject to certain limitations
imposed by law and in the Company's By-laws, 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 $25,000, 40% of which is
payable in Company Common Stock. Each director also receives a fee of $1,000
plus expenses for each meeting of the Board of Directors and its Committees that
the director attends. The chairperson of a Board Committee will receive an
additional $2,000 per year.
The Company established the Directors Retainer Fee Plan whereby the
Company's directors are eligible to receive their annual director's fee,
chairperson fees, and meeting fees in Company Common Stock in lieu of cash. The
Company will use the fees otherwise payable to the director to purchase treasury
shares. Treasury shares will be purchased from the Company at the closing market
price of the stock, on the date that annual
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fees or quarterly retainer installments would otherwise be payable. At the
election of the director, the purchased shares will either be distributed
annually or deferred until after retirement.
The Company established a Deferred Compensation/Capital Accumulation Plan
for Directors for each of calendar years 1993 through 1999 in which all
incumbent directors were eligible to participate. Each participating director
was allowed to elect to defer up to 100% of his or her annual director's fee,
chairperson fee and meeting fees not otherwise deferred. Subject to certain
conditions, the amount of fees deferred bears interest, compounded annually, at
12% per annum. A participating director is entitled to receive payment of the
undistributed amount of such director's 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 the director's deferral account, the director will receive an interim
distribution from the deferral account in both the seventh and the eighth years
following the deferral year in an amount equal to the amount of fees that the
director deferred.
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) will be eligible
to receive benefits when they complete five years of service as outside
directors. The annual retirement benefit payable to each participating director
is equal to the annual director's fee in effect on his or her 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 or her
retirement date and the period of time during which the director 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 1999, the Company has accrued the estimated amount of
retirement benefits under the Retirement Plan.
Pursuant to the 1997 Stock Incentive Plan (the "1997 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. 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 Plan).
ITEM 2
APPROVAL OF AN AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
On September 8, 1999, the Board of Directors of the Company adopted an
amendment to the 1997 Stock Incentive Plan (the "Amendment") to increase the
number of shares of Common Stock reserved for issuance under the 1997 Plan by
2,000,000 shares. As of September 20, 1999, without giving effect to this
proposed increase in shares, 2,000,000 shares had been reserved for issuance
under the 1997 Plan, of which, a total of approximately 133,000 shares remained
available for future grants.
At the Annual Meeting, the stockholders are being asked to approve the
Amendment, thereby increasing the number of shares of Common Stock reserved
under the 1997 Plan by 2,000,000 shares.
DESCRIPTION OF THE 1997 PLAN
Administration. The 1997 Plan is administered by a committee of the Board
of Directors (the "Committee") consisting of not fewer than two directors, each
of whom shall be a "Non-Employee Director"
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<PAGE> 9
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, and an "outside director" within the meaning of section 162(m) of the
Code. Subject to the express provisions of the 1997 Plan, and except for options
granted to non-employee directors, the Committee has the authority to (i) select
eligible officers and other key employees to receive grants of options and (ii)
determine all of the terms and conditions of each grant. Each option will be
evidenced by a written agreement containing such provisions not inconsistent
with the 1997 Plan as the Committee shall approve. The Committee also has
authority to prescribe rules and regulations for administering the 1997 Plan and
to decide questions of interpretation or application of any provision of the
1997 Plan.
Available Shares. Under the 1997 Plan, 4,000,000 shares of Common Stock are
available for grants of options (which is an increase of 2,000,000 shares from
that previously authorized by stockholders), subject to adjustment in the event
of a stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distributions to holders of
Common Stock other than a regular cash dividend. In general, shares subject to
an option that expires or terminates unexercised or is cancelled or forfeited
would again be available for awards under the 1997 Plan. The maximum number of
shares of Common Stock with respect to which options may be granted during any
calendar year to any participant in the 1997 Plan is 200,000, subject to
adjustment as described above.
Effective Date, Termination and Amendment. The 1997 Plan was effective as
of September 4, 1996, the date of its approval by the Board of Directors, and
will terminate 10 years thereafter, unless terminated earlier by the Board of
Directors. The Board of Directors may amend the 1997 Plan at any time except
that, without the approval of the stockholders of the Company, no amendment may,
among other things (i) increase the number of shares of Common Stock available
under the 1997 Plan, (ii) reduce the minimum purchase price of a share of Common
Stock subject to an option or (iii) extend the term of the 1997 Plan.
Non-Qualified Stock Options. The period for the exercise of a non-qualified
stock option and the option exercise price will be determined by the Committee,
provided that the option exercise price per share may not be less than the fair
market value of a share of Common Stock on the date of grant of such option. In
the event of termination of employment of a holder of a non-qualified stock
option for any reason other than disability, retirement on or after age 65 (or,
with approval of the Company, early retirement under a retirement plan of the
Company) or death, unless otherwise specified in the agreement relating to such
option, such non-qualified stock option will be exercisable only to the extent
that such option is exercisable on the effective date of such termination and
may thereafter be exercised after the date of such termination until the earlier
of (i) the date which is three months after the date of such termination (or
such other period as set forth in the agreement relating to such option) and
(ii) the expiration of such option. In the event of termination of employment by
reason of disability, retirement on or after age 65 (or, with the approval of
the Company, early retirement under a retirement plan of the Company) or death,
unless otherwise specified in the agreement relating to such option, each
non-qualified stock option held by such holder will be exercisable only to the
extent that such option is exercisable on the effective date of such termination
and may thereafter be exercised by such holder or such holder's executor,
administrator or similar person until the earlier of (i) the date which is one
year in the case of disability or death, or five years in the case of
retirement, after the date of such termination (or such other period as set
forth in the agreement relating to such option) and (ii) the expiration of such
option. If the holder of a non-qualified stock option dies during the period of
exercisability of such option following termination of employment, unless
otherwise specified in the agreement relating to such option, such non-qualified
stock option will be exercisable only to the extent that such option is
exercisable on the date of such holder's death and may thereafter be exercised
until the earlier of (i) the date which is one year after the date of such death
(or such other period as set forth in the agreement relating to such option) and
(ii) the expiration of such option.
Incentive Stock Options. No incentive stock option will be exercisable more
than 10 years after its date of grant, and in the case of a recipient of an
incentive stock option who owns more than 10 percent of the voting power of all
shares of capital stock of the Company (a "ten percent holder"), the option must
be exercised within five years of its date of grant. The option exercise price
of an incentive stock option will not be less than the fair market value of the
Common Stock on the date of grant of such option and, in the case of a
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<PAGE> 10
recipient of an incentive stock option who is a ten percent holder, the option
exercise price will be the price required by the Code, currently 110% of fair
market value. To the extent that the aggregate fair market value of Common Stock
with respect to which an incentive stock option is exercisable for the first
time by an individual during a calendar year exceeds $100,000, such option is
treated as a non-qualified stock option. In the event of termination of
employment of a holder of an incentive stock option by reason of permanent and
total disability (as defined in section 22(e)(3) of the Code), unless otherwise
specified in the agreement relating to such option, such option will be
exercisable only to the extent exercisable on the date of such termination of
employment and may thereafter be exercised until the earlier of (i) the date
which is one year (or such shorter period as set forth in the agreement relating
to such option) after such termination and (ii) the expiration of such incentive
stock option. In the event of termination of employment by reason of death,
unless otherwise specified in the agreement relating to such option, each
incentive stock option held by such holder will be exercisable only to the
extent that such option is exercisable on the date of such death and may
thereafter be exercised by such holder's executor, administrator or similar
person until the earlier of (i) the date which is one year after the date of
such death (or such other period as set forth in the agreement relating to such
option) and (ii) the expiration of such option. In the event of termination of
employment for any reason other than permanent and total disability or death,
unless otherwise specified in the agreement relating to such option, each
incentive stock option held by such holder will be exercisable only to the
extent such option is exercisable on the effective date of such termination and
may thereafter be exercised until the earlier of (i) the date which is three
months after such termination and (ii) the expiration of such option. If the
holder of an incentive stock option dies during the period of exercisability of
such option following termination of employment, unless otherwise specified in
the agreement relating to such option, each incentive stock option will be
exercisable only to the extent such option is exercisable on the date of such
holder's death and may thereafter be exercised until the earlier of (i) the date
which is one year after the date of such death (or such shorter period as set
forth in the agreement relating to such option) and (ii) the expiration of such
option.
Performance Measures. Under the 1997 Plan, the exercisability of options
may be subject to the satisfaction of certain performance measures. The
performance measures applicable to a particular option will be determined by the
Committee. Under the 1997 Plan, such performance measures may be one or more of
the following: Common Stock value, earnings per share, return to shareholders
(including dividends), return on assets, return on equity, earnings of the
Company, revenues, market share, cash flow, cost reduction goals, or any
combination of the foregoing.
Non-Employee Director Options. Pursuant to the 1997 Plan, on the date of
each annual meeting of stockholders (or on the date on which a person is first
elected or begins to serve as a non-employee director (other than by reason of
termination of employment) if such date is other than the date of an annual
meeting of stockholders), 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. 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. Each non-employee director option
will expire 10 years after its date of grant. If the holder of a non-employee
director option ceases to be a director of the Company for any reason other than
disability, retirement on or after age 65 or death, each non-employee director
option held by such holder will be exercisable only to the extent that such
option is exercisable on the effective date of such holder ceasing to be a
director of the Company and may thereafter be exercised until the earlier of (i)
the date which is three months after the date of such holder ceasing to be a
director of the Company and (ii) the expiration of such option. If the holder of
a non-employee director option ceases to be a director of the Company by reason
of disability, retirement on or after age 65 or death, each non-employee
director option held by such holder will be exercisable only to the extent that
such option is exercisable on the effective date of such holder ceasing to be a
director of the Company and may thereafter be exercised by such holder or such
holder's executor, administrator or similar person until the earlier of (i) the
date which is one year in the case of disability or death, or five years in the
case of retirement,
7
<PAGE> 11
after the date of such holder ceasing to be a director of the Company and (ii)
the expiration of such option. If the holder of a non-employee director option
dies during the period of exercisability of such option following such holder's
ceasing to be a director of the Company, each non-employee director option will
be exercisable only to the extent that such option is exercisable on the date of
such holder's death and may thereafter be exercised until the earlier of (i) the
date which is one year after the date of such death and (ii) the expiration of
such option.
Material Change. In the event of a Material Change (as such term is defined
in the 1997 Plan), all options will be cashed-out by the Company except, in the
case of a merger or similar transaction in which the stockholders receive
publicly traded common stock, all outstanding options will become exercisable in
full and each option will represent a right to acquire the appropriate number of
shares of common stock received in the merger or similar transaction. A
"Material Change," as defined in the 1997 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 1997 Plan.
Transferability of Options. Pursuant to the 1997 Plan, no option will be
transferable other than (i) by will, the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company or (ii)
as set forth in the agreement relating to such option.
Exercise of Options. Payment for shares of Common Stock purchased upon the
exercise of an option granted pursuant to the 1997 Plan shall be made as set
forth in the agreement relating to such option. Such agreement may provide for
payment in cash, by delivery of shares of Common Stock or by a broker-dealer
acceptable to the Company.
Tax Withholding. The Company may require the holder of any option granted
pursuant to the 1997 Plan to pay any federal, state, local or other taxes which
may be required to be withheld by the Company in connection with such option.
The agreement relating to such option may provide that (i) the Company may
withhold shares of Common Stock to pay such taxes or (ii) such holder may
satisfy such obligation by a cash payment, by the delivery of shares of Common
Stock, by authorizing the Company to withhold shares of Common Stock or by
payment by a broker-dealer acceptable to the Company.
Federal Income Tax Consequences. The following is a brief summary of the
U.S. federal income tax consequences of awards made under the 1997 Plan.
A participant will not recognize any income upon the grant of a stock
option. A participant will recognize compensation taxable as ordinary income
(and, except in the case of a non-employee director option, subject to income
tax withholding) upon exercise of a non-qualified stock option, including a
non-employee director option, equal to the excess of the fair market value of
the shares purchased over their exercise price, and the Company will be entitled
to a corresponding deduction. A participant will not recognize income (except
for purposes of the alternative minimum tax) upon exercise of an incentive stock
option. If the shares acquired by exercise of an incentive stock option are held
for the longer of two years from the date the option was granted and one year
from the date it was exercised, any gain or loss arising from a subsequent
disposition of such shares will be taxed as long-term capital gain or loss, and
the Company will not be entitled to any deduction. If, however, such shares are
disposed of within the above-described period, then in the year of such
disposition the participant will recognize compensation taxable as ordinary
income equal to the excess of the lesser of (i) the amount realized upon such
disposition and (ii) the fair market value of such shares on the date of
exercise over the exercise price, and the Company will be entitled to a
corresponding deduction.
Section 162(m) of the Code generally limits to $1 million the amount that a
publicly held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's chief executive officer and its four most
highly compensated officers. However, certain types of compensation paid to such
executives are not subject to the $1 million deduction limit. Based on
regulations published by the Internal Revenue Service,
8
<PAGE> 12
compensation under the 1997 Plan attributable to options granted thereunder is
not expected to be subject to the $1 million deduction limit under section
162(m) of the Code.
PARTICIPATION IN THE 1997 PLAN
Option grants for fiscal year 1999 to the named executive officers of the
Company are set forth in the table to this Proxy Statement entitled "Option
Grants For Last Fiscal Year". In addition, on the date of each annual meeting of
stockholders, each non-employee director is automatically granted an option to
purchase 2,000 shares of Common Stock at an exercise price per share equal to
the fair market value of a share of Common Stock on the date of grant of such
option. Grants to employees under the 1997 Plan are made at the discretion of
the Compensation Committee and future Grants under the 1997 Plan have not yet
been determined.
ITEM 3
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 2000.
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.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation and certain other
components of compensation for fiscal years 1999, 1998 and 1997 for the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company for the fiscal year ended July 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- ----------------------------
AWARDS PAYOUTS
---------- ---------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) OPTIONS(2) LTIP PAYOUTS(3) (4)(5)
- --------------------------------- ------ --------- -------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cronin 1999 $566,667 $258,750 45,000 $222,000 $115,638
Chairman and Chief 1998 513,942 0 56,250 234,000 104,359
Executive Officer 1997 440,040 121,500 110,000 309,000 105,334
Michael O. Duffield 1999 342,500 155,250 75,000 167,000 60,621
President and Chief 1998 276,441 0 25,000 176,000 62,422
Operating Officer 1997 249,960 72,421 55,000 232,000 36,344
Michael T. Leatherman 1999 310,000 117,000 60,000 167,000 62,281
Executive Vice President and 1998 245,655 0 25,000 176,000 58,240
Chief Financial Officer 1997 215,524 61,488 55,000 193,000 34,711
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- ----------------------------
AWARDS PAYOUTS
---------- ---------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) OPTIONS(2) LTIP PAYOUTS(3) (4)(5)
- --------------------------------- ------ --------- -------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne E. Richter 1999 182,500 130,625 25,000 0 24,627
Senior Vice President- 1998 168,391 61,500 10,000 0 25,840
Forms & Labels Segment 1997 150,270 34,133 22,000 19,000 19,428
Thomas G. Brooker 1999 234,705 75,375 10,000 185,000 32,713
Vice President-Sales 1998 188,178 42,407 10,000 110,000 35,279
1997 169,101 47,383 22,000 79,000 22,996
</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 1999, 1998 and 1997 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 1999, 1998
and 1997 under the 1997 Stock Incentive Plan. Regular Stock options granted
to each executive officer for fiscal year 1999 were approved and granted by
the Committee on September 22, 1999. A special option grant was made to
Mssrs. Duffield and Leatherman on May 7, 1999.
(3) Indicates LTIP compensation paid on September 16, 1999 for awards made
during fiscal year 1997, September 16, 1998 for awards made during fiscal
year 1996 and September 16, 1997 for awards made during fiscal year 1995
pursuant to the Company's Long-Term Performance Plan. The Company's Long-
Term Performance Plan was discontinued in fiscal year 1997. At the time that
the Long-Term Performance Plan was discontinued, the awards for 1996 and
1997 were fixed at the then current level.
(4) 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 Plans 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 AND SUPPLEMENTAL PROFIT ABOVE-MARKET
FISCAL YEAR 1999 RETIREMENT PLAN SHARING PLAN ACCRUED INTEREST
- ---------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Mr. Cronin $ 9,727 $28,185 $39,142
Mr. Duffield 15,164 22,748 22,709
Mr. Leatherman 15,164 21,120 25,997
Mr. Richter 13,353 3,176 8,098
Mr. Brooker 13,353 11,481 7,879
</TABLE>
<TABLE>
<CAPTION>
PROFIT SHARING AND SUPPLEMENTAL PROFIT ABOVE-MARKET
FISCAL YEAR 1998 RETIREMENT PLAN SHARING PLAN ACCRUED INTEREST
- ---------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Mr. Cronin $19,631 $29,337 $25,391
Mr. Duffield 19,631 29,326 13,465
Mr. Leatherman 17,176 24,055 17,009
Mr. Richter 17,176 3,188 5,476
Mr. Brooker 17,176 12,991 5,112
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
PROFIT SHARING AND SUPPLEMENTAL PROFIT ABOVE-MARKET
FISCAL YEAR 1997 RETIREMENT PLAN SHARING PLAN ACCRUED INTEREST
- ---------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Mr. Cronin $18,909 $30,445 $17,980
Mr. Duffield 16,536 12,874 6,934
Mr. Leatherman 16,536 7,543 10,632
Mr. Richter 15,752 296 3,380
Mr. Brooker 15,892 4,975 2,129
</TABLE>
(5) Director and meeting fees earned by Mr. Cronin as a director of the Company
were $38,584, $30,000, and $38,000, for fiscal years 1999, 1998 and 1997,
respectively, and are included in All Other Compensation.
OPTION GRANTS FOR FISCAL YEAR 1999
The following table sets forth information with respect to options granted
for fiscal year 1999 to purchase shares of Common Stock under the Company's 1997
Stock Incentive Plan to the five executive officers listed in the Summary
Compensation Table.
OPTION GRANTS FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE GRANT DATE
NAME GRANTED(1) YEAR(2) ($/SH.) EXPIRATION DATE(1) PRESENT VALUE(5)
- ----------------------------- ---------- ------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin 45,000(3) 7.28% $21.56 9/22/09 $312,660
Michael O. Duffield 30,000(4) 4.85% 22.75 5/07/09 220,302
Michael O. Duffield 45,000(3) 7.28% 21.56 9/22/09 312,660
Michael T. Leatherman 30,000(4) 4.85% 22.75 5/07/09 220,302
Michael T. Leatherman 30,000(3) 4.85% 21.56 9/22/09 208,440
Wayne E. Richter 25,000(3) 4.04% 21.56 9/22/09 173,700
Thomas G. Brooker 10,000(3) 1.62% 21.56 9/22/09 69,480
</TABLE>
- ------------------------------
(1) Options generally 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 Committee has the authority to accelerate the
exercisability of an option. Under the terms of the Company's 1997 Stock
Incentive 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.
(2) Based on options to purchase an aggregate of 618,500 shares granted to 113
employees for fiscal year 1999.
(3) Indicates annual options granted to the executive officers on September 22,
1999.
(4) Indicates options granted on May 7, 1999.
(5) 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 5.28 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 Common Stock for the 3 years (36 months) prior to the grant
date; and (d) a dividend rate of $.64 per share, which was the total amount
of dividends paid with respect to a share of Common Stock during the
relevant period.
11
<PAGE> 15
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the exercise in
fiscal year 1999 of options to purchase shares of Common Stock granted under the
Company's Stock Option Plans 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.
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
NUMBER OF OPTIONS AT 7/31/99 AT 7/31/99(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Cronin 12,000 $131,610 160,874 154,249 $774,744 $421,875
Michael O. Duffield 0 0 85,617 103,999 423,432 213,900
Michael T. Leatherman 0 0 36,901 103,999 0 213,900
Wayne E. Richter 0 0 20,001 29,199 0 75,000
Thomas G. Brooker 0 0 18,801 29,199 0 75,000
</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 $23.625 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 30, 1999) over the relevant
exercise price(s).
LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL YEAR 1999
The following table sets forth information with respect to awards made for
fiscal year 1999 under the Company's Performance Share Plan to the five
executive officers named in the Summary Compensation Table.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES, UNITS PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
OR OTHER OTHER PERIOD ------------------------------
NAME RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
- --------------------------------------- ------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin 12,795 10/01/01 0 12,795 25,590
Michael O. Duffield 7,677 10/01/01 0 7,677 15,354
Michael T. Leatherman 6,248 10/01/01 0 6,248 12,496
Wayne E. Richter 3,293 10/01/01 0 3,293 6,586
Thomas G. Brooker 3,071 10/01/01 0 3,071 6,142
</TABLE>
At the 1997 Annual Meeting, the stockholders approved the Performance Share
Plan, the purpose of which was to provide incentive compensation to certain key
employees in a form which aligns the interest of those key employees with the
stockholders. The 1999 Awards under the Performance Share Plan will be
distributed no later than October 1, 2001, unless a Participant makes an
election to defer payment in accordance with the terms of the Performance Share
Plan. Depending on actual results for the three fiscal years 1999, 2000 and
2001, participants could earn awards ranging from zero percent to 200% of the
targeted number of shares. Since awards are payable in shares of Common Stock,
appreciation or depreciation of the market value of the Common Stock during a
three-year performance period would affect the final award value. The
Performance Share Plan is more fully described under COMPENSATION OF EXECUTIVE
OFFICERS- Incentive Bonuses.
12
<PAGE> 16
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS
The Company and Mr. Cronin executed an employment agreement on September 3,
1997, effective as of July 1, 1997, (the "Agreement") which provides that Mr.
Cronin will serve as the Company's Chief Executive Officer through June 30,
2000, with automatic annual extensions, which will then provide for a continuous
three-year term after that date (subject to earlier termination in certain
circumstances as described below).
The Agreement provides for an annual base salary of at least $458,646, plus
annual bonuses that may be awarded to Mr. Cronin under the Company's Annual
Bonus Plan or otherwise. The Agreement calls for a target bonus of 60% of Mr.
Cronin's annual base salary. In addition, Mr. Cronin is eligible to receive
additional benefits under plans that are then in effect for the Company's senior
executives.
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. In lieu of receiving interest on deferred sums,
Mr. Cronin may elect to use deferred amounts to purchase shares of Common Stock
which will be held in a grantor trust for the benefit of Mr. Cronin until
distribution pursuant to a predetermined distribution schedule. Subject to
certain limitations, during the term of the 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, Mr. Cronin and his wife
will be entitled to receive medical insurance benefits, and subject to certain
limitations, reimbursement of all additional medical expenses they may incur
during Mr. Cronin's lifetime. The 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, but to not below 15% of his average monthly
compensation, by 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 and his monthly Social Security benefits (in each case, other than
amounts attributable to his contributions). Subject to certain limitations,
during the term of the Agreement and for a period of two years after the later
to occur of (i) the end of the term of the 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.
Under the Agreement, in the event of Mr. Cronin's voluntary resignation or
termination for cause, he will be entitled to receive compensation and benefits
accrued to date, but shall forfeit any options or other awards not then vested.
In the event of his death or disability, he will be entitled to compensation and
benefits accrued to date and he will be fully vested in any options or other
awards. If Mr. Cronin's employment is terminated by the Company without "cause",
or if he resigns for "good reason" (as such terms are defined in the Agreement),
in addition to compensation and benefits accrued to date and full vesting of any
options and other awards, he will be entitled to receive a pro rata bonus for
the year of termination based upon his then current target annual bonus amount,
continuation for a period of two years of his then current annual base salary
and target annual bonus amount (paid in substantially equal monthly
installments) and of participation in Company employee benefit plans.
The Company has entered into a change of control severance agreement with
Mr. Cronin providing for the payment of compensation and benefits in the event
of termination of employment following a change of control. A Change of Control
is generally defined as: (i) the acquisition by a person, other than the
Company, of 35% or more in voting power of the Company's securities; (ii) 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, (iii) a business combination resulting in the then current
beneficial owners of Common Stock owning less than 65% of the outstanding
shares, (iv) approval of the stockholders of the sale or other disposition of
substantially all of the assets of the Company, or (v) a complete liquidation of
the Company.
13
<PAGE> 17
The change of control agreement will remain in effect for at least three
years following the date of its execution. Thereafter, the agreement will be
extended annually unless the company gives proper notice of its election not to
extend, but will remain in effect for three years following the Change of
Control.
In the event of a Change of Control, 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 Change of Control,
(ii) the Company impedes or otherwise fails to permit Mr. Cronin to exercise
fully and properly his duties and responsibilities, (iii) the Company fails to
pay Mr. Cronin's base salary or award to him an annual bonus when due, (iv) the
Company requires Mr. Cronin to be based more than 50 miles from his current
office, or (v) the Company otherwise fails to comply with the terms of the
change of control severance agreement. Mr. Cronin may also elect to terminate
his services for any reason during the 30 day period following the sixth month
after a Change of Control. In the event the Company terminates Mr. Cronin's
employment or Mr. Cronin elects to terminate his services in such circumstances,
Mr. Cronin will be entitled to a termination payment equal to the sum of all
accrued amounts including a pro rata portion of the target bonus for the then
current year and a Severance Amount equal to three times Mr. Cronin's then
current annual salary and the then current target annual bonus, reduced by any
amounts payable under the Company's Executive Severance Pay Plan. In the event
that 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, excise and
other taxes that may be imposed on Mr. Cronin or his beneficiaries for the
reimbursements described in clause (i) and this clause (ii).
The Company and Mr. Duffield executed an employment agreement on September
8, 1998, which provides that Mr. Duffield will serve as the Company's President
through September 8, 2000, with automatic annual extensions, which will then
provide for a continuous two-year term after that date (subject to earlier
termination in certain circumstances). The agreement provides for an annual base
salary of at least $345,000. All other terms are substantially identical to
those of Mr. Cronin's employment agreement.
The Company has adopted an Executive Severance Pay Plan, in which Mssrs.
Leatherman, Richter, and Brooker 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 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. 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 Employee 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.
Upon any Material Change, (i) the Board of Directors of the Company may
accelerate the vesting of all outstanding unvested options to purchase shares of
Common Stock, (ii) earned benefits would vest early under the Company's
Long-Term Performance Plan, Performance Share Plan and Annual Bonus Plan and
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<PAGE> 18
(iii) earnings would be preserved on benefits accrued under the Company's
Deferred Compensation/Capital Accumulation Plans. The Company's 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
thirty-one days 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
of control or other similar material change with respect to the Company.
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% or 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 following plans and arrangements of the Company
are subject to the Trust: the Deferred Compensation/Capital Accumulation Plans,
the Supplemental Profit Sharing Plan, the Supplemental Retirement Plan, the
Performance Share Plan, the Deferred Executive Incentive Plan, the Long-Term
Performance Plan, Mr. Cronin's and Mr. Duffield's employment and change of
control severance agreements, individual pension arrangements for certain
executive officers and directors and benefits payable to retired directors under
the Retirement Plan for Outside Directors.
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
Chief Executive Officer, defines the Company's compensation philosophy and
objectives and develops 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
Compensation of executive officers for fiscal year 1999 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 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 Performance Share Plan.
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<PAGE> 19
Annual Bonus Plan--The Annual Bonus Plan ("ABP") is a cash bonus plan
pursuant to which the payout is determined based upon a matrix that
measures the level of the expected financial performance and the percentage
of completion an executive achieves on predefined individual performance
objectives. Under the Annual Bonus Plan, executives were targeted to
receive a bonus of 20% to 60% of base salary (Mr. Cronin's fiscal year 1999
target was 60%). The ABP is designed so that a payment will be made only if
the expected financial performance level is reached. ABP awards will vary
from zero, if minimum threshold financial goals are not met, to a maximum
of 2.25 times the target award for specified above-goal performances.
Target awards will range from 20% of base salary for lower level management
positions to 60% of base salary for the Chief Executive Officer. ABP awards
will be paid in a lump sum by October 1 of the fiscal year following the
fiscal year for which performance is measured ("Performance Year"). For
each Performance Year, the Committee will establish one or more individual
performance goals for each participant, including the Chief Executive
Officer, the relative weight to be assigned to each such goal, a specific
target objective or objectives with respect to each such performance goal,
and objective formulae or methods for computing the Individual Performance
Multiplier for each participant on the basis of the extent to which the
individual performance goals are attained. Individual performance goals
will be based upon such objectively determinable business criteria as the
Committee deems appropriate, which may include (but not by way of
limitation) the following criteria as to the Company as a whole or the
particular business unit(s) to which the participant's major
responsibilities relate: (a) productivity and efficiency; (b) cost control;
(c) cash flow; (d) sales revenue; (e) earnings from operations; (f) market
share; (g) assimilation of acquired business; (h) employee development and
retention; (i) quality; and (j) customer satisfaction. Once established,
individual performance goals for a particular Performance Year cannot be
changed.
Performance Share Plan--At the commencement of each performance
period, a target award is established for each participant. The actual
number of Performance Shares to which a participant is entitled at the end
of a performance period, if any, is determined based on a matrix
established by the Committee based on levels of the Company's Invested
Capital and Return on Capital and certain other conditions prescribed by
the Performance Share Plan. Each performance period consists of three
fiscal years of the Company, with a new three-year performance period
beginning on the first day of each fiscal year of the Company during the
term of the Performance Share Plan. For example, fiscal year 1999 was the
first year of the three-year performance period consisting of fiscal years
1999, 2000 and 2001. Awards for each three-year performance period are paid
no later than October 1 following the end of the third fiscal year of such
performance period, unless a Participant makes an election to defer payment
in accordance with the terms of the Performance Share Plan. The established
objectives for Invested Capital and Return on Capital used to determine the
number of Performance Shares payable to a participant under the Performance
Share Plan are based on the Company's strategic plan, which is approved
annually by the Board of Directors. Depending on actual results for the
three fiscal years 1999, 2000 and 2001, participants could earn awards
ranging from zero percent to 200% of the targeted number of Performance
Shares. In no event will a participant's award for a performance period
exceed 50,000 Performance Shares. Since awards are payable in shares of
Common Stock, appreciation or depreciation of the market value of the
Common Stock during a three-year performance period would affect the final
award value. Participants will not be entitled to vote the Performance
Shares until they are awarded. To the extent provided in the agreement
relating to an award, a participant may receive, on a current or deferred
basis, dividend equivalents and interest thereon with respect to the number
of shares subject to such award. At the end of each performance period, the
Performance Share Plan requires the Committee to certify that the
performance targets for the performance period have been achieved and to
calculate the number of Performance Shares earned by each participant for
such period. Upon a change of control, all performance criteria will be
deemed to have been achieved at the target level.
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,
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<PAGE> 20
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 1999 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 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 Capital
Accumulation Plans.
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 1999, the Company provided stock
compensation under the 1997 Stock Incentive Plan.
1997 Stock Incentive Plan: The Committee administers the 1997 Stock
Incentive Plan pursuant to which options to purchase shares of Common Stock
were granted to executive officers and other key members of management.
Options under the 1997 Stock Incentive Plan generally 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. Awards are
based on the recommendation of the Chief Executive Officer subject to
Committee approval. The award for the Chief Executive Officer, however,
will be at the sole discretion of the Committee. The Committee also
considers comparative information, including the number of stock option
grants made by similar companies.
Stock Option Guidelines: The Committee has adopted stock option
guidelines denominated in terms of a number of shares with a range around
competitive practice of plus or minus 25%. The targeted awards under this
program range from 6,000 options for selected vice presidents to 45,000
options for Mr. Cronin. Mr. Cronin's award could be adjusted by the
Committee within a range of 33,750 to 56,250 options. However, nothing
within the plan or guidelines would require annual awards and the Committee
may award no options to a plan participant should the Committee so
determine. As described under "ELECTION OF DIRECTORS-Compensation of
Directors," the 1997 Stock Incentive Plan also provides for directors to
receive stock options annually.
Employee Stock Purchase Plan: The Employee Stock Purchase Plan is
available to all employees of the Company who have completed at least
thirty-one days of service and are employees of the Company as of the
commencement of an offering period. Under the Employee Stock Purchase Plan,
employees electing to participate may purchase shares of 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 compensation 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).
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 executive officers own a minimum of one to three times
their base salary in Common Stock or stock equivalents of the Company (Mr.
Cronin and Mr. Duffield are recommended to own a minimum of three times their
base salary). The guidelines suggest that ownership levels in Common Stock or
stock equivalents should be achieved by August 1, 2001.
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<PAGE> 21
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Cronin's 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").
In addition to the benefits provided under the Agreement, Mr. Cronin is
eligible for Incentive Bonuses, the Deferred Compensation/Capital Accumulation
Plan, Stock Compensation and the Executive Compensation Plan, each discussed
above in "Compensation of Executive Officers."
The fiscal year 1999 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 1999 annual cash compensation of Mr. Cronin was $825,417, consisting
of base salary and a cash bonus. In addition, Mr. Cronin was awarded 12,795
Shares of Common Stock under the Performance Share Plan that is deferred, and
payable during October, 2001. Pursuant to the terms of the Performance Share
Plan, such award can be doubled or decreased to zero based on predetermined
Company performance criteria. Mr. Cronin also was granted 45,000 stock options
under the 1997 Stock Incentive Plan. Mr. Cronin's base salary as of July 31,
1999, of $575,000 was determined based upon the Company's established salary
range for the Chief Executive Officer. Mr. Cronin's fiscal 1999 annual bonus was
$258,750. The annual bonus award was determined by the Company's actual ROC as
compared to targeted ROC and his level of achievement against his individual
performance objectives established at the beginning of the year. The Company's
actual ROC was 97% of its targeted ROC. The Committee believes Mr. Cronin's
incentive bonuses are reasonable as compared to the Company's performance.
Effective October 1, 1999, Mr. Cronin's base salary will be increased to
$600,000, consistent with the Committee's decision to target salaries at
approximately the 50th percentile of comparable CEO positions. 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
year 1999 compensation as an appropriate amount, given the Company's financial
performance in fiscal year 1999, 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
Andrew J. McKenna, Jr.
John C. Pope
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<PAGE> 22
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, 1994
to July 31, 1999, with the cumulative total return for the same period of the
Standard & Poor's ("S&P") 500 index, the S&P MIDCAP 400 index and a stock index
composed of a group of eight publicly traded companies, consisting of The Moore
Corporation, The Standard Register Company, The Reynolds & Reynolds Company,
Banta, Mail-Well, Quebecor, Big Flower Holdings and World Color Press (the "Peer
Group Index"). Comparisons are based on the assumption that the value of an
investment on July 31, 1994, 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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG WALLACE COMPUTER SERVICES, INC., THE S & P 500 INDEX,
THE S & P MIDCAP 400 INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
* $100 invested on 7/13/94 in stock or index--including reinvestment of
dividends. Fiscal Year ending July 31.
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
19
<PAGE> 23
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 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 redemption's 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.
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<PAGE> 24
VOTING SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 20, 1999, 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>
NAME AND ADDRESS SHARES BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED CLASS
------------------- ------------------- ----------
<S> <C> <C>
David L. Babson & Co. 2,877,789(1) 6.9%
One Memorial Drive
Cambridge, MA 02142
</TABLE>
- ------------------------------
(1) Holdings as of February 10, 1999, as reported to the Securities and Exchange
Commission pursuant to Rule 13(f).
SECURITY OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES AND OFFICERS
The following table lists the beneficial ownership of shares of the
Company's Common Stock as well as all other Company stock-based holdings as of
September 27, 1999 by each director, the Board's nominees, the executive
officers listed in the Summary Compensation Table, and all directors, director
nominees and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF OWNER BENEFICIALLY OWNED(1) TOTAL(2)
------------- --------------------- ---------
<S> <C> <C>
Robert J. Cronin 268,497 430,287
Richard F. Doyle 13,600 13,920
William N. Lane III 190,730(3) 192,127
Andrew J. McKenna, Jr. 2,500 2,820
Bettye Martin Musham 7,050 7,850
John C. Pope 10,000 13,114
Neele E. Stearns, Jr. 12,000 12,320
Michael T. Riordan 0 0
Michael O. Duffield 127,197 255,444
Michael T. Leatherman 89,701 197,524
Wayne E. Richter 46,257 90,873
Thomas G. Brooker 34,696 67,092
All Directors, Director Nominees and Executive
Officers as a group (17 persons) 878,877 1,445,832
------- ---------
Percent of the Outstanding Shares of Company
Stock 2.07% 3.41%
------- ---------
</TABLE>
- ------------------------------
(1) No individual Director, Director Nominee or Executive Officer beneficially
owns more than 1% of the outstanding shares of Common Stock.
(2) The amounts shown include the shares of the Company's Common Stock
beneficially owned combined with other stock-based holdings including stock
appreciation rights, share units held in deferred compensation accounts and
the Company's Profit Sharing Plan and options that will not become
exercisable within a period of 60 days. As such, the amounts shown reflect
the economic stake which each of the named individuals and the Directors,
Director Nominees and Officers as a group have in the performance of the
Company's Common Stock. With the exception of the stock options, the
officers and directors have the right to either vote or direct the voting of
the underlying shares.
(3) Includes 90,574 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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
21
<PAGE> 25
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 1999, 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 1999.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Stockholder proposals intended for inclusion in the proxy statement for the
2000 Annual Meeting must be received at the Company's corporate headquarters,
2275 Cabot Drive, Lisle, Illinois 60532, not later than July 7, 2000.
Stockholder proposals should be addressed to the attention of the Company's
Secretary.
In addition, the Company's By-laws 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 By-law 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
/S/ BOB CRONIN
BOB CRONIN
Chairman of the Board of Directors
Lisle, Illinois
October 8, 1999
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<PAGE> 26
IMPORTANT
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.
Accordingly, please contact the person responsible for your account and instruct
that person to execute the Company's 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
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<PAGE> 27
[LOGO]
PROXY
WALLACE COMPUTER SERVICES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 3, 1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints R. J. Cronin 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 3, 1999, 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 APPROVAL OF AN AMENDMENT TO THE
1997 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE THEREUNDER BY 2,000,000 SHARES; AND "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
THE COMPANY FOR ITS FISCAL YEAR ENDING JULY 31, 2000; 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.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 28
/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" EACH OF THE NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND
3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR
AND "FOR" PROPOSALS 2 and 3.
1. Election of Directors
Robert J. Cronin, Neele E. Stearns, Jr., and
Michael T. Riordan
FOR WITHHELD
/ / / /
/ / ---------------------------------------
For All nominees except as noted above
FOR AGAINST ABSTAIN
2. Approval of an amendment to the 1997 Stock / / / / / /
Incentive Plan to increase the number of
shares of Common Stock reserved for issuance
thereunder.
FOR AGAINST ABSTAIN
3. Ratification of Appointment of Arthur / / / / / /
Andersen LLP as Independent Public
Accountants.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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.
Signature ___________________________ Date______________
Signature ___________________________ Date______________
