WALLACE COMPUTER SERVICES INC, DEF 14A, 2000-11-01

WALLACE COMPUTER SERVICES INC
DEF 14A, 2000-11-01
MANIFOLD BUSINESS FORMS

Previous: VALMONT INDUSTRIES INC, 10-Q, EX-27, 2000-11-01

Next: NPS INTERNATIONAL CORP, 8-K, 2000-11-01

<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.
--------------------------------------------------------------------------------
(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:

--------------------------------------------------------------------------------

(4) Date Filed:

--------------------------------------------------------------------------------

<PAGE> 2

WALLACE LOGO

November 1, 2000
------------------------------

ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 29, 2000
------------------------------

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 29,
2000. 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 two directors to hold office for a three year term, (ii) a proposal
to increase the number of shares available under the Employee Stock Purchase
Plan, (iii) the ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 2001, 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 if you have any
questions. Our phone number is (630) 588-5395.

Sincerely,

/s/ NEELE STEARNS /s/ MIKE DUFFIELD

NEELE STEARNS MIKE DUFFIELD
Chairman President and Acting CEO
</TABLE>

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 our Investor Relations department at (630)
588-5395
<PAGE> 3

WALLACE LOGO

------------------------------

NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS

------------------------------

TO THE STOCKHOLDERS OF
WALLACE COMPUTER SERVICES, INC.:

Notice is hereby given that the 2000 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 29, 2000, at 10:00 a.m., for the following purposes:

1. To elect two directors to hold office for a three year term;

2. To consider and vote upon a proposal to approve an amendment to the
Company's Employee Stock Purchase Plan which would increase the
aggregate number of shares of the Company's Common Stock that may be
purchased under the Employee Stock Purchase Plan by 2,000,000;

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 2001; 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 October 10, 2000
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the 2000 Annual Meeting and at any adjournment or postponement
thereof.

It is important that your shares be voted at the 2000 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
November 1, 2000
<PAGE> 4

WALLACE COMPUTER SERVICES, INC.
2275 CABOT DRIVE
LISLE, ILLINOIS 60532
------------------------------

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 29, 2000
------------------------------

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 29, 2000, and at any and all adjournments or postponements
thereof (the "Annual Meeting"). The Board of Directors has fixed the close of
business on October 10, 2000 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 November 1, 2000.

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 40,404,095 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 both of the nominees or withhold authority with respect to either or both 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.

1
<PAGE> 5

With respect to the proposals to amend the Employee Stock Purchase 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 these proposals require 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 is currently
composed of eight directorships, with two directorships remaining vacant. Of the
six directors, five are not, and have not been, officers or employees of the
Company. The terms of two directors expire at this year's Annual Meeting, and
the terms of two directors currently expire at the 2001 and 2002 Annual
Meetings. At this year's Annual Meeting, two directors will be elected for a
term expiring at the 2003 Annual Meeting. The appointment or nomination for
election by the stockholders of two additional members to fill the two vacancies
has been deferred until a permanent Chief Executive Officer has been appointed.

Unless otherwise instructed, the proxy holders will vote the proxies
received by them "FOR" the election of your Board's two nominees named below.
If, for any reason, either 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. Both of your Board's nominees below have consented to serve as a
director, and the Board of Directors has no reason to believe that either
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 John C. Pope and William J. Devers, Jr.
for election as directors at the Annual Meeting to serve as directors until the
2003 Annual Meeting. Both of the Board's nominees for director have substantial
experience serving as directors or executive officers. Both of the Board's
nominees have demonstrated leadership abilities and outstanding achievements in
the companies in which they have served as executives and directors. The Board's
nominees have experience in a broad range of industries and bring to the Wallace
Board substantial business experience and knowledge.

2
<PAGE> 6

THE BOARD'S NOMINEES

The following sets forth information on your Board's nominees for election
as directors at the Annual Meeting:

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS DIRECTOR SINCE COMMITTEE MEMBERSHIP
--------------------------- ---------------------------------------- ---------------- ------------------------
<S> <C> <C> <C>
DIRECTORS NOMINEES FOR THIS ANNUAL MEETING
William J. Devers, Jr. (66) Chairman of Devers Group, Inc., an April 17, 2000 Compensation and
investment company focusing on high-tech Executive Search
start up companies, since 1983.
John C. Pope (51) Chairman PFI Group, LLC, a financial July 8, 1996 Audit (Chairman),
management firm, since 1999. From 1995 Executive, Executive
to 1999 Chairman of MotivePower Search and Governance &
Industries, Inc., a manufacturer of Nominating
locomotives and locomotive
components.(1)
DIRECTORS WITH TERMS EXPIRING AT THE 2001 ANNUAL MEETING
Bettye Martin Musham (67) Chairwoman, President and Chief November 4, 1998 Audit and Governance &
Executive Officer of Gear Holdings, Nominating (Chairperson)
Inc., a design, licensing and marketing
company which develops and implements
brands through design and marketing
strategies, since 1977.(2)
Andrew J. McKenna, Jr. (43) President and Chief Operating Officer of November 4, 1998 Compensation and
Schwarz Paper Company, Inc., a provider Executive Search
of packaging products and distribution (Chairman)
services, since May 1996. Vice President
of Marketing with Schwarz from 1988 to
1996.
DIRECTORS WITH TERMS EXPIRING AT THE 2002 ANNUAL MEETING
Neele E. Stearns, Jr. (64) Chairman of the Board of the Company November 6, 1996 Audit and Executive
since January 18, 2000. Previously (Chairman)
President and Chief Executive Officer of
CC Industries, Inc., a holding company
with operations in envelope
manufacturing, home furnishings and
casual furniture, and real estate
development and management. Director of
Wallace from 1990 to 1995.(3)
Michael T. Riordan (50) Chairman, President and CEO of Paragon November 3, 1999 Compensation (Chairman)
Trade Brands, Inc., a manufacturer of and Governance &
private label diapers and training Nominating
pants, since May, 2000. Previously held
various management positions, including
President and COO of Fort James
Corporation, a manufacturer of paper and
paper products and Chairman, President
and CEO of Fort Howard Corporation.(4)
</TABLE>

-------------------------
(1) Mr. Pope is also a director of Air Canada, Dollar Thrifty Automotive Group,
Inc., Federal-Mogul Corp., Per Se Technologies, Inc. and Waste Management,
Inc.

(2) Ms. Martin Musham is also a director of Brunswick Corporation and Footstar,
Inc.

(3) Mr. Stearns is also a director of Maytag Corporation and Footstar, Inc.

(4) Mr. Riordan is also a director of The Dial Corporation and American Medical
Security Group, 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. The Board of Directors may, in its
discretion, allow a director to continue to serve after the month in which he or
she reaches age 70 until the next Annual Meeting.

3
<PAGE> 7

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 2000, the Board of Directors met twelve times, the Audit
Committee met three times, the Compensation Committee met seven times and the
Governance and Nominating Committee met three times. The Executive Committee did
not meet during fiscal year 2000. Each of the incumbent directors attended at
least 75% of the meetings of the Board of Directors and its Committees on which
such director served during fiscal year 2000.

The Audit Committee, consisting of three 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 and the Audit Committee Charter.

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 and the Compensation Committee
Charter. The Compensation Committee also serves 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 as set forth in the Governance
and Nominating Committee Charter.

The Executive Search Committee is a committee formed for the purpose of
identifying, interviewing and, subject to the approval of the full Board, hiring
a permanent Chief Executive Officer of the Company. The Executive Search
Committee is not a standing committee.

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 receives 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
4
<PAGE> 8

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 2000 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. 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 are 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 served 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 2000, the Company has accrued an
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).

On January 18, 2000, Mr. Neele Stearns was appointed to the position of
Chairman of the Board. Since that time, Mr. Stearns has been requested to devote
his full-time attention to the affairs of the Company. It is anticipated that he
will continue to serve in this capacity until a permanent Chief Executive
Officer is named. Mr. Stearns is being compensated $50,000 per month. Pursuant
to an arrangement approved by the Compensation Committee of the Board of
Directors, Mr. Stearns has elected to receive 40% of his monthly compensation in
stock options in lieu of cash.

ITEM 2
PROPOSAL TO ADOPT AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN

GENERAL

The Board of Directors adopted, subject to stockholder approval, an
amendment (the "Amendment") to the Company's Employee Stock Purchase Plan and is
proposing the Amendment for stockholder approval at the annual meeting. The
Amendment would increase the aggregate number of shares of the Company's Common
Stock that may be purchased pursuant to the Employee Stock Purchase Plan from
6,600,000 shares to 8,600,000 shares (subject to adjustment for stock dividends,
recapitalizations, mergers, consolidations,
5
<PAGE> 9

reorganizations, split-ups, combinations, exchanges and the like). If approved
by the stockholders, the amendment would become effective as of January 1, 2001,
subject to the condition that the Amendment not adversely affect the
applicability of rulings previously issued by the United States Department of
the Treasury with respect to the tax exempt status of the Employee Stock
Purchase Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN

DESCRIPTION OF THE 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
as of the date of the commencement of an offering period (as of July 31, 2000,
7,628 employees were eligible to participate in the Employee Stock Purchase
Plan). Under the Employee Stock Purchase Plan, employees electing to participate
may purchase shares of Common Stock at a 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). Through July 31, 2000, an
aggregate of 5,925,072 shares of Common Stock had been issued pursuant to the
Employee Stock Purchase Plan in fifty-one semi-annual offering periods.

Federal Income Tax Consequences. The Company's Employee Stock Purchase Plan
is intended to qualify as an employee stock purchase plan under section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). Under current law,
neither the granting of a right to purchase nor the exercise of such right
should have any federal income tax consequences to the Company or any
participant in the Employee Stock Purchase Plan. If shares purchased under the
Employee Stock Purchase Plan are sold after two years have elapsed from the
commencement of the six-month offering period in which such shares were
purchased and the selling price exceeds the exercise price, then, under current
federal tax law, any amount of the selling price in excess of market value on
the first day of the offering period is treated as a long-term capital gain and
the balance of the selling price in excess of the exercise price is treated as
ordinary income; if the selling price does not exceed the exercise price, then
the entire difference between the selling price and the exercise price is
treated as a long-term capital loss. If a participant sells shares purchased
under the Employee Stock Purchase Plan within a period of two years from the
commencement of the six-month offering period in which such shares were
purchased, then, under current federal tax law, the participant will have
ordinary income equal to the difference between the exercise price and the
market value on the last day of the offering period and the Company will be
entitled to a deduction to the extent of any ordinary income required to be
reported by the participant; any difference between the selling price and market
value as of the last day of the offering period is treated as long-term or
short-term capital gain or loss, as the case may be, depending upon the period
of time the shares were held prior to sale.

Termination and Amendment. The Company's Employee Stock Purchase Plan may
be terminated, suspended or amended at any time by the Board of Directors.
However, no amendment that would increase the number of shares of stock
available for issuance under the Employee Stock Purchase Plan may be made
without the approval of the stockholders.

6
<PAGE> 10

Benefits Table. The benefits that might be received by employees as a
result of the Amendment cannot be determined because the benefits depend upon
the degree of participation by employees and the trading price of the Company's
Common Stock in future offering periods. The following table, however, discloses
the benefits received by employees during fiscal year 2000 from the Employee
Stock Purchase Plan.

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF UNITS(2)
------------------------------------------------------------ --------------- ------------------
<S> <C> <C>
Thomas G. Brooker, Vice President-Corporate Sales $ 1,675 672
Wayne E. Richter, Senior Vice President-Forms & Labels
Segment 1,421 570
Executive Officers as a group 14,399 6,598
Non-Executive Officer Director Group 0 0(3)
Non-Executive Officer Employee Group 1,736,544 862,538
</TABLE>

------------------------------
(1) Dollar Value of Benefits is calculated as the aggregate difference between
the closing price at the date of exercise and 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 for the two
offering periods during fiscal year 2000.

(2) This column shows the number of shares of Common Stock purchased by the
individuals and groups indicated pursuant to the Employee Stock Purchase
Plan during fiscal year 2000.

(3) Non-employee directors are not eligible to participate in the Employee Stock
Purchase Plan.

The Board of Directors believes that the Company's Employee Stock Purchase
Plan provides an important community of interest between the Company's employees
and that of its stockholders. The Board of Directors believes that the
continuation of the Employee Stock Purchase Plan is in the best interest of the
Company and its stockholders. Accordingly, the Board of Directors recommends
that the stockholders vote in favor of the amendment to the Employee Stock
Purchase Plan being presented for approval.

The closing price of the Company's Common Stock as reported in the New York
Stock Exchange Composite Transactions for October 10, 2000 was $14.44 per share.

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 2001.

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.

7
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the cash compensation and certain other
components of compensation for fiscal years 2000, 1999, and 1998 for the former
Chief Executive Officer, the Acting Chief Executive Officer and the other four
most highly compensated executive officers of the Company for the fiscal year
ended July 31, 2000:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- -----------------------------
AWARDS PAYOUTS
---------- ---------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) OPTIONS(2) LTIP PAYOUTS(3) COMPENSATION(4)
------------------------------- ------ --------- -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Neele E. Stearns, Jr.* 2000 $195,000 $ 0 87,204(5) $ 0 $ 29,552(6)
Chairman 1999
1998
Michael O. Duffield 2000 370,000 112,500 55,000 0 64,139
President, Acting Chief 1999 342,500 155,250 75,000 167,000 60,621
Executive Officer and Chief 1998 276,441 0 25,000 176,000 62,422
Operating Officer
Robert J. Cronin** 2000 353,592 0 0 0 2,665,111(7)
Former Chairman and Chief 1999 566,667 258,750 45,000 222,000 115,638(8)
Executive Officer 1998 513,942 0 56,250 234,000 104,359(8)
Thomas G. Brooker 2000 248,108 43,750 25,000 0 36,868
Vice President-Corporate 1999 234,705 75,375 10,000 185,000 32,713
Sales 1998 188,178 42,407 10,000 110,000 35,279
Wayne E. Richter 2000 218,333 45,000 25,000 0 29,285
Senior Vice President- 1999 182,500 130,625 25,000 0 24,627
Forms & Labels Segment 1998 168,391 61,500 10,000 0 25,840
Craig A. Grant*** 2000 206,042 32,250 30,000 0 431
Vice President, 1999 0 0 0 0 0
Human Resources 1998 0 0 0 0 0
</TABLE>

------------------------------
* Mr. Stearns became an employee Chairman of the Board of Directors on January
18, 2000.

** Mr. Cronin retired as an executive officer effective January 18, 2000.

*** Mr. Grant became an employee of the Company during fiscal year 2000.

(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 2000, 1999 and 1998 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 2000, 1999
and 1998 under the 1997 Stock Incentive Plan. Regular Stock options granted
to each executive officer for fiscal year 2000 were approved and granted by
the Compensation Committee on April 17, 2000. Mr. Duffield received an
additional grant on March 8, 2000 as a result of being appointed Acting
Chief Executive Officer.

(3) Indicates LTIP compensation paid on September 16, 1999 for awards made
during fiscal year 1997 and September 16, 1998 for awards made during fiscal
year 1996 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
8
<PAGE> 12

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 2000 RETIREMENT PLAN SHARING PLAN ACCRUED INTEREST
---------------- ------------------ ------------------- ----------------
<S> <C> <C> <C>
Mr. Stearns $ 0 $ 0 $ 7,654
Mr. Duffield 15,140 21,528 27,471
Mr. Cronin 3,981 45,268 45,910
Mr. Brooker 13,408 14,311 9,149
Mr. Richter 13,408 4,160 11,717
Mr. Grant 0 0 431
</TABLE>

<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. Brooker 13,353 11,481 7,879
Mr. Richter 13,353 3,176 8,098
Mr. Grant 0 0 0
</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. Brooker 17,176 12,991 5,112
Mr. Richter 17,176 3,188 5,476
Mr. Grant 0 0 0
</TABLE>

(5) Includes options to purchase an aggregate of 65,204 shares of Common Stock
granted to Mr. Stearns pursuant to an arrangement whereby Mr. Stearns
elected to receive 40% of his cash compensation in stock options in lieu of
cash. Pursuant to SEC rules, the portion of his salary that Mr. Stearns
elected to receive in stock based awards is not included in the salary
column of this table. Also includes an option to purchase 20,000 shares of
Common Stock granted to Mr. Stearns on March 8, 2000 as a result of his
assumption of the position of Chairman of the Board and 2,000 shares of
Common Stock granted to Mr. Stearns on November 3, 1999 while Mr. Stearns
was a non-employee director.

(6) Includes $21,900 for Director's fees that Mr. Stearns received prior to
becoming an employee of the Company.

(7) Includes Director retainer and meeting fees earned by Mr. Cronin of $17,500
during fiscal year 2000. Also, includes $2,302,452 paid during fiscal year
2000 pursuant to a severance agreement and $250,000 paid during fiscal year
2000 pursuant to consulting agreement with Mr. Cronin (see "Employment
Contracts and Termination, Severance and Change of Control
Arrangements--Separation Agreements with Robert J. Cronin and Michael T.
Leatherman").

(8) Director and meeting fees earned by Mr. Cronin as a director of the Company
were $38,584, and $30,000, for fiscal years 1999 and 1998, respectively, and
are included in All Other Compensation.

9
<PAGE> 13

OPTION GRANTS FOR FISCAL YEAR 2000

The following table sets forth information with respect to options granted
for fiscal year 2000 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(3)
----------------------------- ---------- ------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Robert J. Cronin -- -- -- -- --
Michael O. Duffield 35,000 5.07% 11.44 4/17/2010 105,166
Michael O. Duffield(4) 20,000 2.90% 11.19 3/8/2010 56,484
Thomas Brooker 25,000 3.66% 11.44 4/17/2010 75,118
Wayne E. Richter 25,000 3.66% 11.44 4/17/2010 75,118
Neele E. Stearns, Jr.(5) 64,310 9.32% 11.19 3/8/2010 176,863
Neele E. Stearns, Jr.(6) 20,894 3.03% 8.94 7/31/2010 40,907
Neele E. Stearns, Jr.(7) 2,000 (7) 21.44 11/3/2009 12,662
Craig A. Grant 15,000 2.17% 11.44 4/17/2010 45,071
Craig A. Grant(8) 15,000 2.17% 22.125 9/7/2009 104,512
</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 690,204 shares granted to 186
employees for fiscal year 2000. Options were historically awarded for a
fiscal year in September following the end of the fiscal year. This year's
annual option grants were accelerated to April 17, 2000. In addition, the
Company granted options in September of 2000 and those grants will be
reported in the fiscal 2001 proxy statement.

(3) 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 5.3 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 U.S. Treasury Strips 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 5.3 years (64 months) prior to the
grant date; and (d) a dividend rate of $.66 per share, which was the total
amount of dividends paid with respect to a share of Common Stock during the
relevant period.

(4) An option to purchase 20,000 shares was granted to Michael Duffield as a
result of his assumption of the position of Acting Chief Executive Officer.

(5) Includes an option to purchase 20,000 shares granted by the Compensation
Committee as a result of his assumption of the position of Chairman of the
Board and an option to purchase 44,310 shares in lieu of a portion of his
cash compensation otherwise payable from January 19 through July 18, 2000.
The options to purchase 64,310 shares became fully vested on July 18, 2000.
See "ELECTION OF DIRECTORS--Compensation of Directors".

10
<PAGE> 14

(6) An option to purchase 20,894 shares was granted to Mr. Stearns in lieu of a
portion of his cash compensation otherwise payable July 19 through October
18, 2000. The option became fully vested on October 18, 2000. See "ELECTION
OF DIRECTORS--Compensation of Directors".

(7) Consists of an option to purchase 2,000 shares granted to non-employee
directors on an annual basis. At the time of grant, Mr. Stearns was not an
employee of the Company.

(8) Special grant made in conjunction with Mr. Grant joining the Company.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to the exercise in
fiscal year 2000 of options to purchase shares of Common Stock granted under the
Company's Stock Incentive 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 7/31/00 AT 7/31/00(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Neele E. Stearns, Jr. 0 $ 0 71,310 21,894 $0 $0
Michael O. Duffield 2,000 15,260 129,616 158,000 0 0
Robert J. Cronin 8,000 61,040 270,750 0 0 0
Wayne E. Richter 0 0 33,825 65,375 0 0
Thomas G. Brooker 0 0 32,625 50,375 0 0
Craig A. Grant 0 0 0 30,000 0 0
</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 $8.9375 per share (which was the
closing price of the Company's Common Stock as reported in the New York
Stock Exchange Composite Transactions for July 31, 2000) over the relevant
exercise price(s).

LONG-TERM INCENTIVE PLANS -- AWARDS IN FISCAL YEAR 2000

The following table sets forth information with respect to awards made for
fiscal year 2000 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 PERFORMANCE OR
SHARES, UNITS OTHER PERIOD ESTIMATED FUTURE PAYOUTS
OR OTHER UNTIL MATURATION ------------------------------
NAME RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
--------------------------------------- ------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Neele E. Stearns, Jr. 0 0 0 0
Robert J. Cronin 12,081 10/01/02 0 12,081 24,162
Michael O. Duffield 7,550 10/01/02 0 7,550 15,100
Thomas G. Brooker 3,020 10/01/02 0 3,020 6,040
Wayne E. Richter 3,624 10/01/02 0 3,624 7,248
Craig A. Grant 2,597 10/01/02 0 2,597 5,194
</TABLE>

11
<PAGE> 15

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 that aligns the interest of those key employees with the
stockholders. The 2000 Awards under the Performance Share Plan will be
distributed no later than October 1, 2002, 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 2000, 2001 and
2002, 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.

EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE OF CONTROL
ARRANGEMENTS

The Company and Mr. Duffield executed an employment agreement on September
8, 1998, (the "Agreement") which provides that Mr. Duffield would serve as the
Company's President through September 8, 2000, with automatic annual extensions,
which provide for a continuous two-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 $345,000, plus
annual bonuses that may be awarded to Mr. Duffield under the Company's Annual
Bonus Plan or otherwise. The Agreement calls for a target bonus of 60% of Mr.
Duffield's annual base salary. In addition, Mr. Duffield is eligible to receive
additional benefits under plans that are then in effect for the Company's senior
executives.

At the election of Mr. Duffield, 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. Duffield 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. Duffield
until distribution pursuant to a predetermined distribution schedule. Subject to
certain limitations, during the term of the Agreement, Mr. Duffield 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. Duffield 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. Duffield's lifetime. The Agreement also provides for Mr. Duffield 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. Duffield's employment for any reason, Mr. Duffield 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. Duffield'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. Duffield'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 participation in Company employee benefit plans.

12
<PAGE> 16

The Company has entered into a change of control severance agreement with
Mr. Duffield 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.

The change of control agreement will remain in effect for at least two
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 two years following the Change of Control.

In the event of a Change of Control, Mr. Duffield may elect to terminate
his services if (i) the Company fails to continue to employ Mr. Duffield 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. Duffield to
exercise fully and properly his duties and responsibilities, (iii) the Company
fails to pay Mr. Duffield's base salary or award to him an annual bonus when
due, (iv) the Company requires Mr. Duffield 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. Duffield 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.
Duffield's employment or Mr. Duffield elects to terminate his services in such
circumstances, Mr. Duffield 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 two times Mr.
Duffield'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.
Duffield 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. Duffield 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. Duffield or his
beneficiaries for the reimbursements described in clause (i) and this clause
(ii).

The Company has adopted an Executive Severance Pay Plan, in which Mssrs.
Richter, Brooker, and Grant 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

13
<PAGE> 17

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
(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. 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.

Separation Agreements with Robert J. Cronin and Michael T. Leatherman.

Pursuant to the terms of the separation agreement between Robert J. Cronin
and the Company (the "Cronin Separation Agreement"), effective January 18, 2000,
Mr. Cronin retired from his positions of Chairman and Chief Executive Officer.
Pursuant to the terms of the Cronin Separation Agreement, Mr. Cronin received
payments totaling $2,302,452. In addition, the Company entered into a Consulting
Agreement with Mr. Cronin, which included a covenant not to compete. During
fiscal year 2000, payments under the Consulting Agreement were $250,000. The
remaining obligation of $710,000 will be paid during fiscal year 2001. Prior to
his retirement, Mr. Cronin was employed under an employment agreement
substantially identical to the Agreement described above between the Company and
Mr. Duffield. Mr. Cronin's agreement provided for a continuous three-year term
at a base salary of at least $458,646.

Pursuant to the terms of the separation agreement between Michael T.
Leatherman and the Company (the "Leatherman Separation Agreement"), effective
March 15, 2000, Mr. Leatherman resigned from his positions of Executive Vice
President, Chief Financial Officer and Chief Administrative Officer. Pursuant to
the terms of the Leatherman Separation Agreement, Mr. Leatherman will receive
payments totaling $452,759.

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
and those individuals in other key management positions that have a direct
effect on profits, is (a) to target base salaries at the 50th percentile of a
group of companies in the same industry and/or companies of similar size, (b)
provide for annual incentives targeted at the 50th percentile
14
<PAGE> 18

and that are heavily weighted towards the Company's performance against set
objectives and which provide for upside rewards for achieving results in excess
of those objectives, and (c) provide long-term incentives in the form of stock
based incentives, the value of which is targeted at the 50th percentile.

COMPENSATION OF EXECUTIVE OFFICERS

Compensation of executive officers for fiscal year 2000 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 compared to the overall requirements of the position and performance
objectives established at the beginning of the fiscal year. The Company's
salaries are targeted at median levels in the market. 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.

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. Duffield's fiscal year
2000 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 are paid in a lump sum by October 16 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. As a result of the restructuring and other challenges during
fiscal year 2000, the minimum threshold financial performance was not met.

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

15
<PAGE> 19

year of the Company during the term of the Performance Share Plan. For
example, fiscal year 2000 was the first year of the three-year performance
period consisting of fiscal years 2000, 2001 and 2002. Awards for each
three-year performance period are paid no later than October 16 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 2000,
2001 and 2002, 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. This plan will not be offered during fiscal
year 2001. See "COMPENSATION OF EXECUTIVE OFFICERS -- Fiscal Year 2001
Executive Compensation."

DEFERRED COMPENSATION/CAPITAL ACCUMULATION PLAN--The Deferred
Compensation/Capital Accumulation Plan ("CAP") is intended to motivate executive
officers and employees in certain key management positions to remain in the
employment of the Company, thus providing the Company with a qualified and
stable executive team to achieve its long term goals. The CAP allows
participants to elect to defer up to 20% of their salary and cash bonus. A CAP
has been in effect for each calendar year since 1988, with the exception of
1992. The deferred amount bears interest at a rate determined by the Committee
and has ranged between 12% and 16% per annum. The Committee elected 12% for the
2000 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.

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.

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, was
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 annual awards under
this program range from 6,000 options for selected vice presidents to
45,000 options for the Chief Executive Officer. The Committee can adjust
the Chief Executive Officer's award within a
16
<PAGE> 20

range of 33,750 to 56,250 options. However, nothing within the plan or
guidelines requires 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.
Duffield is recommended to own a minimum of three times his base salary).

FISCAL YEAR 2001 EXECUTIVE COMPENSATION. At the end of fiscal year 2000,
the Compensation Committee retained a nationally recognized compensation
consulting firm to assist the Committee in a review of the Company's executive
compensation plans. In the process of the review, the Committee concluded that
the current compensation plans were not adequately effectuating the Committee's
compensation philosophy. Specifically, the Committee determined that the
Performance Share Plan was not serving its intended purpose of providing a
compelling long-term incentive opportunity to executive officers. The Committee
ultimately decided to eliminate the Performance Share Plan prospectively and use
stock options to provide an appropriate long-term incentive opportunity. As a
result of the review, the Committee is implementing an executive compensation
plan for fiscal 2001 which provides competitive compensation opportunity for
planned performance, attractive incentives to exceed planned performance and
more effective forms of incentives on critical financial and operating measures.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Mr. Duffield'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. Duffield 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 2000 compensation for Mr. Duffield, the Acting 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 2000 annual cash compensation of Mr. Duffield was $482,500
consisting of base salary and a cash bonus. In addition, Mr. Duffield was
awarded 7,550 shares of Common Stock under the Performance Share Plan (the
Company's Long-Term Incentive Plan) that is payable during October 2002 provided
that the Company achieves certain financial objectives. 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. Duffield also was granted
options to purchase 55,000 shares of common stock under the 1997 Stock Incentive
Plan. Mr. Duffield's base salary as of July 31, 2000 of $375,000 was determined
based upon the Company's established salary range for the position of President
and COO. Mr. Duffield's base salary may be adjusted retroactively to January 18,
2000 if he is ultimately chosen as the Company's Chief Executive Officer. If Mr.
Duffield is not chosen, the Compensation Committee may consider a one-time cash
payment in recognition of his services as interim Chief Executive Officer. Until
the Board of Directors reaches a
17
<PAGE> 21

conclusion on the appointment of a Chief Executive Officer, Mr. Duffield will
not be considered for an annual merit increase. For fiscal year 2000, Mr.
Duffield was granted a discretionary annual bonus in the amount of $112,500.
Although the threshold levels established for an award under the Annual Bonus
Plan were not met, the Committee deemed it appropriate to recognize Mr.
Duffield's contribution during a challenging fiscal year. The Committee believes
Mr. Duffield's incentive bonus, at 50% of his targeted amount, brings his fiscal
year 2000 compensation to a level that acknowledges his individual achievements
and meets competitive standards for executives at Mr. Duffield's level of
responsibility.

Submitted by the Compensation Committee of the Board of Directors of the
Company.

Michael T. Riordan, Chairman
William J. Devers, Jr.
Andrew J. McKenna, Jr.

18
<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, 1995
to July 31, 2000, 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 six publicly traded companies, consisting of The Moore
Corporation, The Standard Register Company, The Reynolds & Reynolds Company,
Banta, Mail-Well, and Quebecor (the "Peer Group Index"). Big Flower Holdings
became a private company and World Color Press was acquired by Quebecor during
fiscal year 2000 and therefore are not included in the peer group. Reynolds and
Reynolds sold its business forms division during the later part of fiscal year
2000 and therefore will not be included in future peer group calculations.
Comparisons are based on the assumption that the value of an investment on July
31, 1995, 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.

( Performance Graph)

Cumulative Total Return
----------------------------------------------
7/95 7/96 7/97 7/98 7/99 7/00
----------------------------------------------

WALLACE COMPUTER SERVICES, INC. 100.00 102.53 118.21 70.26 90.34 34.80
S&P 500 100.00 116.57 177.35 211.55 254.29 277.12
S&P MIDCAP 400 100.00 107.74 156.62 167.34 199.66 242.39
PEER GROUP 100.00 109.53 131.31 115.69 118.73 84.22

INDEMNIFICATION ARRANGEMENTS AND LIMITATION ON LIABILITY

Pursuant to the provisions of the Company's Restated Certificate of
Incorporation, as amended, and the provisions of indemnification agreements
between the Company and each of its directors and officers, the Company is
obligated (subject to certain conditions) to hold harmless and indemnify its
directors and officers, to the fullest extent permitted from time to time by
applicable law, from and against expenses (including attorney's fees),
judgments, fines, amounts paid in settlement, and other liabilities and claims
that its directors and officers may incur or become subject to as a result of or
in connection with serving or having served at any time as a director or officer
of the Company (including liabilities relating to service as a trustee or
otherwise in connection with employee benefit plans) and, in the case of
officers, as an employee or agent of the Company or as a director, officer,
employee or agent or in any other capacity at the request of the Company with
any subsidiary or other entity. The Company's indemnification obligations under
its Restated Certificate of Incorporation and under indemnification agreements
with its directors and officers do not extend to liabilities or claims based
upon or attributable to any breach of duty of loyalty to the Company or its
stockholders, any acts or omissions that are not in good faith or that involve
intentional misconduct or deliberate dishonesty, any
19
<PAGE> 23

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 redemptions or
repurchases of stock that are unlawful under the Delaware General Corporation
Law, or for any act or omission that occurred prior to November 12, 1986.

20
<PAGE> 24

VOTING SECURITIES

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of October 10, 2000, the only persons 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 are
the following:

<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED(1) CLASS
------------------- ------------------- ----------
<S> <C> <C>
Neuberger Berman, Inc. 2,948,720 7.04%
605 Third Avenue
New York, NY 10158
Snyder Capital Management, L.P. 2,840,900 6.80%
350 California Street, Suite 1460
San Francisco, CA 94104
David L. Babson & Co. 2,419,622 5.77%
One Memorial Drive
Cambridge, MA 02142
</TABLE>

-------------------------
(1) Holdings as of December 31, 1999, as reported to the Securities and Exchange
Commission pursuant to Rule 13(d).

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
October 10, 2000 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>
NUMBER OF SHARES
----------------------------------
NAME OF OWNER BENEFICIALLY OWNED(1) TOTAL(2)
------------- --------------------- ---------
<S> <C> <C>
William J. Devers, Jr. 21,000 23,782
Andrew J. McKenna, Jr. 8,447 9,177
Bettye Martin Musham 13,168 14,993
John C. Pope 18,809 22,579
Michael T. Riordan 3,000 3,000
Neele E. Stearns, Jr. 109,651 109,693
Michael O. Duffield 180,932 314,707
Thomas G. Brooker 89,943 133,402
Wayne E. Richter 65,162 117,629
Craig A. Grant 11,000 35,000
------- ---------
All Directors, Director Nominees and Executive
Officers as a group (15 persons) 642,299 1,008,916
------- ---------
Percent of the Outstanding Shares of Company
Stock 1.6% 2.5%
------- ---------
</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

21
<PAGE> 25

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.

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 the Securities and
Exchange Commission and the New York Stock Exchange. The Company files Forms 3,
4 and 5 on behalf of the Directors and Executive Officers of 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 2000, the Company has identified a
late filing of a transaction on a Form 4 by each of Joseph Fasolo and John Pope.
Mr. Fasolo resigned from the Company during fiscal year 2000. The Company has
not identified any other failure to file on a timely basis any Form 3, 4 or 5
during fiscal year 2000.

STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING

Stockholder proposals intended for inclusion in the proxy statement for the
2001 Annual Meeting must be received at the Company's corporate headquarters,
2275 Cabot Drive, Lisle, Illinois 60532, not later than August 1, 2001.
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/ NEELE STEARNS
Neele E. Stearns, Jr.
Chairman of the Board of Directors

Lisle, Illinois
November 1, 2000

22
<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 the Investor Relations Department at (630)
588-5395.

23
<PAGE> 27

4650-PS-00
<PAGE> 28
[LOGO]

PROXY

WALLACE COMPUTER SERVICES, INC.

PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 29, 2000.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby constitutes and appoints N.E. STEARNS, JR. and J.C. POPE,
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 29, 2000, 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
EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE THEREUNDER; 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, 2001; 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> 29

/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED "FOR" BOTH OF THE NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND
3.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" BOTH OF THE NOMINEES FOR DIRECTOR
AND "FOR" PROPOSALS 2 and 3.

1. Election of Directors
Nominees: JOHN C. POPE and WILLIAM J. DEVERS, JR.

FOR BOTH NOMINEES WITHHELD FROM BOTH NOMINEES
/ / / /

/ /
---------------------------------------
For both nominees except as noted above

FOR AGAINST ABSTAIN
2. Approval of an amendment to the Employee / / / / / /
Stock Purchase 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
--------------------------- --------------