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The following is an excerpt from a 10-K SEC Filing, filed by WALLACE COMPUTER SERVICES INC on 10/29/1997.
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WALLACE COMPUTER SERVICES INC - 10-K - 19971029 - PROPERTIES

Item 2 Properties

The Company's corporate offices are located in Lisle, Illinois, a suburb of Chicago.

The Company believes that all of its properties are well maintained and in good operating condition.

The following are the Company's principal properties:

                              Approximate
                                 Square
Location                        Footage    Description
--------                      -----------  -----------
Gastonia, North Carolina      120,000      Business Forms Plant
                                           - owned by Company.

Luray, Virginia               162,300      Business Forms Plant
                                           - owned by Company.

Marlin, Texas                 115,700      Business Forms Plant
                                           - owned by Company.

Metter, Georgia               216,300      Warehouse and Distribution
                                           Center and Manufacturing
                                           Plant for the Business Forms
                                           Group
                                           - owned by Company.

Osage, Iowa                   152,500      Business Forms Plant
                                           - owned by Company.

San Luis Obispo,              110,000      Business Forms Plant
  California                               - owned by Company.

Hillside, Illinois            206,600      Commercial Printing Plant
                                           and Corporate and Sales
                                           Offices  (35,000 square feet)
                                           attached to plant
                                           - owned by Company.

Lebanon, Kentucky              89,200      Commercial Printing Plant
                                           -owned by Company.

9

Item 2 Continued

                              Approximate
                                Square
Location                       Footage     Description
--------                      -----------  -----------
Orlando, Florida               60,000      Commercial Printing Plant
                                           - lease ending in 2007.

Orlando, Florida               40,000      Distribution Center
                                           - lease ending in 2007.

Tampa, Florida                 33,000      Commercial Printing Plant
                                           - owned by Company.

West Bend, Wisconsin           31,300      Commercial Printing Plant
                                           - owned by Company.

Lisle, Illinois               105,000      Corporate Headquarters
                                           - owned by Company.

Bellwood, Illinois             30,000      Engineering Facilities
                                           - lease ending March, 2000

Hillside, Illinois             24,400      Additional Corporate Offices
                                           - owned by Company.

Brenham, Texas                128,200      Office Products and Label
                                           Manufacturing Plant
                                           - owned by Company.

Streetsboro, Ohio              80,000      Label Manufacturing Plant
                                           - owned by Company.

Wilson, North Carolina        127,200      Label Manufacturing Plant
                                           - owned by Company.

Cincinnati, Ohio               22,900      Label Manufacturing Plant
                                           - owned by Company.

Lodi, California              138,100      Warehouse and Distribution
                                           Center and Manufacturing Plant for
                                           the Label, Office Products and
                                           Commercial Printing Groups
                                           - owned by Company.

10

Item 2 Continued

                              Approximate
                                 Square
Location                        Footage      Description
--------                      -----------    -----------
St. Charles, Illinois         293,000        Warehouse and Distribution
                                             Center and Manufacturing
                                             Plant for the Business Forms
                                             and Office Products Groups
                                             - owned by Company.

St. Charles, Illinois          92,400        Distribution Center and
                                             Manufacturing  Plant for the Label Group
                                             - owned by Company.

Ontario, California           114,500        Distribution Center
                                             - lease ending October, 2001.

Osage, Iowa                   104,400        Office Products Plant
                                             - owned by Company.

Covington, Tennessee          241,700        Warehouse and Distribution Center,
                                             and Office Products Plant
                                             - owned by Company.

Allentown, Pennsylvania       101,400        Warehouse and Distribution Center
                                             - owned by Company.

Clinton, Illinois             219,000        Promotional Printing Plant
                                             - owned by Company.

LaPalma, California            65,300        Promotional Printing Plant
                                             - lease ending in 2015.

Manchester, Vermont           162,300        Promotional Printing Plant
                                             - owned by Company.

Tonawanda, New York           113,000        Promotional Printing Plant
                                             - owned by Company.

Elk Grove Village, Illinois   142,000        Promotional Printing Plant
                                             and Label Group Office
                                             - owned by Company.

Distribution warehouses and sales offices throughout the United States are leased.

11

Item 3 Legal Proceedings

The company and its subsidiaries may from time to time be involved in claims or lawsuits that arise in the ordinary course of business. Accruals for claims or lawsuits have been provided for to the extent that losses are deemed probable and estimatable. Although the ultimate outcome of these claims or lawsuits cannot be ascertained on the basis of present information and advice received from counsel, it is the opinion of management that the disposition or ultimate determination of such claims or lawsuits will not have a material adverse effect on the company.

Item 4 Submission of Matters to a Vote of Security Holders

None

Executive Officers of the Registrant

Information concerning the executive officers of the Company is contained in Item 10 below.

12

Part II

Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters

The total number of holders of record of the Company's common stock was 3,167 as of October 15, 1997. Information about the market and payment of dividends for the Company's common stock is contained in the 1997 Annual Report to Stockholders on page 27, and is incorporated herein by reference.

Item 6 Selected Financial Data

Selected financial data for each of the eleven years ended July 31, 1997, is contained in the Company's Annual Report to Stockholders for 1997, on pages 20-21, and is incorporated herein by reference.

Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations for the three years ended July 31, 1997 is contained in the Company's Annual Report to Stockholders for 1997, on pages 22-27, and is incorporated herein by reference.

Item 8 Financial Statements and Supplementary Data

The consolidated balance sheets of the Company as of July 31, 1997 and 1996, the consolidated statements of income, cash flows and stockholders' equity for the years ended July 31, 1997, 1996 and 1995, and the notes to consolidated financial statements, together with the report of Arthur Andersen LLP thereon dated September 3, 1997, are contained in the Company's Annual Report to Stockholders for 1997, on pages 28-36, and are incorporated herein by reference. Quarterly financial information for the years ended July 31, 1997 and 1996 is included in Management's Discussion and Analysis of Financial Condition and Results of Operations, which is contained in the Company's Annual Report to Stockholders for 1997 on page 27, and is incorporated herein by reference.

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

13

Part III

Item 10 Directors and Executive Officers of the Registrant

Information concerning the directors of the Company is contained in the Company's definitive Proxy Statement dated October 6, 1997, on pages 2-5, and is incorporated herein by reference.

Information concerning Section 16 (a) Beneficial Ownership Reporting Compliance is contained on page 29 of the Company's definitive Proxy Statement dated October 6, 1997, and is incorporated herein by reference.

Executive Officers of the Company

(a) Names, ages and positions of the executive officers:

Name                       Age     Position
----                       ---     --------
Sandra K. Brandt           38      Treasurer

Thomas G. Brooker          39      Vice President - General Manager
                                   - Office Products

Robert J. Cronin           52      President and Chief Executive
                                   Officer

Bruce D'Angelo             45      Vice President - Corporate Sales

Theodore Dimitriou         71      Chairman of the Board

Michael O. Duffield        45      Senior Vice President - Operations

Michael J. Halloran        49      Vice President, Chief Financial
                                   Officer and Assistant Secretary

Donald J. Hoffmann         59      Vice President - Engineering
                                   and Research

Michael T. Laudizio        40      Secretary

Michael T. Leatherman      44      Senior Vice President - Business
                                   Services  and Chief Information
                                   Officer

William J. Montanez        44      Assistant Treasurer


Michael M. Mulcahy         55     Vice President - General Manager
                                  - Promotional Printing

14

Item 10 Continued

Name                       Age    Position
----                       ---    --------
Wayne E. Richter           41     Vice President - General
                                  Manager - Label Group

All officers are elected at the Annual Meeting of the Board of Directors, which is held immediately after the Annual Meeting of Stockholders.

(b) Business Experience of the Executive Officers:

Ms. Brandt joined Wallace in 1997 as Division Vice President - Treasurer. Ms. Brandt was previously Assistant Treasurer, Cash Management for GATX Corporation from 1991 to 1997.

Mr. Brooker has been with the Company since 1981. He was elected Vice President - General Manager - Office Products in 1995. Mr. Brooker was previously Vice President - General Manager - Tops Division from 1993 to 1995, and Vice President - Sales - Tops Division from 1992 to 1993.

Mr. Cronin has been with the Company since 1967. He was elected President and Chief Executive Officer in 1993. Mr. Cronin was previously elected Chief Operating Officer in 1992. Mr. Cronin is also a director of the Company.

Mr. D'Angelo has been with the Company since 1980. He was elected Vice President - Corporate Sales in 1992.

Mr. Dimitriou joined the Company in 1959. He was Chief Executive Officer of the Company from 1992 to 1993. He is also a director of the Company and has been its Chairman of the Board since 1979.

Mr. Duffield has been with the Company since 1974. He was elected Senior Vice President - Operations in 1992.

Mr. Halloran has been with the Company since 1975. He was elected Vice President and Chief Financial Officer in 1987.

Mr. Hoffmann has been with the Company since 1969. He was elected Vice President - Engineering and Research in 1986.

Mr. Laudizio has been with the Company since 1989. In 1995, he was named Division Vice President Taxes and was elected Secretary. Previously, Mr. Laudizio had been Director of Taxation since 1989, and Assistant Secretary since 1994.

15

Item 10 Continued

Mr. Leatherman has been with the Company since 1990. He was elected Senior Vice President - Business Services in 1997 and Chief Information Officer in 1995. Mr. Leatherman was previously Senior Vice President - Management Information Services.

Mr. Montanez has been with the Company since 1992. He was elected Assistant Treasurer in 1996. Mr. Montanez previously had been Director of Benefits and Risk Management since 1995 and Risk Manager from 1992 to 1995.

Mr. Mulcahy has been with the Company since 1961. He was elected Vice President - General Manager - Promotional Printing Division in 1992.

Mr. Richter has been with the Company since 1979. He was elected Vice President - General Manager - Label Division in 1992.

There are no family relationships between these executives.

Item 11 Executive Compensation

Information concerning management remuneration and transactions for the year ended July 31, 1997 is contained in the Company's definitive Proxy Statement dated October 6, 1997, on pages 4-5 and 14-25, and is incorporated herein by reference.

Item 12 Security Ownership of Certain Beneficial Owners and Management

Information concerning the beneficial ownership of the Company's common stock is contained in the Company's definitive Proxy Statement dated October 6, 1997, on pages 28-30, and is incorporated herein by reference.

Item 13 Certain Relationships and Related Transactions

Information concerning certain relationships and related transactions is contained in the Company's definitive Proxy Statement dated October 6, 1997, and is incorporated herein by reference.

16

Wallace Computer Services, Inc. Fiscal 1997 10-K

Part IV

Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Financial statements and schedules are included in this Form 10-K Annual Report as indicated below. Those portions of the 1997 Annual Report to Stockholders listed below are hereby incorporated by reference.

                                                Page Number
                                               Annual Report
                                              to Stockholders
                                              ---------------
Quarterly Financial Data for the years
ended July 31, 1997 and 1996                        27

Consolidated Statements of Income
for the years ended July 31, 1997,
1996, and 1995                                      28

Consolidated Statements of
Stockholders' Equity for the years
ended July 31, 1997, 1996, and 1995                 29

Consolidated Balance Sheets as of
July 31, 1997 and 1996                              30

Consolidated Statements of Cash
Flows for the years ended July 31,
1997, 1996, and 1995                                31

Notes to Consolidated Financial Statements        32-35

Report of Independent Public Accountants            36

Schedule - II, Valuation and Qualifying Accounts - Page 24 of Form 10-K

Schedules Omitted

All other schedules have been omitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.

17

Item 14 Continued

(b) No reports on Form 8-K were filed during the last quarter of the period covered by this report.

(c) Exhibit Index

3. Articles of Incorporation and By-Laws

3.1A Restated Certificate of Incorporation of the Registrant as filed with the Secretary of State of the State of Delaware on January 7, 1987 (previously filed as part of Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1987, and incorporated herein by reference to such Report).

3.1B Certificate of Amendment amending Section 1 of Article FOURTH of the Certificate of Incorporation of the Registrant as filed with the Secretary of State of the State of Delaware on November 28, 1989 (previously filed as part of Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1987, and incorporated herein by reference to such Report).

3.1C Certificate of Amendment amending Section 1 of Article FOURTH of the Certificate of Incorporation of the Registrant as filed with the Secretary of State of the State of Delaware on March 14, 1997, and filed herewith.

3.1D Certificate of Designation, Preferences and Rights of Series A Preferred Stock of the Registrant as filed with the Secretary of State of the State of Delaware on March 15, 1990 (previously filed as part of Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31, 1990, and incorporated herein by reference to such Report).

3.2 Amended and Restated By-Laws of the Registrant as adopted on January 5, 1996 (previously filed as Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q dated January 31, 1996, and incorporated herein by reference to such Report).

4. Instruments defining Rights of Security Holders, including Indentures *

* The Registrant has not filed as an Exhibit any instrument defining the rights of holders of long-term debt because the Registrant and its consolidated subsidiaries do not have any instrument with respect to long-term debt under which the total amount of authorized securities exceeds 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant has filed an agreement with the Securities and Exchange Commission to furnish a copy of any instrument defining the rights of holders of long-term debt to the Commission upon request.

18

Item 14 Continued

10. Material Contracts

10.1    Form of Rights Agreement, dated as of March 14,
        1990, between Registrant and Harris Trust and Savings
        Bank, as Rights Agent, which includes as Exhibit A the
        Certificate of Designation, Preferences and Rights of
        Series A Preferred Stock, as Exhibit B the form of
        Rights Certificate, and as Exhibit C the form of Summary
        of Rights (previously filed as Exhibit 28.2 to the
        Registrant's Current Report on Form 8-K dated March 14,
        1990, and incorporated herein by reference to such
        Report).

10.2A   Fourth Amended and Restated Agreement made and
        entered into as of January l, 1993 between the
        Registrant and Theodore Dimitriou (previously filed as
        part of Exhibit 10 to the Registrant's Annual Report on
        Form 10-K for the fiscal year ended July 31, 1993, and
        incorporated herein by reference to such Report).

10.2B   First Amendment to Fourth Amended and Restated
        Agreement made and entered into as of January l, 1993
        between the Registrant and Theodore Dimitriou
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1993, and incorporated herein by
        reference to such Report).

10.2C   Second Amendment to Fourth Amended and Restated
        Agreement made and entered into as of January 1, 1993
        between the Registrant and Theodore Dimitriou
        (previously filed as Exhibit 10.1 to the Registrant's
        Quarterly Report on Form 10-Q dated October 31, 1995,
        and incorporated herein by reference to such Report).

10.2D   Third Amendment to Fourth Amended and Restated
        Agreement effective as of July 1, 1997 between the
        Registrant and Theodore Dimitriou, filed herewith.

10.3A   1989 Stock Option Plan of the Registrant, which
        amends and restates as a single, integrated plan the
        1974 Non-Qualified Stock Option Plan of the Registrant
        and the 1981 Incentive Stock Option Plan of the
        Registrant (previously filed as part of Exhibit 10 to
        the Registrant's Annual Report on Form 10-K for the
        fiscal year ended July 31, 1990, and incorporated herein
        by reference to such Report).

10.3B   1997 Stock Incentive Plan of the Registrant
        approved by the stockholders of Registrant at a special
        meeting held on February 28, 1997 (previously filed as
        Exhibit 10.3 to the Registrant's Quarterly Report on
        Form 10-Q for the quarter ended January 31, 1997, and
        incorporated herein by reference to such Report).

19

Item 14 Continued

10.4A   Executive Incentive Plan of the Registrant, as
        restated to reflect Amendment No. 3 thereto, adopted as
        of November 9, 1994 (previously filed as part of Exhibit
        10 to the Registrant's Annual Report on Form 10-K for
        the fiscal year ended July 31, 1995, and incorporated
        herein by reference to such Report).

10.4B   Fourth Amendment, adopted as of September 6,
        1995, to the Executive Incentive Plan of the Registrant
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1995, and incorporated herein by
        reference to such Report).

10.5    Form of Deferred Compensation/Capital Accumulation
        Plan of the Registrant for each of the years 1988, 1989,
        1990, 1991, 1993, 1994, 1995, 1996 and 1997 (previously
        filed as part of Exhibit 10.2 to the Registrant's
        Quarterly Report on Form 10-Q dated October 31, 1995,
        and incorporated herein by reference to such Report).

10.6    Supplemental Profit-Sharing Plan of the Registrant
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1988, and incorporated herein by
        reference to such Report).

10.7A   Executive Severance Pay Plan of the Registrant
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1990, and incorporated herein by
        reference to such Report).

10.7B   First Amendment to the Executive Severance Pay
        Plan of the Registrant (previously filed as part of
        Exhibit 10 to the Registrant's Annual Report on Form
        10-K for the fiscal year ended July 31, 1995, and
        incorporated herein by reference to such Report).

10.8    Employee Annual Bonus Plan of the Registrant
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1994, and incorporated herein by
        reference to such Report).

10.9A   Employee Long-Term Performance Plan of the
        Registrant (previously filed as part of Exhibit 10 to
        the Registrant's Annual Report on Form 10-K for the
        fiscal year ended July 31, 1994, and incorporated herein
        by reference to such Report).

10.9B   First Amendment of the Employee Long-Term
        Performance Plan of the Registrant (previously filed as
        part of Exhibit 10 to the Registrant's Annual Report on
        Form 10-K for the fiscal year ended July 31, 1995, and
        incorporated herein by reference to such Report).

20

Item 14 Continued

10.10   Employee Stock Option Guideline of the
        Registrant (previously filed as part of Exhibit 10 to
        the Registrant's Annual Report on Form 10-K for the
        fiscal year ended July 31, 1994, and incorporated herein
        by reference to such Report).

10.11   Form of Deferred Compensation/Capital
        Accumulation Plan for Directors of the Registrant for
        each of the years 1988, 1989, 1993, 1994, 1995, 1996 and
        1997 (previously filed as Exhibit 10.3 to the
        Registrant's Quarterly Report on Form 10-Q for the
        quarter ended October 31, 1995, and incorporated herein
        by reference to such Report).

10.12   Retirement Plan for Outside Directors of the
        Registrant (previously filed as part of Exhibit 10 to
        the Registrant's Annual Report on Form 10-K for the
        fiscal year ended July 31, 1990, and incorporated herein
        by reference to such Report).

10.13A  Employee Severance Pay Plan of the Registrant
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1992, and incorporated herein by
        reference to such Report).

10.13B  First Amendment of the Employee Severance Pay
        Plan of the Registrant (previously filed as part of
        Exhibit 10 to the Registrant's Annual Report on Form
        10-K for the fiscal year ended July 31, 1995, and
        incorporated herein by reference to such Report).

10.14A  Form of Indemnification Agreement with Director
        between the Registrant and each of the following:
        Robert J. Cronin, Theodore Dimitriou, Richard F. Doyle,
        Albert W. Isenman III, William N. Lane III, John C.
        Pope, Robert P. Rittereiser and Neele E. Stearns, Jr.
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1990, and incorporated herein by
        reference to such Report).

10.14B  Form of Addendum to Indemnification Agreement
        with Director (Member of Profit Sharing Committee)
        between the Registrant and each of the following:
        Robert J. Cronin and Theodore Dimitriou (previously
        filed as part of Exhibit 10 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended July 31,
        1990, and incorporated herein by reference to such
        Report).

21

Item 14 Continued

10.14C  Form of Indemnification Agreement with Director
        (Member of Profit Sharing Committee) between the
        Registrant and Robert P. Rittereiser (previously filed
        as part of Exhibit 10 to the Registrant's Annual Report
        on Form 10-K for the fiscal year ended July 31, 1996,
        and incorporated herein by reference to such Report).

10.15A  Form of Indemnification Agreement with Officer
        between the Registrant and each of the following:
        Sandra K. Brandt, Thomas G. Brooker, Robert J. Cronin,
        Bruce D'Angelo, Theodore Dimitriou, Michael O. Duffield,
        Michael J. Halloran, Donald J. Hoffmann, Michael T.
        Laudizio, Michael T. Leatherman, William J. Montanez,
        Michael M. Mulcahy, and Wayne E. Richter (previously
        filed as part of Exhibit 10 to the Registrant's Annual
        Report on Form 10-K for the fiscal year ended July 31,
        1990, and incorporated herein by reference to such
        Report).

10.15B  Form of Addendum to Indemnification Agreement
        with Officer (Trustee of Profit Sharing and Retirement
        Trust and Member of Profit Sharing Committee) between
        the Registrant and each of the following: Robert J.
        Cronin, Theodore Dimitriou and Michael J. Halloran
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1990, and incorporated herein by
        reference to such Report).

10.15C  Form of Addendum to Indemnification Agreement
        with Officer (Member of Profit Sharing Committee)
        between the Registrant and Michael O. Duffield
        (previously filed as part of Exhibit 10 to the
        Registrant's Annual Report on Form 10-K for the fiscal
        year ended July 31, 1995, and incorporated herein by
        reference to such Report).

10.16   Form of Addendum to Indemnification Agreement
        with Officer for FEC Employee Stock Ownership Trust
        between the Registrant and each of the following:
        Robert J. Cronin, Theodore Dimitriou and Michael O.
        Duffield (previously filed as Exhibit 10.1 to the
        Registrant's Quarterly Report on Form 10-Q dated April
        30, 1996, and incorporated herein by reference to such
        Report).

10.17A  Agreement effective as of July 1, 1997 between
        Registrant and Robert J. Cronin (Employment Agreement),
        filed herewith.

10.17B  Agreement effective as of July 1, 1997 between
        Registrant and Robert J. Cronin (Change of Control
        Agreement).

22

Item 14 Continued

13. Annual Report to Security Holders, Form 10-Q or Quarterly Report to Security Holders.

13. Annual Report - Fiscal 1997 of the Registrant (filed as Exhibit 13 hereto and included only to the extent portions thereof are expressly incorporated by reference in this Report).

21. Subsidiaries of Registrant

21. Subsidiaries of the Company

23. Consents of Experts and Counsel

23. Consent of Arthur Andersen LLP.

27. Financial Data Schedule

27. Financial Data Schedule

23

Wallace Computer Services, Inc. and Subsidiaries Schedule II - Valuation and Qualifying Accounts For the years ended July 31

                                                1997          1996          1995
                                        ------------  ------------  ------------
Balance at Beginning of Year              $3,215,000    $2,671,000    $1,982,000

Provision for Doubtful Accounts            1,189,000       560,000     1,132,000

Accounts Written Off Against Allowance   (1,180,000)     (860,000)   (1,061,000)

Recoveries Credited to Allowance             257,000       346,000       593,000

Other Credits (1)                                ---       498,000        25,000
                                        ------------  ------------  ------------
Balance at End of Year                    $3,481,000    $3,215,000    $2,671,000
                                        ============  ============  ============

(1) Fiscal 1996 credit from acquisition of Forms Engineering Company as of February 8, 1996. Fiscal 1995 credit from acquisition of Lampro Graphics, Inc. as of November 1, 1994.

24

Wallace Computer Services, Inc. Fiscal 1997 10-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on October 24, 1997.

Wallace Computer Services, Inc.

  /s/ Michael J. Halloran
By
   -----------------------------
   Michael J. Halloran
   Vice President, Chief Financial
   Officer and Assistant Secretary
   (principal accounting officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in capacities indicated, on October 24, 1997.

  /s/ Theodore Dimitriou                      /s/ William N. Lane III
-------------------------                   ----------------------------
  Theodore Dimitriou                          William N. Lane III
  Chairman of the Board                       Director

  /s/ Robert J. Cronin                        /s/ John C. Pope
-------------------------                   ----------------------------
  Robert J. Cronin                            John C. Pope
  Director, President and                     Director
  Chief Executive Officer

  /s/ Richard F. Doyle                        /s/ Robert P. Rittereiser
-------------------------                   ----------------------------
  Richard F. Doyle                            Robert P. Rittereiser
  Director                                    Director

  /s/ Albert W. Isenman III                   /s/ Neele E. Stearns
---------------------------                 ----------------------------
  Albert W. Isenman III                       Neele E. Stearns, Jr
  Director                                    Director

25

Exhibit Index

Exhibit
Number                               Description

 3.1A     Restated Certificate of Incorporation of the Registrant as
          filed with the Secretary of State of the State of Delaware on January
          7, 1987 (previously filed as part of Exhibit 3 to the Registrant's
          Annual Report on Form 10-K for the fiscal year ended July 31, 1987,
          and incorporated herein by reference to such Report).

 3.1B     Certificate of Amendment amending Section 1 of Article
          FOURTH of the Certificate of Incorporation of the Registrant as filed
          with the Secretary of State of the State of Delaware on November 28,
          1989 (previously filed as part of Exhibit 3 to the Registrant's
          Annual Report on Form 10-K for the fiscal year ended July 31, 1987,
          and incorporated herein by reference to such Report).

 3.1C     Certificate of Amendment amending Section 1 of Article
          FOURTH of the Certificate of Incorporation of the Registrant as filed
          with the Secretary of State of the State of Delaware on March 14,
          1997, and filed herewith.

 3.1D     Certificate of Designation, Preferences and Rights of
          Series A Preferred Stock of the Registrant as filed with the
          Secretary of State of the State of Delaware on March 15, 1990
          (previously filed as part of Exhibit 3 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1990, and
          incorporated herein by reference to such Report).

 3.2      Amended and Restated By-Laws of the Registrant as adopted
          on January 5, 1996 (previously filed as Exhibit 3.1 to the
          Registrant's Quarterly Report on Form 10-Q dated January 31, 1996,
          and incorporated herein by reference to such Report).

10.1      Form of Rights Agreement, dated as of March 14, 1990,
          between Registrant and Harris Trust and Savings Bank, as Rights
          Agent, which includes as Exhibit A the Certificate of Designation,
          Preferences and Rights of Series A Preferred Stock, as Exhibit B the
          form of Rights Certificate, and as Exhibit C the form of Summary of
          Rights (previously filed as Exhibit 28.2 to the Registrant's Current
          Report on Form 8-K dated March 14, 1990, and incorporated herein by
          reference to such Report).

10.2A     Fourth Amended and Restated Agreement made and entered
          into as of January l, 1993 between the Registrant and Theodore
          Dimitriou (previously filed as part of Exhibit 10 to the Registrant's
          Annual Report on Form 10-K for the fiscal year ended July 31, 1993,
          and incorporated herein by reference to such Report).

10.2B     First Amendment to Fourth Amended and Restated
          Agreement made and entered into as of January l, 1993 between the
          Registrant and Theodore Dimitriou (previously filed as part of
          Exhibit 10 to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended July 31, 1993, and incorporated herein by reference
          to such Report).

26

Exhibit Index (continued)

Exhibit
Number                                Description


10.2C     Second Amendment to Fourth Amended and Restated
          Agreement made and entered into as of January 1, 1993 between the
          Registrant and Theodore Dimitriou (previously filed as Exhibit 10.1
          to the Registrant's dated October 31, 1995, and incorporated
          herein by Quarterly Report on Form 10-Q
          reference to such Report).

10.2D     Third Amendment to Fourth Amended and Restated
          Agreement effective as of July 1, 1997 between the Registrant and
          Theodore Dimitriou, filed herewith.

10.3A     1989 Stock Option Plan of the Registrant, which amends
          and restates as a single, integrated plan the 1974 Non-Qualified
          Stock Option Plan of the Registrant and the 1981 Incentive Stock
          Option Plan of the Registrant (previously filed as part of Exhibit 10
          to the Registrant's Annual Report on Form 10-K for the fiscal year
          ended July 31, 1990, and incorporated herein by reference to such
          Report).

10.3B     1997 Stock Incentive Plan of the Registrant approved by
          the stockholders of Registrant at a special meeting held on February
          28, 1997 (previously filed as Exhibit 10.3 to the Registrant's
          Quarterly Report on Form 10-Q for the quarter ended January 31, 1997,
          and incorporated herein by reference to such Report).

10.4A     Executive Incentive Plan of the Registrant, as restated
          to reflect Amendment No. 3 thereto, adopted as of November 9, 1994
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1995, and
          incorporated herein by reference to such Report).

10.4B     Fourth Amendment, adopted as of September 6, 1995, to the
          Executive Incentive Plan of the Registrant (previously filed as part
          of Exhibit 10 to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended July 31, 1995, and incorporated herein by reference
          to such Report).

10.5      Form of Deferred Compensation/Capital Accumulation Plan of
          the Registrant for each of the years 1988, 1989, 1990, 1991, 1993,
          1994, 1995, 1996 and 1997 (previously filed as part of Exhibit 10.2
          to the Registrant's Quarterly Report on Form 10-Q dated October 31,
          1995, and incorporated herein by reference to such Report).

10.6      Supplemental Profit-Sharing Plan of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1988, and
          incorporated herein by reference to such Report).

27

Exhibit Index (continued)

Exhibit
Number                                Description


10.7A     Executive Severance Pay Plan of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1990, and
          incorporated herein by reference to such Report).

10.7B     First Amendment to the Executive Severance Pay Plan of
          the Registrant (previously filed as part of Exhibit 10 to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          July 31, 1995, and incorporated herein by reference to such Report).

10.8      Employee Annual Bonus Plan of the Registrant (previously
          filed as part of Exhibit 10 to the Registrant's Annual Report on Form
          10-K for the fiscal year ended July 31, 1994, and incorporated herein
          by reference to such Report).

10.9A     Employee Long-Term Performance Plan of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1994, and
          incorporated herein by reference to such Report).

10.9B     First Amendment of the Employee Long-Term Performance
          Plan of the Registrant (previously filed as part of Exhibit 10 to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          July 31, 1995, and incorporated herein by reference to such Report).

10.10     Employee Stock Option Guideline of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1994, and
          incorporated herein by reference to such Report).

10.11     Form of Deferred Compensation/Capital Accumulation Plan
          for Directors of the Registrant for each of the years 1988, 1989,
          1993, 1994, 1995, 1996 and 1997 (previously filed as Exhibit 10.3 to
          the Registrant's Quarterly Report on Form 10-Q for the quarter ended
          October 31, 1995, and incorporated herein by reference to such
          Report).

10.12     Retirement Plan for Outside Directors of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1990, and
          incorporated herein by reference to such Report).

10.13A    Employee Severance Pay Plan of the Registrant
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1992, and
          incorporated herein by reference to such Report).

28

Exhibit Index (continued)

Exhibit
Number                                Description


10.13B    First Amendment of the Employee Severance Pay Plan of
          the Registrant (previously filed as part of Exhibit 10 to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          July 31, 1995, and incorporated herein by reference to such Report).

10.14A    Form of Indemnification Agreement with Director between
          the Registrant and each of the following:  Robert J. Cronin, Theodore
          Dimitriou, Richard F. Doyle, Albert W. Isenman III, William N. Lane
          III, Neele E. Stearns, John C. Pope and Robert P. Rittereiser
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1990, and
          incorporated herein by reference to such Report).

10.14B    Form of Addendum to Indemnification Agreement with
          Director (Member of Profit Sharing Committee) between the Registrant
          and each of the following:  Robert J. Cronin and Theodore Dimitriou
          (previously filed as part of Exhibit 10 to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended July 31, 1990, and
          incorporated herein by reference to such Report).

10.14C    Form of Indemnification Agreement with Director (Member
          of Profit Sharing Committee) between the Registrant and Robert P.
          Rittereiser. (previously filed as part of Exhibit 10 to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          July 31, 1996, and incorporated herein by reference to such Report).

10.15A    Form of Indemnification Agreement with Officer between
          the Registrant and each of the following:  Sandra K. Brandt, Thomas
          G. Brooker, Robert J. Cronin, Bruce D'Angelo, Theodore Dimitriou,
          Michael O. Duffield, Michael J. Halloran, Donald J. Hoffmann, Michael
          T. Laudizio, Michael T. Leatherman, William J. Montanez, Michael M.
          Mulcahy, and Wayne E. Richter (previously filed as part of Exhibit 10
          to the Registrant's Annual Report on Form 10-K for the fiscal year
          ended July 31, 1990, and incorporated herein by reference to such
          Report).

10.15B    Form of Addendum to Indemnification Agreement with
          Officer (Trustee of Profit Sharing and Retirement Trust and Member of
          Profit Sharing Committee) between the Registrant and each of the
          following:  Robert J. Cronin, Theodore Dimitriou and Michael J.
          Halloran (previously filed as part of Exhibit 10 to the Registrant's
          Annual Report on Form 10-K for the fiscal year ended July 31, 1990,
          and incorporated herein by reference to such Report).

29

Exhibit Index (continued)

Exhibit
Number                                Description


10.15C    Form of Addendum to Indemnification Agreement with
          Officer (Member of Profit Sharing Committee) between the Registrant
          and Michael O. Duffield (previously filed as part of Exhibit 10 to
          the Registrant's Annual Report on Form 10-K for the fiscal year ended
          July 31, 1995, and incorporated herein by reference to such Report).

10.16     Form of Addendum to Indemnification Agreement with
          Officer for FEC Employee Stock Ownership Trust between the Registrant
          and each of the following:  Robert J. Cronin, Theodore Dimitriou and
          Michael O. Duffield (previously filed as Exhibit 10.1 to the
          Registrant's Quarterly Report on Form 10-Q dated April 30, 1996, and
          incorporated herein by reference to such Report).

10.17A    Agreement effective as of July 1, 1997 between
          Registrant and Robert J. Cronin (Employment Agreement), filed
          herewith.

10.17B    Agreement effective as of July 1, 1997 between
          Registrant and Robert J. Cronin (Change of Control Agreement), filed
          herewith.

  13      Annual Report - Fiscal 1997 of the Registrant (filed as
          Exhibit 13 hereto and included only to the extent portions thereof
          are expressly incorporated by reference in this Report).

  21      Subsidiaries of the Company

  23      Consent of Arthur Andersen LLP

  27      Financial Data Schedule

30

EXHIBIT 3.1C

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

WALLACE COMPUTER SERVICES, INC.

* * * * * *

Adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware

* * * * * *

WALLACE COMPUTER SERVICES, INC. (the "Corporation"), a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY THAT:

FIRST: The Corporation filed its original Certificate of Incorporation on June 10, 1963, under the name of Wallace Business Forms, Inc.

SECOND: The Corporation filed a Restated Certificate of Incorporation on January 7, 1987.

THIRD: The Corporation filed an amendment to its Restated Certificate of Incorporation on November 15, 1989 amending Article FOURTH.

FOURTH: In accordance with Section 242 of the General Corporation Law of the State of Delaware, all of the members of the Board of Directors of the Corporation adopted a resolution declaring the advisability of amending the Certificate of Incorporation of the Corporation, as heretofore amended and restated, at a meeting of the Board of Directors of the Corporation held on January 14, 1997, which amendment is as follows:

Section 1 of Article FOURTH of the Certificate of Incorporation, as heretofore amended, restated, and corrected, is hereby amended to read as follows:

1. Authorized Shares: The total number of shares of all classes of stock that the corporation shall have authority to issue is 100,500,000, consisting of 100,000,000 shares of common stock


having a par value of $1.00 per share, and 500,000 shares of preferred stock having a par value of $50.00 per share.

FIFTH: In accordance with Section 242 of the General Corporation Law of the State of Delaware, at the meeting of the Board of Directors of the Corporation held on January 14, 1997, the Board of Directors directed that the Amendment be submitted for the consideration and approval of the stockholders of the Corporation at a special Meeting of Stockholders held on February 28, 1997.

SIXTH: In accordance with Section 242 of the General Corporation Law of the State of Delaware, the holders of a majority of the outstanding stock of the Corporation, which outstanding stock consists of one class of stock, adopted the Amendment to Certificate of Incorporation at a Special Meeting of the stockholders of the Corporation held on February 28, 1997.

IN WITNESS WHEREOF, the undersigned has caused this Certificate of Amendment of Certificate of Incorporation to be signed by Robert J. Cronin, President and Chief Executive Officer of the Corporation, and attested by Michael T. Laudizio, its Secretary, effective as of February 28, 1997.

WALLACE COMPUTER SERVICES, INC.
a Delaware corporation

                                         /s/ Robert J. Cronin
                                    -------------------------------------
                                    Robert J. Cronin
                                    President and Chief Executive Officer


ATTEST:


     /s/ Michael T. Laudizio
By:  -----------------------
     Michael T. Laudizio
     Secretary


EXHIBIT 10.2D

THIRD AMENDMENT TO

FOURTH AMENDED AND RESTATED AGREEMENT

THIRD AMENDMENT effective as of July 1, 1997, to FOURTH AMENDED AND RESTATED AGREEMENT made and entered into as of January 1, 1993, by and between WALLACE COMPUTER SERVICES, INC., a Delaware corporation (hereinafter referred to as the "Company"), and THEODORE DIMITRIOU of Mettawa, Illinois (hereinafter referred to as "Dimitriou").

RECITALS

The Company and Dimitriou entered into a Fourth Amended and Restated Agreement dated as of January 1, 1993 (the "Agreement"), pursuant to which Dimitriou was to serve the Company as its Chairman of the Board and to serve thereafter as a consultant to the Company. The Company and Dimitriou have previously entered into a First Amendment to the Agreement to amend Section E.2(a) of the Agreement. The Company and Dimitriou now wish to enter into this Third Amendment so that the Agreement, as so amended, accurately reflects their current intentions.

AGREEMENTS

IN CONSIDERATION OF the foregoing and the mutual undertakings described in this Third Amendment, the Company and Dimitriou hereby:

1. Agree that the Consulting Period described in Section C.1. of the Agreement shall continue until the date of Dimitriou's seventy-second (72nd) birthday, subject to earlier termination in the event of Dimitriou's death, Permanent Disability (as defined in said Section C.1.) or termination for "cause" as provided for in said Section C.1.

2. Amend Section E.2(a) of the Agreement so that such section provides, in its entirety, as follows:

(a) Commencing on the date of his Retirement and continuing until the later of (I) the date of Dimitriou's death or (II) the tenth anniversary of his Retirement, and provided that, after Retirement, Dimitriou does not commit any action that would have permitted the Company to have terminated his employment for "cause" under the provisions of Section B.1(v) (including, if


applicable, the proviso thereto), the Company shall pay to Dimitriou a monthly Supplemental Retirement Benefit determined as provided below; provided, however, that if Dimitriou should die before the tenth anniversary of his Retirement, all remaining monthly Supplemental Retirement Benefit payments shall be made to his Designated Beneficiary under Section E.2(b). The first payment of the Supplemental Retirement Benefit shall be made on the first day of the first month following his Retirement, and the last payment of the Supplemental Retirement Benefit shall be made on the first day of the later of (A) the one hundred twentieth month following his Retirement or (B) the month during which his death occurs. During the Consulting Period described in Section C.1. of this Agreement, the monthly Supplemental Retirement Benefit payable under this Section E.2(a) shall be $21,791.67 reduced by (A) 100% of his monthly social security retirement benefits, if any, and (B) the monthly amount payable under a single-life annuity for the life of Dimitriou commencing on the date of his Retirement which is the actuarial equivalent (using the then current Pension Benefit Guaranty Corporation interest rate for valuing immediate annuities under single-employer pension plans) of the benefits payable to Dimitriou under any retirement plan or program sponsored or maintained by the Company, including, without limitation, any amounts payable to him under the Company's Profit Sharing and Retirement Plan and the Company's Supplemental Profit Sharing Plan that are attributable to Company contributions, but excluding any amounts attributable to contributions made by the Company on behalf of Dimitriou under the Company's Profit Sharing and Retirement Plan pursuant to a salary reduction agreement under Section 401(k) of the Internal Revenue Code of 1986. After the end of the Consulting Period described in Section C.1 of this Agreement, the monthly Supplemental Retirement Benefit payable under this Section E.2(a) shall be $30,125 reduced by the amounts described in parts (A) and (B) of the immediately preceding sentence. The Company shall designate the above provisions of this Agreement relating to the Supplemental Retirement Benefit as a "Plan" subject to the provisions of the Wallace Computer Services, Inc. Benefit Trust.

3. Amend Section F.1 of the Agreement so that such section provides, in its entirety, as follows:

1. Material Change. For purposes of this Agreement, a "Material Change" shall be deemed to have occurred if any of the following should occur:

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange

2

Act) of 35% or more of either (i) the then outstanding shares of capital stock of the Company (the "Outstanding Company Capital Stock") or
(ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"); provided, however, that (X) any acquisition by or from the Company or any of its subsidiaries, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (Z) any acquisition by any corporation with respect to which, following such acquisition, more than 65% of the then outstanding shares of capital stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Capital Stock and Company Voting Securities immediately prior to such acquisition, in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Capital Stock and Company Voting Securities, as the case may be, shall not constitute a Material Change; or

(b) Individuals who, as of September 6, 1995, constituted the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a member of the Board of Directors of the Company subsequent to such date whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to be a member of the Incumbent Board; but provided further, that no individual whose election or initial assumption of office as a director of the Company occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors of the Company, shall be deemed to be a member of the Incumbent Board; or

(c) Approval by the stockholders of the Company of a reorganization, merger or consolidation (a "Business Combination") with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Capital Stock and Company Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 65% of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from the Business Combination, in substantially the same proportion as

3

their ownership immediately prior to such Business Combination of the Outstanding Company Capital Stock and Company Voting Securities, as the case may be; or

(d) Approval by the stockholders of the Company of a sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 65% of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Capital Stock and Company Voting Securities immediately prior to such sale or disposition, in substantially the same proportion as their ownership of the Outstanding Company Capital Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition; or

(e) A complete liquidation or dissolution of the Company.

4. Acknowledge and agree that, in all other respects, the Agreement shall remain in full force and effect in accordance with its terms.

IN WITNESS WHEREOF, the Company has caused this Third Amendment to be executed on its behalf by the Chairman of the Compensation Committee of its Board of Directors and Dimitriou has executed this Third Amendment, all as of the day and year first above written.

WALLACE COMPUTER SERVICES, INC.

ATTEST:

/s/ Michael T. Laudizio                  By: /s/ William N. Lane III
------------------------------               -----------------------------
Its Secretary                                Chairman of the Compensation
                                             Committee of the Board of Directors



                                             /s/ Theodore Dimitriou
                                             -----------------------------
                                             THEODORE DIMITRIOU

4

EXHIBIT 10.17A

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of July 1, 1997, by and between WALLACE COMPUTER SERVICES, INC., a Delaware corporation, (hereinafter called the "Corporation") and ROBERT J. CRONIN, (hereinafter called the "Executive").

WITNESSETH THAT:

WHEREAS, the Corporation desires to continue to employ the Executive as its President and Chief Executive Officer, and the Executive desires to continue in such employment;

NOW, THEREFORE, the Corporation and the Executive, each intending to be legally bound, hereby mutually covenant and agree as follows:

1. Employment and Term.

(a) Employment. The Corporation shall employ the Executive as the President and Chief Executive Officer of the Corporation, and the Executive shall so serve, for the term set forth in Paragraph 1(b).

(b) Term. The term of the Executive's employment under this Agreement shall commence on July 1, 1997 and end on June 30, 2000, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 9. The term of this Agreement shall be extended automatically for one (1) additional year as of July 1, 1998 and each annual anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date, either the Board of Directors of the Corporation (the "Board"), on behalf of the Corporation, or the Executive gives written notice to the other, in accordance with Paragraph 16, that the term of this Agreement shall not be so extended.

2. Duties. During the period of employment as provided in Paragraph 1(b) hereof, the Executive shall serve as President and Chief Executive Officer of the Corporation and have all powers and duties consistent with such positions, subject to the reasonable direction of the Board. The Executive shall also continue to serve as a member of the Board if elected as such, and the parties anticipate (but make no commitment) that, in the absence of a significant change in circumstances, the Executive will be elected in November 1997 to the additional position of Chairman of the Board. The Executive shall devote substantially his entire time during reasonable business hours (reasonable sick leave and vacations excepted) and such additional time as is necessary to fulfill faithfully, responsibly and to the best of his ability his duties hereunder.


3. Salary.

(a) Base Salary. For services performed by the Executive for the Corporation pursuant to this Agreement during the period of employment as provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a base salary at the rate of four hundred fifty-eight thousand six hundred forty-six dollars ($458,646) per year, payable in substantially equal installments in accordance with the Corporation's regular payroll practices. The Executive's base salary (with any increases under paragraph (b), below) shall not be subject to reduction. Any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Corporation or which may be otherwise authorized from time to time by the Board (or an appropriate committee thereof) shall be in addition to the base salary to which the Executive shall be entitled under this Agreement.

(b) Salary Increases. During the period of employment as provided in Paragraph 1(b) hereof, the base salary of the Executive shall be reviewed no less frequently than annually by the Board to determine whether or not the same should be increased in light of the duties and responsibilities of the Executive and the performance thereof, and if it is determined that an increase is merited, such increase shall be promptly put into effect and the base salary of the Executive as so increased shall constitute the base salary of the Executive for purposes of Paragraph 3(a).

4. Annual Bonuses. For each fiscal year during the term of employment, the Executive shall be eligible to receive a cash bonus based on the Corporation's achievement of certain operating and/or financial goals, with an annual target bonus amount equal to 60% of the Executive's then current annual base salary, in accordance with the terms of a bonus plan adopted and administered by the Board for senior executives of the Corporation, which plan may be amended from time to time by the Board in its discretion.

5. Payment of Bonuses. Whenever any annual bonus or any other cash bonus is awarded to Executive, payment of such bonus shall be made in accordance with the following provisions:

(a) Prior to the commencement of any fiscal year, Executive may advise the Compensation Committee of the Board of his election to be paid any annual bonus or any other cash bonus to be awarded to him for such fiscal year on a current or deferred basis. If no such election is made, Executive shall be deemed to have elected to be paid such bonus on a current basis.

(b) Any bonus payable on a current basis shall be paid to Executive within sixty (60) days of the date of the award, subject to normal withholdings and deductions.

(c) Any bonus payable on a deferred basis shall be accrued and paid to Executive as follows:

-2-

(i) Effective as of the date of the award, the Corporation shall credit the amount of any deferred bonus to the book reserve account known as the "Deferred Compensation Account of Robert J. Cronin" (hereinafter referred to as the "Deferred Compensation Account"). There shall also be credited to the Deferred Compensation Account, effective as of the date hereof, all deferred bonuses and interest accrued thereon credited to Executive prior to the date hereof.

(ii) Interest shall accrue on all amounts credited to the Deferred Compensation Account from the date credited to such account until the date paid to Executive as provided in paragraph (iii), below. Such interest shall be computed quarterly on the last day of each calendar quarter based upon the interest rate payable on ninety (90) day certificates of deposit of The First National Bank of Chicago prevailing as of the first day of such calendar quarter. Interest shall be credited to the Deferred Compensation Account, and thereafter accrue interest as provided in this paragraph (ii), effective as of the first day of each calendar year. Any other provision of this subparagraph
(ii) to the contrary notwithstanding, in the event the Corporation shall implement deferred compensation provisions in connection with its incentive compensation programs which provide for deferred payments thereunder in the form of, or based on the rate of return of the Corporation's common stock, the Executive shall be provided with a similar deferred payment opportunity with regard to the Deferred Compensation Account.

(iii) The amounts of deferred bonus and other amounts credited to the Deferred Compensation Account shall be paid to Executive, subject to normal withholdings and deductions, in one hundred twenty (120) equal monthly installments, with interest on the unpaid balance at the rate specified in paragraph (ii), above, commencing in the month immediately following the termination of Executive's employment with the Corporation; provided, however, that if Executive should die before all amounts credited to the Deferred Compensation Account have been paid to him, the full unpaid amount then credited to the Deferred Compensation Account and all interest accrued thereon shall be immediately paid in a lump sum to his designated beneficiary or, if no beneficiary is designated, to his estate.

(d) Any other provision of this Agreement to the contrary notwithstanding, Executive may at any time or from time to time request the payment to him of all or any portion of the amounts then credited to the Deferred Compensation Account, but the Corporation shall make a payment to Executive pursuant to such a request only if and to the extent that such request is approved by the Board.

(e) The Corporation shall designate the provisions of this Agreement and the Change of Control Agreement (described in Paragraph 23 below) relating to the Deferred Compensation Account as a "Plan" subject to the provisions of the Wallace Computer Services, Inc. Benefit Trust (the "Benefit Trust").

6. Equity Incentive Compensation. During the term of employment hereunder the

-3-

Executive shall be eligible to participate, in an appropriate manner relative to other senior executives of the Corporation, in any equity-based incentive compensation plan or program approved by the Board from time to time, including
(but not by way of limitation) any plan providing for the granting of (a)
options to purchase stock of the Corporation, (b) restricted stock of the Corporation or (c) similar equity-based units or interests.

7. Other Benefits. In addition to the compensation described in Paragraphs 3, 4 and 6, above, the Executive shall also be entitled to the following:

(a) Participation in Benefit Plans. The Executive shall be entitled to participate in all of the various retirement, welfare, fringe benefit, executive perquisite, and expense reimbursement plans, programs and arrangements of the Corporation to the extent the Executive is eligible for participation under the terms of such plans, programs and arrangements, except that the Executive shall not participate in the Supplemental Retirement Plan of the Corporation.

(b) Uninsured Medical Expenses. Continuing until Executive's death, or if later, the death of Executive's spouse, the Corporation shall reimburse Executive upon request for expenses incurred by Executive for or in respect of medical care (as defined in Section 213 of the Internal Revenue Code of 1986, as amended (the "Code")) of Executive and his spouse; provided, however, that Executive shall be entitled to reimbursement of medical expenses as set forth in this paragraph (b) if and so long as (and only if and so long as) (i) Executive does not, at any time while he is an employee of the Corporation or at any time thereafter, violate the confidentiality, noncompetition or nonsolicitation covenants set forth in Paragraph 8, below, and (ii) Executive does not commit any action that would permit the Corporation to terminate his employment for "Cause" (as defined in Paragraph 9(d)(ii), below). The Corporation may, in its discretion, pay any such medical expenses directly in lieu of making reimbursement therefor. The reimbursement or payment of such medical expenses on behalf of Executive and/or his spouse shall be limited to an aggregate of $500,000, and reimbursement or payment of such medical expenses shall be made by the Corporation only in the event and to the extent that such reimbursement or payment is not then provided under any insurance policy or policies, whether owned by the Corporation or Executive, or under any other private or public health and accident plan or program under which Executive or his spouse, as the case may be, is then eligible for benefits; provided, however, that, if Executive's employment terminates:

(i) Before his 55th birthday, there shall be no reimbursement or payment of medical expenses on behalf of Executive and/or his spouse after his employment terminates,

(ii) On or after his 55th but before his 60th birthday, the reimbursement or payment of medical expenses on behalf of Executive and/or his spouse shall be limited to an aggregate of $150,000, or

(iii) On or after his 60th but before his 65th birthday, the reimbursement or payment of medical expenses on behalf of Executive and/or his spouse shall be limited to an

-4-

aggregate of $300,000.

Upon the request of the Corporation, Executive shall submit to the Corporation hospitalization, doctor, dental or other medical bills, including premium notices for accident or health insurance, for verification by the Corporation.

(c) Supplemental Retirement Benefit. Except as described in paragraph
(ii), below, the Corporation shall pay to the Executive after the termination of his employment a Supplemental Retirement Benefit ("SRB") determined and paid as follows:

(i) The monthly amount of the SRB shall be the excess of (A) the amount determined by multiplying (1) the Executive's Recent Average Monthly Compensation (as described in paragraph (iii), below) by (2) the Executive's Supplemental Retirement Percentage (as described in paragraph (ii), below) over (B) the sum (but not to exceed 70% of the amount determined under the immediately preceding clause (A)) of (1) the Executive's monthly Social Security retirement benefits, if any, and (2) the monthly amount payable under a single-life annuity for the Executive's life which is the actuarial equivalent of the benefits payable to the Executive under any retirement or profit-sharing plan or program provided by the Corporation, to the extent such benefits are attributable to contributions by the Corporation other than contributions by the Corporation on behalf of the Executive under a salary reduction agreement.

(ii) The Executive's Supplemental Retirement Percentage shall be 25%, plus an additional 2.5% for each additional year of age attained by the Executive after age 55, up to a maximum Supplemental Retirement Percentage of 50% upon attaining age 65; but the Supplemental Retirement Percentage shall be 0% if the Executive's employment with the Corporation and its subsidiaries terminates prior to age 55 and such termination is for Cause (as defined in Paragraph 9(d)(ii), below) or because of the Executive's resignation without Good Reason (as defined in Paragraph 9(d)(v), below).

(iii) The Executive's Recent Average Monthly Compensation shall be the monthly average of his cash compensation for the last 60 months of his full-time employment by the Corporation. Cash compensation shall consist of salary, current and deferred bonuses, and contributions paid on the Executive's behalf by the Corporation pursuant to a salary reduction agreement but shall not include amounts attributable to equity-participation awards or payments made during that 60-month period pursuant to deferral from a previous period.

(iv) The SRB shall be payable in monthly installments for the life of the Executive but in any event for a minimum period of 10 years after the termination of employment. If the Executive dies before the completion of 120 monthly payments, the remaining payments shall be made to his designated beneficiary or, if none is designated, to his estate. If the Executive dies prior to termination of employment, the SRB shall be calculated as of the date of the Executive's death and shall be paid for a period of 10 years to the Executive's designated beneficiary or, if none is designated, to his estate.

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(v) The Corporation's shall designate the provisions of this Agreement and the Change in Control Agreement relating to the SRB as a "Plan" subject to the provisions of the Benefit Trust.

8. Covenants of the Executive. In order to induce the Corporation to enter into this Agreement, the Executive hereby agrees as follows:

(a) Confidentiality. Except for and on behalf of the Corporation with the consent of or as directed by the Board, the Executive shall keep confidential and shall not divulge to any other person or entity, during the term of employment or thereafter, any of the business secrets or other confidential information regarding the Corporation and its subsidiaries which has not otherwise become public knowledge; provided, however, that nothing in this Agreement shall preclude the Executive from disclosing information (i) to an appropriate extent to parties retained to perform services for the Corporation or its subsidiaries or (ii) under any other circumstances to the extent such disclosure is, in the reasonable judgment of the Executive, appropriate or necessary to further the best interests of the Corporation or its subsidiaries or (iii) as may be required by law.

(b) Records. All papers, books and records of every kind and description relating to the business and affairs of the Corporation and its subsidiaries, whether or not prepared by the Executive, other than personal notes prepared by or at the direction of the Executive, shall be the sole and exclusive property of the Corporation, and the Executive shall surrender them to the Corporation at any time upon request by the Board.

(c) Noncompetition and Nonsolicitation. The Executive hereby agrees with the Corporation that during the term of his employment hereunder, and in certain instances, as provided below, for a period of two (2) years following termination of his employment hereunder, (i) he shall not, directly or indirectly, engage in, or be employed by, or act as a consultant to, or be a director, officer, owner or partner of, or acquire a substantial interest in, any business activity or entity which competes significantly with the Corporation or any of its subsidiaries; provided that, after the termination of his employment with the Corporation, "significant" competition shall not include involvement in any line of business that contributes less than five percent (5%) of the gross revenues of the Corporation and its subsidiaries or contributes less than five percent (5%) of the gross revenues of another business entity or activity with which Executive becomes associated, (ii) he shall not solicit any employee of the Corporation or any of its subsidiaries to leave the employment thereof or in any way interfere with the relationship of such employee with the Corporation or its subsidiaries, unless he believes in good faith that such action during the term of his employment by the Corporation is in the best interests of the Corporation, and (iii) he shall not induce or attempt to induce any customer, supplier, licensee or other individual, corporation or other business organization having a business relation with the Corporation or its subsidiaries to cease doing business with the Corporation or its subsidiaries or in any way interfere with the relationship between any such customer, supplier, licensee or other person and the Corporation or its subsidiaries; provided, however, that as to the period after termination of the

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Executive's employment with the Corporation, the restrictive covenants set forth in part (i) of this paragraph (c) shall apply only if such termination results from the Executive's resignation without Good Reason (as defined in Paragraph 9(d)(v), below) or from discharge for Cause (as defined in Paragraph
9(d)(ii), below).

(d) Enforcement. The Executive recognizes that the provisions of this Paragraph 8 are vitally important to the continuing welfare of the Corporation and its subsidiaries and that money damages would constitute an inadequate remedy for any violation thereof. Accordingly, in the event of any such violation by the Executive, the Corporation and its subsidiaries, in addition to any other remedies they may have, shall have the right to compel specific performance thereof or to seek an injunction restraining any action by the Executive in violation of this Paragraph 8.

9. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 9, the Corporation shall continue to employ the Executive and the Executive shall remain employed by the Corporation during the entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 10 hereof sets forth certain obligations of the Corporation in the event that the Executive's employment hereunder is terminated. Certain capitalized terms used in this Paragraph 9 and in Paragraph 10 hereof are defined in Paragraph 9(d), below.

(a) Death or Disability. Except to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination payment obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive's death or in the event that the Executive becomes disabled. The Executive will be deemed to be disabled upon the earlier of (i) the end of a six (6)-consecutive month period, or of an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially all of his usual and customary duties under this Agreement or (ii) the date that a reputable physician selected by the Board, and as to whom the Executive has no reasonable objection, determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive's usual and customary duties under this Agreement for a period of at least six (6) consecutive months. If any question arises as to whether the Executive is disabled, upon reasonable request therefor by the Board, the Executive shall submit to reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability. The Board shall promptly give the Executive written notice of any such determination of the Executive's disability and of any decision of the Board to terminate the Executive's employment by reason thereof. In the event of disability, until the Date of Termination, the base salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Corporation.

(b) Discharge for Cause. In accordance with the procedures hereinafter set forth, the Board may discharge the Executive from his employment hereunder for Cause. Except

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to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause. Any discharge of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Paragraph 16 of this Agreement.

(c) Termination for Other Reasons. The Corporation may discharge the Executive without Cause by giving written notice to the Executive in accordance with Paragraph 16 at least thirty (30) days prior to the Date of Termination. The Executive may resign from his employment, without liability to the Corporation, by giving written notice to the Corporation in accordance with Paragraph 16 at least thirty (30) days prior to the Date of Termination. Except to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged without Cause or resigns.

(d) Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(i) "Accrued Obligations" shall mean, as of the Date of Termination, the sum of (A) the Executive's base salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid, (B) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid, and (D) all other benefits which have accrued as of the Date of Termination, including any applicable retiree benefits (including, but not by way of limitation, medical expense reimbursement benefits under Paragraph 7(b), above, and supplemental retirement benefits under Paragraph 7(c), above) and including any applicable life insurance or disability insurance benefits. For the purpose of this Paragraph 9(d)(i), amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.

(ii) "Cause" shall mean (A) the Executive's willful and continued failure to perform substantially the duties of his employment; or (B) the Executive's willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Corporation; or (C) the Executive's conviction of a felony involving moral turpitude, but specifically excluding any conviction based entirely on vicarious liability (with "vicarious liability" meaning liability based on acts of the Corporation for which the Executive is charged solely as a result of his offices with the Corporation and in which he was not directly involved and did not have prior knowledge of such actions or intended actions); provided, however, that no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's

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action or omission was in the best interests of the Corporation; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Corporation has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission within 30 days after receiving such notice. Termination for Cause must be evidenced by a specific resolution adopted by at least a three-fourths vote of the Board after the Executive is given an opportunity prior to the expiration of such 30-day period, together with his legal counsel, to be heard before the Board.

(iii) "Change of Control" shall mean:

(A) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of capital stock of the Corporation (the "Outstanding Corporation Capital Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Corporation Voting Securities"); provided, however, that (X) any acquisition by or from the Corporation or any of its subsidiaries, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any of its subsidiaries or (Z) any acquisition by any corporation with respect to which, following such acquisition, more than 65% of the then outstanding shares of capital stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such acquisition, in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be, shall not constitute a Change of Control; or

(B) Individuals who, as of September 6, 1995, constituted the Board of Directors of the Corporation (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a member of the Board of Directors of the Corporation subsequent to such date whose election, or nomination for election by the stockholders of the Corporation, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to be a member of the Incumbent Board; but provided further, that no individual whose election or initial assumption of office as a director of the Corporation occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors of the Corporation, shall be deemed to be a member of the Incumbent Board; or

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(C) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation (a "Business Combination") with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 65% of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from the Business Combination, in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be; or

(D) Approval by the stockholders of the Corporation of a sale or other disposition of all or substantially all of the assets of the Corporation other than to a corporation with respect to which, following such sale or disposition, more than 65% of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such sale or disposition, in substantially the same proportion as their ownership of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be, immediately prior to such sale or disposition; or

(E) A complete liquidation or dissolution of the Corporation. Any other provision of this Agreement to the contrary notwithstanding, "Change of Control" shall not include any transaction described in subparagraphs (A),
(C) or (D) of this paragraph (iii) where, in connection with such transaction, the Executive or any party acting in concert with the Executive substantially increases his or its, as the case may be, ownership interest in the Corporation or a successor to the Corporation.

(iv) "Date of Termination" shall mean (A) in the event of a discharge of the Executive by the Board for Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a discharge of the Executive without Cause or a resignation by the Executive, the date specified in the written notice to the Executive (in the case of discharge) or the Corporation (in the case of resignation), which date shall be no less than thirty (30) days from the date of such written notice, (C) in the event of the Executive's death, the date of the Executive's death, and (D) in the event of termination of the Executive's employment by reason of disability pursuant to Paragraph 9(a), the date the Executive receives written notice of such termination.

(v) "Good Reason" shall mean the occurrence of any of the following

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without the Executive's consent: (A) the failure to maintain (I) the Executive in the positions set forth in Paragraph 1(a) above, (II) as a director of the Corporation, or (III) following Executive's election as Chairman of the Board, as Chairman of the Board; (B) the assignment to the Executive of any duties inconsistent in any respect with the Executive's positions with the Corporation as set forth in this Agreement (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Paragraph 2, or any action by the Corporation which results in substantial diminution in such positions, authority, duties or responsibilities, excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 16; or (C) any failure by the Corporation to comply with any of the provisions of this Agreement, other than any isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Corporation promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 16; or (D) the Corporation giving notice to the Executive pursuant to Paragraph 1(b) that the term of this Agreement shall not be extended upon the expiration of the then-current term; or (E) the Corporation requiring the Executive to be based at an office or location which is more than 50 miles from the Executive's office as of July 1, 1997; or (F) the Corporation giving notice to the Executive that the term of the Change of Control Agreement which is described in Paragraph 23, below, shall not be extended upon the expiration of its then current term.

(vi) "Notice of Termination" shall mean a written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice, specifies the termination date.

10. Obligations of the Corporation Upon Termination. The following provisions describe the obligations of the Corporation to the Executive under this Agreement upon termination of his employment. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Corporation or any of its subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Corporation or any of its subsidiaries.

(a) Death, Disability, Discharge for Cause, or Resignation Without Good Reason. In the event this Agreement terminates pursuant to Paragraph 9(a) by reason of the death or disability of the Executive, or pursuant to Paragraph 9(b) by reason of the discharge of the Executive by the Corporation for Cause, or pursuant to Paragraph 9(c) by reason of the resignation of the Executive other than for Good Reason, the Corporation shall pay to the Executive, or his heirs or estate, in the event of the Executive's death, all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in

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accordance with the terms of the relevant plan or policy as applicable to the Executive; and, provided further, that all long-term incentive compensation awards (such as (i) options to purchase stock of the Corporation, (ii) restricted stock of the Corporation, or (iii) similar equity-based units or interests, shall, if not otherwise vested, vest in full upon such termination of this Agreement due to death or disability.

(b) Discharge Without Cause or Resignation with Good Reason. In the event that this Agreement terminates pursuant to Paragraph 9(c) by reason of the discharge of the Executive by the Corporation other than for Cause or disability or by reason of the resignation of the Executive for Good Reason:

(i) The Corporation shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Corporation shall pay to the Executive a cash bonus for the year during which termination occurs, calculated as a prorata portion of his then current target annual bonus amount;

(iii) Continuation for a period of two (2) years of his then current annual base salary and his then current target annual bonus amount, both payable in substantially equal installments in accordance with the Corporation's regular payroll practices;

(iv) For a period of two (2) years after the Date of Termination, the Corporation shall continue to provide benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs and arrangements referred to in Paragraph 7(a) of this Agreement if the Executive's employment with the Corporation had continued for those two (2) years;

(v) All long-term incentive compensation awards to the Executive, including (but not by way of limitation) all equity-based incentive compensation awards (such as (A) options to purchase stock of the Corporation, (B) restricted stock of the Corporation, or (C) similar equity-based units or interests) shall, if not otherwise vested, vest in full upon such termination of this Agreement, and Executive shall be considered to have terminated his employment by reason of retirement for purposes of determining the exercise period applicable to any options following such termination of this Agreement; and

(vi) The Corporation shall, at its sole expense, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive.

11. Certain Additional Payments by the Corporation.

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(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Paragraph 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code") or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(b) Subject to the provisions of paragraph (c), below, all determinations required to be made under this Paragraph 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the accounting firm then serving as the Corporation's independent auditing firm (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Corporation and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Paragraph 11, shall be paid by the Corporation to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any good faith determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to paragraph (c), below, and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.

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(c) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) Give the Corporation any information reasonably requested by the Corporation relating to such claim,

(ii) Take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation,

(iii) Cooperate with the Corporation in good faith in order effectively to contest such claim, and

(iv) Permit the Corporation to participate in any proceedings relating to such claim;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this paragraph (c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner; and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to

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such contested amount. Furthermore, the Corporation's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to paragraph (c), above, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Corporation's complying with the requirements of said paragraph (c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon, after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to said paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid; and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

12. No Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

13. Payment of Certain Expenses. The Corporation agrees to pay promptly as incurred, to the fullest extent permitted by law, all legal fees and expenses which the Executive may reasonably incur in connection with the preparation of this Agreement or as a result of any contest by the Corporation, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest initiated by the Executive about the amount of any payment due pursuant to this Agreement) (together with an additional amount such that after payment by the Executive of Executive's applicable Federal, state and local taxes on such additional amount, Executive shall retain an amount equal to the total of Executive's applicable Federal, state and local taxes arising due to the payment of legal fees and expenses under this Paragraph 13), plus in each case interest on any delayed payment at the interest rate applicable from time to time under the Corporation's primary revolving credit agreement, or in the absence of such a rate, at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code; provided, however, that the Corporation shall not be obligated to make such payment of fees and expenses with respect to any contest in which the Corporation prevails over the Executive.

14. Indemnification. To the fullest extent permitted by law, the Corporation shall, during and after the Executive's term of employment, indemnify the Executive (including the advancement of expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by the Executive in connection with the defense of

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any lawsuit or other claim to which he is made a party by reason of being or having been an officer, director or employee of the Corporation or any of its subsidiaries.

15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Corporation. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Corporation in accordance with the operation of law, and such successor shall be deemed the "Corporation" for purposes of this Agreement.

16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or by reputable commercial delivery service or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows:

(a) If to the Board or the Corporation, to:

Wallace Computer Services, Inc. 2275 Cabot Drive
Lisle, Illinois 60532
Attention: Corporate Secretary

(b) If to the Executive, to:

Mr. Robert J. Cronin
603 Ridgewood Court
Oak Brook, Illinois 60523

with a copy to:

Sonnenschein Nath & Rosenthal 8000 Sears Tower
Chicago, Illinois 60606
Attn: Roger C. Siske

Such addresses may be changed by written notice sent to the other party at the last recorded address of that party.

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17. Tax Withholding. The Corporation shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Corporation to or for the benefit of the Executive under this Agreement or otherwise. The Corporation may, at its option: (a) withhold such taxes from any cash payments owing from the Corporation to the Executive, (b) require the Executive to pay to the Corporation in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

18. Arbitration. Except as to actions described in Paragraph 8(d), any controversy or claim arising out of or relating to this Agreement or the breach hereof shall be settled by arbitration in Chicago, Illinois in accordance with the laws of the State of Illinois, without regard to the choice of law provisions of such laws. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association before an arbitrator appointed by the then President of The Chicago Bar Association. The costs and expenses of the arbitrator shall be borne by the Corporation. The award of the arbitrator shall be binding upon the parties. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.

19. No Assignment. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

20. Execution in Counterparts. This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

21. Jurisdiction and Governing Law. Except as provided in Paragraph 18, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed and interpreted in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such laws.

22. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

23. Effect of Change of Control. Upon the occurrence of a Change of Control (as defined in Paragraph 9(d)(iii), above), this Agreement shall automatically terminate and be

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superseded by a separate Change of Control Agreement made and entered into as of July 1, 1997 by the Executive and the Corporation, in substantially the form attached hereto as Exhibit A.

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24. Prior Understandings. This Agreement embodies the entire understanding of the parties hereto, and supersedes all prior oral or written agreements or understandings between them, regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto. The headings in this Agreement are for convenience and reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

Attest: WALLACE COMPUTER SERVICES, INC.

/s/ Steven L. Carson                By:   /s/ William N.  Lane III
--------------------------              ----------------------------------------
                                    Title:Chairman of the Compensation Committee
                                          --------------------------------------


                                    ROBERT J. CRONIN



                                    /s/ Robert J. Cronin
                                    --------------------------------------------

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EXHIBIT 10.17B

CHANGE OF CONTROL AGREEMENT

AGREEMENT made and entered into as of July 1, 1997 by and between WALLACE COMPUTER SERVICES, INC., a Delaware corporation, (the "Corporation") and ROBERT
J. CRONIN (the "Executive").

The Board of Directors of the Corporation (the "Board") has determined that it is in the best interests of the Corporation and its stockholders to assure that the Corporation will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Corporation. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Corporation currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Corporation to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section l(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Corporation is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who had taken steps reasonably calculated to effect a Change of Control, (ii) otherwise arose in connection with or anticipation of a Change of Control, or (iii) would not have occurred or would be substantially less likely to have occurred in the absence of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment.

(b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one (1) year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof being hereinafter referred to as a "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate three (3) years from such Renewal Date, unless at least sixty (60) days prior to such Renewal Date the Corporation shall give notice to the Executive that the Change of Control Period shall not be so extended.


2. Change of Control. For purposes of this Agreement, a "Change of Control" shall mean:

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty-five percent (35%) or more of either (i) the then outstanding shares of capital stock of the Corporation (the "Outstanding Corporation Capital Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Corporation Voting Securities"); provided, however, that (X) any acquisition by or from the Corporation or any of its subsidiaries, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any of its subsidiaries or (Z) any acquisition by any corporation with respect to which, following such acquisition, more than sixty-five percent (65%) of the then outstanding shares of capital stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such acquisition, in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be, shall not constitute a Change of Control; or

(b) Individuals who, as of September 6, 1995, constituted the Board of Directors of the Corporation (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a member of the Board of Directors of the Corporation subsequent to such date whose election, or nomination for election by the stockholders of the Corporation, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to be a member of the Incumbent Board; but provided further, that no individual whose election or initial assumption of office as a director of the Corporation occurs as a result of an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors of the Corporation, shall be deemed to be a member of the Incumbent Board; or

(c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation (a "Business Combination") with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than sixty-five percent (65%) of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from

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the Business Combination, in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be; or

(d) Approval by the stockholders of the Corporation of a sale or other disposition of all or substantially all of the assets of the Corporation other than to a corporation with respect to which, following such sale or disposition, more than sixty-five percent (65%) of, respectively, the then outstanding shares of capital stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Capital Stock and Corporation Voting Securities immediately prior to such sale or disposition, in substantially the same proportion as their ownership of the Outstanding Corporation Capital Stock and Corporation Voting Securities, as the case may be, immediately prior to such sale or disposition; or

(e) A complete liquidation or dissolution of the Corporation.

Any other provision of this Agreement to the contrary notwithstanding, "Change of Control" shall not include any transaction described in subparagraphs (a),
(c) or (d) of this Section 2 where, in connection with such transaction, the Executive or any party acting in concert with the Executive substantially increases his or its, as the case may be, ownership interest in the Corporation or a successor to the Corporation.

3. Employment Period. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period").

4. Terms of Employment.

(a) Position and Duties.

(i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the twelve (12)-month period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or at any office or location less than fifty (50) miles from such location.

(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the

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Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere significantly with the performance of the Executive's responsibilities to the Corporation.

(b) Compensation.

(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate at least equal to the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Corporation and its affiliated companies with respect to the twenty-four
(24)-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than twelve (12) months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any corporation controlled by, controlling or under common control with the Corporation.

(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's average annual bonus paid or payable under the Corporation's annual incentive plans for the last two (2) full fiscal years prior to the Effective Date (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the first month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.

(iii) Payment of Bonuses. Whenever any annual bonus or any other cash bonus is awarded to Executive, payment of such bonus shall be made in accordance with the following provisions:

(A) Prior to the commencement of any fiscal year, Executive may advise the Compensation Committee of the Board of his election to be paid any annual bonus or any other cash bonus to be awarded to him for such fiscal year on a current or deferred

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basis. If no such election is made, Executive shall be deemed to have elected to be paid such bonus on a current basis.

(B) Any bonus payable on a current basis shall be paid to Executive within sixty (60) days of the date of the award, subject to normal withholdings and deductions.

(C) Any bonus payable on a deferred basis shall be accrued and paid to Executive as follows:

(1) Effective as of the date of the award, the Corporation shall credit the amount of any deferred bonus to the book reserve account known as the "Deferred Compensation Account of Robert J. Cronin" (hereinafter referred to as the "Deferred Compensation Account"). There shall also be credited to the Deferred Compensation Account, effective as of the Effective Date, all deferred bonuses and interest accrued thereon credited to Executive prior to such date.

(2) Interest shall accrue on all amounts credited to the Deferred Compensation Account from the date credited to such account until the date paid to Executive as provided in paragraph (3), below. Such interest shall be computed quarterly on the last day of each calendar quarter based upon the interest rate payable on ninety (90) day certificates of deposit of The First National Bank of Chicago prevailing as of the first day of such calendar quarter. Interest shall be credited to the Deferred Compensation Account, and thereafter accrue interest as provided in this paragraph (2), effective as of the first day of each calendar year. Any other provision of this subparagraph
(ii) to the contrary notwithstanding, in the event the Corporation shall implement deferred compensation provisions in connection with its incentive compensation programs which provide for deferred payments thereunder in the form of , or based on the rate of return of the Corporation's common stock, the Executive shall be provided with a similar opportunity with regard to the Deferred Compensation Account.

(3) The amounts of deferred bonus and other amounts credited to the Deferred Compensation Account shall be paid to Executive, subject to normal withholdings and deductions, in one hundred twenty (120) equal monthly installments, with interest on the unpaid balance at the rate specified in paragraph (2), above, commencing in the month immediately following the termination of Executive's employment with the Corporation; provided, however, that if Executive should die before all amounts credited to the Deferred Compensation Account have been paid to him, the full unpaid amount then credited to the Deferred Compensation Account and all interest accrued thereon shall be immediately paid in a lump sum to his designated beneficiary or, if no beneficiary is designated, to his estate.

(D) Any other provision of this Agreement to the contrary notwithstanding, Executive may at any time or from time to time request the payment to him of all or any portion of the amounts then credited to the Deferred Compensation Account, but the Corporation shall make a payment to Executive pursuant to such a request only if and to the

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extent that such request is approved by the Board.

(E) Immediately after the Effective Date, the Corporation shall, if it has not already done so, deliver to the trustee of the Wallace Computer Services, Inc. Benefit Trust (the "Benefit Trust"), cash or marketable securities or other property having a fair market value (or any combination thereof) equal to the amount then credited to the Deferred Compensation Account.
(iv) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other senior executives of the Corporation and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable for the Executive of those provided by the Corporation and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the twelve (12)-month period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other senior executives of the Corporation and its affiliated companies; provided, however, that the Executive shall not participate during the Employment Period or thereafter in the Supplemental Retirement Plan of the Corporation. For purposes of this paragraph (iv), the reference to incentive plans, practices, policies and programs covers all forms of short-term or long-term incentive compensation arrangements, including but not by way of limitation arrangements providing for stock options, warrants, stock appreciation rights and/or other cash payments.

(v) Other Employee Benefits. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under all welfare benefit, fringe benefit, expense reimbursement, and executive perquisite plans, practices, policies and programs provided by the Corporation and its affiliated companies (including, without limitation, medical, supplemental medical reimbursement, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other senior executives of the Corporation and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable for the Executive, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the twelve (12)-month period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other senior executives of the Corporation and its affiliated companies.

(vi) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Corporation and its affiliated companies at any time during the twelve (12)-month period immediately preceding the Effective

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Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other senior executives of the Corporation and its affiliated companies.

(vii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Corporation and its affiliated companies as in effect for the Executive at any time during the twelve
(12)-month period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other senior executives of the Corporation and its affiliated companies.

5. Uninsured Medical Expenses. Continuing until Executive's death (or, if later, the death of the Executive's spouse), in addition to participating in any medical insurance or other medical benefit program of the Corporation, the Executive shall be entitled to reimbursement from the Corporation for expenses incurred by Executive for or in respect of medical care (as defined in Section 213 of the Internal Revenue Code of 1986, as amended (the "Code")) of Executive and his spouse; provided, however, that Executive shall be entitled to reimbursement of medical expenses as set forth in this Section 5 if and so long as (and only if and so long as) (a) Executive does not, at any time while he is an employee of the Corporation or at any time thereafter, violate the confidentiality or nonsolicitation covenants set forth in Section 7, below, and
(b) Executive does not commit any action that would permit the Corporation to terminate his employment for "Cause" (as defined in Section 8(d)(ii), below). The Corporation may, in its discretion, pay any such medical expenses directly in lieu of making reimbursement therefor. The reimbursement or payment of such medical expenses on behalf of Executive and/or his spouse shall be limited to an aggregate of $500,000, and reimbursement or payment of such medical expenses shall be made by the Corporation only in the event and to the extent that such reimbursement or payment is not then provided under any insurance policy or policies, whether owned by the Corporation or Executive, or under any other private or public health and accident plan or program under which Executive or his spouse, as the case may be, is then eligible for benefits. Upon the request of the Corporation, Executive shall submit to the Corporation hospitalization, doctor, dental or other medical bills, including premium notices for accident or health insurance, for verification by the Corporation.

6. Supplemental Retirement Benefit. Except as described in Section
9(b)(ii)(D), below, the Corporation shall pay to the Executive after the termination of his employment a Supplemental Retirement Benefit ("SRB") determined and paid as follows:

(a) The monthly amount of the SRB shall be the excess of (i) fifty percent (50%) of the Executive's Recent Average Monthly Compensation (as described in paragraph (b), below) over (ii) the sum (not to exceed 70% of the amount determined under the immediately preceding clause (i)) of (A) the Executive's monthly Social Security retirement benefits, if any, and (B) the monthly amount payable under a single-life annuity for the Executive's life which is the actuarial equivalent of the benefits payable to the Executive under any retirement or profit-sharing plan or program provided by the Corporation, to the extent such benefits are attributable to contributions by the Corporation other than contributions by the Corporation on behalf of the

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Executive under a salary reduction agreement.

(b) The Executive's Recent Average Monthly Compensation shall be the monthly average of his cash compensation for the last sixty (60) months of his full-time employment by the Corporation. Cash compensation shall consist of salary, current and deferred bonuses, and contributions paid on the Executive's behalf by the Corporation pursuant to a salary reduction agreement but shall not include amounts attributable to equity-participation awards or to payments made during that sixty (60)-month period pursuant to deferral from a previous period.

(c) The SRB shall be payable in monthly installments for the life of the Executive but in any event for a minimum period of ten (10) years after the termination of employment. If the Executive dies before the completion of one hundred twenty (120) monthly payments, the remaining payments shall be made to his designated beneficiary or, if none is designated, to his estate. If the Executive dies prior to termination of employment, the SRB shall be calculated as of the date of the Executive's death and shall be paid for a period of ten
(10) years to the Executive's designated beneficiary or, if none is designated, to his estate.

Immediately after the Effective Date, the Corporation shall, if it has not already done so, deliver to the trustee of the Benefit Trust cash or marketable securities or other property having a fair market value (or any combination thereof) equal to the amount described in Section 9(b)(ii)(D) below.

7. Covenants of the Executive. In order to induce the Corporation to enter into this Agreement, the Executive hereby agrees as follows:

(a) Confidentiality. Except for and on behalf of the Corporation with the consent of or as directed by the Board, the Executive shall keep confidential and shall not divulge to any other person or entity, during the term of employment or thereafter, any of the business secrets or other confidential information regarding the Corporation and its subsidiaries which has not otherwise become public knowledge; provided, however, that nothing in this Agreement shall preclude the Executive from disclosing information (i) to an appropriate extent to parties retained to perform services for the Corporation or its subsidiaries or (ii) under any other circumstances to the extent such disclosure is, in the reasonable judgment of the Executive, appropriate or necessary to further the best interests of the Corporation or its subsidiaries or (iii) as may be required by law.

(b) Records. All papers, books and records of every kind and description relating to the business and affairs of the Corporation and its subsidiaries, whether or not prepared by the Executive, other than personal notes prepared by or at the direction of the Executive, shall be the sole and exclusive property of the Corporation, and the Executive shall surrender them to the Corporation at any time upon request by the Board.

(c) Noncompetition and Nonsolicitation. The Executive hereby agrees with

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the Corporation that during the term of his employment hereunder, and in certain instances, as provided below, for a period of two (2) years following termination of his employment with the Corporation, (i) he shall not, directly or indirectly, engage in, or be employed by, or act as a consultant to, or be a director, officer, owner or partner of, or acquire a substantial interest in, any business activity or entity which competes significantly with the Corporation or any of its subsidiaries; provided that, after the termination of his employment with the Corporation, "significant" competition shall not include involvement in any line of business that contributes less than five percent (5%) of the gross revenues of the Corporation and its subsidiaries or contributes less than five percent (5%) of the gross revenues of another business entity or activity with which Executive becomes associated, (ii) he shall not solicit any employee of the Corporation or any of its subsidiaries to leave the employment thereof or in any way interfere with the relationship of such employee with the Corporation or its subsidiaries, unless he believes in good faith that such action during the term of his employment by the Corporation is in the best interests of the Corporation, and (iii) he shall not induce or attempt to induce any customer, supplier, licensee or other individual, corporation or other business organization having a business relation with the Corporation or its subsidiaries to cease doing business with the Corporation or its subsidiaries or in any way interfere with the relationship between any such customer, supplier, licensee or other person and the Corporation or its subsidiaries; provided, however, that as to the period after termination of the Executive's employment with the Corporation, the restrictive covenants set forth in part (i) of this paragraph (c) shall apply only if such termination results from the Executive's discharge for Cause (as defined in Section 8(d)(ii), below).

(d) Enforcement. The Executive recognizes that the provisions of this
Section 7 are vitally important to the continuing welfare of the Corporation and its subsidiaries and that money damages would constitute an inadequate remedy for any violation thereof. Accordingly, in the event of any such violation by the Executive, the Corporation and its subsidiaries, in addition to any other remedies they may have, shall have the right to compel specific performance thereof or to seek an injunction restraining any action by the Executive in violation of this Section 7.

8. Termination. Unless earlier terminated in accordance with the following provisions of this Section 8, the Corporation shall continue to employ the Executive and the Executive shall remain employed by the Corporation during the Employment Period as set forth in Section 3. Section 9 hereof sets forth certain obligations of the Corporation in the event that the Executive's employment hereunder is terminated. Certain capitalized terms used in this
Section 8 and in Section 9 hereof are defined in Section 8(d), below.

(a) Death or Disability. Except to the extent otherwise provided in
Section 9 with respect to certain post-Date of Termination payment obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive's death or in the event that the Executive becomes disabled. The Executive will be deemed to be disabled upon the earlier of (i) the end of a six (6)-consecutive month period, or of an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform

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substantially all of his usual and customary duties under this Agreement or
(ii) the date that a reputable physician selected by the Board, and as to whom the Executive has no reasonable objection, determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive's usual and customary duties under this Agreement for a period of at least six (6) consecutive months. If any question arises as to whether the Executive is disabled, upon reasonable request therefor by the Board, the Executive shall submit to reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability. The Board shall promptly give the Executive written notice of any such determination of the Executive's disability and of any decision of the Board to terminate the Executive's employment by reason thereof. In the event of disability, until the Date of Termination, the base salary payable to the Executive under Section 4(b)(i) hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Corporation.

(b) Discharge for Cause. In accordance with the procedures hereinafter set forth, the Board may discharge the Executive from his employment hereunder for Cause. Except to the extent otherwise provided in Section 9 with respect to certain post-Date of Termination obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause. Any discharge of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Section 15 of this Agreement.

(c) Termination for Other Reasons. The Corporation may discharge the Executive without Cause by giving written notice to the Executive in accordance with Section 15 at least thirty (30) days prior to the Date of Termination. The Executive may resign from his employment, without liability to the Corporation, by giving written notice to the Corporation in accordance with
Section 15 at least thirty (30) days prior to the Date of Termination. Except to the extent otherwise provided in Section 9 with respect to certain post-Date of Termination obligations of the Corporation, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged without Cause or resigns.

(d) Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(i) "Accrued Obligations" shall mean, as of the Date of Termination, the sum of (A) the Executive's base salary under Section 4(b)(i) through the Date of Termination to the extent not theretofore paid, (B) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid, and (D) all other benefits which have accrued as of the Date of Termination, including any applicable retiree benefits (including, but not by way of limitation, medical expense reimbursement benefits under Section 5, above, and supplemental retirement benefits under Section 6, above) and including any applicable life insurance or disability insurance benefits. For

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the purpose of this Section 8(d)(i), amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.

(ii) "Cause" shall mean (A) the Executive's willful and continued failure to perform substantially the duties of his employment; or (B) the Executive's willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Corporation; or (C) the Executive's conviction of a felony involving moral turpitude, but specifically excluding any conviction based entirely on vicarious liability (with "vicarious liability" meaning liability based on acts of the Corporation for which the Executive is charged solely as a result of his offices with the Corporation and in which he was not directly involved and did not have prior knowledge of such actions or intended actions); provided, however, that no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Corporation; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Corporation has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission within 30 days after receiving such notice. Termination for Cause must be evidenced by a specific resolution adopted by at least a three-fourths vote of the Board after the Executive is given an opportunity prior to the expiration of such 30-day period, together with his legal counsel, to be heard before the Board.

(iii) "Date of Termination" shall mean (A) in the event of a discharge of the Executive by the Board for Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a discharge of the Executive without Cause or a resignation by the Executive, the date specified in the written notice to the Executive (in the case of discharge) or the Corporation (in the case of resignation), which date shall be no less than thirty (30) days from the date of such written notice, (C) in the event of the Executive's death, the date of the Executive's death, and (D) in the event of termination of the Executive's employment by reason of disability pursuant to
Section 8(a), the date the Executive receives written notice of such termination.

(iv) "Good Reason" shall mean the occurrence of any of the following without the Executive's consent: (A) the failure to maintain (i) the Executive in the positions set forth in Paragraph 4(a) above, (II) as a director of the Corporation, or (III) following Executive's election as Chairman of the Board, as Chairman of the Board; (B) (B) the assignment to the Executive of any duties inconsistent in any respect with the Executive's positions with the Corporation as set forth in this Agreement (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section
4(a), or any action by the Corporation which results in substantial diminution in such positions, authority, duties or responsibilities, excluding for this purpose any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after receipt of written notice thereof given by the Executive in accordance with Section 15; or (C) any failure by the

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Corporation to comply with any of the provisions of this Agreement, other than any isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Corporation promptly after receipt of written notice thereof given by the Executive in accordance with Section 15; or (D) the Corporation requiring the Executive to be based at an office or location which is more than fifty (50) miles from the Executive's office as of July 1, 1997. Any good faith determination by the Executive that Good Reason exists shall be conclusive. In addition, any termination by the Executive during the thirty
(30)-day "window period" beginning six (6) months after a Change of Control shall be deemed to be for "Good Reason."

(v) "Notice of Termination" shall mean a written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice, specifies the termination date.

9. Obligations of the Corporation Upon Termination. The following provisions describe the obligations of the Corporation to the Executive under this Agreement upon termination of his employment during the Employment Period. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Corporation or any of its subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Corporation or any of its subsidiaries.

(a) Death, Disability, Discharge for Cause, or Resignation Without Good Reason. In the event this Agreement terminates pursuant to Section 8(a) by reason of the death or disability of the Executive, or pursuant to Section 8(b) by reason of the discharge of the Executive by the Corporation for Cause, or pursuant to Section 8(c) by reason of the resignation of the Executive other than for Good Reason, the Corporation shall pay to the Executive, or his heirs or estate, in the event of the Executive's death, all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive; and, provided further, that all long-term incentive compensation awards (such as (i) options to purchase stock of the Corporation, (ii) restricted stock of the Corporation, or (iii) similar equity-based units or interests) shall, if not otherwise vested, vest in full upon such termination of this Agreement due to death or disability.

(b) Discharge Without Cause or Resignation with Good Reason. In the event that this Agreement terminates pursuant to Section 8(c) by reason of the discharge of the Executive by the Corporation other than for Cause or disability or by reason of the resignation of the Executive for Good Reason:

(i) The Corporation shall pay all Accrued Obligations to the Executive

-12-

in a lump sum in cash within ten (10) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within ten (10) days after the Date of Termination, the Corporation shall pay to the Executive a lump sum including the following amounts:

(A) A cash bonus for the year of termination, calculated as a pro rata portion of his then current target annual bonus amount;

(B) The full amount then credited to the Deferred Compensation Account described in Section 4(b)(iii), above;

(C) A "Severance Amount" equal to three (3) times the sum of the Executive's (1) then current annual base salary and (2) then current target annual bonus amount; reduced by any amounts payable to the Executive under the Corporation's Executive Severance Pay Plan or any similar plan or program; and

(D) In lieu of the Supplemental Retirement Benefit ("SRB")
described in Section 6, above, a "Supplemental Retirement Amount" equal to the present value of a monthly SRB payable after the termination of employment for the life of the Executive but in any event for a minimum period of ten (10) years, with such value being calculated as follows:

(1) The monthly amount of the SRB shall be the excess of
(a) 50% of the Executive's Recent Average Monthly Compensation (as described in paragraph (2), below) over (b) the sum of (i) the Executive's projected monthly Social Security retirement benefits, if any, and (ii) the monthly amount payable under a single-life annuity for the Executive's life which is the actuarial equivalent of the benefits payable to the Executive under any retirement or profit-sharing plan or program provided by the Corporation, to the extent such benefits are attributable to contributions by the Corporation other than contributions by the Corporation on behalf of the Executive under a salary reduction agreement.

(2) The Executive's Recent Average Monthly Compensation shall be the amount determined by dividing sixty (60) into the sum of (a) the Severance Amount described in paragraph (C), above, and (b) the Executive's cash compensation for the last twenty-four (24) months of his full-time employment by the Corporation. Cash compensation shall consist of salary, current and deferred bonuses, and contributions paid on the Executive's behalf by the Corporation pursuant to a salary reduction agreement but shall not include amounts attributable to equity-participation awards or to payments made during that twenty-four (24)-month period pursuant to deferral from a previous period.

(3) The Executive's Social Security retirement benefits shall be projected as if the Executive began receiving such benefits at the earliest date available to

-13-

him under then current law.

(4) The computation of present value shall use the then current Pension Benefit Guaranty Corporation interest rate for valuing immediate annuities under single-employer pension plans.

(iii) For a period of three (3) years after the Date of Termination, the Corporation shall continue to provide benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs and arrangements referred to in Section 4(b)(v) of this Agreement if the Executive's employment with the Corporation had continued for those three (3) years; provided, however, that such benefits shall be at least equal to the most favorable for the Executive which were provided for the Executive at any time during the twelve (12)-month period immediately preceding the termination of employment.

(iv) All long-term incentive compensation awards to the Executive, including (but not by way of limitation) all equity-based incentive compensation awards (such as (A) options to purchase stock of the Corporation, (B) restricted stock of the Corporation, or (C) similar equity-based units or interests) shall, if not otherwise vested, vest in full upon such termination of this Agreement and Executive shall be considered to have terminated his employment by reason of retirement for purposes of determining the exercise period applicable to any options following such termination of this Agreement; and

(v) The Corporation shall, at its sole expense, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive.

10. Certain Additional Payments by the Corporation.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code") or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(b) Subject to the provisions of paragraph (c), below, all determinations

-14-

required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the accounting firm serving as the Corporation's independent auditing firm immediately prior to the Effective Date (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Corporation and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Corporation to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any good faith determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to paragraph (c), below, and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.

(c) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) Give the Corporation any information reasonably requested by the Corporation relating to such claim,

(ii) Take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the

-15-

Corporation,

(iii) Cooperate with the Corporation in good faith in order effectively to contest such claim, and

(iv) Permit the Corporation to participate in any proceedings relating to such claim;

provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this paragraph (c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner; and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to paragraph (c), above, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Corporation's complying with the requirements of said paragraph (c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon, after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to said paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid; and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

-16-

11. No Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

12. Payment of Certain Expenses. The Corporation agrees to pay promptly as incurred, to the fullest extent permitted by law, all legal fees and expenses which the Executive may reasonably incur in connection with the preparation of this Agreement or as a result of any contest by the Corporation, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest initiated by the Executive about the amount of any payment due pursuant to this Agreement) (together with an additional amount such that after payment by the Executive of Executive's applicable Federal, state and local taxes on such additional amount, Executive shall retain an amount equal to the total of Executive's applicable Federal, state and local taxes arising due to the payment of legal fees and expenses under this Section 12), plus in each case interest on any delayed payment at the interest rate applicable from time to time under the Corporation's primary revolving credit agreement, or in the absence of such a rate, at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code; provided, however, that the Corporation shall not be obligated to make such payment of fees and expenses with respect to any contest in which it is determined that such contest was initiated or maintained by Executive in bad faith.

13. Indemnification. To the fullest extent permitted by law, the Corporation shall, during and after the Executive's term of employment, indemnify the Executive (including the advancement of expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being or having been an officer, director or employee of the Corporation or any of its subsidiaries.

14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Corporation. The Corporation shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Corporation in accordance with the operation of law, and such successor shall be deemed the "Corporation" for purposes of this Agreement.

-17-

15. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or by reputable commercial delivery service or mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to the Board or the Corporation, to:

Wallace Computer Services, Inc. 2275 Cabot Drive
Lisle, Illinois 60532
Attention: Corporate Secretary

(b) If to the Executive, to:

Mr. Robert J. Cronin
603 Ridgewood Court
Oak Brook, Illinois 60523

With a copy to:

Sonnenschein Nath & Rosenthal 8000 Sears Tower
Chicago, Illinois 60606
Attention: Roger C. Siske

Such addresses may be changed by written notice sent to the other party at the last recorded address of that party.

16. Tax Withholding. The Corporation shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Corporation to or for the benefit of the Executive under this Agreement or otherwise. The Corporation may, at its option: (a) withhold such taxes from any cash payments owing from the Corporation to the Executive, (b) require the Executive to pay to the Corporation in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

17. Arbitration. Except as to actions described in Section 7(d), any controversy or claim arising out of or relating to this Agreement or the breach hereof shall be settled by arbitration in Chicago, Illinois in accordance with the laws of the State of Illinois, without regard to the choice of law provisions of such laws. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association before an arbitrator appointed by the then President of The Chicago Bar Association. The costs and expenses of the arbitrator shall be borne by the Corporation. The award of the arbitrator shall be binding upon the parties. Judgment upon the award rendered by the arbitrator may be entered in any court having

-18-

jurisdiction.

18. No Assignment. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

19. Execution in Counterparts. This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

20. Jurisdiction and Governing Law. Except as provided in Section 17, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed and interpreted in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such laws.

21. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

-19-

22. Relationship to Employment Agreement. The Executive and the Corporation acknowledge that, prior to the Effective Date, the Executive's employment shall be governed by the Employment Agreement between the Executive and the Corporation dated as of July 1, 1997, as it may be amended and/or restated from time to time (the "Prior Agreement"). From and after the Effective Date, this Agreement shall supersede the Prior Agreement and any other agreement between the parties with respect to the subject matter hereof.

23. Prior Understandings. This Agreement embodies the entire understanding of the parties hereto, and supersedes all prior oral or written agreements or understandings between them, regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto. The headings in this Agreement are for convenience and reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

Attest:                             WALLACE COMPUTER SERVICES, INC.



/s/ Steven L.  Carson               By: /s/ William N.  Lane III
----------------------------            ----------------------------------------
                                    Title:Chairman of the Compensation Committee
                                          --------------------------------------


                                    ROBERT J.  CRONIN



                                    /s/ Robert J.  Cronin
                                    --------------------------------------------

-20-

WALLACE 1997 ANNUAL REPORT

WALLACE MAKES IT
SIMPLE


[BACKGROUND PICTURE]

COPIER PAPER

INVOICES

ENVELOPES

INDUSTRIAL CATALOGS

LABELING SOFTWARE

ATM ROLLS

DISKETTES

STOCK LABELS

TELECOM SERVICE NOTICES

MARKERS

PRINTER CARTRIDGES

NOTEPADS

PENS

PHONE MESSAGE PADS

PAPER CLIPS

STATEMENTS

ELECTRONIC ARTICLE SURVEILLANCE LABELS

AIRLINE BAG TAGS

BOTTLE LABELS

STOCK FORMS

TAPE

PACKAGE DELIVERY FORMS

LEGAL PADS

HMO DIRECTORIES

STAPLERS

COMPUTER PAPER

FILE FOLDERS

INTERCOMPANY FORMS

MARKETING BROCHURES

DIRECT MAIL OFFERS

BAR-CODED SHIPPING LABELS

INTRACOMPANY FORMS

P.O.S. DISPLAYS

CREDIT CARD OFFERS


WALLACE AT A GLANCE

------------------------------------------------------------------------------------------------------------------------------------
                                                                             PERCENTAGE                       PRODUCT
PRODUCT SEGMENT                EXAMPLES                                   OF CORPORATE SALES                REVENUE GROWTH
------------------------------------------------------------------------------------------------------------------------------------

FORMS                          -    Air freight package forms              ---------------------          ---------------------
                               -    Monthly billing                           $305.6 MILLION                1997       2 Year
                                    statements                             ---------------------           GROWTH       CAGR
                               -    Mortgage applications                          34%                    ---------------------
                               -    Healthcare forms                       ---------------------            -5.7%       4.5%
                               -    Credit card statements                      PIE GRAPH                 ---------------------
                               -    Point-of-sale transaction forms        ---------------------                 $323.9
                                                                                                                         $305.6
                                                                                                           $280.0
                                                                                                          ---------------------
                                                                                                                 BAR GRAPH
                                                                                                          ---------------------
                                                                                                          1995   1996    1997
                                                                                                          ---------------------
                                                                                                              (IN MILLIONS)
















------------------------------------------------------------------------------------------------------------------------------------
PRINT                          -    Sweepstakes mailings                   ---------------------          ---------------------
                               -    Credit card offers                        $242.0 MILLION                1997       2 YEAR
                               -    Retail point-of-sale materials         ---------------------           GROWTH       CAGR
                               -    Product brochures                              27%                    ---------------------
                               -    Healthcare plan directories            ---------------------            11.4%       23.1%
                               -    On-demand, individual mailings               PIE CHART                ---------------------
                                                                                                                         $242.0
                                                                                                                 $217.2
                                                                                                          $159.6
                                                                                                          ---------------------
                                                                                                          1995   1996    1997
                                                                                                          ---------------------
                                                                                                              (IN MILLIONS)

















------------------------------------------------------------------------------------------------------------------------------------
OFFICE PRODUCTS                -    Legal pads                             ---------------------          ---------------------
                               -    Computer paper                             $221.3 MILLION                1997      2 YEAR
                               -    Printer ribbons and                    ---------------------            GROWTH      CAGR
                                    cartridges                                     24%                    ---------------------
                               -    ATM and cash register paper rolls      ---------------------             9.9%       14.5%
                               -    Brand-name office supplies                   PIE CHART                ---------------------
                               -    Standardized business forms            ---------------------                         $221.3
                                                                                                                 $201.4
                                                                                                          $168.8
                                                                                                          ---------------------
                                                                                                          1995   1996    1997
                                                                                                          ---------------------
                                                                                                              (IN MILLIONS)




















------------------------------------------------------------------------------------------------------------------------------------
LABELS                         -    Bar-coded shipping labels              ---------------------          ---------------------
                               -    Consumer product labels                    $137.4 MILLION                1997      2 YEAR
                               -    Airline bag tags                       ---------------------            GROWTH      CAGR
                               -    Blank stock labels                             15%                    ---------------------
                               -    Label software, printers and           ---------------------            14.7%       14.7%
                                    applicators                                PIE CHART                  ---------------------
                               -    Electronic article surveillance        ---------------------                        $137.4
                                    (EAS) tags                                                                   $119.8
                                                                                                          $104.4
                                                                                                          ----------------------
                                                                                                          1995    1996   1997
                                                                                                          ----------------------
                                                                                                               (IN MILLIONS)
------------------------------------------------------------------------------------------------------------------------------------


[GRAPH]

                                                         WALLACE AT A GLANCE
------------------------------------------------------------------------------------------------------------------
PRODUCT SEGMENT                    FISCAL 1997 HIGHLIGHTS                     GROWTH STRATEGY
------------------------------------------------------------------------------------------------------------------

FORMS                       -  Unit sales of forms grew %5,              -  The outsourcing trend will continue
                               but in dollars were 5.7% below               to produce new opportunities
                               last year due to paper prices that           to penetrate the Fortune 1000.
                               were as much as 40% below
                               fiscal 1996 levels.
                                                                         -  Communicate the proven results
                            -  Wallace became the recognized                we have achieved for 314 W.I.N.
                               leader in forms management                   and Select Services customers
                               services, and the strong market              to continue market share gains.
                               appeal of W.I.N. (TM) and Select
                               Services(TM) drove the number             -  Further expand and enhance forms
                               of new forms contracts up 29.2%              management services to maintain a
                                                                            superior customer value offering.
                            -  Began rolling-out the third phase
                               of MIPS establishing digital order        -  Focus special attention on key
                               entry and pricing to speed                   vertical markets.
                               customer price estimating, and
                               a new automated planning and              -  Introduce Priorities(TM), a
                               scheduling system in the plants.             structured program that provides
                                                                            a potential new customer with a
                            -  Launched QUEST, a quality and                comprehensive audit of all forms
                               productivity enhancement program             and departments to identify cost
                               in all forms plants.                         reduction opportunities.

                            -  Developed @W.I.N. Direct(TM),             -  Continue to leverage Wallace's
                               an internet ordering system                  information systems' strengths
                               that makes it faster and easier              to develop and implement programs
                               for end-users to order their                 that increase customer service
                               forms and supplies.                          and savings, as well as
                                                                            manufacturing efficiency and
                                                                            quality.

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

PRINT                       -  Direct response and commercial            -  The way most large organizations
                               printing sales grew 11.4% to                 currently purchase and manage
                               $242.0 million over fiscal 1996.             materials such as marketing
                                                                            brochures represents a sizable
                                                                            opportunity to apply Wallace's
                            -  Launched a new commercial                    services and expertise, resulting
                               printing strategy aimed at                   in reduced overall costs for
                               becoming the supplier of                     the customer and new sales
                               printed promotional items,                   opportunities for Wallace.
                               such as brochures and marketing
                               materials, to large                       -  Roll-out W.I.N. 3.0 to leverage
                               organizations.                               existing account relationships to
                                                                            generate commercial print and
                            -  Developed W.I.N. 3.0 which adds              direct response sales
                               the capabilities needed to manage .          opportunities.
                               all commercial printing supplies
                               and generate cost and work savings        -  Make further acquisitions to
                                                                            increase geographic availability
                            -  Acquired Post Printing and Moran             of high-end commercial printing
                               Printing to add to Wallace's                 capability.
                               high-end commercial printing
                               capabilities.                             -  Continue developing additional
                                                                            customer applications for The
                            -  The Daily Mail(TM) service                   Daily Mail's unique benefits.
                               doubled in size. This exclusive
                               product offers new on-demand              -  Emphasize and strengthen direct
                               solutions to customer                        response capabilities for smaller
                               notification and marketing                   quantity, more targeted direct
                               programs.                                    mail campaigns for which demand is
                                                                            rebounding.
------------------------------------------------------------------------------------------------------------------------------------

OFFICE PRODUCTS             -  Aggregate office product sales            -  Based on superior supplies
                               grew 9.9% over fiscal 1996.                  management services and the trend
                                                                            forcustomers to consolidate vendors,
                            -  The number of contract stationer             continue to acquire contract
                               customers tripled and finished               stationery accounts.
                               the year with 143 agreements
                               to supply brand-name office               -  Together(TM), Wallace's integrated
                               products.                                    supply management service, will
                                                                            increase the number of stock
                            -  TOPS expanded its lines of                   products that customers buy from
                               designed pad products which                  Wallace.
                               are attractive to mass
                               merchandise retailers, and                -  Maintain Wallace's position as the
                               obtained product placement                   industry's low-cost producer and
                               in the nation's largest mass                 continue its cost advantage in the
                               merchandiser.                                marketplace.

                            -  Became exclusive supplier of              -  TOPS will introduce additional
                               pads to one of the largest                   special design pad products to
                               contract stationers and also                 increase appeal and penetration
                               to the nation's largest office               in the mass market retail channel.
                               products wholesaler.
                                                                         -  Focus marketing efforts for
                            -  TOPS did an outstanding job                  contract stationery on existing
                               of increasing unit sales                     W.I.N. accounts.
                               to mostly offset the effects
                               of dramatically lower paper
                               prices from the prior year.

                            -  Introduced W.I.N. Office(TM),
                               a software tool that allows
                               end-users to order office
                               supplies directly from Wallace.

------------------------------------------------------------------------------------------------------------------------------------
LABELS                      -  Label product sales increased             -  Leverage established W.I.N. and
                               14.7% over 1996.                             Select Services account  relationships
                                                                            to increase label sales.
                            -  Joined the Digital Label
                               Alliance to develop digital               -  Further expand product lines, such
                               label printing technologies                  as linerless labels, to become our
                               for shorter run applications                 customers' one-stop shop for all
                               and lower pre-press costs.                   labeling needs.

                            -  Established Wallace's Label               -  Continue developing the Sensormatic
                               Design Center to do custom                   relationship to increase retail
                               programming and design bar                   security tag sales and integrate
                               coded labels for customers.                  EAS technology into other types of
                                                                            labels forsource-tagging.
                            -  Formed an alliance with
                               Sensormatic Electronics Corp.             -  Introduce new airline bag tag
                               for the production of EAS                    materials which will provide
                               tags and joint development                   enhanced  performance and better
                               of new technologies.                         values.

                                                                         -  Leverage material supplier
                            -  Implemented a re-engineering                 relationships for new product
                               process, the Press Ready                     development, just-in-time delivery
                               Organization (PRO) System,                   and lower costs.
                               to reduce make-ready time
                               in the manufacturing plants.              -  Fully implement PRO in all plants.

                            -  Wallace was selected as the
                               American OEM of the Year
                               by Zebra Technologies
                               Corporation, whose bar-code
                               label printers we resell and
                               integrate.

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


WALLACE MAKES
SAVING MONEY
ON INFORMATION
MANAGEMENT SUPPLIES
SIMPLE

1

FINANCIAL HIGHLIGHTS

(in thousands except per share amounts)

=======================================================================
         FISCAL YEARS ENDED JULY 31           1997      1996    CHANGE
=======================================================================

         Net sales                          $906,290  $862,287     5%
-----------------------------------------------------------------------
         Net income                         $ 81,282  $ 72,999    11%
-----------------------------------------------------------------------
         Net income per share               $   1.88  $   1.60    17%
-----------------------------------------------------------------------
         Dividends per share                $   0.56  $   0.43    30%
-----------------------------------------------------------------------
         Working capital                    $149,234  $206,238   (28%)
-----------------------------------------------------------------------
         Stockholders' equity               $493,188  $510,443    (3%)
-----------------------------------------------------------------------
         Stockholders' equity per share     $  11.45  $  11.20     2%
-----------------------------------------------------------------------
         Average common shares outstanding    43,322    45,582    (5%)
=======================================================================

[LINE GRAPH]

 ===================================================
                SALES (IN THOUSANDS)
 ---------------------------------------------------
                 2 year CAGR 12.8%
                 5 year CAGR 12.1%
 ===================================================
      93        94       95        96        97
 ---------------------------------------------------
$ 545,315   $ 588,173 $ 712,838  $ 862,287 $ 906,290

[LINE GRAPH]

==================================================
               EARNINGS PER SHARE
--------------------------------------------------
                2 year CAGR 23.6%
                5 year CAGR 16.4%
==================================================
     93        94       95        96        97
--------------------------------------------------
  $ .92      $ 1.08    $ 1.23    $ 1.60    $ 1.88

[LINE GRAPH]

==================================================
               DIVIDENDS PER SHARE
--------------------------------------------------
                2 year CAGR 23.0%
                5 year CAGR 15.7%
==================================================
     93        94       95        96        97
--------------------------------------------------
  $ .29      $  .32    $  .37     $ .43     $ .56

2

            LETTER TO OUR SHAREHOLDERS

          FOR ORGANIZATIONS THAT WANT TO
     CUT COSTS AND INCREASE PRODUCTIVITY,
 WALLACE IS THE BUSINESS SUPPLIES SOURCE THAT
         PROVIDES THE SIMPLEST SOLUTIONS
     WITH THE MAXIMUM ADMINISTRATIVE CONTROL
       AND COST SAVINGS. OUR ABILITY TO DO
THIS BETTER THAN ANYONE ELSE IS GENERATING GROWTH
              AND SHAREHOLDER VALUE.

      TED DIMITRIOU             BOB CRONIN
         Chairman             President and
                         Chief Executive Officer

[PICTURE]

Nineteen ninety-seven was a year of continued growth. We fortified our core competitive advantages, made good progress on near-term growth opportunities and initiated a new strategy for longer-term growth. We are confident that Wallace will continue to be the best opportunity for large organizations to cut costs by outsourcing the work of purchasing and managing forms and other supplies. More than any other vendor, we can take on more of the day-to-day work; give the customer the greatest control; and deliver the greatest cost savings. As a result, the company posted its 36th consecutive record year in sales, and our market position and the opportunities we see ahead have never been stronger.

MET CORPORATE OBJECTIVES
Results for fiscal 1997 continue to reflect the best performance in the industry and met our operating and financial objectives excluding the impact of paper price changes. For the fiscal year ended July 31, 1997, unit sales increased 12 percent which generated a 5.1 percent increase in dollar sales to $906.3 million. Falling paper prices had the effect of understating our real sales growth. Compounded over the last three years, which averages the swings in paper prices, the company's annual growth rates were 15.5 percent in sales and 20.3 percent in earnings per share.

Reported fiscal 1997 net income increased 11.3 percent to $81.3 million, or $1.88 per share, compared to $73.0 million, or $1.60 per share in fiscal 1996.

3

LETTER TO OUR SHAREHOLDERS

Excluding takeover expenses from the prior year, fiscal 1997 net income increased 2.6 percent. Ratios of financial performance remained strong, although affected by paper prices and acquisitions. Return on Net Sales reached 9.0 percent, Return on Average Assets was 11.5 percent and Return on Average Equity was 16.2 percent.

FORTIFIED COMPETITIVE ADVANTAGES AND
MAPPED FUTURE GROWTH STRATEGY

In fiscal 1997, we strengthened our fundamental competitive position as the leader in forms management. We added 71 new forms management customers, and at year-end had an installed base of more than 300. The savings we have documented for these organizations have become persuasive selling tools and we continue to increase market share.

This year we also developed additional services that further reduce customer workload and add savings opportunities. These include W.I.N. Direct(TM), @W.I.N. Direct(TM), W.I.N. Office(TM), and StatusNow!(TM). Enhancements to our information systems and manufacturing infrastructure increased customer service and production efficiency. These internal systems allow us to be flexible, molding our organization to each customer's unique systems and business processes. Additionally, we began making all systems Year 2000 compliant and project completion by the end of fiscal 1999.

In fiscal 1997, we took our expertise in new directions and began applying our forms management services to other product areas, helping companies generate additional cost savings and consolidation. Office products sales through our contract stationer program continued to grow. We also recognized that printed promotional materials, such as brochures and point-of-sale pieces, can benefit dramatically from our supplies management services. As a result, we launched a new high-end commercial print strategy to become the market's only added-value services supplier of these promotional materials. We made two acquisitions to

[LINE GRAPH]

===================               ========================
SALES PER EMPLOYEE                        RATE OF
-------------------                     REINVESTMENT
LATEST FISCAL YEAR                ------------------------
SALES PER EMPLOYEE                   FIVE YEAR AVERAGE
===================               CAPITAL EXPENDITURES AS
 (IN THOUSANDS)                      A PERCENT OF SALES
-------------------               ========================
WALLACE    INDUSTRY                 WALLACE     INDUSTRY
$ 207.4    $ 140.2                   6.0%         3.9%
===================               ========================
















===================               =====================

4

LETTER TO OUR SHAREHOLDERS

launch this capability; more geographic acquisitions are anticipated to provide nationwide coverage.

For the future, we are looking at additional custom and stock product categories where our supplies management services could provide value to large organizations. Also this year, we mapped out what we believe will develop into a major growth initiative: integrated supply management. Our unique approach, which we call Together, is the ultimate execution of our expanding product offering. We will become a large organization's single source for all the business supplies used in its office areas. Market conditions are favorable for this type of comprehensive service and we have strong competitive advantages that will facilitate evolving and expanding our role with customers. In conjunction with the launch of our integrated supply strategy in early fiscal 1998, we will roll-out W.I.N. 3.0. This new version is the single tool customers need to control this broad relationship, and expands Wallace's leadership in supplies management services.

We are accomplishing all this ahead of our competitors because of the company's long-standing commitment to reinvesting in the business. Over the last 10 years, these investments have created the company's primary competitive assets in information systems, manufacturing, distribution, the salesforce, and workforce skills, which allow us to offer these advanced services.

OTHER EVENTS

In the first few days of fiscal 1997, the Moore Corporation formally abandoned its efforts to buy Wallace. Within a day, one of the remaining takeover speculators launched a proxy fight. At the November annual meeting, shareholders voted down his slate of dissident board candidates as well as his two proposals. The few remaining speculators sold their positions within a few weeks following the annual meeting and the company's shareholder base returned to normal. With those issues aside, Wallace looks forward to fiscal 1998 and beyond.

At a special meeting held in February, stockholders increased the number of authorized common shares from 50 million to 100 million. The additional shares authorized for future issuance may be used for general corporate purposes such as any future stock splits, stock dividends, issuance under the company's employee benefit plans, raising additional capital or in connection with acquisitions, and other appropriate uses. Stockholders also approved a stock incentive plan, which will further align the interests of certain employees, officers and directors with the company's stockholders.

In April of this year, we completed a $100 million share buyback program under which 3,444,200 shares were repurchased. Subsequently in May, the Board authorized an additional $100 million program. At fiscal 1997 year-end, 177,400 shares had been repurchased and Wallace had 43.1 million shares outstanding. We anticipate that the remainder of this authorization could be utilized by the end of fiscal 1998.

WALLACE MAKES IT SIMPLE FOR CUSTOMERS

Making supplies management easier and less costly for our customers is hard work. It takes motivated, creative people to take on additional tasks and help customers change business processes. The talent and motivation of Wallace's people are clearly illustrated by sales per employee that is almost 50 percent above the industry average.

As much as Wallace and its customers changed in 1997, it was only the beginning. Wallace will continue to be the industry's leading agent of change in how customers manage their business supplies, and further growth and shareholder value will result. Thank you for your support.

TED DIMITRIOU                           BOB CRONIN

TED DIMITRIOU                           BOB CRONIN
Chairman                                President and
                                        Chief Executive Officer

5

SIMPLE TO
ORDER

SIMPLE TO
DISTRIBUTE

SIMPLE TO
STREAMLINE

6

FINDING QUALIFIED VENDORS
DETERMINING VENDOR REQUIREMENTS
WRITING RFPS
EVALUATING PROPOSALS
NEGOTIATING CONTRACTS
CONSOLIDATING VENDORS
OUTSOURCING OPPORTUNITIES
PLACING ORDER
ESTABLISHING QUANTITIES
MANAGING ITEM SPECIFICATIONS
MONITORING LOCATION ORDERS
RESOLVING PROBLEMS
LOST SHIPMENTS
STREAMLINING WORK FLOW
ITEM OBSOLESCENCE
ELIMINATING DUPLICATIONS
DISTRIBUTING
MONITORING USAGE
IMPLEMENTING SPEC CHANGES
PURCHASING COMPLIANCE
POLICY COMPLIANCE
REPORTING
DESIGN CHANGES

WALLACE MAKES SAVING MONEY
SIMPLE BY LETTING CUSTOMERS
OFF-LOAD THE DAY-TO-DAY ADMINISTRATION OF
INFORMATION MANAGEMENT SUPPLIES.

There's a lot of work in managing supplies. One customer's research found that while accounting for only 15% of their total purchase costs, supplies took up 78% of their transactions. Wallace provides supplies management services that make the purchasing manager's job easier and generate significant cost savings for the company.

The following pages describe how Wallace can assume tasks such as ordering, distributing and streamlining, and provide examples of how companies of varying sizes are benefitting.

MANAGING INVENTORIES
OUT-OF-STOCKS
OVERSTOCKS
SHRINKAGE
PLACING ORDERS
ESTABLISHING QUANTITIES
MANAGING ITEM SPECIFICATIONS
MONITORING LOCATION ORDERS
RESOLVING PROBLEMS
LOST SHIPMENTS
ITEM OBSOLESCENCE
DISTRIBUTING
MONITORING USAGE
PURCHASING COMPLIANCE
QUALITY ASSURANCE
LOGISTICS
BUDGETING
REVIEWING COSTS
SORTING BILLING DETAILS
FINDING COST REDUCTION OPPORTUNITIES
PAYING INVOICES
MAINTAINING VENDOR RELATIONSHIPS
EVALUATING VENDOR PERFORMANCE
EXPEDITING ORDERS
UNDERSTANDING USER NEEDS
INVESTIGATING NEW TECHNOLOGIES


[PICTURE]
A wide range of products helps corporations consolidate vendors and reduce their workload.

[PICTURE]

[PICTURE]
We help purchasing managers control usage and ordering throughout their organization to reduce costs and increase compliance.

[PICTURE]

[PICTURE]
End-users can order supplies directly by phone, fax, e-mail and the internet.

[PICTURE]
W.I.N., the tool for Purchasing,
provides comprehensive current
information for better cost control.


[PICTURE]
SIMPLE TO ORDER

FLEXIBLE ORDERING SYSTEMS
MAKE IT EASY TO
PLACE AND MANAGE ORDERS
FROM THOUSANDS OF LOCATIONS.


[PICTURE]
SIMPLE TO DISTRIBUTE

CUSTOMERS CUT THEIR COSTS
AND WORKLOAD BY OUTSOURCING
THEIR SUPPLIES
DISTRIBUTION TO WALLACE


[PICTURE]

[PICTURE]
Wallace's distribution system is highly automated to reduce costs and increase fulfillment speed and accuracy.

[PICTURE]
Wallace's distribution system ships more than 22,000 order line items per day.

[PICTURE]
We ship directly to end-users throughout our customers' organizations.

[PICTURE]
By consolidating many different supply items into one shipment, we can dramatically reduce shipping costs.

[PICTURE]

[PICTURE]

[PICTURE]


[PICTURE]

[PICTURE]
Leveraging our experience and superior tools, we have generated first-year savings of 15-20%.

[PICTURE]
Wallace teams conduct department-by-department reviews of forms and other supplies to identify consolidation, combination, redesign and streamlining opportunities.

[PICTURE]

[PICTURE]
People in all Wallace departments work with customers to streamline the supplies management process.

[PICTURE]
Implementation teams input all the data about every form and supply item into the W.I.N. system to make it easy to track items and changes.


[PICTURE]
SIMPLE TO STREAMLINE

WALLACE DOES THE LEGWORK
TO IDENTIFY STREAMLINING AND
COST REDUCTION OPPORTUNITIES


SIMPLE
TO SAVE
MONEY

By outsourcing these activities to Wallace, customers dramatically reduce their workload and costs. At year-end, more than 300 companies were leveraging Wallace's services and saving tens of millions of dollars. The following three cases illustrate how companies of various sizes have benefitted.

14

SELECT SERVICES(TM) CUSTOMERS

Central to all the customer services we provide is the Wallace Information Network (TM) (W.I.N.), a software tool that ties customers into Wallace's corporate information system and centrally organizes and manages all the customer's data about supplies. Select Services is Wallace's program for customers who buy more than $400,000 annually. These customers use the W.I.N. system through their local sales office. There, a Wallace representative utilizes the W.I.N. system's analysis tools to uncover and recommend cost saving opportunities. In this way, customers outsource the work of managing forms and other supplies to Wallace, while retaining decision-making control.

Regional Healthcare Provider

Annual information management supplies purchases:

$500,000

CASE 1

[PICTURE]

REVENUES: $415 MILLION

LOCATIONS: 8

EMPLOYEES: 4,400

DOCUMENTED FIRST YEAR

SAVINGS

19%

SERVICE LEVEL SELECT SERVICES

A regional medical center with one main hospital and seven satellite facilities wanted to minimize its forms costs. To begin, Wallace conducted its Consultative Assessment Program(TM), analyzing 19 departments and 870 form and label items. This review identified key items and processes where costs could be reduced. Significant findings included: service department personnel were diverting time to create and maintain these items; consistent design and workflow standards were not being followed; and the previous vendor had not enforced compliance with purchasing control measures.

Wallace then took on the production and management of all custom forms and labels as well as stock forms - more than 500 items. The customer realized a 19% cost savings the first year through redesigning and consolidating forms, combining production runs and the re-assignment of its in-house forms design function. Additional savings have been generated through more effective use of the hospital's print center, and purchasing compliance has also increased with a large number of "bootleg" forms being brought under management.

Based on the forms management program's success, the customer is expanding the number of product lines it is purchasing and managing through Wallace to also include stock labels, envelopes, letterhead, business cards, custom charts, manuals and brochures. Purchasing is also analyzing its current ordering procedure, with an eye towards upgrading to Wallace's internet ordering system, @W.I.N. Direct, to allow end-users to order individual-use quantities directly from Wallace.

15

W.I.N.(TM) CUSTOMERS

Customers that sign multi-year contracts to purchase $1 million or more annually can choose to have a W.I.N. system placed on-site as well as a Wallace employee (W.I.N. Administrator) to run it. The additional services are valuable because these customers have many more supply items, end-users and locations to manage.

International Manufacturer of Durable Consumer Goods

Annual information management supplies purchases:

$1,600,000

CASE 2

[PICTURE]

SERVICE LEVEL W.I.N.

REVENUES: $ 2.4 BILLION

LOCATIONS: 200

EMPLOYEES: 14,000

DOCUMENTED FIRST YEAR

SAVINGS

26%

In 1995, a large manufacturer embarked on a new program to centralize purchasing control, reduce supplies costs and eliminate vendors. At the time, it had more than 8,000 vendors, including 60 forms suppliers. The company's $60 cost to process every invoice was a significant factor behind this drive to consolidate. Each division was ordering and managing their supplies separately. Company-wide, tremendous amounts of warehouse space were devoted to supplies storage and the company experienced high obsolescence costs because there was no effective system for tracking supplies.

The manufacturer conducted an extensive vendor review based on quality, technology, price and service. Wallace received the highest score and was awarded a long-term contract to supply all forms and labels. We then took over the distribution of these products, freeing up all the previously committed warehouse space. The sales team, with reps in all major facilities, uses our W.I.N. system to manage inventories and plan more efficient production runs. As part of this process, we have standardized forms specs across the organization to create more opportunities for group production runs. End users now order directly from Wallace, eliminating all the daily order handling work that previously bogged down the various Purchasing groups.

Wallace has changed the entire company's process for ordering, producing, storing and distributing supplies. In the first year we exceeded promised savings targets, reducing costs by 26%. Subsequently, the customer broadened the categories it buys from Wallace to 6,000 items, successfully reducing its vendor base by 200.

16

TOGETHER(TM) CUSTOMERS
Together represents the future of many of our customer relationships. Together is Wallace's just-introduced service level for customers that want to outsource and fully integrate the management of all their supplies. To make this service a reality, a new version of W.I.N. (3.0) was introduced in July that manages all types of supply items, both stock and custom, in one easy-to-use system.

National Specialty Retailer

CASE 3

SERVICE LEVEL

TOGETHER

REVENUES: $4.6 BILLION

LOCATIONS: 133 STORES

EMPLOYEES: 8,400

[PICTURE]

Annual information management

supplies purchases: projected

$2,000,000

DOCUMENTED FIRST YEAR

SAVINGS

PROJECTED

19%

In late 1996, a new purchasing philosophy was initiated to go beyond traditional purchasing models to generate greater cost savings and business process streamlining for the corporation and its stores. Purchasing executives began talking with Wallace, which at the time was developing a new, fully integrated supply management service. In the spring of 1997 a contract was signed. The retailer's objectives for this newly-formed relationship include:
reduce the unit costs of supply items; improve service levels; reduce the costs of distributing supplies throughout the organization; and consolidate all supply items under one vendor.

We have become the retailer's single source and even at this early stage, nearly every order goes through Wallace. We produce forms, labels, office products, direct mail and commercial printing. Other third-party items (such as shirts, bags and signage) are inventoried and distributed by Wallace. Some orders, for unusual, low-volume items, Wallace hands off to separate vendors for fulfillment. Whatever the product, however, Wallace provides the central, coordinated ordering and management for all these supplies. Under Purchasing's guidance and control, Wallace is doing the day-to-day work that is necessary to streamline supplies usage across the organization. Wallace is also working as an extension of Purchasing to drive compliance with this new purchasing model. Stores are embracing it because it lowers their costs, provides greater assurance of correct quantities on-hand, and provides billing flexibility to optimize each store's budget. During the first months' start-up, 12% cost reductions were generated. For the first full year, aggregate savings of 18-20% are anticipated.

17

SIMPLER
EVERY DAY

Customers see that the ultimate future of this simplification is for Wallace to become their integrated supply manager, furnishing and managing all the supplies used in their offices throughout the organization.

This is a continuous process. To help customers further consolidate vendors, we are broadening our range of products and are rapidly approaching a million SKUs under management. At the same time, we continue to add new services and enhance existing ones to help customers off-load even more work and drive additional costs out of their supply processes. Our work never stops to make supplies purchasing and management simple for our customers.

18

FINANCIALS

11 Year Financial Summary................................................ 20

Management's Discussion and Analysis..................................... 22

Consolidated Financial Statements........................................ 28

Notes to Consolidated Financial Statements............................... 32

Corporate and Investor Information......................   INSIDE BACK COVER

19

11 YEAR SUMMARY OF SELECTED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                     1997               1996               1995               1994
==================================================================================================================================
OPERATIONS
==================================================================================================================================
Net sales                                                $   906,290         $   862,287        $   712,838          $  588,173
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                    81,282              72,999             55,297              47,931
----------------------------------------------------------------------------------------------------------------------------------
Net income per share                                            1.88                1.60               1.23                1.08
----------------------------------------------------------------------------------------------------------------------------------
Dividends per share                                              .56                 .43                .37                 .32
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
==================================================================================================================================
Total assets                                             $   720,442         $   695,850        $   592,702          $  538,592
----------------------------------------------------------------------------------------------------------------------------------
Long-term debt                                                24,500              30,600             25,600              23,500
----------------------------------------------------------------------------------------------------------------------------------
Capital expenditures                                          39,225              59,506             51,487              34,228
----------------------------------------------------------------------------------------------------------------------------------
Working capital                                              149,234             206,238            193,150             183,432
----------------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT RATIOS
==================================================================================================================================
Net income:
----------------------------------------------------------------------------------------------------------------------------------
     Return on net sales                                         9.0%                8.5%               7.8%                8.1%
----------------------------------------------------------------------------------------------------------------------------------
     Return on average assets                                   11.5%               11.3%               9.8%                9.4%
----------------------------------------------------------------------------------------------------------------------------------
     Return on average equity                                   16.2%               15.1%              12.8%               12.3%
----------------------------------------------------------------------------------------------------------------------------------
Current ratio                                                    2.1                 3.1                3.9                 3.8
----------------------------------------------------------------------------------------------------------------------------------
Long-term debt/debt plus equity                                  4.7%                5.7%               5.3%                5.4%
----------------------------------------------------------------------------------------------------------------------------------
Book value per share                                     $     11.45         $     11.20        $     10.05           $    9.16
----------------------------------------------------------------------------------------------------------------------------------
Sales per employee*                                      $     207.4         $     218.4        $     195.4           $   171.0
----------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment per employee*          $      69.0         $      73.2        $      70.3           $    67.7
----------------------------------------------------------------------------------------------------------------------------------
OTHER
==================================================================================================================================
Number of employees                                            4,610               4,131              3,765               3,530
----------------------------------------------------------------------------------------------------------------------------------
Number of stockholders of record                               3,680               3,863              4,383               4,531
==================================================================================================================================

*Based on average number of employees during the fiscal year

NOTES TO 11 YEAR SUMMARY

A. ACQUISITIONS: On July 24, 1997, the company acquired Moran Printing Company. The acquisition price included notes payable of $29.5 million, and the assumption of net debt totalling $4.9 million. On October 22, 1996, the company acquired Post Printing, Inc. The acquisition price was $6.6 million of cash. On February 1, 1996, the company sold the LaserMax division to Stralfors A.B. of Ljungby, Sweden in a cash transaction that approximated book value. On February 8, 1996, the company acquired Forms Engineering Company. The acquisition price included $27.8 million of cash, a note payable of $5.0 million, and the assumption of net debt totalling $2.0 million. On April 19, 1995, the company acquired Retterbush and Sauer Label Corporation. The acquisition price included $10.1 million of cash and a note payable of $2.0 million. On November 29, 1994, the company acquired Lampro Graphics, Inc. The acquisition price included $4.6 million of cash, a note

20

    1993             1992              1991           1990          1989             1988            1987
=============================================================================================================

=============================================================================================================
$  545,315        $  511,572        $  458,840      $ 448,700     $ 429,008        $ 383,045       $ 340,504
-------------------------------------------------------------------------------------------------------------
    41,170            39,455            35,009         39,555        36,867           31,610          26,027
-------------------------------------------------------------------------------------------------------------
       .92               .88               .81            .93           .88              .76             .64
-------------------------------------------------------------------------------------------------------------
       .29               .27               .25            .23           .20              .17             .15
-------------------------------------------------------------------------------------------------------------

=============================================================================================================
$  480,722        $  467,142        $  399,093      $ 375,203     $ 331,830        $ 291,764       $ 260,004
-------------------------------------------------------------------------------------------------------------
    25,210            25,959            19,790         20,155        20,465           20,830          21,180
-------------------------------------------------------------------------------------------------------------
    31,818            33,517            40,540         49,835        30,677           24,948          30,039
-------------------------------------------------------------------------------------------------------------
   157,937           152,246           141,390        137,598       138,218          117,139         100,128
-------------------------------------------------------------------------------------------------------------

=============================================================================================================

-------------------------------------------------------------------------------------------------------------
       7.5%              7.7%              7.6%           8.8%         8.6%              8.3%            7.6%
-------------------------------------------------------------------------------------------------------------
       8.7%              9.1%              9.0%          11.2%        11.8%             11.5%           10.7%
-------------------------------------------------------------------------------------------------------------
      11.4%             11.9%             11.9%          15.1%        16.2%             16.1%           15.3%
-------------------------------------------------------------------------------------------------------------
       3.9               3.9               4.3            3.8           4.4              4.2             3.9
-------------------------------------------------------------------------------------------------------------
       6.4%              6.8%              6.0%           6.7%         7.7%              9.0%           10.4%
-------------------------------------------------------------------------------------------------------------
$     8.34        $     7.86        $     7.11      $    6.52     $   5.77         $    5.05       $    4.41
-------------------------------------------------------------------------------------------------------------
$    161.9        $    160.4        $    154.2      $   154.4     $  154.4         $   145.8       $   136.3
-------------------------------------------------------------------------------------------------------------
$     67.7        $     70.7        $     64.7      $    59.3     $   50.3         $    48.4       $    46.3
-------------------------------------------------------------------------------------------------------------

=============================================================================================================
     3,350             3,386             2,993          2,957         2,857            2,700           2,554
-------------------------------------------------------------------------------------------------------------
     4,260             4,435             4,347          4,396         4,350            4,038           4,104
=============================================================================================================

payable of $.3 million, and the assumption of debt totalling $1.9 million. Effective August 1, 1991, the company acquired MGI Industries, Inc. and subsidiaries and substantially all of the assets of Evergreen Realty (collectively "Colorforms"). The acquisition price included 608,034 shares of common stock, $13 million of cash and the assumption of debt totalling $17.5 million. On December 15, 1988, the company acquired Apollo Labeling Systems for $900,000.

All acquisitions were accounted for as purchases, and, accordingly, their results of operations are included in the consolidated financial statements from their respective dates of acquisition.

B. STOCK SPLITS: All share and per share amounts have been adjusted for the 2 for 1 stock splits effective August, 1989 and July, 1996.

21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

FISCAL 1997 VERSUS FISCAL 1996

Net sales for fiscal 1997 increased by 5.1% to $906.3 million. A breakdown by the four major product groups is as follows:

                  % TO TOTAL   % REVENUE
PRODUCT GROUP       REVENUE    INCREASE
========================================
Forms                  34          (6)
----------------------------------------
Print                  27          11
----------------------------------------
Office Products        24          10
----------------------------------------
Labels                 15          15
========================================

Over the last five years, sales have grown at an annual compounded growth rate of 12.1%.

The company estimates that actual unit growth for the year was 12%, the same growth rate as fiscal 1996 when sales dollars were up 21.0%. This dramatic change in sales dollars between years with comparative unit growth is attributed to paper price changes. Paper is the basic raw material for 75% of the company's products. Paper price changes, therefore, have a material effect on reported sales dollars.

The majority of paper used by the company is uncoated free sheet, with additional large purchases of both tablet and offset grades. Using 20 pound white uncoated free sheet as a proxy for the paper market, published prices during the last two fiscal years decreased by 42%.

The effects of paper price changes are felt immediately by the Print product lines (commercial and promotional printing) and by the stock tab product lines sold under Forms and Office Products. These products collectively represent 30% of consolidated net sales.

For the 61% of the Forms product line which is sold under contract, there is usually a 60 to 90 day lag between the time of a paper price change and its effect on reported sales. When paper prices first increase, the 60 to 90 day lag can put pressure on margins. Conversely, when paper prices decrease, the lag can produce some margin expansion.

Overall, our best estimate for fiscal 1997 is that the impact of lower paper prices reduced reported sales by 7%.

The number of new W.I.N. and Select Services customers continued to grow throughout fiscal 1997. The number of customers for these programs increased by 29%. Most are new customers and most sign five year agreements for their forms, office products, labels and other information management requirements. The 314 W.I.N. and Select Services customers at year-end represented 44% of consolidated sales for the year.

The Forms product group continues to grow in a product category that is declining on an industrywide basis. For fiscal 1997, we estimate that Forms' unit growth was 5%, with lower paper prices reducing sales by 9%. Fiscal 1996 sales had included $7.4 million of sales for a business that was sold in February, 1996. Stock computer paper represented 8% of Forms sales for 1997, down from 10% last year.

The Print product category includes commercial and promotional printing. The commercial printing products include both long-run catalogs and quick turnaround documents such as medical provider directories. In fiscal 1997, the company expanded the commercial printing product line with the acquisitions of Post Printing and Moran Printing. These companies produce collateral marketing pieces such as brochures and point of sale displays. These two acquisitions added $8.7 million of sales for fiscal 1997.

The promotional printing products sold through the Colorforms division include high quality printing and personalization services. The Daily Mail program for regulated industries and weekly signage services for major retail customers continued to grow during fiscal 1997. A full year of sales in fiscal 1997 for Forms Engineering Company (FEC) acquired in February, 1996, added $19 million of sales. Without the additive sales from FEC, Colorforms sales results would have decreased 4% due to lower selling prices related to lower paper costs and increasing competition. As the forms market declines, more forms manufacturers have entered the promotional printing market, which is expected to grow 8-9% per year.

The Office Products group includes commodity items that are produced by the company such as legal pads, ribbons,

[PIE CHART]

==================================
            REVENUE
          CONTRIBUTION
==================================
Forms                   34%
Print                   27%
Office Products         24%
Labels                  15%
==================================

22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

standardized business forms, add rolls, and stock computer paper. Manufactured products represent 70% of office product sales. The balance of 30% represents products purchased from other vendors for resale. The office products alliance, which gives the company a presence in the contract stationery business, grew to an annualized rate of $14 million.

The TOPS division, which manufactures paper based products for the resale market, performed well despite the paper price decrease. Total sales for the year were down $2.3 million, including a decrease of $6.0 million in stock computer paper. Unit growth for TOPS was in line with the company average.

The Label Group had a good year with estimated unit growth of 17% and a sales dollar increase of 15%. Label raw material costs do not fluctuate as much as paper costs so the Label Group's results are more consistent year over year. The Group manufactures both data processing and packaging labels, and sells proprietary labeling software along with hardware items such as label applicators. The sale of packaging labels and labeling equipment was up 10% during fiscal 1997.

Net income for the year increased $8.3 million or 11.3%. Before takeover expenses of $10.1 million in fiscal 1996, net income would have been up $2.0 million or 2.6%. The after-tax ratio for fiscal 1997 was 9.0%, the highest net income ratio since the company went public in 1961.

For the last five years, net income has grown at an average annual compound rate of 15.6%.

Cost of goods sold as a percent to sales for fiscal 1997 was 61.4% versus 62.4% in 1996. Fiscal 1996 had included a LIFO credit of $6.6 million due to the drop in paper costs in the second half of that year. We recorded another LIFO credit of $2.1 million in fiscal 1997 because paper prices declined again. On a per share basis, the LIFO credits added 3 cents to fiscal 1997 and 9 cents to fiscal 1996. Before the effects of LIFO accounting, cost of goods sold was 61.6% in 1997 and 63.2% in 1996. The margin improvement in fiscal 1997 came from the replacement of lower margin stock tab product sales with increased sales to and improved margins from the W.I.N. and Select Services customers.

Selling and administrative expenses increased 9.3% for the year. As a percent to sales, they were 18.3% in fiscal 1997 and 17.6% in fiscal 1996. One unusual expense in fiscal 1997 was $800,000 of legal and other fees in connection with an unsuccessful attempt to place three dissident directors on the Board at the November, 1996 annual meeting. The biggest expense increase in the administrative area was an incremental $3.5 million for Information Systems. We expect increasing IS expenditures in future years to keep the selling and administrative percentage in the 18-19% range.

Depreciation and amortization expense was 5.4% of sales in fiscal 1997 and 5.2% in fiscal 1996. The increase in 1997 came from higher amortization of capitalized software development costs.

One additional expense in fiscal 1997 was $264,000 for costs related to Year 2000 programming. The total cost to make the company's 10,000 programs Year 2000 compliant is estimated at $7.3 million. $1 million of this total will go toward new financial software packages which will add additional functionality and will, therefore, be capitalized. The balance of $6.3 million will be expensed as incurred. Estimated expense for fiscal years 1998 and 1999 is $3.0 million each year.

Operating income for fiscal 1997 was up 15.5% after takeover expenses and 6.3% before takeover expenses.

Due to the share repurchase program, interest expense for fiscal 1997 exceeded interest income. The company recorded net interest expense of $743,000 in 1997 and net interest income of $1,556,000 in 1996. Interest income from tax exempt investments was $.5 million in fiscal 1997 and $1.5 million in 1996. Capitalized interest for the year was $1.3 million in 1997 and $1.4 million in 1996.

The effective income tax rate for fiscal 1997 was 39.5% versus 38.4% in fiscal 1996. The rate was higher in 1997 due to

[LINE GRAPH]

==================================================
                  NET INCOME
                (IN THOUSANDS)
--------------------------------------------------
                2 year CAGR 21.2%
                5 year GAGR 15.6%
==================================================
   93         94         95        96       97
--------------------------------------------------
   41,170     47,931     55,297    72,999   81,282

23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

lower tax-exempt investment income and lower tax credits. We expect the effective rate for fiscal 1998 to remain at 39.5%.

New modules have been developed for the W.I.N. and Select Services programs, which will further distinguish these services. Early success with Integrated Supply Management has reinforced the viability of this concept. To offer ISM on a national basis, the company will create a network of high-quality regional commercial printers. Our goal will be to make acquisitions that are accretive to earnings per share in the first year of operations.

As the company approaches $1 billion in sales, we will be nearing the volume limitations of our base computer system (known as WCSS) that was designed in 1984 and has been continually upgraded since then. The company will spend over $30 million in the next several years to expand WCSS to handle several billion dollars of sales and to further support the ISM strategy.

A new distribution center in the Ohio Valley has been approved by the Board of Directors, as have six new presses for the Label division.

The drivers for the company's future growth will be continued reinvestment in computer systems, distribution facilities, and new manufacturing equipment, coupled with accretive acquisitions and expansion of the company's 700 person salesforce, which we believe to be the best in our industry.

FISCAL 1996 VERSUS FISCAL 1995

Net sales for fiscal 1996 increased by 21% to $862.3 million. The breakdown by major product group is as follows: Forms products, which represented 38% of total sales, increased by 16%; Print, which represented 25% of sales, increased 36%; Office Products, representing 23% of sales, increased 19%; and Labels, which represented 14% of sales, increased 15%.

Paper prices, which affect 75% of sales, remained stable through the first half of fiscal 1996. In the second half of the year, however, paper prices declined by as much as 40%. For the 59% of the Forms product line which is sold under contract, there is usually a 60 to 90 day lag between the time of a paper price change and its effect on our reported sales. For those parts of the business that are not under contract, the impact of lower paper prices is felt almost immediately.

The company believes that sales growth in fiscal 1996 was hampered by the hostile takeover attempt announced by the Moore Corporation on July 31, 1995. The uncertainty surrounding the Moore tender offer affected our ability to recruit new employees, especially new salespeople. Several customers declined to give the company new business due to this uncertainty.

Despite the takeover related issues, sales for the year increased by $149.4 million through a combination of internal growth and acquisitions. Approximately $85.5 million of the increase is attributed to 12% unit growth. Another $18.7 million of sales came from the acquisition of Forms Engineering Company (FEC) in February, 1996. The remaining $45.2 million of sales increase came from higher selling prices.

During fiscal 1996, the company added 86 new customers to the W.I.N. and Select Services programs, bringing the total to 243 customers at year-end. Collectively, they represented 40% of consolidated net sales for the year.

Net income for fiscal 1996 increased 32% or $17.7 million. The after-tax ratio to sales was 8.5% in fiscal 1996 and 7.8% in fiscal 1995. Fiscal 1996 results include $10.1 million of one time pre-tax expenses in connection with the Moore tender offer. On a per share basis, we reported $1.60, which would have been $1.74 without takeover related expenses, versus $1.23 in fiscal 1995.

Cost of goods sold for fiscal 1996 includes a LIFO credit of $6.6 million due to the decrease in raw material costs. During fiscal 1995, we had recorded a LIFO charge of $13.8 million due to dramatically higher paper costs. Before the effects of LIFO accounting, costs of goods sold as a percent to sales was 63.2% in fiscal 1996 and 62.1% for fiscal 1995.

Selling and administrative expenses increased 13.6% for the

24

[LINE GRAPH]

--------------------------------------------------------------------------------
                                  BOOK VALUE
                                  PER SHARE
--------------------------------------------------------------------------------
                               2 year CAGR 6.7%
                               5 year CAGR 7.8%
================================================================================
        93              94              95              96              97
--------------------------------------------------------------------------------
      $  8.34          $  9.16        $  10.05         $  11.20        $  11.45


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

year. As a percent to sales, they were 17.6% in fiscal 1996 and 18.8% in fiscal 1995. In absolute terms, selling and administration expenses increased by $18.1 million. The lower percentage to sales in fiscal 1996 is due primarily to higher selling prices.

Depreciation and amortization expense increased 20.7% to $45.0 million, including $4.2 million for the amortization of internally developed software programs. Major software initiatives added $10.4 million of capitalized development costs in fiscal 1996. Capital expenditures of $51.5 million in fiscal 1995 contributed to the depreciation expense increase in 1996, as did the $59.5 million of capital expenditures in fiscal 1996.

Investment income decreased between years by $772,000 due to lower interest rates and lower investable balances following the FEC acquisition. The company acquired FEC for a combination of cash, notes and the assumption of debt for a total of $34.8 million.

During fiscal 1996, the company incurred a net expense of $4.2 million for the continuing development of electronic forms software. The net loss is made up of several components: sales less cost of goods sold was $0.7 million, amortization and depreciation of purchased and developed software was $2.3 million, and selling and administrative expenses were $1.2 million. The comparable pre-tax expense for fiscal 1995 was $3.8 million. Its components were: sales less cost of goods sold was $1.3 million, amortization and depreciation of purchased and developed software was $1.1 million, and selling and administrative expenses were $1.4 million.

The effective income tax rate for fiscal 1996 was 38.4% versus 36.8% in 1995. The rate increased due to lower tax-exempt investment income during fiscal 1996.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1997, the company purchased $95.3 million of its common stock in open market transactions. Borrowings under our revolving credit agreement to support the share repurchase program reached a high of $30 million in January, 1997. By fiscal year-end, all borrowings under the revolving credit agreement had been repaid.

Working capital at July 31, 1997 was $149.2 million, a decrease of $57.0 million from the prior year-end. This year's total includes $15.9 million of cash and short-term investments, a decrease of $46.8 million from July 31, 1996. The beginning of the year cash and short-term investment balances were used to purchase stock.

Capital expenditures for the year were $39.2 million, down from $59.5 million in fiscal 1996. Last year's total included $21.4 million for new buildings and related equipment. Building expenditures during fiscal 1997 totaled $5.0 million. There were no major construction projects in-process at fiscal year-end.

Over the last five years, capital expenditures have totaled $216.3 million. $7.2 million of these expenditures were financed by industrial revenue bonds, with the balance being financed through internally generated funds. Over the last five years, the company has also spent $36.4 million for the development of proprietary software programs.

Total capital expenditures for fiscal 1998 are estimated at $40.0 million. Expenditures for software development are estimated at $16.0 million including $4.0 million for Year 2000 related activities.

The company acquired Post Printing in October, 1996 and acquired Moran Printing in July, 1997. Post Printing was an all cash purchase for $6.6 million. Moran Printing was purchased for $34.4 million through a combination of notes payable and the retirement of debt. $28.5 million of short-term borrowing at July 31, 1997 represents payments due to the Moran principals. $15.0 million was paid in August, 1997. The balance will be paid early in calendar 1998.

Long-term debt at July 31, 1997 was $24.5 million. $23.5 million represents industrial revenue bonds issued in prior years for the construction of three manufacturing facilities. The remaining balance of $1 million represents deferred payments in connection with the Moran acquisition. $7.1 million of deferred

===================================================================================================
                                         TOTAL CAPITALIZATION
                                            (IN THOUSANDS)
                         93                94               95              96             97
---------------------------------------------------------------------------------------------------
Long-term debt          $  25,210         $  23,500        $  25,600       $  30,600      $  24,500

Stockholders' equity    $ 368,146         $ 410,139        $ 456,118       $ 510,443      $ 493,188
===================================================================================================

25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

payments from acquisitions in fiscals 1995 and 1996 will be paid during fiscal 1998 and are shown as the current portion of long-term debt on the balance sheet.

The company has a $50 million revolving credit facility with two major national banks. During fiscal 1997, unsecured money market lines of $50 million each were added with three national banks, two of which participate in the revolving credit agreement. The maximum amount of short-term debt outstanding under the revolver and the money market lines is limited to $50 million. There are no compensating balance requirements under these agreements.

Stockholders' equity decreased by $17.3 million to $493.2 million. Return on average stockholders' equity was 16.2% versus 15.1% last year after takeover expenses. Book value per share was $11.45 at July 31, 1997 and $11.20 at July 31, 1996.

During fiscal 1997, the company completed the $100 million share repurchase which had been authorized in June, 1996 by the Board of Directors. Shares were repurchased at an average price of $28.98. Total repurchases during fiscal 1997 under this authorization were $89.9 million.

In May, 1997, the Board of Directors approved a second $100 million share repurchase program. Through July 31, 1997, $5.3 million of stock had been repurchased at an average price of $30.09.

The company anticipates that it will complete the second repurchase authorization by the end of fiscal 1998. The company also expects to complete one or more acquisitions for cash during fiscal 1998. The company will have to increase its credit lines to finance both the share repurchase and acquisitions.

COMMON STOCK

Dividends were raised for the 25th consecutive year to $.56 per share in September, 1996, a 30.2 % increase.

During fiscal 1997, 771,000 shares of common stock were issued in connection with the company's 1989 Stock Option Plan, the Employee Stock Purchase Plan, and the Profit Sharing and Retirement Plan. In February, 1997, the stockholders approved an additional 2 million shares for the 1997 Stock Incentive Plan.

Shares of stock repurchased during fiscal 1997 total 3,111,000 shares under the fiscal 1996 authorization and 177,000 shares under the fiscal 1997 authorization. These treasury shares will be used for future acquisitions or for stock purchases under employee benefit programs.

The company's common stock is traded on the New York Stock Exchange under the symbol WCS.

FORWARD LOOKING STATEMENTS

The written statements made in this annual report by the company may contain forward-looking statements covered by the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements involve uncertainties and risks and there can be no assurance that actual results will not differ from the company's expectations. Factors which could cause materially different results include, among others, customer acceptance of new product categories and service offerings, the frequency and magnitude of paper price changes, the pace of new customer sales ramp-ups, changes in software and communications technologies, general economic and business conditions, competitive actions, and other risks described in the company's other filings with the Securities and Exchange Commission.

======================================================================
                         CAPITAL EXPENDITURES
                           AND DEPRECIATION
======================================================================
                        93          94        95        96       97
Depreciation          28,543      30,934     33,708   39,473    42,256
Capital Expenditures  31,818      34,228     51,487   59,506    39,225

26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

                               QUARTERLY RESULTS
              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
====================================================================================================================================
                                              1ST QUARTER         2ND QUARTER         3RD QUARTER         4TH QUARTER
====================================================================================================================================
1997
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                       $220,793           $225,439           $225,807           $234,251
------------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold (excluding depreciation)      132,787            135,569            141,613            146,104
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                  34,858             35,800             32,100             32,336
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                        35,009             35,630             31,843             31,869
------------------------------------------------------------------------------------------------------------------------------------
Net income                                        21,180             21,556             19,265             19,281
------------------------------------------------------------------------------------------------------------------------------------
Net income per share                            $    .48           $    .50           $    .45           $    .45
------------------------------------------------------------------------------------------------------------------------------------
1996
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                       $214,438           $219,545           $213,762           $214,542
------------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold (excluding depreciation)      136,331            136,535            133,781            131,726
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                  26,543             31,481             28,195             30,703
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                        27,061             31,823             28,375             31,219
------------------------------------------------------------------------------------------------------------------------------------
Net income                                        16,778             19,571             17,451             19,199
------------------------------------------------------------------------------------------------------------------------------------
Net income per share                            $    .37           $    .43           $    .38           $    .42
------------------------------------------------------------------------------------------------------------------------------------

                      MARKET PRICE PER SHARE                 DIVIDENDS PAID PER SHARE
====================================================================================================================================
                FISCAL 1997            FISCAL 1996          FISCAL 1997   FISCAL 1996
====================================================================================================================================
QUARTER               HIGH       LOW         HIGH     LOW
------------------------------------------------------------------------------------------------------------------------------------
First                $30.38    $26.63       $29.75  $27.88        $.1075        $.0925
------------------------------------------------------------------------------------------------------------------------------------
Second                35.50     29.63        29.69   26.44         .14           .1075
------------------------------------------------------------------------------------------------------------------------------------
Third                 34.38     26.13        30.00   27.31         .14           .1075
------------------------------------------------------------------------------------------------------------------------------------
Fourth                33.50     26.88        30.56   27.13         .14           .1075
====================================================================================================================================

[27]

CONSOLIDATED STATEMENTS OF INCOME
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARIES

(in thousands, except per share amounts) For the years ended July 31, 1997, 1996 and 1995      1997      1996      1995
====================================================================================================================================
Net sales                                                                                  $906,290  $862,287  $712,838
------------------------------------------------------------------------------------------------------------------------------------
Cost and expenses:
------------------------------------------------------------------------------------------------------------------------------------
  Cost of goods sold                                                                        556,073   538,373   456,799
------------------------------------------------------------------------------------------------------------------------------------
  Selling and administrative expenses                                                       165,918   151,846   133,713
------------------------------------------------------------------------------------------------------------------------------------
  Provision for depreciation and amortization                                                49,205    45,029    37,296
------------------------------------------------------------------------------------------------------------------------------------
  Hostile takeover expenses                                                                       -    10,117         -
------------------------------------------------------------------------------------------------------------------------------------
     Total costs and expenses                                                               771,196   745,365   627,808
------------------------------------------------------------------------------------------------------------------------------------
Operating income                                                                            135,094   116,922    85,030
------------------------------------------------------------------------------------------------------------------------------------
  Interest income                                                                           (1,876)   (2,867)   (3,639)
------------------------------------------------------------------------------------------------------------------------------------
  Interest expense, net of capitalized interest                                               2,619     1,311     1,209
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                                  134,351   118,478    87,460
------------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes: (Note 7)
------------------------------------------------------------------------------------------------------------------------------------
  Current:
------------------------------------------------------------------------------------------------------------------------------------
     Federal                                                                                 42,825    35,385    24,309
------------------------------------------------------------------------------------------------------------------------------------
     State                                                                                    8,210     7,390     5,942
------------------------------------------------------------------------------------------------------------------------------------
  Deferred                                                                                    2,034     2,704     1,912
------------------------------------------------------------------------------------------------------------------------------------
       Total income taxes                                                                    53,069    45,479    32,163
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                                  $81,282   $72,999   $55,297
------------------------------------------------------------------------------------------------------------------------------------
Net income per share                                                                        $  1.88   $  1.60   $  1.23
====================================================================================================================================

The accompanying notes are an integral part of these statements.

[28]

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARIES

(in thousands)                                            SHARES OF COMMON STOCK                            COMMON
                                                         ------------------------        PREFERRED           STOCK
For the years ended July 31, 1997, 1996 and 1995          ISSUED     IN TREASURY             STOCK       PAR VALUE
====================================================================================================================================
Balance, July 31, 1994                                    22,796              (403)             $-         $22,796
====================================================================================================================================
  Net income                                                   -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.37 per share)                              -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                              -               266               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                        -                30               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                               -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                     -                 -               -               -
====================================================================================================================================
Balance, July 31, 1995                                    22,796              (107)              -          22,796
====================================================================================================================================
  Net income                                                   -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.43 per share)                              -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                             35               153               -              35
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                       51                32               -              51
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                               -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Treasury stock purchased                                     -              (167)              -               -
------------------------------------------------------------------------------------------------------------------------------------
  Two-for-one stock split effective July, 1996            22,882               (88)              -          22,882
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                     -                 -               -               -
====================================================================================================================================
Balance, July 31, 1996                                    45,764              (177)              -          45,764
====================================================================================================================================
  Net income                                                   -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.56 per share)                              -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                              -               324               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                        -               230               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Stock transferred to profit sharing and
     retirement fund                                           -               217               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                               -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Amortization of difference between market price
     and option price for 1997 option plan (Note 5)            -                 -               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Treasury stock purchased                                     -            (3,288)              -               -
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                     -                 -               -               -
====================================================================================================================================
Balance, July 31, 1997                                    45,764            (2,694)             $-         $45,764
====================================================================================================================================

                                                                                       UNREALIZED         COST OF
(in thousands)                                         ADDITIONAL       RETAINED         SECURITY        TREASURY
For the years ended July 31, 1997, 1996 and 1995          CAPITAL       EARNINGS        GAIN/LOSS           STOCK
====================================================================================================================================

Balance, July 31, 1994                                    $51,028       $346,626               $-       $ (10,311)
====================================================================================================================================
  Net income                                                    -         55,297                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.37 per share)                               -        (16,680)               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                             (42)          (358)               -           6,834
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                      (107)           (91)               -             789
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                              518              -                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                      -              -             (181)              -
====================================================================================================================================
Balance, July 31, 1995                                     51,397       $384,794             (181)         (2,688)
====================================================================================================================================
  Net income                                                    -         72,999                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.43 per share)                               -        (19,622)               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                           1,100           (414)               -           6,465
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                     1,230           (298)               -             925
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                            1,771              -                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Treasury stock purchased                                      -              -                -          (9,878)
------------------------------------------------------------------------------------------------------------------------------------
  Two-for-one stock split effective July, 1996            (22,882)             -                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                      -              -              (39)              -
====================================================================================================================================
Balance, July 31, 1996                                     32,616        437,459             (220)         (5,176)
====================================================================================================================================
  Net income                                                    -         81,282                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends ($.56 per share)                               -        (23,993)               -               -
------------------------------------------------------------------------------------------------------------------------------------
  Sale of stock under employee
     stock purchase plan (Note 5)                            (337)          (291)               -           8,939
------------------------------------------------------------------------------------------------------------------------------------
  Stock options exercised net of shares
     exchanged in lieu of cash (Note 5)                    (1,165)        (2,738)               -           6,572
------------------------------------------------------------------------------------------------------------------------------------
  Stock transferred to profit sharing and
     retirement fund                                        1,502              -                -           5,998
------------------------------------------------------------------------------------------------------------------------------------
  Tax benefit from early disposition by
     employees of stock issued under stock
     option plans and exercise of
     non-qualified stock options                            1,869              -                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Amortization of difference between market price
     and option price for 1997 option plan (Note 5)           254              -                -               -
------------------------------------------------------------------------------------------------------------------------------------
  Treasury stock purchased                                      -              -                -        (95,272)
------------------------------------------------------------------------------------------------------------------------------------
  Unrealized security gain (loss) (Note 9)                      -              -              125               -
====================================================================================================================================
Balance, July 31, 1997                                    $34,739       $491,719            $ (95)      $(78,939)
====================================================================================================================================
The accompanying notes are an integral part of these statements.        Prior years have been reclassified to conform with current
                                                                        year presentation.

[29]

CONSOLIDATED BALANCE SHEETS
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARIES

(dollars in thousands) July 31, 1997 and 1996                        1997              1996
===============================================================================================
Assets
Current Assets:
  Cash and cash equivalents                                        $  14,168       $   23,618
-----------------------------------------------------------------------------------------------
  Short-term investments (Note 9)                                      1,706           39,025
-----------------------------------------------------------------------------------------------
  Accounts receivable, less allowance for doubtful accounts
     of $3,481 in 1997 and $3,215 in 1996                            167,578          148,918
-----------------------------------------------------------------------------------------------
  Inventories (Note 2)                                                85,150           71,332
-----------------------------------------------------------------------------------------------
  Prepaid taxes                                                       16,748           15,138
-----------------------------------------------------------------------------------------------
  Advances and prepaid expenses                                        5,140            6,077
-----------------------------------------------------------------------------------------------
       Total current assets                                          290,490          304,108
-----------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
-----------------------------------------------------------------------------------------------
  Land and buildings                                                 140,930          123,993
-----------------------------------------------------------------------------------------------
  Machinery, equipment, furniture and fixtures                       465,878          431,648
-----------------------------------------------------------------------------------------------
  Leasehold improvements                                               1,678            1,428
-----------------------------------------------------------------------------------------------
  Total property, plant and equipment                                608,486          557,069
-----------------------------------------------------------------------------------------------
  Less-reserves for depreciation and amortization                   (306,994)        (268,197)
-----------------------------------------------------------------------------------------------
       Net property, plant and equipment                             301,492          288,872
-----------------------------------------------------------------------------------------------
Intangible assets arising from acquisitions                           59,913           43,180
-----------------------------------------------------------------------------------------------
Cash surrender value of life insurance                                39,845           32,244
-----------------------------------------------------------------------------------------------
System development costs                                              24,404           21,499
-----------------------------------------------------------------------------------------------
Other assets                                                           4,298            5,947
-----------------------------------------------------------------------------------------------
          Total Assets                                             $ 720,442       $  695,850
===============================================================================================
Liabilities and Stockholders' Equity
-----------------------------------------------------------------------------------------------
Current Liabilities:
-----------------------------------------------------------------------------------------------
  Current maturities of long-term debt                             $   7,100       $      -
-----------------------------------------------------------------------------------------------
  Short-term notes payable                                            28,500              -
-----------------------------------------------------------------------------------------------
  Accounts payable                                                    49,348           46,044
-----------------------------------------------------------------------------------------------
  Dividends payable                                                    6,030            4,900
-----------------------------------------------------------------------------------------------
  Accrued compensation and related expenses                           24,458           22,281
-----------------------------------------------------------------------------------------------
  Other accrued expenses                                               8,200            8,821
-----------------------------------------------------------------------------------------------
  Contribution to profit sharing and retirement fund (Note 4)         17,620           15,824
-----------------------------------------------------------------------------------------------
       Total current liabilities                                     141,256           97,870
-----------------------------------------------------------------------------------------------
Deferred compensation and retirement benefits (Note 8)                28,829           24,750
-----------------------------------------------------------------------------------------------
Deferred income taxes (Note 7)                                        32,669           32,187
-----------------------------------------------------------------------------------------------
Long-term debt (Note 3)                                               24,500           30,600
-----------------------------------------------------------------------------------------------
Stockholders' equity:
-----------------------------------------------------------------------------------------------
  Preferred stock, $50 par value, authorized 500,000 shares               -               -
-----------------------------------------------------------------------------------------------
  Common stock, $1.00 par value, authorized 100,000,000 shares*       45,764           45,764
-----------------------------------------------------------------------------------------------
  Additional capital*                                                 34,739           32,616
-----------------------------------------------------------------------------------------------
  Retained earnings*                                                 491,719          437,459
-----------------------------------------------------------------------------------------------
  Unrealized security loss (Note 9)                                      (95)            (220)
-----------------------------------------------------------------------------------------------
  Treasury stock*                                                    (78,939)          (5,176)
-----------------------------------------------------------------------------------------------
       Total stockholders' equity                                    493,188          510,443
-----------------------------------------------------------------------------------------------
          Total Liabilities and Stockholders' Equity               $ 720,442       $  695,850
===============================================================================================

The accompanying notes are an integral part of these statements. *Prior year has been reclassified to conform with current year presentation.

30

CONSOLIDATED STATEMENTS OF CASH FLOW
WALLACE COMPUTER SERVICES, INC. AND SUBSIDIARIES

(dollars in thousands) For the years ended July 31, 1997, 1996 and 1995          1997       1996      1995
====================================================================================================================================
Cash flows from operating activities:
------------------------------------------------------------------------------------------------------------------------------------
  Net income                                                                $  81,282  $  72,999  $ 55,297
------------------------------------------------------------------------------------------------------------------------------------
  Adjustments to reconcile net income to
  net cash provided by operating activities:
------------------------------------------------------------------------------------------------------------------------------------
     Depreciation and amortization                                             49,205     45,029    37,296
------------------------------------------------------------------------------------------------------------------------------------
     Deferred taxes*                                                              409      5,398     1,481
------------------------------------------------------------------------------------------------------------------------------------
     (Gain) loss on disposal of property                                          (21)         3      (399)
------------------------------------------------------------------------------------------------------------------------------------
  Changes in assets and liabilities, net of effects from the purchase of
  Lampro Graphics, Retterbush and Sauer, Forms Engineering Company,
  Post Printing, and Moran Printing, and the sale of the LaserMax Division:
------------------------------------------------------------------------------------------------------------------------------------
     Accounts receivable                                                      (11,433)   (13,863)  (30,538)
------------------------------------------------------------------------------------------------------------------------------------
     Inventories                                                               (9,276)     4,820    (9,213)
------------------------------------------------------------------------------------------------------------------------------------
     Prepaid taxes*                                                            (1,218)    (6,344)   (3,574)
------------------------------------------------------------------------------------------------------------------------------------
     Advances and prepaid expenses                                              1,459       (145)      778
------------------------------------------------------------------------------------------------------------------------------------
     Other assets                                                             (15,588)   (16,032)  (14,145)
------------------------------------------------------------------------------------------------------------------------------------
     Accounts payable and other liabilities                                     1,009     26,523     6,328
------------------------------------------------------------------------------------------------------------------------------------
     Federal and state income taxes                                                 -     (2,055)   (1,886)
------------------------------------------------------------------------------------------------------------------------------------
     Deferred compensation and retirement benefits                              4,079      3,583     3,191
------------------------------------------------------------------------------------------------------------------------------------
     Realized security (gain) loss*                                               106        107      (144)
------------------------------------------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                                   100,013    120,023    44,472
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
------------------------------------------------------------------------------------------------------------------------------------
  Capital expenditures                                                        (39,225)   (59,506)  (51,487)
------------------------------------------------------------------------------------------------------------------------------------
  Purchases of short-term investments*                                        (14,000)  (116,378)  (56,245)
------------------------------------------------------------------------------------------------------------------------------------
  Proceeds from sales of short-term investments*                               51,420    107,423    85,256
------------------------------------------------------------------------------------------------------------------------------------
  Proceeds from disposal of property                                              313        407       455
------------------------------------------------------------------------------------------------------------------------------------
  Net construction funds held by trustee                                        1,044      3,137     1,970
------------------------------------------------------------------------------------------------------------------------------------
  Other capital investments, including acquisitions/divestitures              (40,981)   (29,165)  (17,017)
------------------------------------------------------------------------------------------------------------------------------------
  Net cash used in investing activities                                       (41,429)   (94,082)  (37,068)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
------------------------------------------------------------------------------------------------------------------------------------
  Cash dividends paid                                                         (22,864)   (18,919)  (16,065)
------------------------------------------------------------------------------------------------------------------------------------
  Amounts paid on long-term debt                                                    -       (205)   (6,110)
------------------------------------------------------------------------------------------------------------------------------------
  Proceeds from issuance of short-term debt                                    58,500      4,216     4,829
------------------------------------------------------------------------------------------------------------------------------------
  Proceeds from issuance of long-term debt                                      1,000      5,000     2,100
------------------------------------------------------------------------------------------------------------------------------------
  Proceeds from issuance of common stock                                       20,602     10,864     7,544
------------------------------------------------------------------------------------------------------------------------------------
  Retirement of short-term and acquired debt                                  (30,000)    (4,216)   (6,474)
------------------------------------------------------------------------------------------------------------------------------------
  Purchase of treasury stock                                                  (95,272)    (9,878)        -
------------------------------------------------------------------------------------------------------------------------------------
  Net cash used in financing activities                                       (68,034)   (13,138)  (14,176)
------------------------------------------------------------------------------------------------------------------------------------
Net changes in cash and cash equivalents                                       (9,450)    12,803    (6,772)
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                                 23,618     10,815    17,587
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                    $  14,168  $  23,618  $ 10,815
====================================================================================================================================
Supplemental disclosure:
------------------------------------------------------------------------------------------------------------------------------------
  Interest paid (net of interest capitalized)                               $     917  $    (297) $   (220)
------------------------------------------------------------------------------------------------------------------------------------
  Income taxes paid                                                            51,712     46,910    35,520
====================================================================================================================================
The accompanying notes are an integral part of these statements.      *Prior year has been reclassified to conform with current year
                                                                       presentation.

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997

1. SUMMARY OF MAJOR ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include the accounts of the company and its subsidiaries, which are wholly owned. All significant intercompany transactions have been eliminated.

REVENUE RECOGNITION: Revenues from product sales and software licenses are recorded when the product is shipped to the customer. In some instances, revenue is not recognized until installation is complete or customer acceptance is acknowledged.

INVENTORIES: Inventories are stated at cost which does not exceed market and include material, labor and overhead. Cost is determined on the last-in, first-out (LIFO) basis for certain inventories, and on the first-in, first-out (FIFO) basis for other inventories.

DEPRECIATION: Depreciation for financial statement purposes is computed using the straight-line method over the estimated useful lives of the various classes of property, plant and equipment.

===================================================
Buildings                                 40 years
---------------------------------------------------
Building equipment                     10-15 years
---------------------------------------------------
Machinery and equipment                 3-10 years
---------------------------------------------------
Leasehold improvements                Lease period
===================================================

INTANGIBLE ASSETS: The excess of cost over the assigned value of the net tangible assets in connection with all acquisitions is being amortized on a straight-line basis primarily over 40 years. Amortization expense amounted to $1,205,000 in 1997, $965,000 in 1996 and $491,000 in 1995. The unamortized balance relating to Moran Printing Company was $17,035,000 at July 31, 1997; the balance relating to all other acquisitions was $42,878,000 at July 31, 1997, and $43,180,000 at July 31, 1996.

SYSTEM DEVELOPMENT COSTS: Computer software that is either purchased or developed internally for use by the company is amortized over a useful life of one to seven years. Amortization of internal use software was $3,029,000 in fiscal 1997; $2,127,000 in fiscal 1996; and $1,907,000 in fiscal 1995. Certain computer software costs are capitalized in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," and are reported at the lower of unamortized cost or net realizable value. This software, marketed under the name Platforms(TM), has been developed to provide customers with electronic forms. The software is customized to meet the customer's requirements. The originally purchased software, which is the base technology for our Platforms product, is being amortized over five years. Subsequent software developments are being amortized over two years. All costs incurred to customize the specific application for a customer are included in cost of goods sold in the period in which revenue is recognized. Revenues and expenses for the Platforms' product are included in the statements of operations. Amortization of Platforms' software was $2,229,000 in fiscal 1997; $2,042,000 in fiscal 1996; and $959,000 in fiscal 1995. The unamortized balance of all capitalized computer software was $24,404,000 in 1997 and $21,499,000 in 1996.

OTHER ASSETS: $1,280,000 in 1997 and $2,325,000 in 1996 represent the unused balance of construction funds held for the Lebanon, Kentucky plant.

ACCOUNTING CHANGES: In fiscal 1997, the company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The statement requires that long-lived assets, including related goodwill, be reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The effect of the accounting change had no impact on the company's financial statements.

INCOME TAXES: The company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes." Under that standard, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying statutory tax rates applicable to future years to differences between the financial statement carrying amount and the tax bases of existing assets and liabilities. Investment tax credits are amortized to income over the lives of the applicable assets. The unamortized investment tax credit amounted to $243,000 in 1997 and $300,000 in 1996.

INDUSTRY SEGMENT: The company is engaged primarily in the computer services and supply industry.

NET INCOME PER SHARE: Net income per share is based on the weighted average number of shares outstanding during each year.

In 1997, the Financial Accounting Standards Board issued a new standard, SFAS No. 128 on Earnings Per Share disclosure which is effective for financial statements for periods ending after December 15, 1997. The company will adopt this statement and reflect its disclosures in the company's fiscal 1998 financial statements. SFAS No. 128 requires dual presentation of basic and diluted earnings per share, as defined, for current and prior periods. Earnings per share were as follows:

                                  1997   1996   1995
======================================================
Basic                             $1.88  $1.60  $1.23
------------------------------------------------------
Diluted                            1.86   1.59   1.23
======================================================

CASH AND CASH EQUIVALENTS: The company invests excess cash balances in short-term securities, including commercial paper, money market funds, and municipal bonds whose original maturities are less than three months.

CAPITALIZED INTEREST COSTS: Interest costs are capitalized based upon the cost of capital projects in progress during the year. Interest costs capitalized for the last three years were:

(IN THOUSANDS)  INTEREST EXPENSE  INTEREST CAPITALIZED
======================================================
1997                      $3,940                $1,321
------------------------------------------------------
1996                       2,717                 1,406
------------------------------------------------------
1995                       2,717                 1,508
======================================================

Amortization expense for interest capitalized was $912,000 in 1997; $794,000 in 1996; and $681,000 in 1995.

USE OF ESTIMATES: In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect reported and disclosed assets and liabilities at the date of the financial statements and reported revenues and expenses during the reporting period. Actual results could differ from those estimates.

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. INVENTORIES:

Inventories at July 31, were as follows:

(IN THOUSANDS)                              1997     1996
===========================================================
Raw materials                             $21,440  $20,470
-----------------------------------------------------------
Work in process                             1,426    1,771
-----------------------------------------------------------
Finished products                          62,284   49,091
-----------------------------------------------------------
                                          $85,150  $71,332
===========================================================

At July 31, 1997 and 1996 the cost of inventories aggregating $55,484,000 and $49,623,000, respectively, was determined on the LIFO method.

Inventories would have been $17,649,000 higher in Fiscal 1997 and $19,790,000 higher in Fiscal 1996, if the FIFO method had been used for all inventories.

3. FINANCING ARRANGEMENTS:

Long-term debt consisted of the following at July 31:

(IN THOUSANDS)                               1997     1996
===========================================================
Average 3.73% adjustable industrial
revenue bonds due 2007                    $ 7,000  $ 7,000
-----------------------------------------------------------
Average 3.64% adjustable industrial
revenue bonds due 2009                      8,000    8,000
-----------------------------------------------------------
Average 3.73% adjustable industrial
revenue bonds due 2019                      8,500    8,500
-----------------------------------------------------------
Average 5.43% adjustable promissory
note due 1998                               2,000    2,000
-----------------------------------------------------------
Average 4.95% adjustable promissory note
maturing not earlier than 1998                100      100
-----------------------------------------------------------
Average 5.27% adjustable promissory
note due 1998                               5,000    5,000
-----------------------------------------------------------
Average 5.80% adjustable promissory
note due 1999                               1,000        -
-----------------------------------------------------------
                                          $31,600  $30,600
-----------------------------------------------------------
Less-current portion                        7,100        -
-----------------------------------------------------------
                                          $24,500  $30,600
===========================================================

Based upon the interest rates currently available to the company for borrowings with similar terms and maturities, the fair value of the company's debt and other financial instruments are either carried at fair value or do not materially differ from fair value.

The industrial revenue bonds due 2007, 2009 and 2019 may be tendered at the option of the holders on dates specified in the agreements.

The company maintains arrangements with agents to remarket any bonds tendered before the final maturity dates. The bonds are also supported by letters of credit.

The company's financing arrangements contain certain restrictive financial covenants. Under the most restrictive of the covenants, the company must maintain a current ratio of at least 2 to 1, net worth of not less than $403 million and funded debt not greater than 40% of net tangible assets plus funded debt. The company was in compliance with all debt covenants at July 31, 1997 and 1996.

Principal payments due on long-term debt during the next five years are as follows: $7,100,000 in 1998; $1,000,000 in 1999; and $0 in each of 2000 through 2002.

Short-term notes payable of $28.5 million represents payments due to Moran Printing principals. The notes carry an interest rate of 5.8%. $15 million was paid in August, 1997, with the balance due in January, 1998.

The company has a $50 million revolving credit facility with The First National Bank of Chicago as the agent and Bank of America Illinois as co-agent. Additionally, unsecured money market lines of $50 million each were added in fiscal 1997. The maximum amount as authorized by the Board of Directors for short-term borrowings under the revolver and the money market lines is limited to $50 million. There are no compensating balance requirements under these agreements. There were no borrowings under these agreements at July 31, 1997 and 1996.

4. PROFIT SHARING AND RETIREMENT PLAN:

The company has a contributory profit sharing and retirement plan covering most employees. Company contributions to the Plan charged to operations were $17,620,000 in Fiscal 1997, $15,824,000 in Fiscal 1996, and $11,906,000 in Fiscal 1995.

5. STOCK OPTIONS:

The company has two stock option plans, the 1997 Stock Incentive Plan ("The 1997 Plan") and the 1989 Stock Option Plan ("The 1989 Plan"), and an employee stock purchase plan adopted in 1974 ("The 1974 Plan").

Under the terms of the 1997 Plan, which expires September 4, 2006, options may be granted to employees, as well as to non-employee Directors. Two types of options to purchase common stock may be granted to officers and others, except for non-employee Directors: Incentive Options and Non-Qualified Options. In the case of Incentive Options, the option price may not be less that 100% of the market value of the stock at the date of grant. For Non-Qualified Options, the grant price may not be less than 85% of the market value; however, to date no options have been granted at less than 100% of market value. The option price may be paid in cash or by exchanging previously acquired company common stock with a market value equal to the purchase price. Options generally become exercisable as to 40% of the shares granted one year after grant and the remaining 60% of the shares granted become exercisable two years after grant. Options expire 10 years after grant. The exercisability of options may be subject to one or more of the following performance measures: 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 above.

The 1997 plan additionally provides for options for non-employee Directors. Immediately following the company's annual meeting, each non-employee Director will be granted an option to purchase 2,000 shares 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. The options will vest at 25% every three months, such that they will be fully vested within one year, or by the next annual meeting, whichever occurs first.

Under the terms of the 1989 Plan, which will expire on September 12, 1999, options may be granted to officers and others. This plan is similar to the 1997 plan except it does not permit grants to non-employee Directors and it does not provide for performance measures to determine vesting. Currently there are 70,952 options still available under this plan. The company does not intend to seek authorization for additional shares under this plan.

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The company accounts for employee stock options under Accounting Principles Board Opinion No. 25. The company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the plans been determined consistent with SFAS No. 123, the company's net income and earnings per share would have been reduced to the following pro forma amounts:

(IN THOUSANDS, EXCEPT EPS)                  1997     1996
===========================================================
Net Income as reported                    $81,282  $72,999
-----------------------------------------------------------
Net Income pro forma                       78,333   71,743
-----------------------------------------------------------
Earnings per Share as reported               1.88     1.60
-----------------------------------------------------------
Earnings per Share pro forma                 1.81     1.57
===========================================================

Because the SFAS No. 123 method of accounting has not been applied to options granted prior to August 1, 1995, the resulting pro forma compensation cost may not be representative of expected compensation cost in future years.

The following table summarizes the activity under the stock option plans for the last two years:

                                     NUMBER OF  WEIGHTED AVERAGE
                                        SHARES    EXERCISE PRICE
=================================================================
Outstanding at July 31, 1995          819,784            $ 13.18
-----------------------------------------------------------------
Granted                               267,400              28.94
-----------------------------------------------------------------
Forfeited                              (5,800)             18.76
-----------------------------------------------------------------
Exercised                            (174,212)             12.38
-----------------------------------------------------------------
Outstanding at July 31, 1996          907,172            $ 17.94
-----------------------------------------------------------------
Granted                               845,715              27.18
-----------------------------------------------------------------
Forfeited                              (6,300)             28.15
-----------------------------------------------------------------
Exercised                            (249,744)             13.04
-----------------------------------------------------------------
Outstanding at July 31, 1997        1,496,843            $ 23.94
=================================================================
                                       July 31           July 31
-----------------------------------------------------------------
                                         1997               1996
-----------------------------------------------------------------
Shares available for future grants  1,489,337            328,752
-----------------------------------------------------------------
Shares exercisable                    757,468            536,657
=================================================================

Of the 845,715 options granted in fiscal 1997, 567,000 were granted with performance measure vesting provisions as outlined in the 1997 Plan. The performance measures for the options are based on revenues, pretax income, return on equity, and return on assets. Vesting will occur in 3 years to the extent that the company meets specified performance measures. To the extent that the measures are not met, the options will vest in 9.5 years. These options were issued with shareholder approval on February 28, 1997, with a grant date of September 4, 1996. The difference between market price on February 28, 1997 and the grant date will be reflected as expense in the company's operations statement over the vesting period. Fiscal 1997 includes additional expense of $254,000. The remaining options granted in 1997 did not have performance vesting provisions.

The Employee Stock Purchase Plan, adopted in 1974, was to end on December 31, 1997. During 1997, the 1974 Plan was amended to add 14 additional 6-month offering periods, subject to shareholder approval. A total of 6,600,000 shares of common stock have been reserved for purchase by employees through semi-annual offerings, of which 1,900,000 shares are subject to shareholder approval. The option price is the lower of 85% of the market price of the shares on the commencement date or the termination date of each offering period. Employees participate in the plan through payroll deductions and the plan qualifies for certain tax advantages under section 423 of the Internal Revenue Code. Options were exercised to purchase 324,002 shares at $25.65 in Fiscal 1997, 375,754 shares at $19.12 in Fiscal 1996, and 531,254 shares at $12.11 in Fiscal 1995. There were 2,553,496 shares available at July 31, 1997 and 977,498 shares available at July 31, 1996 for future issuance under this plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted- average assumptions used for grants: risk-free interest rates of 5.2% to 6.8% depending on expected life of the option; expected dividend yield of 1.3% to 1.7%; expected lives of 5.4 years for options issued without performance measures, 7.4 years for options with performance measures, and 0.5 years for options granted through the Employee Stock Purchase Plan; and expected volatility of 25.2% to 25.8% for options granted through the stock option plan, and 9.5% to 43.6% for options granted through the Employee Stock Purchase Plan.

6. LEASE COMMITMENTS:

Total rent expense for manufacturing facilities, sales offices and equipment amounted to $6,225,000 in 1997, $5,906,000 in 1996 and $5,508,000 in 1995. The minimum future rental commitments under non-cancellable lease arrangements are $3,821,000 in 1998; $3,030,000 in 1999; $1,982,000 in 2000; $1,618,000 in 2001; and $6,368,000 for 2002 and beyond.

7. INCOME TAXES:

The significant deferred tax assets and liabilities at July 31 were as follows:

(IN THOUSANDS)                                                             1997     1996
=============================================================================================
Deferred tax liabilities:
---------------------------------------------------------------------------------------------
  Accelerated depreciation                                              $30,576  $30,053
---------------------------------------------------------------------------------------------
  Software development                                                    8,661    7,545
---------------------------------------------------------------------------------------------
  Other                                                                   7,871    7,544
---------------------------------------------------------------------------------------------
  Total Deferred Liabilities                                             47,108   45,142
---------------------------------------------------------------------------------------------
Deferred tax assets:
---------------------------------------------------------------------------------------------
  Deferred compensation                                                   8,471    7,126
---------------------------------------------------------------------------------------------
  Postretirement benefits                                                 1,376    1,516
---------------------------------------------------------------------------------------------
  Inventory capitalization                                                3,207    2,514
---------------------------------------------------------------------------------------------
  Accrued vacation                                                        1,548    1,468
---------------------------------------------------------------------------------------------
  Supplemental profit sharing                                             1,525    1,121
---------------------------------------------------------------------------------------------
  Other                                                                   5,673    5,702
---------------------------------------------------------------------------------------------
  Total Deferred Assets                                                  21,800   19,447
---------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities                                            $25,308  $25,695
=============================================================================================

The provision for income taxes is comprised of the following:

                                                   1997         1996           1995
=============================================================================================
Statutory federal income tax rate                  35.0%         35.0%         35.0%
---------------------------------------------------------------------------------------------
State and local income taxes                        4.4           4.4           4.4
---------------------------------------------------------------------------------------------
Tax exempt interest income                         (0.1)         (0.4)        (1.0)
---------------------------------------------------------------------------------------------
Tax credits and other                               0.2          (0.6)        (1.6)
---------------------------------------------------------------------------------------------
Effective tax rate                                 39.5%         38.4%         36.8%
=============================================================================================

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. POSTRETIREMENT BENEFITS:

All current retirees; employees at least 55 with 20 or more years of service as of December 31, 1993; and employees between the ages of 50 and 54 who have at least 20 years of service as of December 31, 1993, and retire before December 31, 1998; are entitled to postretirement health care coverage. These benefits are subject to the same deductibles and co-payment provisions which apply to active employees. All other employees who retire after December 31, 1993 will pay 100% of their retirement medical coverage. The company may amend or change the plan periodically.

The net accrual basis expense for postretirement benefits as of July 31 was as follows:

(IN THOUSANDS)                                                1997      1996      1995
=========================================================================================
Components of net periodic postretirement benefit costs:
-----------------------------------------------------------------------------------------
Service cost                                                  $  10     $  22     $  22
-----------------------------------------------------------------------------------------
Interest cost                                                   278       298       308
-----------------------------------------------------------------------------------------
Amortization of (gain) loss                                       -       134      (985)
-----------------------------------------------------------------------------------------
Net periodic postretirement benefit cost                      $ 288     $ 454     $(655)
=========================================================================================

The liability at July 31 (included in Deferred Compensation and Retirement Benefits on the accompanying Consolidated Balance Sheet) for postretirement benefits is as follows:

(IN THOUSANDS)                                          1997         1996
===========================================================================
Actuarial present value of benefit obligations:
---------------------------------------------------------------------------
Retirees                                              $2,175       $2,386
---------------------------------------------------------------------------
Fully eligible active plan participants                  863          947
---------------------------------------------------------------------------
Other active plan participants                           245          269
---------------------------------------------------------------------------
Life insurance                                           200          219
---------------------------------------------------------------------------
Actuarial present value of benefit obligations        $3,483       $3,821
===========================================================================

For financial reporting purposes, the actuarial computations assumed a discount rate of 8.0% to determine the accumulated postretirement benefit obligation, and an assumed health care cost trend rate of 7.5% and 7.0% for pre-65 and post-65 medical coverage, respectively, for 1997, declining gradually to 5.0% in 2002, to measure the accumulated postretirement benefit obligation. However, a one percentage point increase in the assumed health care cost trend would increase the aggregate of the service cost and interest cost components of the annual postretirement expense by $21,000 and the postretirement benefit obligation as of July 31, 1997 by $228,000.

9. INVESTMENTS IN DEBT AND EQUITY SECURITIES:

SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," requires securities that are available-for-sale to be carried at fair value, with changes in net unrealized gains and losses recorded as a separate component of shareholders' equity. This statement decreased shareholders' equity by $95,000 at July 31, 1997 and $220,000 at July 31, 1996 (net of tax).

The amortized cost and market value of investments as of July 31, 1996, and July 31, 1997 were as follows:

(IN THOUSANDS)
=====================================================================================================
 July 31, 1996                              AMORTIZED           UNREALIZED HOLDING          MARKET
                                              COST            GAINS            LOSSES        VALUE
=====================================================================================================
 Available-for-sale
-----------------------------------------------------------------------------------------------------
  State, municipal & other gov't debt       $      60         $     -          $   23       $    37
-----------------------------------------------------------------------------------------------------
  Equity                                       39,332               -             344        38,988
-----------------------------------------------------------------------------------------------------
 Held-to-maturity
-----------------------------------------------------------------------------------------------------
  State, municipal & other gov't debt               -               -               -             -
-----------------------------------------------------------------------------------------------------
    Total short-term investments            $  39,392         $     -          $  367       $39,025
-----------------------------------------------------------------------------------------------------
 Long-term available-for-sale
-----------------------------------------------------------------------------------------------------
  Equity                                    $   1,880         $     -          $    -       $ 1,880
=====================================================================================================
 July 31, 1997                              AMORTIZED           UNREALIZED HOLDING          MARKET
                                              COST            GAINS            LOSSES        VALUE
=====================================================================================================
 Available-for-sale
-----------------------------------------------------------------------------------------------------
  State, municipal & other gov't debt       $       -         $     -          $    -       $     -
-----------------------------------------------------------------------------------------------------
  Equity                                        1,866               -             160         1,706
-----------------------------------------------------------------------------------------------------
 Held-to-maturity
-----------------------------------------------------------------------------------------------------
  State, municipal & other gov't debt               -               -               -             -
-----------------------------------------------------------------------------------------------------
    Total short-term investments            $   1,866         $     -          $  160       $ 1,706
-----------------------------------------------------------------------------------------------------
 Long-term available-for-sale
-----------------------------------------------------------------------------------------------------
  Equity                                    $   1,730         $     -          $    -       $ 1,730
=====================================================================================================

Maturities for all debt securities classified as short-term are less than one year. The long-term investment is included in the 'Other Assets' section of the balance sheet.

Proceeds on the sale of securities were $51,420,000 for Fiscal 1997, and $107,423,000 for Fiscal 1996, with gross realized losses of $106,000 in Fiscal 1997, and $107,000 in Fiscal 1996.

The amortized cost of these securities was based on specific identification. No securities during the period were classified as trading securities. There have been no sales of held-to-maturity securities other than at their maturity date. The reduction in net unrealized loss on available-for-sale securities from July 31, 1996 to July 31, 1997 was $125,000 (net of tax).

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Wallace Computer Services, Inc.

We have audited the accompanying consolidated balance sheets of Wallace Computer Services, Inc., (a Delaware corporation) and Subsidiaries as of July 31, 1997 and 1996 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three Fiscal years in the period ended July 31, 1997. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wallace Computer Services, Inc. and Subsidiaries as of July 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three Fiscal years in the period ended July 31, 1997 in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Chicago, Illinois
September 3, 1997

36

CORPORATE AND INVESTOR INFORMATION

BOARD OF DIRECTORS

THEODORE DIMITRIOU (E) (P)
Chairman

ROBERT J. CRONIN (E) (P)
President and Chief
Executive Officer

RICHARD F. DOYLE (A) (E)
Former Senior Vice President
Finance and Administration
Texas Oil & Gas Corp.

ALBERT W. ISENMAN III (C)
Professor of Management
Kellogg Graduate School
of Management
Northwestern University

WILLIAM N. LANE, III (C) (E)
Chairman, President and
Chief Executive Officer
Lane Industries, Inc.

JOHN C. POPE (A) (C)
Chairman of the Board
MotivePower Industries, Inc.

ROBERT P. RITTEREISER (P)
Chairman and
Chief Executive Officer
Gruntal Financial L.L.C.
Gruntal & Co. L.L.C.

NEELE E. STEARNS, JR. (A)
Former President and
Chief Executive Officer
CC Industries., Inc.

(A) Member of the Audit Committee
(C) Member of the Compensation Committee (E) Member of the Executive Committee (P) Member of the Profit Sharing Committee

OFFICERS

THEODORE DIMITRIOU
Chairman of the Board

ROBERT J. CRONIN
President and Chief
Executive Officer

MICHAEL O. DUFFIELD
Senior Vice President
Operations

MICHAEL T. LEATHERMAN
Senior Vice President
Business Services
Chief Information Officer

THOMAS G. BROOKER
Vice President, General Manager
Office Products Group

BRUCE D'ANGELO
Vice President Corporate Sales

MICHAEL J. HALLORAN
Vice President, Chief Financial
Officer and Assistant Secretary

DONALD J. HOFFMANN
Vice President Engineering
and Research

MICHAEL M. MULCAHY
Vice President, General Manager
Direct Response Group

WAYNE E. RICHTER
Vice President, General Manager
Label Group

SANDRA K. BRANDT
Treasurer, Division Vice President

MICHAEL T. LAUDIZIO
Secretary, Division Vice
President Taxes

WILLIAM J. MONTANEZ
Assistant Treasurer

DIVISION MANAGERS

MICHAEL A. ANDERSON
Vice President Commercial Printing

STEVEN F. ARPAIA
Vice President Colorforms Sales

DAVID W. BERTRAM
Vice President Contract Services

DOUGLAS W. FITZGERALD
Vice President Marketing

JOSEPH J. JUSZAK
Vice President Quality
and Technical Services

MICHAEL D. KEIM
Vice President Manufacturing
Systems

JAMES E. KERSTEN
Vice President Direct Sales - West

MARK J. KOVACH
Vice President Sales, TOPS

MARC A. LOOMER
Vice President Business Forms
Manufacturing

MARK D. MINDRUM
Vice President Direct Sales -
Midwest

MICHAEL A. REPP
Vice President, General Manager
TOPS Division

EDWARD A. RIGUARDI
Vice President Direct Sales - East

DAVID M. ROUSSEAU
Vice President Information
Services

RONALD D. SEAVEY
Vice President Direct Sales -
Southeast

DIANE E. SCHREINER
Vice President Distribution
Services

BARRY L. WHITE
Vice President Human Resources

FACILITIES

Headquarters - Lisle, IL

La Palma, CA
Lodi, CA
Ontario, CA
San Luis Obispo, CA
Orlando, FL (2)
Tampa, FL
Metter, GA
Bellwood, IL
Clinton, IL
Elk Grove Village, IL
Hillside, IL
St. Charles, IL (2)
Osage, IA (2)
Lebanon, KY
Gastonia, NC
Wilson, NC
Tonawanda, NY
Cincinnati, OH
Streetsboro, OH
Allentown, PA
Covington, TN
Brenham, TX
Marlin, TX
Luray, VA
Manchester, VT
West Bend, WI

Sales Offices - Nationwide

CORPORATE INFORMATION

GENERAL COUNSEL
Steven L. Carson

AUDITORS
Arthur Andersen LLP, Chicago, IL

PRODUCT INFORMATION
Information about Wallace's information
management products, services and
solutions is available on our
web site at www.wallace.com.
You may also contact the Marketing
Department at corporate headquarters
in Lisle.
800/323-8447

E-mail: corpmarketing@wallace.com

STOCKHOLDER INFORMATION

COMMON STOCK
The company's common shares
are traded on the New York Stock
Exchange, ticker symbol WCS.

TRANSFER AGENT AND REGISTRAR

Questions regarding stock transfer
requirements, lost stock certificates,
dividends or address changes
should be directed to:

Boston EquiServe, L.P.
Investor Relations
MS 45-02-64
P.O. Box 644
Boston, MA 02102-0644
800/733-5001

REPORTS TO THE S.E.C.
Reports to the S.E.C. on forms
10-K and 10-Q are available at
no charge upon written request
to the Corporate Secretary.

COMPANY NEWS
Wallace press releases and
additional company information
are available on Wallace's web
site at www.wallace.com

INVESTOR CONTACT
Brad Samson, Director of
Investor Relations
630/588-5395
E-mail: bsamson@wallace.com

Printed by Moran Printing


WALLACE LOGO

INFORMATION MANAGEMENT PRODUCTS, SERVICES, SOLUTIONS.

WALLACE COMPUTER SERVICES, INC.
CORPORATE OFFICES
2275 CABOT DRIVE LISLE, IL 60532-3630
630-588-5000

4650-AR-97 Q/R


EXHIBIT 21

The Registrant owns 100% of the Stock of Visible Computer Supply Corporation, an Illinois corporation and Wallace Commercial Printing, Inc., a Delaware corporation.

31

EXHIBIT 23

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the incorporation of our reports, dated September 3, 1997, included (or incorporated by reference) in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (File No. 2-52229, No. 2-52357, No. 2-60252, No. 2-63000, No. 2-70022, No. 2-87821, No. 33-10353, No. 33-32706 and No. 33-86496).

Arthur Andersen LLP

Chicago, Illinois
October 28, 1997

Report of Independent Public Accountants with Respect to Financial Statement Schedule

We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Wallace Computer Services, Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated September 3, 1997. Our audit was made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. This financial statement schedule is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the consolidated financial statements. The financial statement schedule has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the consolidated financial statements taken as a whole.

Arthur Andersen LLP

Chicago, Illinois
September 3, 1997

32

ARTICLE 5
MULTIPLIER: 1,000


PERIOD TYPE YEAR
FISCAL YEAR END JUL 31 1997
PERIOD START AUG 01 1996
PERIOD END JUL 31 1997
CASH 14,168
SECURITIES 1,706
RECEIVABLES 171,059
ALLOWANCES (3,481)
INVENTORY 85,150
CURRENT ASSETS 290,490
PP&E 608,486
DEPRECIATION (306,994)
TOTAL ASSETS 720,442
CURRENT LIABILITIES 141,256
BONDS 24,500
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 45,764
OTHER SE 447,424
TOTAL LIABILITY AND EQUITY 720,442
SALES 906,290
TOTAL REVENUES 906,290
CGS 556,073
TOTAL COSTS 771,196
OTHER EXPENSES 0
LOSS PROVISION 1,189
INTEREST EXPENSE 2,619
INCOME PRETAX 134,351
INCOME TAX 53,069
INCOME CONTINUING 81,282
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 81,282
EPS PRIMARY 1.88
EPS DILUTED 1.86
BROKERAGE PARTNERS