VESTCOM INTERNATIONAL INC, S-1/A, 1997-07-01

VESTCOM INTERNATIONAL INC
S-1/A, 1997-07-01
BUSINESS SERVICES, NEC

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<PAGE> 1

REGISTRATION NO. 333-23519
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

VESTCOM INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
NEW JERSEY 7389 22-3477425
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

1100 VALLEY BROOK AVENUE
LYNDHURST, NEW JERSEY 07071
(201) 935-7666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

JOEL CARTUN

PRESIDENT
VESTCOM INTERNATIONAL, INC.
1100 VALLEY BROOK AVENUE, LYNDHURST, NEW JERSEY 07071
(201) 935-7666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
ALAN WOVSANIKER, ESQ. DAVID W. POLLAK, ESQ.
LAURA R. KUNTZ, ESQ. HOWARD L. SHECTER, ESQ.
LOWENSTEIN, SANDLER, KOHL, FISHER & BOYLAN, P.A. MORGAN, LEWIS & BOCKIUS LLP
65 LIVINGSTON AVENUE 101 PARK AVENUE
ROSELAND, NEW JERSEY 07068 NEW YORK, NEW YORK 10178-0060
(201) 992-8700 (212) 309-6000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS MAXIMUM AGGREGATE
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Common Stock, no par value.................. 4,427,500 shares $13.00 $57,557,500 $17,442(3)
================================================================================================================
</TABLE>

(1) Includes 577,500 shares issuable upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.
(3) Previously paid.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there by any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.

SUBJECT TO COMPLETION, DATED JULY 1, 1997

3,850,000 SHARES
VESTCOM INTERNATIONAL, INC.
COMMON STOCK
------------------------
All of the shares of the Company's Common Stock (the "Common Stock")
offered hereby (the "Shares") are being sold by Vestcom International, Inc. (the
"Company").

Prior to the offering (the "Offering"), there has been no public market for
the Common Stock. It is anticipated that the initial public offering price will
be between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "VESC."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total(3).......................... $ $ $
=================================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.

(2) Before deducting expenses of the Offering payable by the Company estimated
at $3.0 million.

(3) The Underwriters have been granted an option, exercisable within 30 days
from the date hereof, to purchase up to 577,500 additional shares of Common
Stock at the Price to Public per share, less the Underwriting Discount, for
the purpose of covering over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------

The Shares are offered severally by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates representing the Shares will be made
against payment on or about , 1997 at the office of Oppenheimer &
Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281.

------------------------
OPPENHEIMER & CO., INC. PRUDENTIAL SECURITIES INCORPORATED
The date of this Prospectus is , 1997.
<PAGE> 3

[COMPANY GRAPHICS TO BE INSERTED]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 4

PROSPECTUS SUMMARY

Concurrently with the consummation of the offering made hereby (the
"Offering"), Vestcom plans to acquire, in separate transactions (collectively,
the "Acquisitions," and with the Offering, the "Consolidation"), in exchange for
consideration including shares of its Common Stock, seven companies which
provide computer output and document management services (collectively, the
"Founding Companies"). Unless otherwise indicated by the context, references
herein to "Vestcom" mean Vestcom International, Inc. and to the "Company" mean
Vestcom and the Founding Companies. Vestcom currently has no business operations
other than activities relating to the Acquisitions. Unless otherwise indicated,
all references to the business of the Company refer to the businesses of the
Founding Companies as they are currently being conducted on an independent
basis.

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
pro forma financial information, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all financial
information, share and per share data in this Prospectus (i) give effect to the
Acquisitions, (ii) assume no exercise of the Underwriters' over-allotment
option, (iii) assume no exercise of stock options to purchase shares of the
Company's Common Stock which have been or will be granted prior to or
immediately after the Offering under the Company's stock option plan and (iv)
assume that the initial public offering price is $12.00 per share, the mid-point
of the range set forth on the cover of this Prospectus. In addition, all
earnings per share and pro forma book value per share calculations contained in
this Prospectus assume that none of the 903,971 shares of Common Stock which may
be issued pursuant to certain earn-out provisions contained in the acquisition
agreements pertaining to four Founding Companies will have been issued. See
"Certain Transactions -- Organization of the Company -- Acquisitions" and
"-- Canadian Acquisition."

THE COMPANY

Vestcom was incorporated in September 1996 to create an international
provider of computer output and document management services. The Company plans
to achieve this goal by acquiring companies that provide similar and
complementary services in the highly fragmented computer output and document
management services industry. Upon the consummation of the Offering, Vestcom
will concurrently acquire seven computer output and document management services
companies servicing various markets in the Northeast, Midwest and Southeast
regions of the U.S. and in the Province of Quebec, Canada. The Company intends
to operate on a decentralized basis with each acquired company's local
management continuing to exercise responsibility for customer relationships and
day-to-day operating decisions. Each acquired company will be supported by
marketing and product development programs, financial controls and operating
systems provided by Vestcom.

The seven Founding Companies provide a number of value-added services
including (i) the production and distribution of time-sensitive
computer-generated documents on paper, compact disc, microfiche, microfilm and
labels, (ii) demand publishing, (iii) mailing services, (iv) marketing materials
fulfillment and (v) forms management. Applications of Vestcom's services include
printing and mailing of computer-generated brokerage statements, invoices,
cellular telephone bills, management reports and supermarket point-of-purchase
shelf labels. These services are primarily offered to large corporations on a
repetitive (e.g., daily, weekly, monthly, quarterly) basis and typically result
in a recurring source of revenue.

The Company believes that the computer output and document management
market that the Company services was over $20 billion in 1996. Industry sources
have estimated that the North American market for outsourcing of the production
and distribution of computer-generated documents was $5 billion in 1996 and will
grow to approximately $14 billion by the year 2000. Vestcom further believes
that over 5,000 companies currently are in the computer output and document
management services industry with fewer than 150 companies having revenues in
excess of $10 million. By consolidating several regional companies, the Company
believes it will be positioned to gain a greater market share through the
provision of cost-effective, technologically advanced computer output services
in the U.S. and portions of Canada (and eventually on a broader international
scale).

3
<PAGE> 5

The Company's strategy of becoming a leading international provider of
computer output and document management services includes the following:

- Provide a broad range of high quality computer output and document
management services at competitive costs from multiple locations

- Capitalize on cross-selling opportunities to expand the range of services
provided to existing customers as well as to broaden the Company's
customer base

- Provide complete outsourcing solutions for customers by assuming most of
the document output and distribution responsibilities previously
performed by the customers' in-house operations

- Operate with a decentralized management philosophy to provide
personalized customer service and a motivating environment for employees

- Achieve cost savings through consolidation and economies of scale by: (i)
consolidating a number of administrative functions; (ii) combining the
purchasing of such items as materials and supplies, equipment maintenance
and employee benefits; (iii) reducing or eliminating redundant functions
and facilities; and (iv) sharing production through a communications
network to maximize equipment utilization and to speed delivery

Vestcom intends to grow through the acquisition of companies with similar
or complementary businesses in new geographic markets, by making tuck-in
acquisitions within its existing markets, by cross-selling its various services
among the clients of the Founding Companies and of other acquired companies and
by acquiring the in-house computer output centers of targeted corporations. The
Company believes that it will be an attractive acquiror of other computer output
and document management services companies due to its strategy of retaining the
management of acquired companies and offering members of such management the
opportunity to become stockholders of Vestcom.

The Company believes that the consolidation of computer output and document
management services businesses will provide it with a significant competitive
advantage over existing smaller competitors and will permit it to take advantage
of the significant increase in outsourcing of computer output and document
management services. As the Company increases its presence in certain geographic
markets, it expects to be able to capitalize on its existing client
relationships, technical expertise, additional operating efficiencies, enhanced
marketing initiatives and national account programs.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,850,000 shares
Common Stock to be outstanding after the
Offering(1)................................ 7,826,447 shares
Use of proceeds.............................. To pay the cash portion of the purchase price
for the Founding Companies, to repay certain
indebtedness of Vestcom and of the Founding
Companies, to pay certain fees in connection
with the Acquisitions and for general
corporate purposes, which are expected to
include future acquisitions.
Nasdaq National Market Symbol................ VESC
</TABLE>

- ---------------
(1) The number of shares to be outstanding on completion of the Offering
excludes (x) up to an aggregate of 903,971 additional shares which may be
issued in connection with the Acquisitions of four Founding Companies
pursuant to certain earn-out provisions if specified revenue and earnings
thresholds are achieved, (y) 577,500 shares issuable upon exercise of the
Underwriters' over-allotment option and (z) 700,000 shares of Common Stock
reserved for issuance under the Company's 1997 Equity Compensation Program
(the "Stock Option Plan"). See "Certain Transactions -- Organization of the
Company -- Acquisitions" and "-- Canadian Acquisition" and
"Management -- Stock Option Plan."

RISK FACTORS

An investment in the Shares being offered by this Prospectus involves a
high degree of risk. See "Risk Factors."

5
<PAGE> 7

SUMMARY PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Vestcom will acquire the Founding Companies concurrently with and as a
condition to the consummation of the Offering. Vestcom has been identified as
the accounting acquiror for financial statement purposes. The following summary
unaudited pro forma financial data present certain data for the Company, as
adjusted for (i) the effects of the Acquisitions on an historical basis, (ii)
the effects of certain pro forma adjustments to the historical financial
statements and (iii) the consummation of the Offering. See "Selected Financial
Data" and the Unaudited Pro Forma Financial Statements and the notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA(1)
-------------------------------------------
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED ---------------------
DECEMBER 31, 1996 1996 1997
----------------- -------- --------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA (UNAUDITED):
Revenues............................................ $ 65,287 $ 16,193 $ 18,307
Gross profit........................................ 21,865 5,785 6,782
Selling, general and administrative expenses(2)..... (15,516) (3,660) (4,076)
Goodwill amortization(3)............................ (1,493) (362) (363)
----------- --------- ---------
Income from operations.............................. 4,856 1,763 2,343
Other, net(2)....................................... 190 15 4
----------- --------- ---------
Income before provision for income taxes............ 5,046 1,778 2,347
Provision for income taxes.......................... 2,616 856 1,084
----------- --------- ---------
Net income.......................................... $ 2,430 $ 922 $ 1,263
=========== ========= =========
Net income per share................................ $ .31 $ .12 $ .16
=========== ========= =========
Shares used in computing pro forma net income per
share(4)......................................... 7,826,815 7,826,815 7,826,815
=========== ========= =========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
PRO FORMA
PRO FORMA(1) FOR OFFERING(5)
------------ ---------------
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED):
Working capital................................................ $ 22,342(6) $14,245
Total assets................................................... 83,795 92,321
Total debt, including current portion.......................... 19,268 6,784
Stockholders' equity........................................... 29,387 69,353
</TABLE>

- ---------------
(1) The pro forma statements of operations data and the pro forma balance sheet
data assume that the Acquisitions were consummated on January 1 of each
period presented and March 31, 1997, respectively, and are not necessarily
indicative of the results the Company would have obtained had these events
actually then occurred or of the Company's future results.

(2) The pro forma statements include the effect of certain reductions in
compensation to the former owners of the Founding Companies to which they
have agreed commencing on the consummation of the Offering. See Note 5 to
the Unaudited Pro Forma Financial Statements. Vestcom recorded a non-
recurring, non-cash charge to compensation and interest expense of $5.1
million (the "Charge") in 1996, representing the difference between the
amount paid for shares issued by Vestcom in December 1996 and the fair value
of the shares on the date of sale as estimated for accounting purposes. The
Charge of $5.1 million is not included in pro forma net income.

(3) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 30-year period and computed on the basis described in
Note 5 to the Unaudited Pro Forma Financial Statements.

(4) Consists of (i) 1,124,336 shares issued to the initial investors in Vestcom,
(ii) 2,852,111 shares to be issued as consideration in the Acquisitions,
(iii) the 3,850,000 shares offered hereby and (iv) 368 shares assumed for
accounting purposes only to have been issued to compensate for the issuance
of shares for consideration lower than the assumed initial public offering
price. See Note 5 to the Unaudited Pro Forma Financial Statements.

(5) Reflects the consummation of the Offering and the Company's application of
the estimated net proceeds therefrom, including the repayment of certain
indebtedness. See "Use of Proceeds."

(6) Includes $18.4 million payable to the stockholders of the Founding Companies
in connection with the Acquisitions.

6
<PAGE> 8

SUMMARY INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
(IN THOUSANDS)

The following table presents summary data for each of the Founding
Companies (see "The Company" for the complete names of each Founding Company)
for the three most recent fiscal years and the three months ended March 31, 1996
and 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31,(1)(2)(3) MARCH 31,(1)(2)
------------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
COMVESTRIX
Revenues............................... $16,606 $19,298 $21,447 $ 5,460 $ 6,051
Income from operations................. 280 1,635 1,834 590 785
DMS
Revenues............................... $ 8,504 $ 9,423 $13,360 $ 3,207 $ 3,363
Income from operations................. 425 1,080 687 389 387
IMAGE
Revenues............................... $ 8,628 $ 8,062 $ 9,034 $ 2,576 $ 2,880
Income (loss) from operations.......... 186 (52) 339 173 360
EIS
Revenues............................... $ 4,454 $ 5,259 $ 7,624 $ 1,564 $ 2,255
Income (loss) from operations.......... 102 178 (489) (19) 111
COS INFORMATION
Revenues............................... $ 3,365 $ 3,914 $ 4,987 $ 1,251 $ 1,130
Income (loss) from operations.......... (11) 168 441 125 77
COMPUTER OUTPUT
Revenues............................... $ 2,192 $ 3,542 $ 4,855 $ 1,190 $ 1,528
Income from operations................. 51 117 528 187 215
MYSTIC
Revenues............................... $ 3,040 $ 3,393 $ 4,065 $ 944 $ 1,224
Income from operations................. 221 315 310 101 197
</TABLE>

- ---------------
(1) Does not reflect the effects of pro forma adjustments, including certain
reductions in compensation to the former owners of the Founding Companies to
which they have agreed commencing on the consummation of the Offering.

(2) The following Summary Individual Founding Company Financial Data are
unaudited: all data for Mystic; 1994 data for EIS and COS Information; 1995
data for EIS; and all data for the three months ended March 31, 1996 and
1997.

(3) Data for COS Information are presented for the twelve months ended July 31,
1994, 1995 and 1996.

7
<PAGE> 9

RISK FACTORS

An investment in the Shares being offered by this Prospectus involves a
high degree of risk. In addition, this Prospectus contains forward-looking
statements which involve risks and uncertainties. Discussions containing such
forward-looking statements may be found in the material set forth under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Industry Overview,"
"Business -- Services," "Business -- Business Strategy,"
"Business -- Acquisition Strategy," "Business -- Sales and Marketing" and
"Business -- Customers," as well as in this Prospectus generally. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in the following risk factors and elsewhere in this Prospectus.
Accordingly, prospective investors should consider carefully the following risk
factors, in addition to the other information concerning the Company and its
business contained in this Prospectus, before purchasing the Shares.

ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATION

Vestcom has conducted no operations to date other than in connection with
the Offering and the Acquisitions of the Founding Companies. See "The Company"
and "Certain Transactions." The Founding Companies have operated, and will
continue to operate prior to the consummation of the Acquisitions, as separate,
independent businesses. Consequently, the historical and pro forma financial
information herein may not be indicative of the Company's financial condition
and future operating results. Until the Company establishes centralized
accounting and other administrative systems, it will rely on the separate
systems of the Founding Companies. The success of the Company will depend, in
part, on the extent to which the Company is able to centralize these functions,
eliminate the unnecessary duplication of other functions and otherwise integrate
the Founding Companies and such additional businesses as the Company may acquire
into a cohesive, efficient enterprise. No assurance can be given that the
Company's senior management group, which has been recently formed and is not yet
complete, will be able to manage effectively the combined entity or implement
the Company's acquisition or operating strategy. See "Reliance on Key
Personnel."

A number of the Founding Companies offer different services, utilize
different capabilities and technologies and target different geographic markets.
While the Company believes that there are substantial potential opportunities as
a consequence of integrating these businesses, these differences increase the
difficulties involved in successfully completing such integration. Further,
there can be no assurance that the Company's strategy to become a leading
provider of computer output and document management services will be successful,
or that the Company's target customer segments will accept the Company as a
provider of such services. In addition, there can be no assurance that the
operating results of the Company will match or exceed the combined individual
operating results achieved by the Founding Companies prior to their acquisition.

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY

The Company intends to expand its operations through the acquisition of
additional businesses which provide computer output and document management
services. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses, if any, into the Company without substantial costs, delays
or other operational or financial difficulties. Further, acquisitions may
involve a number of special risks, including adverse effects on the Company's
operating results, diversion of management's attention, failure to retain key
personnel, risks associated with unanticipated events and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on the Company's business, financial condition or results of operations.
In addition, if competition for acquisition candidates develops or increases,
the cost of acquiring businesses could increase materially. Unfavorable
developments at a single acquired company could have a material adverse impact
on the reputation and business of the Company as a whole. In addition, there can
be no assurance that acquired businesses, if any, will achieve anticipated
revenues and earnings. The inability of the Company to implement and manage its
acquisition strategy successfully may have an adverse effect on the business or
future prospects of the Company. See "Business -- Acquisition Strategy."

8
<PAGE> 10

NEED FOR ADDITIONAL FINANCING

The Company currently intends to use its Common Stock for a portion of the
consideration to be paid in future acquisitions. The extent to which the Company
will be able or willing to use its Common Stock for this purpose will depend on
its market value from time to time and the willingness of potential acquisition
candidates to accept Common Stock as part of the consideration for the sale of
their businesses. If the Company is unable to use its Common Stock to make
future acquisitions, the Company may be required to use more of its cash
resources, if available, to initiate and maintain its acquisition program. If
the Company does not have sufficient cash resources, its growth could be limited
unless it is able to obtain additional capital through additional debt or equity
financing. There can be no assurance that the Company will be able to obtain
such financing if and when it is needed or that, if available, it will be
available on terms the Company deems acceptable. As a result, the Company might
be unable successfully to implement or manage its acquisition strategy, which
may have an adverse effect on the business or future prospects of the Company.
See "Business -- Acquisition Strategy."

Approximately $18.4 million of the net proceeds of the Offering will be
used by the Company to pay the cash portion of the acquisition prices for the
Founding Companies. Additionally, up to $2.8 million in cash and up to 903,971
shares of Vestcom's Common Stock may be used to pay deferred purchase prices
which may be earned over the next one to two years if the applicable revenue and
earnings thresholds of certain of the Founding Companies are achieved. Any
earn-outs will increase goodwill recorded for the Acquisition transactions. The
amortization of any additional goodwill and the increased number of shares
issued if the earn-outs are achieved will negatively affect the Company's future
earnings per share. See "Certain Transactions -- Organization of the
Company -- Acquisitions." The Company will use $14.3 million to repay existing
debt of the Founding Companies and Vestcom as well as certain other obligations
incurred in connection with the Consolidation. The Company has agreed to pay
Oppenheimer & Co., Inc. up to $1.8 million for advisory services. Such amount is
payable only if the Consolidation is consummated. The Company will also need
additional funds to implement its acquisition and internal growth strategies.
The Company has received a commitment letter from a bank for a $30 million
credit facility (which includes a $5 million line to be used solely for
equipment financing), subject to the consummation of the Offering and the
satisfaction of various other conditions. The Company intends to use this credit
facility for working capital and other general corporate purposes, which may
include future acquisitions. There can be no assurance, however, that this or
any other line of credit will be obtained or will be sufficient for the
Company's needs or that, if any other line is offered, it will be on terms that
are acceptable to the Company. See "Use of Proceeds" and
"Business -- Acquisition Strategy."

PROCEEDS OF OFFERING PAYABLE TO THE FOUNDING COMPANIES AND INITIAL INVESTORS

Vestcom will use the net proceeds of the Offering and cash available from
the Founding Companies to meet its cash requirements relating to the
consummation of the Acquisitions. In connection with the consummation of the
Acquisitions, Vestcom will pay, subject to possible adjustments, approximately
$18.4 million in cash to the stockholders of the Founding Companies for the
stock of the Founding Companies. Up to a maximum of an additional $2.8 million
of the net proceeds may be used to pay deferred purchase prices. Certain of the
stockholders of the Founding Companies will become directors of the Company
and/or executive officers of subsidiaries of the Company. The Company will also
use $12.5 million to repay existing debt of the Founding Companies (including
amounts owed to certain stockholders of the Founding Companies and amounts owed
to financial institutions that are personally guaranteed by certain stockholders
of the Founding Companies) and Vestcom. No assurance can be given that the net
proceeds of the Offering will be sufficient to meet the Company's requirements
for working capital expenditures and for potential acquisitions after repaying
such debt and paying the cash portion of the purchase price for the
Acquisitions. See "Use of Proceeds" and "Certain Transactions."

COMPETITION

The services provided by the Company are highly competitive. A significant
source of competition is the in-house capability of the Company's target
customer base. There can be no assurance that these businesses

9
<PAGE> 11

will outsource more of their computer output and document management needs or
that such businesses will not bring in-house services that they currently
outsource. In addition, with respect to those services that are outsourced, the
Company competes with a variety of competitors, many of which have substantially
greater financial resources than the Company. A number of the Company's current
suppliers of equipment and services are also a source of competition. There can
be no assurance that the Company will be able to compete successfully against
current or future competitors or that competitive pressures will not have a
material adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Competition."

The Company also competes for acquisition candidates in the computer output
and document management services industry. The Company's ability to grow through
acquisitions could be adversely affected by such competition.

RELIANCE ON KEY PERSONNEL

The Company's operations are dependent on the continued efforts of its
executive officers and technical staff and on the senior management of the
Founding Companies. Vestcom intends to add to its management team after the
Offering. Furthermore, the Company will likely be dependent on the senior
management of companies that may be acquired in the future. If any of these
individuals elect not to continue in their roles with the Company, or if the
Company is unable to attract and retain senior management and other skilled
employees, including computer programmers and other technical personnel, the
Company's business could be adversely affected. The Company maintains key
executive life insurance for Joel Cartun, its President and Chief Executive
Officer, in the amount of $1 million. See "Management" and "Business -- Business
Strategy."

DEPENDENCE ON TECHNOLOGY

The success of the Company will be highly dependent on its ability to
acquire and utilize competitive computer output and document production
technologies that are not readily available on a cost-effective basis to the
Company's existing and potential customers, thereby creating the need to
outsource. The Company's services could be rendered noncompetitive or obsolete
by technological advances made by the Company's current or potential
competitors. In addition, the Company could make a significant investment in
equipment or technology which quickly becomes obsolete. There can be no
assurance that the Company will be able to obtain the rights to use any such
technologies, that it will be able to implement effectively such technologies on
a cost-effective basis or that such technologies will not render noncompetitive
or obsolete the Company's role as a provider of computer output and document
management services. See "Business -- Services."

DEVELOPMENT OF NEW SERVICES

The Company believes that its future success depends on its ability to
enhance its current services and develop new services that address the
increasingly sophisticated needs of its customers. The introduction of services
incorporating new technologies and the emergence of new technical standards
could render some or all of the Company's services unmarketable. The failure of
the Company to develop and introduce enhancements and new services in a timely
and cost-effective manner in response to changing technologies or customer
requirements could have a material adverse effect on the Company's business,
financial condition or results of operations. See
"Business -- Services -- Development of New Services."

POTENTIAL LIABILITY FOR BREACH OF CONFIDENTIALITY

A substantial portion of the Company's business involves the handling of
documents containing confidential and other sensitive information. There can be
no assurance that unauthorized disclosure will not result in liability to the
Company. It is possible that such liabilities could have a material adverse
effect on the Company's reputation and results of operations. See
"Business -- Services -- Confidentiality of Customer Information."

10
<PAGE> 12

CONTROL BY CERTAIN STOCKHOLDERS

Following the completion of the Offering, the former stockholders of the
Founding Companies and the directors and other executive officers of the
Company, and entities affiliated with them, will beneficially own approximately
50.8% of the then outstanding shares of Common Stock (47.3% if the Underwriters'
over-allotment option is exercised in full), which percentage will increase if
additional shares of Common Stock are issued to the stockholders of four of the
Founding Companies in connection with the Acquisitions pursuant to certain
earn-out provisions. Accordingly, the stockholders of the Founding Companies are
likely to continue to exercise substantial control over the Company's affairs.
These stockholders acting together would be able to elect a sufficient number of
directors to control the Company's Board of Directors and would likely be able
to approve or disapprove any matter submitted to a vote of stockholders. See
"Principal Stockholders."

RISK OF BUSINESS INTERRUPTIONS AND DEPENDENCE ON SINGLE FACILITIES FOR CERTAIN
SERVICES; INSURANCE

The Company believes that its future results of operations will be
dependent in large part upon its ability to provide prompt and efficient
services to its customers. Certain of the Company's operations are performed at
a single location and are dependent on continuous computer, electrical and
telephone service. As a result, any disruption of the Company's day-to-day
operations could have a material adverse effect upon the Company. There can be
no assurance that a fire, flood, earthquake, power loss, phone service loss or
other event affecting one or more of the Company's facilities would not disable
these services. Any significant damage to any such facility or other failure
that causes significant interruptions in the Company's operations may not be
covered by insurance. Any uninsured or underinsured loss could have a material
adverse effect on the Company's business, financial condition or results of
operations.

EFFECT OF POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; PRIOR LOSSES

The Company may experience significant quarter to quarter fluctuations in
its results of operations. Quarterly results of operations may fluctuate as a
result of a variety of factors, including, but not limited to, the size and
timing of customer jobs, changes in customer budgets, variations in the cost of
paper and other materials, the opening of new facilities, the size and timing of
acquisitions, the integration of acquired businesses into the Company's
operations, the number and timing of new hires, the demand for the Company's
services, the timing of the introduction of new services and service
enhancements by the Company or its competitors, the market acceptance of new
services, competitive conditions in the industry and general economic
conditions.

As a result, the Company believes that period to period comparisons of
results of operations are not necessarily meaningful and not necessarily
indicative of the results that the Company may achieve in any subsequent quarter
or a full year. Such fluctuations may result in volatility in the price of the
Common Stock, and it is possible that in future quarters the Company's results
of operations could be below the expectations of public market analysts and
investors. Such an event could have a material adverse effect on the market
price of the Common Stock.

One of the Founding Companies recorded a net loss for 1996. No assurance
can be given that this company will become profitable in the future.

FLUCTUATIONS IN THE PRICE OF SUPPLIES; ALTERNATIVE TECHNOLOGIES

Prices for paper, film, compact discs, postage and other materials used by
the Company may increase from time to time in the future. Any significant
increases in the prices of these materials that cannot be passed on to customers
could have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, increases in the prices of
supplies and other materials might cause some of the Company's customers to
utilize alternative technologies in their respective businesses that do not
involve the use of paper or the mail, such as the Internet. There can be no
assurance that one or more non-paper-based technologies (whether now existing or
developed in the future) may not in the future reduce or supplant the mailing of
documents as a preferred medium for the Company's customers, which could in turn
adversely affect the Company's business.

11
<PAGE> 13

REGULATORY COMPLIANCE

As a public company, the Company will be subject to continuing compliance
with federal securities laws and may also be subject to increased scrutiny with
respect to laws applicable to all businesses, such as employment, safety and
environmental laws. The Company's management group has limited experience in
managing a public company. There can be no assurance that management will be
able to effectively and timely implement programs and policies that adequately
respond to such increased legal and regulatory compliance requirements.

ABSENCE OF PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained. The initial public offering price for the Common Stock offered
hereby will be determined by negotiations among the Company and the Underwriters
and may bear no relationship to the price at which the Common Stock will trade
after completion of the Offering. See "Underwriting" for factors to be
considered in determining such offering price. In addition, the stock market
has, from time to time, experienced extreme price and volume volatility. These
fluctuations may be unrelated to the operating performance of particular
companies whose shares are publicly traded. Market fluctuations may adversely
affect the market price of the Common Stock. The market price of the Common
Stock could be subject to significant fluctuations in response to the Company's
operating results and other factors, and there can be no assurance that the
market price of the Common Stock will not decline below the initial public
offering price.

IMMEDIATE AND SUBSTANTIAL DILUTION

Investors purchasing shares of Common Stock in the Offering will experience
immediate and substantial dilution in the net tangible book value of their
shares of approximately $8.76 from the assumed initial public offering price of
$12.00 per share (the mid-point of the range set forth on the cover page of this
Prospectus). See "Dilution." In the event the Company issues additional shares
of Common Stock in the future, including shares which may be issued in
connection with the Acquisitions pursuant to certain earn-out provisions and in
connection with future acquisitions, purchasers of Common Stock in the Offering
may experience further dilution in the net tangible book value per share of the
Common Stock of the Company.

POTENTIAL EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK

Upon the consummation of the Consolidation, 7,826,447 shares of Common
Stock will be outstanding. The 3,850,000 shares of Common Stock being sold in
the Offering will be freely tradeable unless acquired by affiliates of the
Company. The remaining shares outstanding may be sold publicly only following
their effective registration under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to an available exemption (such as provided by
Rule 144 following a holding period for previously unregistered shares) from the
registration requirements of the Securities Act. The holders of 332,990 of those
remaining shares have certain rights to have their shares registered in the
future under the Securities Act (see "Shares Eligible for Future Sale") but have
agreed not to exercise such rights until two years following the consummation of
the Offering.

Upon the consummation of the Offering, the Company will have outstanding
under its Stock Option Plan options to purchase an aggregate of 288,046 shares
of Common Stock at the initial public offering price. Generally, such options
vest in 25% annual increments commencing one year after the Offering. The
Company intends to register the shares issuable upon exercise of options granted
under the Stock Option Plan, and, upon such registration, such shares will be
eligible for resale in the public market. See "Management -- Stock Option Plan."

12
<PAGE> 14

grant any options or warrants to purchase any shares of Common Stock without the
prior written consent of Oppenheimer & Co., Inc., on behalf of the Underwriters,
except that the Company may grant options pursuant to the Stock Option Plan and
may issue Common Stock in connection with acquisitions and pursuant to the
Company's Stock Option Plan. See "Shares Eligible For Future Sale."

The Company currently intends to register an additional 2,000,000 shares of
Common Stock under the Securities Act as soon as possible after completion of
the Offering for use by the Company as a portion of the consideration to be paid
in future acquisitions. These shares will generally be freely tradeable after
their issuance, unless the sale thereof is contractually restricted or the
shares are acquired by affiliates of the Company.

Sales of a substantial number of shares of Common Stock in the public
market could adversely affect the market price of the Common Stock.

EFFECT OF CERTAIN CHARTER PROVISIONS

The Board of Directors of the Company is empowered to issue common stock
and preferred stock without stockholder action. The existence of this
"blank-check" common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise and may adversely affect the
prevailing market price of the Common Stock. The Company currently has no plans
to issue any such securities, other than certain shares of preferred stock which
will be issued in connection with the Acquisitions of certain of the Founding
Companies. See "Certain Transactions -- Organization of the
Company -- Acquisitions" and "-- Canadian Acquisition" and "Description of
Capital Stock." In addition, the New Jersey Shareholders Protection Act
prohibits certain persons from engaging in business combinations with the
Company. See "Description of Capital Stock."

NO FUTURE DIVIDENDS

The Company does not anticipate paying any cash dividends on shares of the
Common Stock in the foreseeable future and intends to retain future earnings, if
any, for use in its business. See "Dividend Policy" and "Description of Capital
Stock -- Common Stock."

13
<PAGE> 15

THE COMPANY

Vestcom was incorporated in September 1996 under the laws of the State of
New Jersey to create a leading provider of computer output and document
management services. The Company has entered into agreements to acquire the
Founding Companies concurrently with the consummation of the Offering. For a
description of the transactions pursuant to which these businesses will be
acquired, see "Certain Transactions." The Founding Companies currently provide
the services listed below to customers in a variety of industries, including
financial, telecommunications, pharmaceutical, health care, publishing and
retail and manufacturing firms. For a description of these services, see
"Business -- Services."

COMVESTRIX CORP. ("COMVESTRIX"), founded in 1969, is headquartered in
Lyndhurst, New Jersey. Its primary businesses are (i) the production and
distribution of documents on paper, microfiche, microfilm and compact disc, (ii)
computer center document outsourcing services, (iii) mailing services and (iv)
forms management. Comvestrix had revenues of $21.4 million for the year ended
December 31, 1996.

DIRECT MAIL SERVICES ("DMS," consisting of Morris County Direct Mail
Services, Inc., founded in 1965, Quality Control Printing, Inc., founded in
1987, and First Class Presort, Inc., founded in 1990) is headquartered in Dover,
New Jersey. Its primary businesses are (i) marketing materials fulfillment, (ii)
mailing services and (iii) forms management. DMS had revenues of $13.4 million
for the year ended December 31, 1996.

IMAGE PRINTING SYSTEMS, INC. ("IMAGE"), founded in 1980, is headquartered
in Milwaukee, Wisconsin. Its primary businesses are (i) the production and
distribution of documents on paper, microfiche, microfilm and compact disc, (ii)
marketing materials fulfillment, (iii) demand publishing, (iv) mailing services
and (v) forms management. Image had revenues of $9.0 million for the year ended
December 31, 1996.

ELECTRONIC IMAGING SERVICES, INC. ("EIS"), founded in 1985, is
headquartered in Little Rock, Arkansas, and has branch offices in Houston,
Texas, Nashville, Tennessee, Greenville, South Carolina and Columbus, Ohio. Its
primary businesses are (i) the production and distribution of computer-generated
labels, (ii) the production and distribution of documents on paper, microfiche,
microfilm and compact disc and (iii) forms management. EIS had revenues of $7.6
million for the year ended December 31, 1996.

COS INFORMATION INC. ("COS INFORMATION"), founded in 1974, is headquartered
in Montreal, Quebec, Canada. Its primary businesses are (i) the production and
distribution of computer-generated labels, (ii) the production and distribution
of documents on paper, microfiche, microfilm and compact disc, (iii) demand
publishing, (iv) mailing services and (v) forms management. COS Information had
revenues of $5.0 million for the year ended July 31, 1996.

COMPUTER OUTPUT SYSTEMS, INC. ("COMPUTER OUTPUT"), founded in 1994, is
headquartered in Stamford, Connecticut. Its primary businesses are (i) the
production and distribution of documents on paper, (ii) computer center document
outsourcing services, (iii) marketing materials fulfillment, (iv) mailing
services and (v) forms management. Computer Output had revenues of $4.9 million
for the year ended December 31, 1996.

MYSTIC GRAPHIC SYSTEMS, INC. ("MYSTIC"), founded in 1981, is headquartered
in Woburn, Massachusetts. Its primary businesses are (i) demand publishing, (ii)
marketing materials fulfillment and (iii) forms management. Mystic had revenues
of $4.1 million for the year ended December 31, 1996.

The Company's executive offices are located at 1100 Valley Brook Avenue,
Lyndhurst, New Jersey 07071, and its telephone number is 201-935-7666.

14
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby,
after deduction of the underwriting discounts and estimated offering expenses
payable by the Company, are approximately $40.0 million ($46.4 million if the
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $12.00 per share (the mid-point of the range set forth
on the cover of this Prospectus). Of this amount, approximately $18.4 million
will be used to pay the cash portion of the purchase prices for the Acquisitions
and $14.3 million will be used to repay outstanding indebtedness as well as
certain other obligations incurred in connection with the Consolidation
(including $11.7 million of indebtedness of the Founding Companies and $739,000
of indebtedness of Vestcom pursuant to certain promissory notes which were
issued in connection with Vestcom's organization). Additionally, up to $2.8
million in cash may be used to pay deferred purchase prices which may be earned
over the next one to two years if the applicable revenue and earnings thresholds
of four of the Founding Companies are achieved. See "Certain Transactions."

Of the $11.7 million of indebtedness of the Founding Companies,
approximately $10.0 million was incurred after March 31, 1996 for purposes other
than working capital. Of such amount, approximately $9.4 million was incurred
for fixed asset purchases or capital leases, and approximately $628,000 was
incurred in connection with the acquisitions of two businesses by DMS for a
purchase price of approximately $662,000.

The indebtedness evidenced by Vestcom's promissory notes bears interest at
a rate equal to the prime rate, as such prime rate may change from time to time.
The borrowed funds were used to pay organizational and pre-operating expenses.
The other indebtedness to be repaid from the proceeds of the Offering bears
interest at rates ranging from 4.8% to 15.0%. Such indebtedness matures at
various dates through 2003.

The remaining net proceeds of the Offering, approximately $9.1 million,
will be used for general corporate purposes, which are expected to include
future acquisitions. The Company currently has no agreement or understanding
with respect to any future acquisitions. Pending the use of the net proceeds for
such purposes, the Company will invest such net proceeds in short-term, interest
bearing securities.

The Company has received a commitment letter from a bank for a $30 million
unsecured credit facility (which includes a $5 million line to be used solely
for equipment financing). Any financing pursuant to the commitment letter is
subject to internal bank approvals, negotiation of a binding loan agreement, the
consummation of the Offering and the satisfaction of various other conditions.
The Company intends to use the credit facility for working capital and other
general corporate purposes, which may include additional acquisitions. There can
be no assurance, however, that this or any other line of credit will be obtained
or be sufficient for the Company's needs or that, if any other line is offered,
it will be on terms that are acceptable to the Company. See "Risk
Factors -- Risks Related to the Company's Acquisition Strategy."

15
<PAGE> 17

CAPITALIZATION

The following table sets forth the short-term debt and current maturities
of long-term obligations and capitalization as of March 31, 1997 of (i) the
Company on a pro forma combined basis to give effect to the Acquisitions and
(ii) the Company, pro forma as adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom (including the repayment of
certain existing indebtedness). See "Use of Proceeds." This table should be read
in conjunction with the Unaudited Pro Forma Financial Statements of the Company
and the related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
PRO FORMA
PRO FORMA FOR OFFERING
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current maturities of long-term obligations....... $ 8,542 $ 920
Long-term obligations, net of current maturities...................... 10,726 5,864
Pro forma cash due to Founding Companies(1)........................... 18,423 --
Stockholders' equity:
Undesignated Stock, 10,000,000 shares authorized:
Class A and Class C Convertible Preferred Stock, 300 shares
issued and outstanding pro forma and pro forma for
offering(2)..................................................... -- --
Class B Preferred Stock, 1 share issued and outstanding pro forma
and pro forma for offering(3)................................... 2,592 2,592
Common Stock, 20,000,000 shares authorized; 3,976,447 shares issued
and outstanding pro forma; 7,826,447 shares issued and
outstanding pro forma for offering(4)(5)......................... 31,892 71,858
Subscriptions receivable............................................ -- --
Retained earnings................................................... (5,097) (5,097)
------- -------
Total stockholders' equity....................................... 29,387 69,353
------- -------
Total capitalization........................................ $67,078 $ 76,137
======= =======
</TABLE>

- ---------------
(1) Excludes up to an additional $2.8 million which may be paid by Vestcom in
connection with the Acquisitions of Computer Output, EIS and Image. See
"Certain Transactions."

(2) An aggregate of 200 shares of Class A Convertible Preferred Stock will be
issued in connection with the Acquisition of EIS, and will be convertible
into up to 359,999 shares of Common Stock, depending on the pre-tax earnings
of EIS for the two year period beginning on the first day of the fiscal
quarter within which the Offering is consummated. An aggregate of 100 shares
of Class C Convertible Preferred Stock will be issued in connection with the
Acquisition of Image and will be convertible into up to 316,666 shares of
Common Stock, depending on the pre-tax earnings of Image for the one year
period beginning on the first day of the fiscal quarter within which the
Offering is consummated.

(3) One share of Class B Preferred Stock will be issued in connection with the
Acquisition of COS Information, the Canadian Founding Company, and will have
voting rights equal to the 239,988 shares of Common Stock which the Company
will be required to issue upon conversion of the exchangeable shares of
Vestcom's Canadian subsidiary.

(4) For purposes of this table, (i) the number of exchangeable shares of
Vestcom's Canadian subsidiary to be issued in the Acquisition of COS
Information are deemed to have been converted into 239,988 shares of Common
Stock and (ii) none of the additional 903,971 shares of Common Stock which
may be issued in connection with the Acquisitions of Computer Output, COS
Information, EIS and Image upon the attainment of specified revenue or
earnings thresholds are deemed to have been issued.

(5) Excludes an aggregate of 288,046 shares subject to options which will have
been granted prior to or immediately after the consummation of the Offering
pursuant to the Company's Stock Option Plan at an exercise price equal to
the initial public offering price and reflects an aggregate of 170,856
shares which were reacquired by Vestcom subsequent to March 31, 1997. See
"Certain Transactions."

16
<PAGE> 18

DIVIDEND POLICY

The Company has not declared or paid any dividends on its Common Stock. The
Company currently intends to retain earnings to support its growth strategy and
does not anticipate paying dividends in the foreseeable future. Payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors after taking into account various factors, including the Company's
financial condition, results of operations, current and anticipated cash needs
and plans for expansion and any restrictions that may be imposed by the
Company's future credit facilities. The Company has received a commitment letter
from a bank for a $30 million credit facility, subject to the consummation of
the Offering and the satisfaction of various other conditions. The terms of this
credit facility, if consummated, will restrict the Company's ability to pay cash
dividends on its Common Stock.

17
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Company at March 31, 1997 was
approximately ($14.6 million), or ($3.67) per share, after giving effect to the
Acquisitions. The pro forma net tangible book value per share represents the
amount by which the Company's pro forma total liabilities exceed pro forma net
tangible assets as of March 31, 1997, divided by the number of shares of Common
Stock to be outstanding after giving effect to the Acquisitions, assuming that
none of the 903,971 shares of Common Stock which may be issued pursuant to
certain earn-out provisions have been issued. After giving effect to the sale of
the 3,850,000 shares of Common Stock offered hereby and deducting underwriting
discounts and estimated offering expenses payable by the Company, the Company's
pro forma net tangible book value at March 31, 1997 would have been
approximately $25.4 million, or $3.24 per share. This represents an immediate
increase in pro forma net tangible book value of approximately $6.91 per share
to existing stockholders and an immediate and substantial dilution of
approximately $8.76 per share to the investors purchasing shares in the Offering
(the "New Investors"). The following table illustrates this pro forma per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $12.00
Pro forma net tangible book value per share before the Offering.... ($3.67)
Increase in pro forma net tangible book value attributable to
New Investors................................................... 6.91
-------
Pro forma net tangible book value per share after the Offering..... 3.24
-------
Dilution per share to New Investors.................................. $ 8.76
=======
</TABLE>

The following table sets forth, on a pro forma basis to give effect to the
Acquisitions as of March 31, 1997, the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company, and the
average price per share paid to the Company by existing stockholders and by the
New Investors (based upon an assumed initial public offering price of $12.00 per
share and before deduction of underwriting discounts and estimated offering
expenses payable by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
--------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 3,976,447(2) 50.8% $(14,596,933) (46.2)% $ (3.67)
New Investors................. 3,850,000 49.2 46,200,000 146.2 $ 12.00
--------- ----- ------------ -----
Total......................... 7,826,447 100.0% $ 31,603,067 100.0%
========= ===== ============ =====
</TABLE>

- ---------------
(1) Total consideration paid by existing stockholders includes the combined
stockholders' equity of the Founding Companies before the Offering, and the
equity investment made by the initial investors in Vestcom, adjusted to
reflect the payment of $18.4 million in cash as part of the consideration
for the Acquisitions. See "Use of Proceeds" and "Capitalization."

(2) Excludes all of the 903,971 shares which may be issued pursuant to certain
earn-out provisions in connection with the Acquisitions and reflects an
aggregate of 170,856 shares which were reacquired by Vestcom subsequent to
March 31, 1997. See "Use of Proceeds," "Capitalization" and "Certain
Transactions."

18
<PAGE> 20

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Vestcom will acquire the Founding Companies concurrently with and as a
condition to the consummation of the Offering. For financial statement
presentation purposes, Vestcom has been identified as the accounting acquirer.
The following selected historical financial data of Vestcom as of December 31,
1996 and for the period from inception to December 31, 1996 have been derived
from the audited financial statements of Vestcom included elsewhere in this
Prospectus. The following selected historical financial data for Vestcom as of
and for the three months ended March 31, 1997 have been derived from the
unaudited financial statements of Vestcom, which have been prepared on the same
basis as the audited financial statements and, in the opinion of Vestcom,
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of such data. The following summary unaudited pro forma
financial data present certain data for the Company, as adjusted for (i) the
effects of the Acquisitions on an historical basis, (ii) the effects of certain
pro forma adjustments to the historical financial statements and (iii) the
consummation of the Offering. See the Unaudited Pro Forma Financial Statements
and the notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
VESTCOM PRO FORMA(1)(2)
-------------------------------------------
VESTCOM HISTORICAL
------------------------------ FOR THE
FOR THE YEAR ENDED
PERIOD FROM FOR THE DECEMBER FOR THE THREE MONTHS ENDED
INCEPTION TO THREE MONTHS 31, MARCH 31,
DECEMBER 31, ENDED MARCH ----------- ---------------------------
1996 31, 1997 1996 1996 1997
------------- ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ -- $ -- $ 65,287 $ 16,193 $ 18,307
Gross profit.............................. -- -- 21,865 5,785 6,782
Selling, general and administrative
expenses(1)(3).......................... (1,633) (4) (15,516) (3,660) (4,076)
Goodwill amortization(4).................. -- -- (1,493) (362) (363)
---------- ---------- ----------
Income (loss) from operations............. (1,633) (4) 4,856 1,763 2,343
Other, net(1)(3).......................... (3,445) (15) 190 15 4
---------- ---------- ----------
Income before provision for income
taxes(5)................................ -- -- 5,046 1,778 2,347
Provision for income taxes................ -- -- 2,616 856 1,084
------- --- ---------- ---------- ----------
Net income (loss)......................... $(5,078) $(19) $ 2,430 $ 922 $ 1,263
======= === ========== ========== ==========
Net income per share...................... -- -- $ .31 $ .12 $ .16
========== ========== ==========
Shares used in computing pro forma net
income per share(6)..................... -- -- 7,826,815 7,826,815 7,826,815
========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
VESTCOM
MARCH 31, 1997
------------------------------------------------
PRO FORMA
PRO FOR
HISTORICAL FORMA(1) OFFERING(7)
----------- ----------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $ (1,106) $ (22,342) $ 14,245
Total assets........................................................ 2,210 83,795 92,321
Total debt, including current portion............................... 1,293 19,268 6,784
Stockholders' equity................................................ 385 29,387 69,353
</TABLE>

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

(1) Includes the non-recurring, non-cash Charge to compensation and interest
expense of $5.1 million for the historical period ended December 31, 1996.

(2) The pro forma statements of operations data and the pro forma balance sheet
data assume that the Acquisitions were consummated on January 1 of each
period presented and March 31, 1997, respectively, and are not necessarily
indicative of the results the Company would have obtained had these events
actually then occurred or of the Company's future results. The pro forma
financial information treats Vestcom as the accounting acquiror for
financial statement purposes, and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.

(3) The pro forma combined statements include the effect of certain reductions
in compensation to the owners of the Founding Companies to which they have
agreed commencing on the consummation of the Offering, and do not include
the Charge to compensation and interest expense of $5.1 million recorded in
1996. See Note 5 to the Unaudited Pro Forma Financial Statements.

(4) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions over a 30-year period and computed on the basis described in
Note 5 to the Unaudited Pro Forma Financial Statements.

(5) Assuming a corporate income tax rate of 40% and the non-deductibility of
goodwill.

(6) Consists of (i) 1,124,336 shares issued to the initial investors in Vestcom,
(ii) 2,852,111 shares to be issued as consideration in the Acquisitions,
(iii) the 3,850,000 shares offered hereby and (iv) 368 shares assumed for
accounting purposes only to have been issued to compensate for the issuance
of shares for consideration lower than the assumed initial public offering
price. See Note 5 to the Unaudited Pro Forma Financial Statements.

(7) Reflects the consummation of the Offering and the Company's application of
the net proceeds therefrom, including the repayment of certain indebtedness.
See "Use of Proceeds."

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<PAGE> 21

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

The following discussion of the results of operations of certain Founding
Companies should be read in conjunction with the Financial Statements of the
Founding Companies and the related notes thereto and the "Selected Financial
Data" appearing elsewhere in this Prospectus. The discussion of the results of
COS Information, a Founding Company headquartered in Montreal, Quebec, Canada,
is presented in U.S. dollars.

INTRODUCTION

Vestcom International, Inc. was incorporated in September 1996.
Concurrently with the consummation of the Offering, the Company will acquire the
Founding Companies, each of which has been operating as a separate independent
entity.

The Founding Companies have been managed throughout the periods presented
as independent private companies, and their results of operations reflect
different tax structures (S corporations and C corporations for the U.S.
Founding Companies), which have influenced, among other things, their historical
levels of owners' compensation. In connection with the organization of the
Company, these owners and certain key employees have agreed to certain
reductions in their compensation commencing on the consummation of the Offering.

Vestcom, which has conducted no operations to date other than in connection
with the Acquisitions and the financing activities related thereto, including
the Offering, intends to integrate these businesses and their operations and
administrative functions over a period of time. This integration process may
present opportunities to reduce costs through the elimination of duplicative
functions and through economies of scale, particularly in obtaining greater
volume discounts from suppliers, but will also necessitate additional costs and
expenditures for corporate management and administration (including costs
related to the hiring of additional management personnel), corporate expenses
related to being a public company, systems integration and facilities expansion.
These various costs and possible cost-savings may make comparison of historical
operating results not comparable to, or indicative of, future performance. In
addition, Vestcom may make payment of up to $2.8 million and may issue up to an
additional 903,971 shares of Common Stock in connection with the Acquisitions of
four Founding Companies if specified revenue or earnings thresholds are attained
during various periods ending no later than two years after the first day of the
fiscal quarter in which the Offering is consummated. Any earn-outs will increase
goodwill recorded for the Acquisition transactions. The amortization of any
additional goodwill and the increased number of shares issued if the earn-outs
are achieved will negatively affect the Company's future earnings per share. See
"Certain Transactions -- Organization of the Company -- Acquisitions" for a
discussion of the terms of such earn-outs.

RESULTS OF OPERATIONS -- COMVESTRIX

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues increased $591,000, or 10.8%, from $5,460,000 for the three months
ended March 31, 1996 to $6,051,000 for the three months ended March 31, 1997.
This increase was primarily attributable to an increase in the volume of
Comvestrix's production of statements, although revenues also increased in most
other areas of Comvestrix's business.

Comvestrix's gross profit increased $426,000, or 17.6%, from $2,414,000 for
the three months ended March 31, 1996 to $2,840,000 for the three months ended
March 31, 1997. The gross profit margin increased from 44.2% in 1996 to 46.9% in
1997 primarily due to improved capacity utilization resulting from the increase
in the volume of business.

Selling, general and administrative expenses increased $230,000, or 12.6%,
from $1,824,000 for the three months ended March 31, 1996 to $2,054,000 for the
three months ended March 31, 1997. As a percentage of revenues, selling, general
and administrative expenses increased from 33.4% in 1996 to 33.9% in 1997. The
increase in the dollar amount of selling, general and administrative expenses
was primarily attributable to

20
<PAGE> 22

increased compensation expense for new technical personnel, increased
commissions and increased administrative expenses to support the greater volume
of business.

Net income increased from $565,000 for the three months ended March 31,
1996 to $610,000 for the three months ended March 31, 1997.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues increased $2,149,000, or 11.1%, from $19,298,000 in 1995 to
$21,447,000 in 1996. This increase was primarily attributable to an increase in
the volume of Comvestrix's production of statements, although revenues also
increased in all other areas of Comvestrix's business. The 1996 revenues also
reflect enhanced value-added services provided by Comvestrix, such as the
utilization of highlight color on laser printed documents and the production and
distribution of documents on compact disc. Comvestrix introduced its compact
disc service in October 1995, and, accordingly, the year ended December 31, 1996
was the first full year in which revenues were generated from Comvestrix's
production and distribution of documents on compact disc.

During 1996, one of Comvestrix's major customers lost one of its customers,
which loss resulted in approximately $500,000 of lost revenue to Comvestrix in
1996. Comvestrix anticipates that this loss will result in approximately
$1,500,000 of additional lost revenue to Comvestrix in 1997. Comvestrix does not
currently anticipate receiving any additional business from this customer after
its current contract expires in the summer of 1997. Comvestrix believes that
such loss in revenues will be substantially offset by revenues derived from new
business from existing customers and business from new customers.

Comvestrix's gross profit increased $429,000, or 4.9%, from $8,688,000 in
1995 to $9,117,000 in 1996. The gross profit margin decreased from 45.0% in 1995
to 42.5% in 1996. Compensation expense and equipment maintenance and supply
costs increased in 1996 in connection with the expansion of Comvestrix's
operating facilities and to support the increased volume of business. The
increase in expenses, which affected 1996 more significantly than 1995, resulted
in the decrease in Comvestrix's gross profit margin.

Selling, general and administrative expenses increased $229,000, or 3.2%,
from $7,053,000 in 1995 to $7,282,000 in 1996. As a percentage of revenues,
selling, general and administrative expenses decreased from 36.5% in 1995 to
34.0% in 1996. The increase in selling, general and administrative expenses was
primarily attributable to increased compensation expense for new technical
personnel, increased commissions and increased administrative expenses to
support the greater volume of business.

Net income decreased from $2,017,000 in 1995 to $1,747,000 in 1996. Net
income for 1995 included a non-recurring payment of $475,000 to Comvestrix by a
former customer in connection with the early termination of a contract.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues increased $2,692,000, or 16.2%, from $16,606,000 in 1994 to
$19,298,000 in 1995. Increased revenues were recorded in most areas of
Comvestrix's business, particularly in the statement and computer outsourcing
business. The increase in revenues primarily reflected an increase in the volume
of business from both new and existing customers.

Comvestrix's gross profit increased $1,984,000, or 29.6%, from $6,704,000
in 1994 to $8,688,000 in 1995. The gross profit margin increased from 40.4% in
1994 to 45.0% in 1995, primarily as a result of the growth of Comvestrix's
business. Increases in compensation expense related to new personnel were offset
by the increase in revenues.

Selling, general and administrative expenses increased $629,000, or 9.8%,
from $6,424,000 in 1994 to $7,053,000 in 1995. As a percentage of revenues,
selling, general and administrative expenses decreased from 38.7% in 1994 to
36.5% in 1995. The increase in selling, general and administrative expenses was
primarily attributable to increased compensation expense for new personnel and
increased commissions as a result of the greater volume of business.

21
<PAGE> 23

Net income increased from $361,000 in 1994 to $2,017,000 in 1995. Net
income for 1995 included a non-recurring payment of $475,000 to Comvestrix by a
former customer in connection with the early termination of a contract.

LIQUIDITY AND CAPITAL RESOURCES -- COMVESTRIX

At March 31, 1997, Comvestrix had working capital of $544,000 and total
cash and cash equivalents of $437,000, as compared to $860,000 and $107,000,
respectively, at December 31, 1996. Comvestrix has historically funded its
operations with cash flow from operations and limited borrowings from bank
lenders. Net cash provided by operating activities for the three months ended
March 31, 1997 and 1996 was $1,432,000 and $2,352,000, respectively. Comvestrix
currently has a $2,550,000 bank line of credit, which includes a $300,000 line
to be utilized solely for equipment financing. An aggregate of $1,650,000 was
available under this line of credit at March 31, 1997. Historically, Comvestrix
has been able to fund its equipment purchase needs through secured loans or
equipment leases. During the three months ended March 31, 1997, Comvestrix
entered into a $6,250,000 five year capital lease for production equipment. This
lease replaced existing operating leases, upgraded production equipment to the
latest available technology and increased production capacity. The net annual
cost of the new capital lease was lower than the cost of the operating leases
which were replaced.

Comvestrix incurs postage costs on behalf of customers of approximately
$1,000,000 to $2,000,000 each month. Comvestrix's policy is to collect such
postage costs from its customers in advance. To the extent Comvestrix is
unsuccessful in doing so, cash flow is negatively affected, and Comvestrix may
be required to utilize its bank credit line. While no assurance can be given,
management of Comvestrix believes it has adequate cash flow and financing
alternatives available to it to fund its operations and capital requirements for
the foreseeable future.

RESULTS OF OPERATIONS -- DMS

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues increased $156,000, or 4.9%, from $3,207,000 for the three months
ended March 31, 1996 to $3,363,000 for the three months ended March 31, 1997. A
portion of this increase was attributable to DMS' acquisitions in May 1996 of a
four-color printing and processing company and a presorting company to support
DMS' core operations. DMS' revenue growth is constrained by physical space
limitations. DMS is in the process of negotiating a lease for a new and larger
facility, which it believes will allow for increased revenues and improved
production efficiencies.

DMS' gross profit increased $84,000, or 7.7%, from $1,085,000 for the three
months ended March 31, 1996 to $1,169,000 for the three months ended March 31,
1997. The gross profit margin increased from 33.8% in 1996 to 34.8% in 1997.
Revenues from the increased volume of business were offset by the costs
associated with the acquired businesses described above, compensation expense
related to the hiring of new personnel to support the increased volume of
business and expenses related to DMS' telemarketing service.

Selling, general and administrative expenses increased $86,000, or 12.4%,
from $696,000 for the three months ended March 31, 1996 to $782,000 for the
three months ended March 31, 1997. As a percentage of revenues, selling, general
and administrative expenses increased from 21.7% in 1996 to 23.3% in 1997. The
increase in selling, general and administrative expenses was primarily
attributable to increased compensation expense for new personnel who were hired
in connection with DMS' two acquisitions.

Net income decreased from $365,000 for the three months ended March 31,
1996 to $343,000 for the three months ended March 31, 1997.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues increased $3,937,000, or 41.8%, from $9,423,000 in 1995 to
$13,360,000 in 1996. Approximately $2,500,000 of this increase was attributable
to DMS' acquisitions in May 1996 of Stuyvesant Press, Inc., a four-color
printing and processing company, and Regal Mail Service, Inc., a presorting
company to support DMS' core operations. The remainder of the increase was
primarily attributable to an increase in the

22
<PAGE> 24

volume of DMS' mailing and marketing materials fulfillment business and, to a
lesser extent, to price increases.

DMS' gross profit increased $850,000, or 28.4%, from $2,993,000 in 1995 to
$3,843,000 in 1996. The gross profit margin decreased from 31.8% in 1995 to
28.8% in 1996. Revenues from the increased volume of business offset the costs
associated with the acquired businesses described above, compensation expense
related to the hiring of new personnel to support the increased volume of
business and expenses related to DMS' telemarketing service. DMS introduced its
telemarketing service in the fourth quarter of 1996 in order to enhance its
marketing materials fulfillment business. During 1996, management of DMS decided
to explore the feasibility of DMS moving to alternative space. As a result, net
leasehold improvements of $497,000 were written off, resulting in a decrease in
the gross profit margin.

Selling, general and administrative expenses increased $1,242,000, or
64.9%, from $1,913,000 in 1995 to $3,155,000 in 1996. As a percentage of
revenues, selling, general and administrative expenses increased from 20.3% in
1995 to 23.6% in 1996. The increase in selling, general and administrative
expenses was primarily attributable to increased compensation expense for new
personnel who were hired in connection with DMS' two acquisitions.

Net income decreased from $865,000 in 1995 to $613,000 in 1996.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues increased $919,000, or 10.8%, from $8,504,000 in 1994 to
$9,423,000 in 1995. Increased revenues were recorded in most areas of DMS'
business. The increase in revenues reflected increased business from both new
and existing customers and, to a lesser extent, price increases.

DMS' gross profit increased $1,028,000, or 52.3%, from $1,965,000 in 1994
to $2,993,000 in 1995. The gross profit margin increased from 23.1% in 1994 to
31.8% in 1995. The increase in the gross profit margin was primarily
attributable to improved productivity through automating functions which were
previously performed manually.

Selling, general and administrative expenses increased $373,000, or 24.2%,
from $1,540,000 in 1994 to $1,913,000 in 1995. As a percentage of revenues,
selling, general and administrative expenses increased from 18.1% in 1994 to
20.3% in 1995. The increase in selling, general and administrative expenses was
primarily attributable to the hiring of two new salespersons, increased
commissions paid to new and existing salespersons and increased administrative
expenses to support the growth in DMS' business.

Net income increased from $328,000 in 1994 to $865,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES -- DMS

At March 31, 1997, DMS had working capital of $983,000 and total cash and
cash equivalents of $287,000, as compared with $447,000 and $573,000,
respectively, at December 31, 1996. DMS had accounts receivable of $1,337,000 at
December 31, 1995, compared to $2,647,000 at December 31, 1996 and $3,201,000 at
March 31, 1997. The increase in accounts receivable was primarily attributable
to the increased volume of business and the acquisitions which were consummated
during 1996. DMS has historically funded its operations with cash flow from
operations and limited borrowings from bank lenders. Net cash used by operating
activities for the three months ended March 31, 1997 was $222,000 primarily as a
result of the increase in accounts receivable. Net cash provided by operating
activities for the year ended December 31, 1996 was $469,000. DMS currently has
a $425,000 line of credit, which includes a $200,000 line to be utilized solely
for equipment financing. An aggregate of $275,000 was available under this line
of credit at March 31, 1997. Historically, DMS has been able to fund its
equipment purchase needs through secured loans or equipment leases. During 1996,
DMS utilized approximately $762,000 to acquire two companies.

DMS incurs postage costs on behalf of customers of approximately $1,000,000
to $2,000,000 each month. DMS' policy is to collect such postage costs from its
customers in advance. To the extent that DMS is unsuccessful in doing so, cash
flow is negatively affected, and DMS may be required to utilize its bank credit

23
<PAGE> 25

line. While no assurance can be given, management of DMS believes it has
adequate cash flow and financing alternatives available to it to fund its
operations and capital requirements for the foreseeable future.

RESULTS OF OPERATIONS -- COMPUTER OUTPUT

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues increased $338,000, or 28.4%, from $1,190,000 for the three months
ended March 31, 1996 to $1,528,000 for the three months ended March 31, 1997.
Approximately $274,000 of the additional revenue was attributable to one new
customer. The remainder of the increase was attributable to an increase in
volume from new and existing customers.

Computer Output's gross profit increased $81,000, or 18.4%, from $441,000,
for the three months ended March 31, 1996 to $522,000 for the three months ended
March 31, 1997. The gross profit margin decreased from 37.1% in 1996 to 34.2% in
1997. This decrease was primarily attributable to costs associated with the
hiring of additional management personnel and production staff to support the
increased sales volume and the acquisition of equipment to position Computer
Output to perform additional services.

Selling, general and administrative expenses increased $54,000, or 21.3%,
from $254,000 in 1996 to $308,000 in 1997. As a percentage of revenues, selling,
general and administrative expenses decreased from 21.3% in 1996 to 20.2% in
1997. The increase in the dollar amount of selling, general and administrative
expenses was primarily attributable to increased commissions of approximately
$45,000.

Net income increased from $157,000 for the three months ended March 31,
1996 to $183,000 for the three months ended March 31, 1997.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues increased $1,313,000, or 37.1%, from $3,542,000 in 1995 to
$4,855,000 in 1996. This increase was primarily attributable to an increase in
the volume of all areas of Computer Output's business. The increased revenues
reflected increased business from both new and existing customers.

Computer Output's gross profit increased $627,000, or 57.2%, from
$1,096,000 in 1995 to $1,723,000 in 1996. The gross profit margin increased from
30.9% in 1995 to 35.5% in 1996. The increase in the gross profit margin was
primarily attributable to the fact that fixed costs remained relatively stable
while Computer Output's volume of business increased.

Selling, general and administrative expenses increased $216,000, or 22.1%,
from $979,000 in 1995 to $1,195,000 in 1996. As a percentage of revenues,
selling, general and administrative expenses decreased from 27.6% in 1995 to
24.6% in 1996. The increase in selling, general and administrative expenses was
primarily attributable to increased compensation expense as a result of the
hiring of additional personnel and increased commissions resulting from the
increased volume of business.

Net income increased from $60,000 in 1995 to $437,000 in 1996.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues increased $1,350,000, or 61.6%, from $2,192,000 in 1994 to
$3,542,000 in 1995. This increase was primarily attributable to an increase in
the volume of all areas of Computer Output's business. Approximately $500,000 of
the revenue growth was attributable to one customer.

Computer Output's gross profit increased $363,000, or 49.5%, from $733,000
in 1994 to $1,096,000 in 1995. The gross profit margin decreased from 33.4% in
1994 to 30.9% in 1995. The decrease in the gross profit margin was primarily
attributable to Computer Output meeting its need for additional production
equipment through operating leases and, to a lesser extent, purchases of
equipment. In addition, a significant portion of the increased sales volume in
1995 was the result of an increase in Computer Output's preprinted forms and
envelope business, which has a lower profit margin than Computer Output's other
businesses.

24
<PAGE> 26

Selling, general and administrative expenses increased $297,000, or 43.5%,
from $682,000 in 1994 to $979,000 in 1995. As a percentage of revenues, selling,
general and administrative expenses decreased from 31.1% in 1994 to 27.6% in
1995. The increase in the dollar amount of selling, general and administrative
expenses was primarily attributable to increased commissions as a result of the
increased volume of business.

Net income increased from $1,000 in 1994 to $60,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES -- COMPUTER OUTPUT

At March 31, 1997, Computer Output had working capital of $186,000 and
total cash and cash equivalents of $175,000, as compared with $156,000 and $0,
respectively, at December 31, 1996. Computer Output has historically funded its
operations with cash flow from operations and limited borrowings from bank
lenders. Net cash provided by operating activities for the three months ended
March 31, 1997 was $263,000, as compared with $322,000 for the year ended
December 31, 1996. Computer Output currently has a $300,000 bank line of credit,
of which $50,000 was available at March 31, 1997. Historically, Computer Output
has been able to fund its equipment purchase needs through secured loans or
equipment leases. While no assurance can be given, management of Computer Output
believes it has adequate cash flow and financing alternatives available to it to
fund its operations and capital requirements for the foreseeable future.

RESULTS OF OPERATIONS -- IMAGE

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues increased $304,000, or 11.8%, from $2,576,000 for the three months
ended March 31, 1996 to $2,880,000 for the three months ended March 31, 1997.
This increase was primarily attributable to increases in the volume of Image's
print and mail and compact disc businesses.

Image's gross profit margin increased $149,000, or 19.2%, from $775,000 for
the three months ended March 31, 1996 to $924,000 for the three months ended
March 31, 1997. The gross profit margin improved from 30.1% in 1996 to 32.1% in
1997. The increase in the gross profit margin was primarily attributable to
improved cost control and increased volume.

Selling, general and administrative expenses decreased $37,000, or 6.2%,
from $601,000 for the three months ended March 31, 1996 to $564,000 for the
three months ended March 31, 1997. As a percentage of revenues, selling, general
and administrative expenses decreased from 23.3% in 1996 to 19.6% in 1997 which
was primarily attributable to the sales volume increase noted above.

Net income increased from $140,000 for the three months ended March 31,
1996 to $306,000 for the three months ended March 31, 1997.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues increased $972,000, or 12.1%, from $8,062,000 in 1995 to
$9,034,000 in 1996. This increase was primarily attributable to an increase in
the volume of Image's microfiche and compact disc business. Revenues also
increased in other areas of Image's business other than presorting, which
recorded a $69,000 decrease in revenues from 1995 to 1996. As a result of
competitive pressures in Image's local markets, Image was unable to achieve its
desired volume of presorting business. Accordingly, in the third quarter of
1995, Image began to outsource its presorting service and to focus internally on
the other areas of its business.

Image's gross profit increased $576,000, or 27.9%, from $2,068,000 in 1995
to $2,644,000 in 1996. The gross profit margin increased from 25.7% in 1995 to
29.3% in 1996. The increase in the gross profit margin was primarily
attributable to operating efficiencies resulting from Image's decision to
outsource its presorting service and to focus on the other more profitable areas
of its business.

Selling, general and administrative expenses increased $185,000, or 8.7%,
from $2,120,000 in 1995 to $2,305,000 in 1996. As a percentage of revenues,
selling, general and administrative expenses decreased from 26.3% in 1995 to
25.5% in 1996. The increase in the dollar amount of selling, general and
administrative expenses was primarily attributable to increased compensation
expense.

25
<PAGE> 27

Image recorded a loss of $348,000 in 1995 and net income of $87,000 in
1996.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues decreased $566,000, or 6.6%, from $8,628,000 in 1994 to $8,062,000
in 1995. This decrease was primarily attributable to the loss of a major portion
(approximately $600,000) of one client's business, plus a reduction in revenues
from Image's presorting business, as a result of Image's decision to outsource
such business beginning in the third quarter of 1995.

Image's gross profit decreased $249,000, or 10.7%, from $2,317,000 in 1994
to $2,068,000 in 1995. The gross profit margin decreased from 26.9% in 1994 to
25.7% in 1995. The decrease in the gross profit margin was primarily
attributable to the lost business from the major customer discussed above (which
business had a relatively high profit margin) plus losses during the first eight
months of 1995 in connection with Image's presorting business.

Selling, general and administrative expenses decreased $11,000, or less
than 0.5%, from $2,131,000 in 1994 to $2,120,000 in 1995. As a percentage of
revenues, selling, general and administrative expenses increased from 24.7% in
1994 to 26.3% in 1995.

Image recorded a loss of $88,000 in 1994 and a loss of $348,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES -- IMAGE

At March 31, 1997, Image had a working capital deficit of $943,000 and
total cash and cash equivalents of $256,000, as compared with a deficit of
$986,000 and cash and cash equivalents of $61,000, respectively, at December 31,
1996. Image has historically met its working capital requirements by borrowing
from bank lenders and by managing its accounts receivable. Net cash provided by
operating activities for the three months ended March 31, 1997 was $462,000, as
compared with $520,000 for the year ended December 31, 1996. Image currently has
a $850,000 bank line of credit, of which $105,000 was available at March 31,
1997. Historically, Image has been able to fund its equipment purchase needs
through secured loans or equipment leases. During the three months ended March
31, 1997, Image entered into a $766,000 five year capital lease for production
equipment. The lease replaced existing operating leases, upgraded production
equipment to the latest available technology and increased production capacity.
The net annual cost of the new capital lease was lower than the cost of the
operating leases which were replaced.

Image incurs postage costs on behalf of customers of approximately
$1,000,000 to $1,500,000 each month. Image's policy is to collect such postage
costs from its customers in advance. To the extent Image is unsuccessful in
doing so, cash flow is negatively affected, and Image may be required to utilize
its bank credit line. While no assurance can be given, management of Image
believes that with the financing alternatives available to it and by managing
its accounts receivable, it will be able to fund its operations and capital
requirements for the foreseeable future.

RESULTS OF OPERATIONS -- COS INFORMATION

Three Months Ended March 31, 1997 compared to Three Months Ended March 31,
1996

Revenues decreased $121,000, or 9.7%, from $1,251,000 for the three months
ended March 31, 1996 to $1,130,000 for the three months ended March 31, 1997.
This decrease was primarily attributable to a decrease in the volume of COS
Information's label and laser printing business and also to delays in the start
of new contracted business.

COS Information's gross profit decreased $49,000, or 11.8%, from $417,000
for the three months ended March 31, 1996 to $368,000 for the three months ended
March 31, 1997. The gross profit margin decreased from 33.3% in 1996 to 32.6% in
1997. The decrease in the gross profit margin was primarily a result of COS
Information's increased costs related to the move to its new premises and the
decreased volume of business.

Selling, general and administrative expenses remained constant for the
three months ended March 31, 1996 compared to the three months ended March 31,
1997. As a percentage of revenues, selling, general and

26
<PAGE> 28

administrative expenses increased from 23.3% in 1996 to 25.8% in 1997 due to the
decrease in volume discussed above.

Net income decreased from $87,000 for the three months ended March 31, 1996
to $51,000 for the three months ended March 31, 1997.

Year Ended July 31, 1996 Compared to Year Ended July 31, 1995

Revenues increased $1,073,000, or 27.4%, from $3,914,000 in fiscal 1995 to
$4,987,000 in fiscal 1996. This increase was primarily attributable to an
increase in the volume of business in COS Information's microfiche, microfilm
and laser printing business. The increased revenues in fiscal 1996 also
reflected enhanced value-added services, such as the utilization of highlight
color on laser printed documents.

COS Information's gross profit increased $510,000, or 40.6%, from
$1,257,000 in fiscal 1995 to $1,767,000 in fiscal 1996. The gross profit margin
increased from 32.1% in fiscal 1995 to 35.4% in fiscal 1996. The improvement in
the gross profit margin was primarily a result of COS Information's fixed
expenses remaining relatively stable or decreasing as revenues increased.

Selling, general and administrative expenses increased $236,000, or 21.7%,
from $1,089,000 in fiscal 1995 to $1,325,000 in fiscal 1996. As a percentage of
revenues, selling, general and administrative expenses decreased from 27.8% in
fiscal 1995 to 26.6% in fiscal 1996. The increase in the dollar amount of
selling, general and administrative expenses was primarily attributable to
increased equipment maintenance and rental cost and increased sales commissions.

Net income increased from $98,000 in fiscal 1995 to $337,000 in fiscal
1996.

Five Months Ended December 31, 1996 Compared to Five Months Ended
December 31, 1995 (Unaudited)

Revenues decreased $84,000, or 4.1%, from $2,058,000 for the five months
ended December 31, 1995, compared to $1,974,000 for the five months ended
December 31, 1996. This decrease was primarily attributable to a decrease in the
volume of business from a single customer for whom COS Information provides high
speed laser printing services.

COS Information's gross profit decreased $45,000, or 6.5%, from $688,000
for the five months ended December 31, 1995 to $643,000 for the five months
ended December 31, 1996. The gross profit margin decreased from 33.4% for the
five months ended December 31, 1995 to 32.6% for the comparable period in 1996.
The decrease in gross profit was primarily attributable to the decreased volume
of business.

Selling, general and administrative expenses increased from $535,000 for
the five months ended December 31, 1995 to $536,000 for the five months ended
December 31, 1996. As a percentage of revenues, selling, general and
administrative expenses increased from 26.0% for the five months ended December
31, 1995 to 27.2% for the five months ended December 31, 1996. The increase in
selling, general and administrative expenses was primarily a result of increased
compensation expense.

Net income decreased from $111,000 for the five months ended December 31,
1995 to $50,000 for the five months ended December 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES -- COS INFORMATION

At March 31, 1997, COS Information had working capital of $331,000 and no
cash and cash equivalents as compared with $290,000 and $88,000, respectively,
at December 31, 1996. COS Information has historically funded its operations
with cash flow from operations and limited borrowings from bank lenders. Net
cash provided by operating activities for the year ended July 31, 1996 was
$276,000, net cash used by operations for the five months ended December 31,
1996 was $14,000 and net cash used by operating activities for the three months
ended March 31, 1997 was $69,000. Historically, COS Information has been able to
fund its equipment purchase needs through secured loans or equipment leases. For
the five months ended December 31, 1996, COS Information utilized $304,000 for
the acquisition of capital assets, and incurred new

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<PAGE> 29

debt of $292,000. While there can be no assurance, management of COS Information
believes it has adequate cash flow and financing alternatives available to it to
fund its operations and capital requirements for the foreseeable future.

RESULTS OF OPERATIONS -- EIS

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues increased $691,000, or 44.2%, from $1,564,000 for the three months
ended March 31, 1996 to $2,255,000 for the three months ended March 31, 1997.
This increase was primarily attributable to additional EIS offsite facilities in
Nashville, Tennessee, and Greenville, South Carolina (which were opened in 1996)
and business from a new customer at the existing facility in Little Rock,
Arkansas.

EIS' gross profit increased $159,000, or 50.8%, from $313,000 for the three
months ended March 31, 1996 to $472,000 for the three months ended March 31,
1997. The gross profit margin increased from 20.0% in 1996 to 20.9% in 1997,
primarily as a result of EIS' expenses remaining relatively stable or decreasing
as revenues increased.

Selling, general and administrative expenses increased $30,000, or 9.0%,
from $332,000 for the three months ended March 31, 1996 to $362,000 for the
three months ended March 31, 1997. As a percent of revenues, selling, general
and administrative expenses decreased from 21.2% in 1996 to 16.1% in 1997. The
increase in the dollar amount of selling, general and administrative expenses
was primarily attributable to compensation for additional personnel while the
percentage decrease was attributable to the increase in revenues discussed
above.

EIS recorded a net loss of $35,000 for the three months ended March 31,
1996 and net income of $28,000 for the three months ended March 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES -- EIS

At March 31, 1997, EIS had a working capital deficit of $980,000 and no
cash and cash equivalents, as compared with a working capital deficit of
$1,108,000 and cash and cash equivalents of $45,000 at December 31, 1996. EIS's
expansion of its operations and ownership restructuring primarily contributed to
the deficit. EIS has historically funded operations from existing cash flow and
the use of a $750,000 bank line of credit. An aggregate of $257,640 was
available under this line of credit at March 31, 1997. Historically, EIS has
been able to fund its equipment purchase needs through secured loans or
equipment leases. EIS believes that the Acquisition of EIS by Vestcom will
improve its working capital position. See Note 1 of Notes to Financial
Statements of EIS for the year ended December 31, 1996.

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<PAGE> 30

BUSINESS

Vestcom International, Inc. provides computer output and document
management services to a broad range of industries. Concurrently with the
consummation of the Offering, Vestcom will acquire the seven Founding Companies.
These companies provide a number of value-added services including (i) the
production and distribution of time-sensitive computer-generated documents on
paper, compact disc, microfiche, microfilm and labels, (ii) demand publishing,
(iii) mailing services, (iv) marketing materials fulfillment and (v) forms
management. See "The Company." Prior to the Offering, Vestcom has not conducted
any operations. Unless otherwise indicated, all references to the business of
the Company refer to the businesses of the Founding Companies as they are
currently being conducted on an independent basis.

The Company believes that after consummation of the Consolidation, it will
be well-positioned to pursue its goal of becoming a leading provider of computer
output and document management services, initially in the U.S. and portions of
Canada, and eventually on a broader international scale. The Company believes
that its enhanced capital resources, technological expertise and operating
efficiencies will enable it to provide a broad range of services from multiple
locations. The Company intends to grow through acquisitions to enhance its
geographic penetration and to augment its existing services and customer base.
The Company will operate with a decentralized management philosophy which
permits local management to make most day-to-day operating decisions. The
Company believes that this approach will enable its acquired businesses to
maintain their high level of customer service and contact, while allowing them
to draw upon the collective resources of the Company as a whole.

The Company currently provides services to a broad range of industries,
including financial, telecommunications, pharmaceutical, health care, publishing
and retail and manufacturing firms. The Company believes that its services
afford its customers an opportunity to obtain improved quality, reliability and
turnaround of documents, at a reduced cost. The Company's services enable
customers to:

- Utilize a broad range of computer output services to create documents for
their specific needs

The Company believes that a key competitive advantage is its
significant computer processing and programming capabilities. The
Company's technical staff designs and implements the software and systems
to produce customized output for customers. The Company's capabilities
provide customers with the flexibility to obtain small or large volumes of
documents with the same high quality, while permitting each document to be
different from the next. The Company produces documents for most of its
customers on a regular basis, either daily, weekly, monthly, quarterly or
as otherwise required by the customer.

- Obtain computer output and document management services at a reduced cost

The Company's advanced computer processing and distribution
capabilities permit customers to reduce their production, distribution and
mailing costs. Customers can also reduce their overhead and fixed costs by
decreasing or eliminating equipment, floor space, personnel, utilities and
other related expenses. The Company's specialized equipment can be
utilized 24 hours a day, seven days a week, to meet customers' needs. In
contrast, in order to perform many computer output and document management
services in-house, customers are required to make significant capital
expenditures for equipment which may not be utilized to capacity on a
daily basis.

- Reduce turnaround time and substantially reduce downtime

The Company's advanced technology and equipment, internal equipment
redundancy and multi-site production capabilities reduce turnaround time
and maximize capacity utilization.

- Gain access to the newest technologies

The Company keeps abreast of frequent changes in technology and
equipment in the computer output and document management services
industry, enabling its customers to (i) receive the benefits of
technological advances without making significant investments in hardware
and software and (ii) retain the flexibility to change the equipment and
technologies they utilize as their respective needs change. The Company's
technological expertise and equipment will be shared Company-wide.

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<PAGE> 31

INDUSTRY OVERVIEW

The Company believes that the computer output and document management
market that the Company services was over $20 billion in 1996, which includes
over $5 billion for the production and distribution of statements and invoices,
approximately $8 billion for demand publishing and approximately $5 billion for
microfiche, microfilm, compact discs and other imaging services. The Company
further believes that there is a significant market for the production and
distribution of computer-generated documents other than statements and invoices
(including point-of-purchase labels), marketing materials fulfillment and
mailing services.

As a result of the increased complexity and volume of computer-generated
documents and the increased costs of producing these documents in-house, a
growing number of companies have looked to outsourcing as an alternative to
performing computer output and document management services in-house. Gartner
Group, an information technology consulting firm, has estimated that the North
American market for outsourcing of the production and distribution of
computer-generated documents was $5 billion in 1996 and will grow to
approximately $14 billion by the year 2000. Gartner Group also has estimated
that in the United States and Europe document outsourcing will grow at a
compound annual growth rate of 30% per year through 2000.

The computer output and document management services business is highly
fragmented and is characterized by many small companies, numerous in-house
operations and several national service bureaus. The Company believes that there
are over 5,000 companies in this business, of which fewer than 150 have revenues
in excess of $10 million. The Company believes that for the most part, these
5,000 companies serve local markets and provide a narrow range of services. The
Company further believes that many computer output and document management
services businesses: (i) have insufficient capital for expansion; (ii) do not
invest sufficiently in rapidly changing technologies; and (iii) are unable to
meet the needs of large, geographically dispersed clients.

The Company believes that the growth of the computer output and document
management services market is being driven by several factors, including: (i)
the increasing trend of businesses to outsource their non-core functions; (ii)
the growth of the companies and industries in the Company's customer base, which
has resulted in an increase in the volume and variety of documents which these
companies need to generate; (iii) the increased demand of managers, employees
and customers for time-sensitive computer-generated documents as a result of
recent advances in information technology; and (iv) government regulations that
require the reporting and retention of, and access to, a broad range of
information.

BUSINESS STRATEGY

The Company's goal is to become a leading provider of computer output and
document management services, initially in the U.S. and portions of Canada, and
eventually on a broader international scale. To achieve this goal, the Company
intends to implement the following strategy:

Provide a Broad Range of High Quality Services at a Competitive Cost from
Multiple Locations

The Company intends to provide a broad range of high quality computer
output and document management services at a competitive cost in targeted
geographic locations through selective acquisitions and the expansion of its
existing businesses. The Company intends to market its services to customers
with a geographically-dispersed presence throughout the United States and Canada
and to customers with strong ties to local markets.

Capitalize on Cross-Selling Opportunities

The Company intends to capitalize on the expertise of the various Founding
Companies to expand the range of services provided to existing customers as well
as to broaden the Company's customer base. For example, while certain of the
Founding Companies presently provide compact disc, microfiche, microfilm and
demand publishing services to customers, the Company believes that these
services could be marketed to additional customers that are presently obtaining
other services from the Company. In addition, certain of the Founding Companies
have expertise in particular industries and with specific types of customers,
such as

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<PAGE> 32

credit unions, supermarket chains and pharmaceutical companies. The Company
believes that this expertise will enhance its ability to obtain and service
customers in the same industries in additional geographic areas.

Provide Complete Outsourcing Solutions for Clients

The Company intends to provide a turnkey document output and distribution
service in which the Company assumes most of the document output and
distribution responsibilities previously performed by the customer's in-house
operations. The Company believes that, in most cases, it can perform these
services more cost-effectively than the customer can perform them internally.

Operate with a Decentralized Management Philosophy

The Company intends to operate with a decentralized management structure to
provide personalized customer service and a motivating environment for its
staff. The Company intends to permit local management to have continued
responsibility and accountability and to make most day-to-day operating
decisions. The Company intends to provide financial, marketing, planning and
administrative support on a centralized basis. The Company believes that this
approach will enable acquired businesses to maintain their high level of
customer service and contact, while allowing them to draw upon the collective
resources of the Company as a whole.

Achieve Cost Savings Through Consolidation and Economies of Scale

The Company intends to achieve significant economies of scale by (i)
consolidating a number of administrative functions; (ii) combining the
purchasing of such items as materials and supplies, equipment maintenance and
employee benefits; (iii) reducing or eliminating redundant functions and
facilities; and (iv) sharing production through a communications network to
maximize equipment utilization and speed delivery.

ACQUISITION STRATEGY

The Company plans to acquire additional companies in the highly-fragmented
computer output and document management services industry. The Company intends
to expand to targeted geographic areas in the United States, Canada and abroad
by acquiring companies that have specified characteristics in order to create a
multi-site, multi-service company. Targeted geographical areas include those
areas which have a high concentration of potential customers with high-volume,
computer-generated output. In identifying potential acquisition candidates, the
Company will look for companies (i) with services that are similar or
complementary to those provided by the Company; (ii) serving geographic markets
targeted by the Company; and (iii) with strong management and customer
relationships.

The Company intends to further augment its acquisitions with "tuck-in"
acquisitions in the same or contiguous areas that can then be assimilated into
one or more of the Company's existing operations. The Company believes that it
can increase market share through tuck-ins by adding additional customers and
leveraging operational efficiencies through the sharing of capacities and
capabilities and the elimination of duplicate overhead. The Company also intends
to grow by acquiring the in-house computer output centers of targeted
corporations.

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<PAGE> 33

The following map indicates where the headquarters and branch offices of
the Founding Companies are located.

[MAP OF THE UNITED STATES]

For a discussion of certain risks associated with the Company's future
acquisition strategy, see "Risk Factors -- Risks Related to the Company's
Acquisition Strategy" and "-- Need for Additional Financing."

SERVICES

The Company provides a variety of computer output and document management
services for its customers based on their specific needs. The Founding
Companies' current services (which the Company will continue to provide) include
the following:

OUTPUT SERVICES

Production and Distribution of Time-Sensitive Documents on Paper

The Company converts electronic data received from its customers into
informative, accurate and customized documents such as brokerage statements,
bank statements, invoices, pension reports, credit union statements and
management reports (including sales reports, financial and accounting reports
and inventory reports). The Company's technical staff develops specialized
systems and software to meet its customers' needs. Upon receipt of computer data
from its customers, the data are processed through the specialized systems and
software generally developed by the Company to provide, among other things,
customized formatting of output, cost-effective and speedy postal delivery,
intelligent insertion, selective distribution and quality control. The Company's
processing of its customers' data enables the Company to create customized
output, such as selective marketing messages and highlight color on invoices.
The Company's capabilities enable it to print small or large volumes of
documents with the same high quality, while permitting each document to be
different from the next. The Company produces documents for most of its
customers on a regular basis, either daily, weekly, monthly, quarterly or as
otherwise required by the customer. The Company produces approximately 57
million impressions (pages) per month.

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<PAGE> 34

Production and Distribution of Documents on Compact Disc

The Company converts electronic data onto compact disc. Compact disc is
primarily used for rapid access to information and in situations where the user
needs to manipulate the data easily, such as meeting customer service
requirements, for archiving, and as an alternate method of distributing various
documents such as sales reports. The Company produces approximately 5 million
images (pages) per month on compact disc.

Production and Distribution of Documents on Microfiche and Microfilm

The Company converts electronic data onto microfiche and microfilm.
Microfiche and microfilm are used primarily for archiving, to meet customer
service requirements and for other purposes which are not highly time-sensitive.
The Company produces approximately 100 million images (pages) per month on
microfiche and microfilm.

Production and Distribution of Computer-Generated Labels

The Company produces and distributes computer-generated point-of-purchase
labels for grocery stores, drug stores and discount and retail department
stores. These labels generally display the product's price (including unit
price), a bar-code for scanning and information about the product such as its
size and weight. The Company utilizes high-speed laser printers and specialized
finishing equipment to produce such labels. The Company provides rapid
turnaround of labels to its customers' stores and distribution centers daily,
weekly or as otherwise required to reflect changes in the information contained
on the labels. The Company prints approximately 2 million sheets of
computer-generated labels per month, with each sheet containing from one to up
to 120 labels.

Demand Publishing

The Company prints, packages and distributes documents that are subject to
frequent revision or unpredictable demand, such as product instruction manuals,
management training manuals and technical materials. For example, a software
company that provides instruction manuals to its customers may need to update
the manuals frequently to reflect changes in its product. The Company's print on
demand system permits the customer to revise the instruction manual and
cost-effectively produces the number of copies the customer requires at the time
the information is needed. The flexibility of the Company's system enables the
customer to make product enhancements (such as corrections or improvements to
product manuals) without maintaining costly inventories of documents which might
quickly become outdated. The Company provides complete assembly of software
packages, including coordination of software duplication and production of the
applicable documentation. The Company prints approximately 8 million impressions
(pages) per month.

COMPUTER CENTER DOCUMENT OUTSOURCING SERVICES

As contrasted with the Company's individualized services described under
"Output Services," the Company's Computer Center Document Outsourcing Services
is a turnkey document output and distribution service. The Company typically
assumes most of the document output and distribution responsibilities previously
performed by the customer's in-house operations. This service often enables the
customer to close its in-house computer output printing center. The customer
transmits its computer-generated data to one of the Company's output and
production centers, which then processes, produces and distributes all of the
reports, invoices, statements and other computer output documents needed by the
customer.

MAILING SERVICES

The Company provides cost-effective and rapid distribution of completed
documents and is able to obtain postal discounts of up to approximately 25% off
the current U.S. first class single piece postage rate.

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<PAGE> 35

Insertion

The Company provides both selective (intelligent) and non-selective
insertion services. The Company's insertion equipment folds and inserts reports,
bills, invoices and other marketing materials into envelopes. The Company's
automated insertion equipment inserts approximately 13 million pieces per month.

Presorting

The Company sorts mail to United States and Canadian Postal Service
specifications and adds postal bar-codes in order to obtain the greatest
available discount and speed delivery. The Company sorts approximately 6 million
pieces of mail per month.

Commingling

By combining volumes of mail from a number of customers and adding postal
bar-codes, the Company is able to generate postal discounts for customers that
do not produce sufficient volume to obtain these benefits on their own. The
Company commingles approximately 13 million pieces of mail per month.

MARKETING MATERIALS FULFILLMENT

The Company's fulfillment operations provide an efficient mechanism for its
customers to distribute marketing materials and instruction manuals to
geographically dispersed locations on demand, in a timely, cost-effective
manner. The Company receives marketing and related materials from customers,
stores them and then ships the materials to various locations upon the receipt
of a customer order. For example, a candy manufacturer uses the Company's
services to distribute advertising displays and related materials to
supermarkets, and a watch manufacturer uses the Company's services to distribute
instruction manuals to consumers who have misplaced their original instruction
booklets. The Company receives orders to ship materials by telephone, computer,
phone mail, fax, mail, electronic mail and Electronic Data Interchange (EDI).
The Company's inbound telemarketing service includes customer service
representatives who take orders and provide information concerning inventory
availability, anticipated delivery and the status of previously placed orders.
The Company also produces customized computer reports which track the volume and
frequency of shipments of materials to various locations. As an additional
service, the Company produces specialized computer reports for pharmaceutical
companies which track the distribution of drug samples and provide detailed
information as required by law. The Company ships approximately 52,000 packages
of marketing and related materials per month.

FORMS MANAGEMENT

The Company's services include the purchase, storage and maintenance of
printed forms, envelopes, letterhead and marketing materials for customers. The
Company also offers limited offset printing services to print forms, stationery
and other marketing materials.

DEVELOPMENT OF NEW SERVICES

The Company believes that its future success depends on its ability to
enhance its current services and develop new services that address the
increasingly sophisticated needs of its customers. For example, during the last
five years, several of the Founding Companies have increased their document
storage capabilities. While previously offering only microfiche and microfilm
technology, several of the Founding Companies now offer customers compact disc
technologies. In addition, as postal regulations have changed, several of the
Founding Companies have improved and updated their software capabilities in
order to process nine digit zip codes and use bar coding to take advantage of
new postal discounts.

The Company continually faces challenges in keeping abreast of new
technologies. As an example of a future challenge, many companies may increase
their use of the Internet to transmit information to employees or customers. To
remain competitive, the Company may need to be prepared to offer its customers
services that utilize Internet technology. The Company attempts to keep up with
technological advances by attending trade shows and by maintaining close contact
with its principal customers.

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CONFIDENTIALITY OF CUSTOMER INFORMATION

A substantial portion of the Company's business involves the handling of
documents containing confidential and other sensitive information of its
customers. Certain of the Founding Companies already take steps to protect such
information, such as requiring employees to enter into confidentiality
agreements as a condition of employment and restricting access to certain areas
within the Founding Company's premises to certain employees with the need for
such access. Following consummation of the Acquisitions, the Company intends to
implement uniform policies throughout the Company to protect confidential
information, including requiring all new employees and, to the extent practical,
existing employees, to execute confidentiality agreements to the extent not
previously executed. In addition, while some of the Founding Companies have
printer's error insurance to insure against certain risks of breach of
confidentiality, the Company intends to obtain printer's error insurance to
attempt to reduce the economic impact of any breach. A breach of confidentiality
would also have collateral damaging effects on the Company's business
reputation.

SALES AND MARKETING

The Company's sales efforts are handled principally through its in-house
direct sales staff of approximately 35 people located in five states and the
Province of Quebec. The Company's sales representatives generally have expertise
in specific industries, such as the pharmaceutical, telecommunications and
financial services industries, and in specific output services, such as
statements, computer-generated labels, compact discs and demand publishing. The
Company employs customer service representatives to provide on-going support to
existing customers and to oversee the implementation of new customer projects.

The Company augments the work of its sales personnel through a variety of
direct marketing techniques, including direct mail, regular participation in
industry trade shows and conferences, articles and advertisements in trade
journals and Company-sponsored seminars for customers and prospective customers.

The Company intends to provide Company-wide marketing support to its sales
staff through the production and distribution of marketing materials,
telemarketing and seminars. The Company plans to augment local sales and
marketing efforts through the implementation of a national account program for
large customers. The Company's sales and customer service personnel will
continue to interact extensively with customer and Company operations staff to
address specific customer needs.

CUSTOMERS

The Company currently has approximately 1,200 customers, including
financial institutions, telecommunications companies, pharmaceutical companies,
health care institutions, publishing companies and retail and manufacturing
firms. No one customer presently accounts for over 5% of the Company's sales.

The Founding Companies have demonstrated the ability to retain customers
over the long-term under short-term contracts, and in many instances, without
written contracts. The Company believes that quality of performance, on-going
customer support and the technologically advanced customized services provided
by the Founding Companies have contributed to this record of successful customer
retention.

COMPETITION

The Company operates in a highly competitive industry. A significant source
of competition is the in-house document handling capability of the Company's
target customer base. In addition, with respect to those services that are
outsourced, the Company competes with a variety of companies, many of which have
greater financial resources than the Company. The Company's major competitors
include Xerox Business Services, Pitney Bowes Management Services, Anacomp,
First Image (a subsidiary of First Data Corporation), Output Technologies (a
division of DST Systems, a subsidiary of Kansas City Southern Industries), IKON
Office Solutions and Lason, as well as smaller local providers.

The Company believes that the principal competitive factors in providing
computer output and document management services include technological
expertise, quality and accuracy, turnaround time, price, reliability and
security of service, reputation, client industry expertise, capacity and
customer support and service.

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LITIGATION

The Company is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on the
Company's business, financial condition or results of operations.

FACILITIES

The Company currently operates 19 computer output and document management
service facilities, aggregating approximately 623,000 square feet. These
facilities are located in nine states and in the Province of Quebec, Canada. All
of these facilities are leased and are used for operations, administrative and
storage functions. Leases vary in term remaining from month-to-month to seven
years and in some cases, include options to extend the lease term. See "Certain
Transactions" for further information relating to these leases.

EMPLOYEES

At March 31, 1997, the Company had approximately 670 full-time and 230
part-time employees. No employees of the Company are represented by a labor
union. The Company considers its relations with its employees to be good.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of
Vestcom's directors, executive officers and persons who will become directors or
executive officers of Vestcom following the consummation of the Offering:

<TABLE>
<CAPTION>
NAME AGE POSITION*
- --------------------------------- --- ----------------------------------------------
<S> <C> <C>
Joel Cartun...................... 57 President, Chief Executive Officer and
Director of Vestcom; President of Comvestrix
Peter J. McLaughlin.............. 59 Executive Vice President and Director of
Vestcom
Harvey Goldman................... 51 Executive Vice President, Chief Financial
Officer and Treasurer
Leslie M. Abcug.................. 49 Vice President -- Finance and Administration
of Vestcom; Vice President of Finance and
Administration of Comvestrix
Howard April..................... 66 Director of Vestcom; Chairman of the Board of
COS Information
Gary J. Marcello................. 53 Director of Vestcom; President of DMS
Stephen R. Bova.................. 50 Director of Vestcom
Leonard J. Fassler............... 65 Director of Vestcom
Fred S. Lafer.................... 68 Director of Vestcom
Richard D. White................. 43 Director of Vestcom
</TABLE>

- ---------------
* Upon consummation of the Offering, it is anticipated that Mr. McLaughlin will
resign as a director and that Messrs. April, Marcello, Bova, Fassler, Lafer
and White will become directors.

Members of the Board of Directors will serve until the next annual meeting
of stockholders and thereafter until their successors are elected and qualified.

The Company plans to establish an Audit Committee and a Compensation
Committee of the Board of Directors upon the consummation of the Offering. The
Company anticipates that Leonard J. Fassler and Richard D. White will be the
initial members of the Audit Committee and that Stephen R. Bova and Fred S.
Lafer will be the initial members of the Compensation Committee.

Joel Cartun has been the President, Chief Executive Officer and a director
of Vestcom since its incorporation in September 1996. Mr. Cartun founded
Comvestrix, one of the Founding Companies, in 1969, and has served as President,
Chief Executive Officer and a director of that corporation since its
incorporation. Mr. Cartun was a founder of Xplor International, a trade
association for the electronic printing industry.

Peter J. McLaughlin has served as Executive Vice President of Vestcom since
March 1997 and as a consultant to Vestcom from July 1996 to March 1997. He
served as Chief Financial Officer and Treasurer of Vestcom from March 1997 to
May 1997. Mr. McLaughlin has been a director of Vestcom from its inception and
will continue to serve as such through the consummation of the Offering, at
which time it is expected he will resign. He was a partner from 1994 to 1996 in
the merger and acquisition firm of McLaughlin & Tonra. Prior thereto, he held
several positions, most recently as Senior Vice President of the Eastern Region,
with Zytron (a Dun & Bradstreet subsidiary specializing in computer output
services) and its successor company, First Image Management, from 1986 to 1993.
He was the founder and Chief Executive Officer of Micrographics Systems, a
computer output microfilm service bureau that was sold to Dun & Bradstreet in
1986.

Harvey Goldman has served as Executive Vice President, Chief Financial
Officer and Treasurer of Vestcom since May 1997. He served as President, Chief
Executive Officer and Chairman of the Board of Conversion Technologies
International, Inc. (a publicly traded specialty materials company) from 1994 to
May 1997. From June 1991 to March 1994, Mr. Goldman served as Executive Vice
President and as a

37
<PAGE> 39

director of Air & Water Technologies Corporation, a publicly held environmental
technologies company (and successor to Research-Cottrell, Inc.), and as its
Chief Financial Officer from June 1987 through June 1991. Prior to joining
Research Cottrell, Inc. in 1985, Mr. Goldman was a partner at Arthur Young & Co.
(now Ernst & Young LLP), where he served as Director of Financial Consulting in
New York City and National Director of Environmental Consulting.

Leslie M. Abcug has served as Vice President -- Finance and Administration
of Vestcom since January 1997 and as Vice President of Finance and
Administration of Comvestrix, one of the Founding Companies, since 1986.

Howard April will become a director of Vestcom upon the consummation of the
Offering. Mr. April founded COS Information, one of the Founding Companies, in
1972 and has served as its Chairman of the Board since 1995. He also served as
its President from 1972 to 1995. Mr. April has also served as President of
Lirpaco Inc., COS Information's parent, since 1972. Mr. April's son, Leonard
April, is President of COS Information.

Gary J. Marcello will become a director of Vestcom upon the consummation of
the Offering. Mr. Marcello has served as the President of the largest of the
three companies constituting DMS (see "The Company"), one of the Founding
Companies, since 1975.

Stephen R. Bova will become a director of Vestcom upon the consummation of
the Offering. Mr. Bova has served as President of the Global Banking Division of
Electronic Data Systems Corporation (a provider of technical and information
services) since November 1996. Prior thereto, he served as President of the
Global Financial Division of Alltel Information Services, Inc. (a provider of
software and information services) for in excess of five years.

Leonard J. Fassler will become a director of Vestcom upon the consummation
of the Offering. Mr. Fassler has served as a consultant to GE Capital
Information Technology Systems, Inc. (an international computer reselling and
integration company affiliated with General Electric) since August 1996. Mr.
Fassler served as Co-Chairman of AmeriData Technologies, Inc. (an international
computer integration and support company) for in excess of five years until GE's
acquisition of that company in July 1996.

Fred S. Lafer will become a director of Vestcom upon the consummation of
the Offering. Mr. Lafer has served as President of the Taub Foundation (a
charitable foundation) since 1994. Mr. Lafer served as Senior Vice President and
Secretary of Automatic Data Processing, Inc. (a provider of employer, financial
and data services) for in excess of five years, until 1996.

Richard D. White will become a director of Vestcom upon the consummation of
the Offering. Mr. White has been a Managing Director of Oppenheimer & Co., Inc.,
one of the Representatives of the Underwriters of the Offering, for in excess of
five years. Mr. White is also a director of Midway Games Inc.

The following table sets forth certain information concerning certain
principals of the Founding Companies who will continue as employees of the
Company following the consummation of the Acquisitions and the Offering:

<TABLE>
<S> <C> <C>
Leonard April.................... 38 President of COS Information
Steven R. Bardwell............... 38 President and Chief Executive Officer of EIS
Frank J. Capozzi................. 54 Executive Vice President of Image
Timothy M. Cicchese.............. 36 Chairman of the Board and Chief Executive
Officer of Computer Output
Alfred F. Gismondi............... 52 Vice President of Marketing of Mystic
James H. Horst................... 59 Chairman of the Board and President of Image
Timothy E. McKenzie.............. 40 Executive Vice President -- Sales and
Marketing of EIS
Robert R. Rogus.................. 56 Vice President of Sales of Comvestrix
Anthony Rossi.................... 39 Vice President of DMS
</TABLE>

38
<PAGE> 40

Leonard April has served as President of COS Information, one of the
Founding Companies, since 1996. Prior thereto, he served as Vice
President -- Sales and Marketing of COS Information for in excess of five years.
Mr. April is Howard April's son.

Steven R. Bardwell co-founded EIS, one of the Founding Companies, in 1985
and has served as its Chief Executive Officer and President for in excess of
five years.

Frank J. Capozzi co-founded Image, one of the Founding Companies, in 1980
and has served as its Executive Vice President for in excess of five years.

Timothy M. Cicchese has served as the Chairman of the Board and Chief
Executive Officer of Computer Output, one of the Founding Companies, since 1995
and as Vice President and Chief Financial Officer of Computer Output and its
predecessor from 1993 to 1995. Prior thereto, he served as the Data Center
Manager for NCR Corp. (a division of AT&T) from 1992 to 1993.

Alfred F. Gismondi has served as the Vice President of Marketing of Mystic,
one of the Founding Companies, for in excess of five years.

James H. Horst co-founded Image, one of the Founding Companies, in 1980 and
has served as its Chairman of the Board and President for in excess of five
years.

Timothy E. McKenzie has served as the Executive Vice President of EIS, one
of the Founding Companies, since 1994. He also served as its Vice President from
1991 to 1994.

Robert R. Rogus has served as Vice President of Sales of Comvestrix, one of
the Founding Companies, for in excess of five years.

Anthony Rossi has served as Vice President of the largest of the three
companies constituting DMS, one of the Founding Companies, for in excess of five
years.

DIRECTORS' COMPENSATION

Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives an annual retainer of $6,000 and an additional fee of
$1,000 for each day's attendance at a Board of Directors meeting and/or
committee meeting. Under the Company's Stock Option Plan, each non-employee
director will also receive options to acquire 10,000 shares of Common Stock at
the beginning of his or her first year of service as a director, and options
covering 5,000 shares of Common Stock for each year of service thereafter. See
"Stock Option Plan." Directors of the Company are reimbursed for out-of-pocket
expenses incurred in their capacity as directors of the Company. Gary J.
Marcello and Howard April, who will become directors of the Company upon the
consummation of the Offering, have entered into employment agreements with DMS
and COS Information, respectively, each of which will commence on the
consummation date of the Offering. For a description of their respective
employment agreements, see "Employment Agreements."

EXECUTIVE COMPENSATION

Vestcom was incorporated in September 1996 and has not conducted any
operations since that time other than in connection with its formation, the
negotiation of the Acquisitions and the Offering. The Company anticipates that
subject to the hiring of additional executive officers, during 1997 its five
most highly compensated executive officers and their annualized base salaries
will be as follows: Mr. Cartun -- $200,000, Mr. Marcello -- $200,000, Mr.
Goldman -- $180,000, Mr. McLaughlin -- $144,000 and Mr. Abcug -- $110,000. Each
executive officer has entered into an employment agreement with the Company or a
subsidiary thereof commencing on the consummation of the Offering, except that
Mr. McLaughlin commenced employment with Vestcom on March 1, 1997 and Mr.
Goldman commenced employment with Vestcom on May 21, 1997. See "Employment
Agreements." Neither Joel Cartun, Leslie M. Abcug, Harvey Goldman nor Gary
Marcello received any compensation from Vestcom or from any of the Founding
Companies for services rendered to Vestcom during the year ended December 31,
1996. For amounts paid to Mr. McLaughlin, see "Certain Transactions."

39
<PAGE> 41

EMPLOYMENT AGREEMENTS

Mr. Cartun and Mr. McLaughlin have each entered into an employment
agreement with the Company, Mr. Abcug has entered into an employment agreement
with Comvestrix, Mr. Marcello has entered into an employment agreement with DMS,
and Mr. Howard April has entered into an employment agreement with COS
Information, each of which will commence on the consummation of the Offering and
the Acquisitions (other than Mr. McLaughlin's agreement, which commenced on
March 1, 1997) and will continue for a term of three years following the
consummation of the Offering.

Pursuant to their respective agreements, Mr. Cartun will serve as President
and Chief Executive Officer of the Company at an annual base salary of $200,000,
Mr. McLaughlin will serve as Executive Vice President of the Company at an
annual base salary of $144,000, Mr. Abcug will serve as Vice President of
Finance and Administration of Comvestrix at an annual base salary of $110,000,
Mr. Marcello will serve as President of DMS at an annual base salary of $200,000
and Mr. Howard April will serve as Chairman of the Board of COS Information at
an annual base salary of CDN $100,000 (approximately U.S. $75,188). Each of
Messrs. Cartun, McLaughlin, Abcug, Marcello and April will be entitled to
participate in all compensation and employee benefit plans maintained by the
Company and its subsidiaries, including such bonuses as may be authorized by the
Board of Directors from time to time.

Each of the employment agreements provides that, in the event of a
termination of employment by the Company without cause, such employee will be
entitled to receive from the Company an amount in cash equal to the employee's
then-current annual base salary for the remainder of the term. In the event of a
Change in Control (as defined) of the Company, if the employee has not received
sufficient prior notice that such employee's employment will be continued
following the Change in Control, such Change in Control will be deemed to be a
termination without cause. Further, in the event of any Change in Control, the
employee may also elect to treat the Change in Control as a termination without
cause by giving appropriate notice to the Company. Each employment agreement
also provides that, in the event of a termination of employment as a result of
death or disability, such employee (or his heirs or legal representatives, as
the case may be) will be entitled to receive a lump-sum amount in cash equal to
the employee's then-current base salary, offset by any payments made by the
Company pursuant to any life insurance or disability policies. If employment
terminates for cause or the employee terminates his employment for reasons other
than death or permanent disability, the employee will only be entitled to
receive earned but unpaid salary as of the date of termination.

Each employment agreement also contains certain non-competition covenants
which will continue for a period equal to the longer of five years after the
consummation of the Offering or one year following termination of employment.
Each employment agreement also contains certain anti-solicitation, anti-raiding
and confidentiality provisions.

Mr. Goldman has entered into an at-will employment agreement with Vestcom,
dated May 21, 1997, pursuant to which he will serve as Executive Vice President
and Chief Financial Officer of the Company at an annual base salary of $180,000.
Mr. Goldman's agreement provides that in the event of a Change in Control, if he
does not receive sufficient prior notice of continued employment, he will be
entitled to receive severance pay of $180,000, in 12 monthly installments. Mr.
Goldman also has the right in the event of a Change in Control to terminate his
employment, in which case he will be entitled to receive the $180,000 of
severance pay. Mr. Goldman's agreement also contains certain non-competition
covenants which will continue for one year following termination of employment.
Upon consummation of the Offering, Mr. Goldman's agreement provides that he will
be granted options to purchase 50,000 shares of Common Stock at an exercise
price equal to the initial public offering price. See "Stock Option Plan."

STOCK OPTION PLAN

In March 1997, the Board of Directors and stockholders of Vestcom approved
the Company's 1997 Equity Compensation Program (the "Stock Option Plan"). The
purpose of the Stock Option Plan is to provide directors, officers, key
employees and consultants with additional incentives by increasing their
ownership interests in the Company. Directors, officers and other key employees
of the Company and its subsidiaries are eligible to participate in the Stock
Option Plan. Awards may also be granted to consultants

40
<PAGE> 42

providing valuable services to the Company. In addition, individuals who have
agreed to become a key employee or consultant, and key employees and consultants
of entities that are expected to become subsidiaries, are eligible for option
grants, conditional in each case on actual employment, consultant or subsidiary
status. The Stock Option Plan authorizes the granting of incentive stock
options, non-qualified stock options, stock appreciation rights, performance
shares and stock bonus awards.

The Stock Option Plan also provides for automatic option grants to
directors who are not otherwise employed by Vestcom or its subsidiaries. Upon
commencement of service, a non-employee director will receive a non-qualified
option to purchase 10,000 shares of Common Stock, and continuing non-employee
directors will receive annual options to purchase 5,000 shares of Common Stock.
Options granted to non-employee directors become fully exercisable one year
after the date of grant. Non-employee directors' options have a term of ten
years from the date of grant.

The maximum number of shares of Common Stock that may be subject to
outstanding options and awards under the Stock Option Plan, determined
immediately after the grant of any option or award, is the greater of 700,000
shares or 10% of the aggregate number of shares of the Company's Common Stock
outstanding, provided, however, that options to purchase no more than 700,000
shares of Common Stock may be granted as incentive stock options. No one person
may receive options or awards for more than 100,000 shares of Common Stock per
calendar year.

The Stock Option Plan will be administered by the Board of Directors or by
a committee of the Board (in either case, the "Plan Administrator"). Options and
awards granted under the Stock Option Plan will have an exercise or payment
price as established by the Plan Administrator, provided that the exercise price
of incentive stock options may not be less than the fair market value of the
underlying shares on the date of grant and the exercise price of stock options
granted to non-employee directors will be equal to the fair market value of the
underlying shares on the date of grant. Upon exercise or payment of an option or
award, the participant will be required to provide the payment price in full in
cash or in shares of Common Stock valued at fair market value on the date of
exercise. In connection with any exercise of options or awards, the Company will
have the right to collect or withhold from any payments under the Stock Option
Plan all taxes required to be withheld under applicable law.

Unless otherwise provided by the Plan Administrator, options and awards
granted under the Stock Option Plan to persons other than non-employee directors
are exercisable in 25% increments commencing one year after the date of grant.
The Stock Option Plan provides that all stock options granted to non-employee
directors will become immediately exercisable upon the occurrence of a "Change
in Control Event" (as defined in the Stock Option Plan). The Stock Option Plan
further provides that the Plan Administrator may accelerate the vesting of any
other option or award upon the occurrence of a Change in Control Event.

Options and awards granted under the Stock Option Plan generally will be
nontransferable, except by will or by the laws of descent and distribution.
During the lifetime of a participant, an option generally may be exercised only
by the participant. The Stock Option Plan contains various termination
provisions for options and awards in the event of termination of employment or
status as a director for various reasons.

The Stock Option Plan may be amended or terminated at any time by the Board
of Directors, except that no amendment may be made without stockholder approval
if such approval is required by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or other applicable law and no amendment or
revision may alter or impair an option or award without the consent of the
holder thereof. The Stock Option Plan will terminate on March 1, 2007, unless
earlier terminated by the Board of Directors. No options or awards may be
granted after termination, although such termination will not affect the status
of any option or award outstanding on the date of termination.

Upon consummation of the Acquisitions and the Offering, options covering an
aggregate of 288,046 shares of Common Stock will be outstanding under the Stock
Option Plan, including (i) options to purchase 10,000 shares of Common Stock
which will have been granted to each of Stephen R. Bova, Leonard J. Fassler,
Fred S. Lafer and Richard D. White, (ii) options to purchase 15,000 shares of
Common Stock which will have been granted to Howard April and (iii) options to
purchase an additional 233,046 shares of Common

41
<PAGE> 43

Stock which will have been granted to other employees of Vestcom and its
subsidiaries (including options to purchase 50,000 shares which will have been
granted to Harvey Goldman, the Company's Executive Vice President and Chief
Financial Officer). All of the options granted at or prior to the consummation
of the Offering will expire ten years after the date of grant (except for Mr.
April's options, which will expire on January 2, 2001) and have an exercise
price, subject to adjustment, equal to the initial public offering price of the
Common Stock in the Offering. Such options will be exercisable annually in 25%
increments beginning with the first anniversary of the date of grant, except for
the options granted to Messrs. April, Bova, Fassler, Lafer and White, each of
which becomes fully exercisable one year after the date of grant. See "Certain
Transactions -- Organization of the Company -- Canadian Acquisition."

42
<PAGE> 44

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to beneficial
ownership of the Common Stock, after giving effect to the Acquisitions and the
Offering, by (i) all persons known to the Company to be the beneficial owner of
5% or more thereof, (ii) each director and person who will become a director
upon consummation of the Offering, (iii) each executive officer and person who
will become an executive officer upon consummation of the Offering and (iv) all
executive officers and directors as a group. The address of each such person is
c/o Vestcom International, Inc., 1100 Valley Brook Avenue, Lyndhurst, New Jersey
07071. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
AFTER OFFERING(1)
---------------------
NAME NUMBER PERCENT
- ----------------------------------------------------------------------- --------- -------
<S> <C> <C>
Joel Cartun............................................................ 1,446,198(2) 18.5%
Peter J. McLaughlin.................................................... 172,837 2.2
Harvey Goldman......................................................... -- --
Leslie M. Abcug........................................................ 31,628 *
Howard April........................................................... 141,464(3) 1.8
Gary J. Marcello....................................................... 565,291(4) 7.2
Stephen R. Bova........................................................ -- --
Leonard J. Fassler..................................................... -- --
Fred S. Lafer.......................................................... -- --
Richard D. White....................................................... 154,656(5) 2.0
All executive officers and directors as a group (10 persons)........... 2,512,074 32.1
</TABLE>

- ---------------
* Less than one percent.

(1) Does not include shares underlying options which will have been granted to
the indicated persons, none of which are exercisable within 60 days of the
date of this Prospectus.

(2) Includes 200,000 shares held by trusts for the benefit of Mr. Cartun's
children. As trustee of such trusts, Mr. Cartun's wife has the right to vote
and dispose of such shares.

(3) Includes 127,746 Exchangeable Shares of Vestcom's Canadian subsidiary which
will be convertible into 127,746 shares of Common Stock. For purposes of
this table, all of such 127,746 Exchangeable Shares are deemed to have been
converted. Mr. April also will have a beneficial interest in one share of
Vestcom's Class B Preferred Stock, which will entitle him to vote on any
matter submitted to a vote of the holders of the Common Stock as though he
owned 127,746 shares of Common Stock. See "Certain Transactions."

(4) Includes 27,436 shares held by a family limited partnership controlled by
Mr. Marcello.

(5) Includes 116,360 shares held in the aggregate by Oppenheimer & Co., Inc. and
an affiliate of Oppenheimer & Co., Inc. Mr. White is a Managing Director of
Oppenheimer & Co., Inc. Mr. White disclaims beneficial ownership of these
116,360 shares.

43
<PAGE> 45

CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

Initial Capitalization. The Company was initially capitalized with $1.7
million, $200,000 of which was funded in September 1996 and the remaining $1.5
million of which was funded in December 1996. The $200,000 was comprised of
$160,035 of loans provided by Comvestrix and Peter J. McLaughlin, Executive Vice
President and Chief Financial Officer of Vestcom (represented by promissory
notes in the aggregate principal amount of $160,035) and $39,965 of equity
(791,346 shares of Common Stock) provided by the stockholders of Comvestrix and
Mr. McLaughlin. The 791,346 shares include 593,509 shares issued to the
stockholders of Comvestrix proportionately to their Comvestrix stockholdings
(including 512,446 shares which were issued to Joel Cartun (President, Chief
Executive Officer and a director of Vestcom), 11,127 shares which were issued to
Leslie M. Abcug (Vice President -- Finance and Administration of Vestcom) and
69,936 shares which were issued to other stockholders of Comvestrix) and 197,837
shares which were issued to Mr. McLaughlin. All shares were issued at a price of
approximately $.05 per share, which the Board determined was fair market value
at such time. The notes, which bear interest at the prime rate, as it may change
from time to time, are due on the earlier of June 30, 1997 or upon consummation
of the Offering and are subordinated to the $1.5 million financing. In the event
the Company is unable to pay the notes in full when due, the noteholders have
agreed to extend the due date of the notes to the earlier of the Offering or
December 31, 1998.

The $1.5 million was raised in a private placement of stock and notes to
Oppenheimer & Co., Inc. ("Oppenheimer"), Opco Senior Executive Partnership, L.P.
("OSEP") (an Oppenheimer affiliate), Richard D. White (a managing director of
Oppenheimer who will become a director of Vestcom upon the consummation of the
Offering), Comvestrix, the stockholders of Comvestrix (including Joel Cartun and
Leslie M. Abcug), an entity controlled by Gary J. Marcello and Howard April. Mr.
Marcello and Mr. April will become directors of Vestcom upon the consummation of
the Offering. The $1.5 million was comprised of 503,846 shares of Common Stock
of Vestcom, sold at a price of approximately $.73 per share, and notes in the
aggregate principal amount of $1,132,697 bearing interest at the prime rate, as
it may change from time to time, which are due on the earlier of June 30, 1997
or upon consummation of the Offering. In the event the Company is unable to pay
the notes in full when due, the noteholders have agreed to extend the due date
of the notes to the earlier of the Offering or December 31, 1998. The price for
the stock was the subject of arms' length negotiations. In such $1.5 million
financing, the Company issued (i) notes payable to Oppenheimer, OSEP, Mr. White,
Comvestrix, Mr. Marcello's entity and Mr. April in the principal amounts of
$432,495.53, $108,123.88, $72,082.59, $399,996.26, $79,999.16 and $39,999.58,
respectively, and (ii) 229,773, 57,443, 38,296, 118,444, 27,436, 13,718, 2,572
and 16,164 shares of Common Stock to Oppenheimer, OSEP, Mr. White, Mr. Cartun,
Mr. Marcello's entity, Howard April, Mr. Abcug and the other stockholders of
Comvestrix, respectively. In May 1997, Oppenheimer relinquished to Vestcom
170,856 shares of Vestcom Common Stock, thereby increasing the average price it
paid for its remaining 58,917 shares to $2.84 per share.

Mr. McLaughlin received $74,400 from Vestcom in 1997 for consulting
services rendered to Vestcom during 1996. In addition, upon the consummation of
the Acquisitions, Vestcom has agreed to pay McLaughlin & Tonra, a partnership in
which Mr. McLaughlin held a 50% interest, the sum of $75,000 in payment of
consulting services rendered by that firm in connection with the Acquisitions.

Vestcom has agreed to pay Oppenheimer up to $1.8 million for advisory
services rendered. Such amount is payable only if the Consolidation is
consummated. Assuming the transactions contemplated by the Consolidation are
consummated during 1997, up to $1.0 million is payable on January 1, 1998 and
the remainder is payable in quarterly installments during 1998. In addition,
Vestcom has agreed to reimburse Oppenheimer for up to $75,000 of out-of-pocket
expenses related to such services.

Acquisitions. Concurrently with the consummation of the Offering, Vestcom
will acquire by merger with Vestcom subsidiaries all of the issued and
outstanding capital stock of the Founding Companies (except that COS Information
will be acquired by a stock purchase of its holding company rather than a
merger), at which time each Founding Company will become a wholly-owned
subsidiary of the Company. (See "Canadian Acquisition" below.) The aggregate
consideration that will be paid by Vestcom to acquire the

44
<PAGE> 46

Founding Companies consists of (i) approximately $18.4 million in cash and (ii)
2,852,111 shares of Common Stock (or 36.4% of the outstanding shares after
completion of the Acquisitions and the Offering), for an aggregate value of
approximately $52.6 million, assuming an initial public offering price of $12.00
per share, the mid-point of the range set forth on the cover of this Prospectus.
By way of comparison, investors in the Offering will pay $46.2 million for 49.2%
of the shares to be outstanding after completion of the Acquisitions and the
Offering. In connection with the Acquisitions, the Company will assume all of
the indebtedness of the Founding Companies. Portions of such debt have been
guaranteed by certain stockholders of the Founding Companies in the aggregate
amount of $1.3 million. The Company has agreed to have such guarantees released
or the loans repaid within 120 days after the consummation of the Offering. It
is anticipated that the Company will repay substantially all long-term bank
debt, capital lease obligations incurred prior to December 31, 1996 and related
party indebtedness of the Founding Companies and Vestcom shortly after the
consummation of the Offering, in the aggregate amount of approximately $12.9
million. Such amount includes sums to be repaid to stockholders of the Founding
Companies, including approximately $1,132,000 (as of March 31, 1997) which will
be repaid to Gary J. Marcello and companies he controls.

The Company has consented to the distribution of cash to those Founding
Companies that are S Corporations, namely Comvestrix, DMS, Computer Output,
Image and Mystic, in an amount equal to the balance of each such Founding
Company's Accumulated Adjustment Account ("AAA") as of the consummation (which
shall be a reduction of the cash portion of the purchase price) plus up to 45%
of the net income of the Founding Company for 1996 (to the extent not previously
distributed) and 1997 (estimated through the consummation date), to enable the
stockholders of such Founding Companies to pay income taxes on such corporate
income.

The terms of each Acquisition were negotiated with the shareholders of each
Founding Company based on past earnings history and trends. The following table
sets forth for each Founding Company the aggregate consideration to be paid to
the holders of its common stock in (i) cash and (ii) shares of Common Stock:

<TABLE>
<CAPTION>
SHARES OF
COMMON
FOUNDING COMPANY STOCK(1) CASH
--------------------------------------------------- --------- --------------
(IN THOUSANDS)
<S> <C> <C>
Computer Output(2)................................. 297,028 $1,592
Comvestrix......................................... 943,643 4,771
COS Information(3)................................. 239,988 1,036
DMS................................................ 1,049,760 5,307
EIS(4)............................................. 114,000 1,018
Image(5)........................................... 76,923 3,000
Mystic............................................. 130,769 1,700
</TABLE>

- ---------------
(1) Does not include 730,689, 27,436 and 13,718 shares issued to all of the
stockholders of Comvestrix, one stockholder of DMS and one stockholder of
COS Information, respectively, in connection with the initial capitalization
of Vestcom.

(2) An additional earn-out of up to $1,500,000 may be paid, $420,012 of which
would be paid in cash and the remainder of which would be paid in Common
Stock (89,999 shares if the initial public offering price is $12.00 per
share), depending on Computer Output's 1997 revenues and net income before
interest and taxes ("EBIT"), except for interest on any capital equipment
purchases made after the beginning of the earn-out period.

(3) The stockholders of Lirpaco Inc. (COS Information's parent) will receive
239,988 shares of a Canadian subsidiary of Vestcom, which will be
exchangeable into 239,988 shares of Vestcom Common Stock. The cash payment
in the chart is presented in U.S. dollars. An additional earn-out of up to
$2.1 million Canadian dollars may be paid, all of which would be payable in
shares of Vestcom's Canadian subsidiary valued at $13.00 per share. Such
shares will be exchangeable into up to 137,307 shares of Common Stock
(assuming a maximum .85 Canadian dollar conversion rate), depending on COS
Information's calendar 1997 EBIT, except for interest on any capital
equipment purchases made after the beginning of the earn-out period. See
"Canadian Acquisition."

45
<PAGE> 47

(4) An additional earn-out of up to $6,000,000 may be paid, $1,680,009 of which
would be paid in cash and the remainder of which would be paid by delivery
on the consummation date of the Acquisitions of shares of a class of the
Company's Preferred Stock convertible into up to 359,999 shares of Common
Stock (if the initial public offering price is $12.00 per share), with the
amount of cash and the conversion ratio based on EIS' EBIT, except for
interest on any capital equipment purchases made after the beginning of the
earn-out period, for the two year period beginning on the first day of the
fiscal quarter within which the Offering is consummated.

(5) An additional earn-out of up to $4,499,997 may be paid, $700,007 of which
would be paid in cash and the remainder of which would be paid by delivery
on the consummation date of the Acquisitions of shares of a class of the
Company's Preferred Stock convertible into up to 316,666 shares of Common
Stock (if the initial public offering price is $12.00 per share), with the
amount of cash and the conversion ratio based on Image's EBIT, except for
interest on any capital equipment purchases made after the beginning of the
earn-out period, for the one year period beginning on the first day of the
fiscal quarter within which the Offering is consummated.

Joel Cartun, a principal stockholder of Comvestrix, Gary Marcello, a
principal stockholder of DMS, and Howard April, a principal stockholder of COS
Information, are or will become directors of Vestcom upon consummation of the
Acquisitions. Leslie M. Abcug, a stockholder of Comvestrix, is an executive
officer of Vestcom. Of the consideration described above, Joel Cartun will
receive $4,129,610 and 815,308 shares of Common Stock for his ownership interest
in Comvestrix, Mr. Marcello will receive $3,271,303 and 537,855 shares of Common
Stock for his ownership interest in DMS, Mr. April will receive $499,560 and
127,746 shares of Vestcom's Canadian subsidiary which will be exchangeable into
127,746 shares of Common Stock for his ownership interest in COS Information and
Mr. Abcug will receive $90,813 and 17,929 shares of Common Stock for his
ownership interest in Comvestrix. Mr. April may receive up to an additional
73,075 shares of Vestcom's Canadian subsidiary which would be exchangeable into
an equal number of shares of Common Stock pursuant to certain earn-out
provisions if specified earnings thresholds of COS Information are attained. See
"Principal Stockholders" for the total number of shares of Common Stock to be
held by the Company's executive officers and directors after the Offering.

Pursuant to the agreements relating to the Acquisitions, all stockholders
of each of the Founding Companies have agreed not to compete with the Company
for a period of five years commencing on the consummation date of the
Acquisitions (except for two minority stockholders of Computer Output who have
agreed not to compete for the longer of one year following the consummation date
of the Acquisitions or one year following termination of their employment). A
total of 17 of the stockholders of the various Founding Companies will enter
into three year employment agreements with Vestcom or its subsidiaries effective
upon the consummation of the Offering and the Acquisitions. Mr. McLaughlin has
entered into an employment agreement with Vestcom effective March 1, 1997, which
terminates three years following the consummation of the Offering. Mr. Goldman
has entered into an employment agreement with Vestcom effective May 21, 1997.
See "Management -- Employment Agreements."

After the consummation of the Acquisitions, the Company will lease property
from various entities in which the stockholders of Image, Joel Cartun and Gary
J. Marcello have interests. The Company believes that the rent it will pay for
each of these properties is equal to the fair market rental value of each
respective property. See "Real Estate Transactions."

Canadian Acquisition A subsidiary of Vestcom has been organized under the
laws of the Province of New Brunswick, Canada. This subsidiary will acquire all
of the issued and outstanding stock of Lirpaco Inc., the holding company for COS
Information, in exchange for U.S. $1,036,000 cash and 239,988 shares of a class
of non-voting stock of such New Brunswick corporation (the "Exchangeable
Shares") which will be convertible into 239,988 shares of Common Stock at any
time at the option of the holders of the Exchangeable Shares or, under certain
limited conditions, by Vestcom. In addition, the former Lirpaco stockholders
will receive one share of Vestcom Preferred Stock which will have voting rights
equal to the 239,988 shares of Common Stock into which the Exchangeable Shares
can be converted. If COS Information's EBIT for calendar 1997 meets specified
thresholds, up to 137,307 additional Exchangeable Shares may be issued, which
shares would be convertible into a like number of shares of Common Stock. In
such event, the voting rights of the one share of

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<PAGE> 48

Vestcom Preferred Stock which will be issued to the former Lirpaco stockholders
would be increased to equal the total number of shares of Common Stock into
which the total number of outstanding Exchangeable Shares can be converted. In
addition, in connection with the Acquisition of COS Information, Howard April
will receive an option to purchase 15,000 shares of Common Stock at the initial
public offering price. Mr. April's option, which expires on January 2, 2001,
becomes fully exercisable one year after the date of grant.

Each of the stockholders of the Founding Companies has agreed to indemnify
Vestcom and the Underwriters of the Offering against certain liabilities,
including liabilities under the Securities Act.

REAL ESTATE TRANSACTIONS

Mr. Joel Cartun has a 50% interest in the partnership which owns the
property used by the Company and Comvestrix in Lyndhurst, New Jersey. The
partnership leases the property to Comvestrix. The current lease expires in
2001. Comvestrix's related party rent expense for this property for the fiscal
years ended December 31, 1994, 1995 and 1996 was $661,635, $363,472 and
$628,083, respectively. The current annual rent is $454,632 per year, which the
Company believes to be the fair market rental value of the property. See Note 11
of the Notes to Financial Statements of Comvestrix.

Mr. Gary Marcello (either alone or with his wife) owns interests ranging
from 75% to 100% in the partnerships which own the four properties used by DMS
in Dover, New Jersey and Scranton, Pennsylvania and which lease such property to
DMS. The current leases expire at various times from 1998 through 2004. DMS'
related party rent expense for these properties for the fiscal years ended
December 31, 1994, 1995 and 1996 was $760,468, $639,768 and $777,112,
respectively. The current annual rent for all of these properties is $824,583
per year (inclusive of real estate taxes), which the Company believes to be the
fair market rental value of the property. The Company is exploring the
feasibility of alternative space to the space currently utilized by DMS and
leased from Mr. Marcello. In connection with any move, the Company has agreed to
pay Mr. Marcello's partnerships 80% of the base rent in effect after
consummation of the Acquisitions (the "Reduced Rent") in exchange for early
termination of the existing leases. The Reduced Rent shall be further reduced by
the amount of rent to be paid under any new leases which may be entered into by
Mr. Marcello's partnerships with new tenants. The obligation to pay the Reduced
Rent will terminate on the earlier of the sale of any vacated property or two
years after payment of the Reduced Rent begins. See Note 7 of the Notes to
Combined Financial Statements of DMS.

Mr. James Horst and Mr. Frank Capozzi, the stockholders, officers and
directors of Image, own the property leased to and used by Image Printing in
Milwaukee, Wisconsin. Image's rent expense for this property is $120,000 per
year. Under the current lease, the lessor has the option to increase the rent by
the lesser of 4% per year or the percentage increase in the Consumer Price
Index. See Notes 3 and 8 of the Notes to Financial Statements of Image. Upon
consummation of the Acquisition of Image, the current lease will be terminated
and replaced by a new lease agreement between Image, as lessee, and Mr. James
Horst and Mr. Frank Capozzi, as lessors. The new lease will expire five years
after the consummation of the Offering, subject to an option to renew the lease
for an additional five years. The rent payable by Image under the new lease is
$80,000 per year, triple net, which the Company believes is fair market rental.

OTHER

Gary Marcello and two other officers and shareholders of DMS have made
loans to DMS in the form of demand notes bearing interest at a rate of 6.5% per
annum. Gary Marcello made loans in the following principal amounts: $297,535,
$75,000, $71,705 and $293,932. The two other officers made loans in the amount
of $62,485 and $81,090. See Note 7 of the Notes to Combined Financial Statements
of DMS.

During 1996, EIS forgave a $100,000 note receivable from Steven R.
Bardwell, a stockholder and President of EIS. See Note 12 of the Notes to
Financial Statements of EIS.

COMPANY POLICY

In the future, transactions with affiliates of the Company are anticipated
to be minimal, will be required to be approved by a majority of the Board of
Directors, including a majority of the disinterested members of the Board of
Directors, and will be made on terms no less favorable to the Company than those
that could be obtained from unaffiliated third parties.

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<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, no par value (the "Common Stock"), and 10,000,000 shares of
undesignated stock, which may be issued from time to time by the Board of
Directors as shares of one or more classes or series of common stock or
preferred stock. After giving effect to the Acquisitions, but prior to the
consummation of the Offering, the Company will have outstanding 3,976,447 shares
of Common Stock and 301 shares of Preferred Stock. Upon completion of the
Offering, the Company will have outstanding 7,826,447 shares of Common Stock
(8,403,947 shares if the Underwriters' over-allotment option is exercised in
full) and 301 shares of Preferred Stock. In addition, the Company will have
700,000 shares of Common Stock reserved for issuance under the Company's Stock
Option Plan. See "Management -- Stock Option Plan." As of March 31, 1997, there
were 21 holders of record of Common Stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.

Subject to the rights of any then outstanding shares of Preferred Stock,
the holders of the Common Stock are entitled to such dividends as may be
declared at the discretion of the Board of Directors out of funds legally
available therefor. Holders of Common Stock are entitled to share ratably in the
net assets of the Company upon liquidation after payment or provision for all
liabilities and any preferential liquidation rights of any Preferred Stock then
outstanding. The holders of Common Stock have no pre-emptive rights to purchase
shares of stock of the Company. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock to be issued pursuant to the Offering will be upon payment therefor, fully
paid and nonassessable.

UNDESIGNATED STOCK

The undesignated stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series of preferred stock or
common stock. Subject to the provisions of the Company's Certificate of
Incorporation and limitations prescribed by law, the Board of Directors is
expressly authorized to adopt resolutions to issue the shares, to fix the number
of shares and to change the number of shares constituting any series or class,
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of
preferred stock or common stock, in each case without any further action or vote
by the stockholders.

One share of Class B Preferred Stock will be issued in connection with the
Acquisition of COS Information and initially will have voting rights equal to
the 239,988 shares of Common Stock that the Company will be obligated to issue
upon conversion of the Exchangeable Shares of Vestcom's Canadian subsidiary.
(The number of outstanding shares of Common Stock referred to above includes the
239,988 shares of Common Stock issuable upon conversion of such Exchangeable
Shares.) The voting rights of the share of Class B Preferred Stock will increase
if additional Exchangeable Shares are issued based on COS Information's earnings
before interest and taxes for 1997. See "Certain Transactions -- Organization of
the Company -- Canadian Acquisition." An aggregate of 200 shares of Class A
Convertible Preferred Stock will be issued in connection with the Acquisition of
EIS, and will be convertible into up to 359,999 shares of Common Stock based on
EIS' pre-tax earnings for the two year period beginning on the first day of the
fiscal quarter within which the Offering is consummated. An aggregate of 100
shares of Class C Convertible Preferred Stock will be issued in connection with
the Acquisition of Image, and will be convertible into up to

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<PAGE> 50

316,666 shares of Common Stock based on Image's pre-tax earnings for the one
year period beginning on the first day of the fiscal quarter within which the
Offering is consummated. (The number of outstanding shares of Common Stock
referred to above excludes an aggregate of 676,665 shares of Common Stock
issuable upon conversion of such shares of Preferred Stock.) See "Certain
Transactions." The Company has no current plans to issue any additional shares
of preferred stock or common stock of any class or series.

One of the effects of undesignated stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to obtain control
of the Company by means of a tender offer, proxy contest, merger or otherwise,
and thereby to protect the continuity of the Company's management. The issuance
of shares of preferred stock or common stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, preferred stock or common stock issued by the Company
may rank prior to the Common Stock as to dividend rights, liquidation preference
or both, may have full or limited voting rights and may be convertible into
shares of Common Stock. Accordingly, the issuance of shares of such stock may
discourage bids for the Common Stock at a premium or may otherwise adversely
affect the market price of the Common Stock.

STATUTORY BUSINESS COMBINATION PROVISIONS

The New Jersey Business Corporation Act provides that in determining
whether a proposal or offer to acquire a corporation is in the best interest of
the corporation, the Board may, in addition to considering the effects of any
action on stockholders, consider any of the following: (a) the effects of the
proposed action on the corporation's employees, suppliers, creditors and
customers, (b) the effects on the community in which the corporation operates
and (c) the long-term as well as short-term interests of the corporation and its
stockholders, including the possibility that these interests may best be served
by the continued independence of the corporation. The statute further provides
that if, based on these factors, the Board determines that any such offer is not
in the best interest of the corporation, it may reject the offer. These
provisions may make it more difficult for a stockholder to challenge the Board's
rejection of, and may facilitate the Board's rejection of, an offer to acquire
the Company.

The Company will be subject to the New Jersey Shareholders Protection Act
(the "Protection Act"), which prohibits certain New Jersey corporations from
engaging in business combinations (including mergers, consolidations,
significant asset dispositions and certain stock issuances) with any interested
shareholder (defined to include, among others, any person that becomes a
beneficial owner of 10% or more of the affected corporation's voting power) for
five years after such person becomes an interested shareholder, unless the
business combination is approved by the Board of Directors prior to the date the
shareholder became an interested shareholder. In addition, the Protection Act
prohibits any business combination at any time with an interested shareholder
other than a transaction that (i) is approved by the Board of Directors prior to
the date the interested shareholder became an interested shareholder, or (ii) is
approved by the affirmative vote of the holders of two-thirds of the voting
stock not beneficially owned by the interested shareholder, or (iii) satisfies
certain "fair price" and related criteria.

LIMITATION OF DIRECTORS' LIABILITIES

Pursuant to the provisions of the Company's Certificate of Incorporation,
directors of the Company are not personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or any transaction in which a director has derived an improper
personal benefit.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.

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<PAGE> 51

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the consummation of the Acquisitions,
the Company will have outstanding 7,826,447 shares of Common Stock. The
3,850,000 shares of Common Stock sold in the Offering (plus any additional
shares of Common Stock sold upon exercise of the underwriters' over-allotment
option) will be freely tradeable without restriction unless purchased by
affiliates of the Company. None of the remaining 3,976,447 outstanding shares of
Common Stock (collectively, the "Restricted Shares") have been issued in
transactions registered under the Securities Act, which means that they may be
resold publicly only in future transactions registered under the Securities Act,
or in compliance with an exemption from the registration requirements of the
Securities Act, including the exemption provided by Rule 144 thereunder.

In general, under Rule 144 as amended effective April 29, 1997, if one year
has elapsed since the later of the date of the acquisition of restricted shares
of Common Stock from either the Company or any affiliate of the Company, the
acquiror or subsequent holder thereof may sell, within any three-month period
commencing 90 days after the effective date of the Registration Statement of
which this Prospectus is a part, a number of shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock (approximately
78,000 shares immediately after the Offering, assuming no exercise of the
Underwriters' over-allotment option) or the average weekly trading volume of the
Common Stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. Under Rule 144 as amended
effective April 29, 1997, if two years have elapsed since the later of the date
of the acquisition of restricted shares of Common Stock from the Company or any
affiliate of the Company, a person who is not deemed to have been an "affiliate"
of the Company at any time during the 90 days preceding a sale would be entitled
to sell such shares under Rule 144(k) without regard to the limitations
described above. The foregoing summary of Rule 144 is not intended to be a
complete description thereof.

Upon the consummation of the Offering, the holders of 332,990 of the
Restricted Shares issued or connected with the Company's $1.5 million private
placement (See "Certain Transactions -- Organization of the Company -- Initial
Capitalization") will have certain registration rights. During the period from
the first anniversary of the consummation of the Offering through the seventh
anniversary of such consummation, such holders will have one demand registration
right, exercisable by the holders of a majority of such 332,990 shares, pursuant
to which the Company is required to file a registration statement under the
Securities Act to register the sale of shares by those requesting stockholders
and any other holders of Common Stock with such registration rights who desire
to sell pursuant to such registration statement. The holders of such shares have
agreed not to exercise such rights until two years following the consummation of
the Offering. In addition, subject to certain conditions and limitations, the
holders of such 332,990 shares also have piggyback registration rights at any
time prior to December 31, 2003, pursuant to which they have the right to
participate in registrations by the Company of its equity securities. The
Company will pay the registration fees and expenses in connection with any
requested registration, except that the stockholders exercising such
registration rights will pay any underwriting discounts and commissions relating
to the shares owned by them and included in any such registration. The number of
shares of Common Stock that must be registered on behalf of these selling
stockholders is subject to limitation if the managing underwriter determines
that market conditions require such a limitation. The Company will indemnify the
selling stockholders, and such stockholders will indemnify the Company, against
certain liabilities in respect of any registration statement filed pursuant to
the exercise of such registration rights.

The Company, all of the stockholders of the Founding Companies, the
existing stockholders of the Company and the officers and directors of the
Company have agreed for a period of 180 days from the consummation of the
Offering (the "Lockup Period") not to request or demand the filing of a
registration statement to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) or grant any options or warrants to purchase any
shares of Common Stock without the prior written consent of Oppenheimer & Co.,
Inc., on behalf of the Underwriters, except for (i) any such options granted,
and any such shares of Common Stock issuable upon any options granted, pursuant
to the Stock Option Plan, (ii) the filing by the Company of a shelf

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<PAGE> 52

registration statement to register an additional 2,000,000 shares of Common
Stock with the Commission under the Securities Act for use by the Company as
consideration to be paid in future acquisitions (and not for sales by selling
stockholders of the Company), (iii) the issuance of shares of Common Stock in
connection with future acquisitions and (iv) the filing by the Company of a
Registration Statement on Form S-8 to register the shares of Common Stock
reserved for issuance under the Stock Option Plan.

The Founding Company shareholders have agreed in their respective
Acquisition agreements not to sell or transfer any of the 2,852,111 shares of
Vestcom Common Stock acquired in the Acquisitions for a period of two years
after the consummation of the Offering unless they obtain the prior written
consent of Vestcom. Any decision to grant such consent will be made by the
directors of Vestcom who are not Founding Company shareholders. While the
Company does not anticipate giving its consent to a transfer of such restricted
shares prior to two years from the consummation of the Offering, it would
consider permitting such a transfer in the event that the individual making the
request demonstrated that it would not have an adverse impact on the tax-free
nature of the stock portion of the Acquisitions, that it would not adversely
affect Vestcom's rights to indemnification under the Acquisition agreements and
that it was otherwise in the best interests of Vestcom. Oppenheimer & Co., Inc.
and its affiliates have agreed not to sell or transfer the 154,656 shares of
Vestcom Common Stock which they acquired as part of the initial capitalization
of Vestcom for a period of two years after the consummation of the Offering.

The Company currently intends to file a shelf registration statement to
register an additional 2,000,000 shares of Common Stock with the Commission
under the Securities Act as soon as possible after completion of the Offering
for use by the Company as consideration to be paid in future acquisitions. These
shares will generally be freely tradeable after their issuance, unless the sale
thereof is contractually restricted or the shares are acquired by certain
related parties, in which case they may be sold pursuant to Rule 145 under the
Securities Act. Rule 145 permits, in part, certain persons to resell immediately
securities acquired in transactions covered under the Rule, provided such
securities are resold in accordance with the public information requirements,
volume limitations and manner of sale requirements of Rule 144. Pursuant to Rule
145 as amended effective April 29, 1997, if a period of one year has elapsed
since the date such securities were acquired in such transaction and if the
issuer meets the public information requirements of Rule 144, Rule 145 permits a
person who is not an affiliate of the issuer to freely resell such securities.

Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market could adversely affect prevailing market
prices and the Company's ability to raise equity capital in the future.

Upon the consummation of the Offering, the Company will have outstanding
under the Stock Option Plan options to purchase an aggregate of 288,046 shares
of Common Stock at the initial public offering price. Generally, such options
vest in 25% annual increments commencing one year after consummation of the
Offering. The Company intends to register the shares issuable upon exercise of
options granted under the Stock Option Plan and, upon such registration, such
shares will be eligible for resale in the public market. See
"Management -- Stock Option Plan."

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<PAGE> 53

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Oppenheimer & Co., Inc. and Prudential Securities
Incorporated are acting as Representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite the name of such Underwriter below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITERS COMMON STOCK
----------------------------------------------------------------------- ------------
<S> <C>
Oppenheimer & Co., Inc. ...............................................
Prudential Securities Incorporated.....................................

---------
Total........................................................ 3,850,000
=========
</TABLE>

The Underwriters propose to offer the shares of Common Stock directly to
the public initially at the public offering price set forth on the cover page of
this Prospectus and in part to certain securities dealers at such price less a
concession of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain brokers and
dealers. After the shares of Common Stock are released for sale to the public,
the initial public offering price and other selling terms may from time to time
be changed by the Representatives. The Underwriters are obligated to take and
pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any are taken.

The Company has granted the Underwriters an option, exercisable for up to
30 days after the date of this Prospectus, to purchase up to an aggregate of
577,500 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise such option, the Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them as shown in
the foregoing table bears to the 3,850,000 shares of Common Stock offered
hereby. The Underwriters may exercise such option only to cover over-allotments
made in connection with the sale of the shares of Common Stock offered hereby.
The Representatives have advised the Company that the Underwriters do not intend
to confirm sales in excess of 5% of the shares offered hereby to any account
over which they exercise discretionary authority.

The Company has applied to the Nasdaq National Market for listing of the
Common Stock under the symbol "VESC." In order to meet one of the requirements
for listing the Common Stock on the Nasdaq National Market, the Underwriters
will undertake to sell shares to a minimum of 400 beneficial holders.

The Company has agreed to indemnify the Representatives and the several
Underwriters against certain liabilities, losses and expenses, including
liabilities under the Securities Act and to contribute to payments that the
Underwriters may be required to make in respect thereof. Each of the
stockholders of the Founding Companies has agreed to indemnify Vestcom and the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

The Company's officers and directors, the Company's stockholders prior to
the Offering and the stockholders of the Founding Companies have agreed not to
offer, sell, contract to sell, pledge or grant any option to purchase or
otherwise dispose of such securities for 180 days after the date of this
Prospectus, without the prior written consent of Oppenheimer & Co., Inc., on
behalf of the Underwriters. The Company

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<PAGE> 54

has also agreed not to offer, sell, contract to sell, or otherwise dispose of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or any rights to acquire Common Stock (other than
(i) options which may be granted under the Stock Option Plan, (ii) shares
issuable upon exercise of outstanding options, (iii) the filing of a shelf
registration statement to register an additional 2,000,000 shares of Common
Stock with the Commission under the Securities Act for use by the Company as
consideration to be paid in future acquisitions, (iv) the issuance of shares of
Common Stock in connection with future acquisitions and (v) the filing of a
registration statement on Form S-8 to register the shares of Common Stock
reserved for issuance under the Stock Option Plan) for a period of 180 days
after the date of this Prospectus, without the prior written consent of
Oppenheimer & Co., Inc., on behalf of the Underwriters. See "Shares Eligible for
Future Sale."

For a description of certain investments in Vestcom made by Oppenheimer &
Co., Inc. and its affiliates, and certain fees payable by Vestcom to Oppenheimer
& Co., Inc., see "Certain Transactions." Oppenheimer and its affiliates have
agreed not to sell or transfer the 154,656 shares of Vestcom Common Stock which
they acquired as part of the initial capitalization of Vestcom for a period of
two years after the consummation of the Offering.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for
and purchase shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions from syndicate members in
the Offering, if the syndicate repurchases previously distributed Common Stock
in syndicate covering transactions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities, and may end any of these activities at any time.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
among the Company and the Representatives. The principal factors considered in
such negotiations will be prevailing market conditions, the results of
operations of the Company in recent periods, market valuations of companies that
the Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the history of and prospects
for the industry in which the Company competes, and such other factors as the
Company and the Representatives deem relevant.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company by Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A., Roseland, New
Jersey. Certain legal matters related to the Offering will be passed upon for
the Underwriters by Morgan, Lewis & Bockius LLP, New York, New York.

EXPERTS

The financial statements and schedules included in this Prospectus and
elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information contained in the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the

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<PAGE> 55

Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or any other document are not
necessarily complete; with respect to each such contract or document filed as an
exhibit to the Registration Statement, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement for
a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. A copy of the
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at 500 West Madison Street, Suite 1400, Chicago, IL 60661 and Seven
World Trade Center, 13th Floor, New York, NY 10048. Copies of such material may
be obtained from the Public Reference Branch of the Commission at 450 Fifth
Street, N.W. Washington, DC 20549 upon payment of the fees prescribed by the
Commission. The Commission also maintains an Internet web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of that site
is http://www.sec.gov.

The Company intends to furnish to its stockholders annual reports
containing financial statements audited by independent certified public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year of the Company.

54
<PAGE> 56

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Pro Forma Financial Statements
Basis of Presentation........................................................... F-4
Pro Forma Balance Sheet as of March 31, 1997 (unaudited)........................ F-5
Pro Forma Statement of Operations for the Year Ended December 31, 1996
(unaudited).................................................................... F-6
Pro Forma Statement of Operations for the Three Months Ended March 31, 1996
(unaudited).................................................................... F-7
Pro Forma Statement of Operations for the Three Months Ended March 31, 1997
(unaudited).................................................................... F-8
Notes to Unaudited Pro Forma Combined Financial Statements...................... F-9
Historical Financial Statements
Vestcom International, Inc.
Report of Independent Public Accountants........................................ F-14
Balance Sheet -- As of December 31, 1996........................................ F-15
Statement of Operations -- For the Period from Inception (September 19, 1996) to
December 31, 1996.............................................................. F-16
Statement of Stockholders' Equity -- For the Period From Inception (September
19, 1996) to December 31, 1996................................................. F-17
Statement of Cash Flows -- For the Period From Inception (September 19, 1996) to
December 31, 1996.............................................................. F-18
Notes to Financial Statements................................................... F-19
Condensed Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-23
Condensed Statement of Operations -- For the Three Months Ended March 31, 1997
(unaudited).................................................................... F-24
Condensed Statement of Cash Flows -- For the Three Months Ended March 31, 1997
(unaudited).................................................................... F-25
Notes to Condensed Financial Statements (unaudited)............................. F-26
Comvestrix Corp.:
Report of Independent Public Accountants........................................ F-29
Balance Sheets -- As of December 31, 1995 and 1996.............................. F-30
Statements of Income -- For the Years Ended December 31, 1994, 1995 and 1996.... F-31
Statements of Stockholders' Equity -- For the Years Ended December 31, 1994,
1995 and 1996.................................................................. F-32
Statements of Cash Flows -- For the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-33
Notes to Financial Statements................................................... F-34
Condensed Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-40
Condensed Statements of Income -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-41
Condensed Statements of Cash Flows -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-42
Notes to Condensed Financial Statements (unaudited)............................. F-43
</TABLE>

F-1
<PAGE> 57

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Morris County Direct Mail Services, Inc. and related companies:
Report of Independent Public Accountants........................................ F-44
Combined Balance Sheets -- As of December 31, 1995 and 1996..................... F-45
Combined Statements of Income -- For the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-46
Combined Statements of Stockholders' Equity -- For the Years Ended December 31,
1994, 1995 and 1996............................................................ F-47
Combined Statements of Cash Flows -- For the Years Ended December 31, 1994, 1995
and 1996....................................................................... F-48
Notes to Combined Financial Statements.......................................... F-49
Condensed Combined Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-55
Condensed Combined Statements of Income -- For the Three Months Ended March 31,
1996 (unaudited) and 1997 (unaudited).......................................... F-56
Condensed Combined Statements of Cash Flows -- For the Three Months Ended March
31, 1996 (unaudited) and 1997 (unaudited)...................................... F-57
Notes to Condensed Combined Financial Statements (unaudited).................... F-58
Lirpaco Inc. and Subsidiary:
Report of Independent Public Accountants........................................ F-59
Consolidated Balance Sheets -- As of July 31, 1995 and 1996 and December 31,
1996........................................................................... F-60
Consolidated Statements of Income -- For the Years Ended July 31, 1995 and 1996
and the Five Months Ended December 31, 1995 (Unaudited) and 1996............... F-61
Consolidated Statements of Stockholders' Equity -- For the Years Ended July 31,
1995 and 1996 and the Five Months Ended December 31, 1996...................... F-62
Consolidated Statements of Cash Flows -- For the Years Ended July 31, 1995 and
1996 and the Five Months Ended December 31, 1995 (Unaudited) and 1996.......... F-63
Notes to Consolidated Financial Statements...................................... F-64
Condensed Consolidated Balance Sheets -- As of December 31, 1996 and March 31,
1997 (unaudited)............................................................... F-70
Condensed Consolidated Statements of Income -- For the Three Months Ended March
31, 1996 (unaudited) and 1997 (unaudited)...................................... F-71
Condensed Consolidated Statements of Cash Flows -- For the Three Months Ended
March 31, 1996 (unaudited) and 1997 (unaudited)................................ F-72
Notes to Condensed Consolidated Financial Statements (unaudited)................ F-73
Computer Output Systems, Inc.:
Report of Independent Public Accountants........................................ F-74
Balance Sheets -- As of December 31, 1995 and 1996.............................. F-75
Statements of Income -- For the Years Ended December 31, 1994, 1995 and 1996.... F-76
Statements of Stockholders' Equity -- For the Years Ended December 31, 1994,
1995 and 1996.................................................................. F-77
Statements of Cash Flows -- For the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-78
Notes to Financial Statements................................................... F-79
Condensed Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-84
Condensed Statements of Income -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-85
</TABLE>

F-2
<PAGE> 58

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Condensed Statements of Cash Flows -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-86
Notes to Condensed Financial Statements (unaudited)............................. F-87
Electronic Imaging Services, Inc.:
Report of Independent Public Accountants........................................ F-88
Balance Sheet -- As of December 31, 1996........................................ F-89
Statement of Operations -- For the Year Ended December 31, 1996................. F-90
Statement of Changes in Stockholders' Deficit -- For the Year Ended December 31,
1996........................................................................... F-91
Statement of Cash Flows -- For the Year Ended December 31, 1996................. F-92
Notes to Financial Statements................................................... F-93
Condensed Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-98
Condensed Statements of Operations -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-99
Condensed Statements of Cash Flows -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-100
Notes to Condensed Financial Statements (unaudited)............................. F-101
Image Printing Systems, Inc.:
Report of Independent Public Accountants........................................ F-102
Balance Sheets -- As of December 31, 1995 and 1996.............................. F-103
Statements of Operations -- For the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-104
Statements of Stockholders' Equity -- For the Years Ended December 31, 1994,
1995 and 1996.................................................................. F-105
Statements of Cash Flows -- For the Years Ended December 31, 1994, 1995 and
1996........................................................................... F-106
Notes to Financial Statements................................................... F-107
Condensed Balance Sheets -- As of December 31, 1996 and March 31, 1997
(unaudited).................................................................... F-112
Condensed Statements of Income -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-113
Condensed Statements of Cash Flows -- For the Three Months Ended March 31, 1996
(unaudited) and 1997 (unaudited)............................................... F-114
Notes to Condensed Financial Statements (unaudited)............................. F-115
</TABLE>

F-3
<PAGE> 59

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(UNAUDITED)

The following unaudited pro forma financial statements give effect to the
acquisitions by Vestcom International, Inc. ("Vestcom") of substantially all of
the net assets of Comvestrix Corp. ("Comvestrix"), Direct Mail Services ("DMS"),
Computer Output Systems, Inc. ("Computer Output"), COS Information Inc. ("COS
Information"), Electronic Imaging Services, Inc. ("EIS"), Image Printing
Systems, Inc. ("Image") and Mystic Graphic Systems, Inc. ("Mystic") (together,
the Founding Companies). Vestcom and the Founding Companies are hereinafter
referred to as the Company. These acquisitions (the Acquisitions) will occur
concurrently with the closing of Vestcom's initial public offering (the
Offering) and will be accounted for using the purchase method of accounting.
Vestcom has been identified as the acquiror for financial statement presentation
purposes. The unaudited pro forma financial statements also give effect to the
issuance of Common Stock, which will be issued by Vestcom to the sellers of the
Founding Companies upon the effectiveness of the Offering. These statements are
based on the historical financial statements of the Founding Companies and the
estimates and assumptions set forth below and in the notes to the unaudited pro
forma financial statements.

In December 1996, Vestcom sold 503,846 shares of Common Stock to investors.
As a result, Vestcom recorded a non-recurring, non-cash charge (the "Charge") to
compensation and interest expense of $5.1 million in 1996, representing the
difference between the amount paid for the shares and the fair value of the
shares on the date of sale as estimated for accounting purposes. This Charge of
$5.1 million is not included in pro forma net income in the accompanying
unaudited pro forma financial statements.

The unaudited pro forma combined balance sheet gives effect to these
transactions (the Acquisitions and the Offering) as if they had occurred on
March 31, 1997. The unaudited pro forma combined statements of operations give
effect to the transactions as if they had occurred at the beginning of the
periods presented.

In July 1996, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 97 ("SAB 97") relating to business combinations
immediately prior to an initial public offering. SAB 97 requires that these
combinations be accounted for using the purchase method of acquisition
accounting. Under the purchase method, one of the companies must be designated
as the accounting acquirer. For the remaining companies, $44.0 million,
representing the excess of the fair value of the consideration received over the
fair value of the net assets to be acquired, will be recorded as "goodwill" on
the Company's balance sheet. Goodwill will be amortized as a non-cash charge to
the income statement over a 30-year period. The pro forma impact of this
amortization expense, which is non-deductible for tax purposes, is $1.5 million
per year on an after-tax basis. The amount of goodwill to be recorded and the
related amortization expense will depend in part on the actual Offering price.
See "Certain Transactions -- Organization of the Company."

The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate.
Management has preliminarily analyzed the savings that it expects to be realized
from reductions in salaries and certain benefits to the shareholders of the
Founding Companies. To the extent the shareholders of the Founding Companies
have agreed prospectively to reductions in salary, bonuses and benefits, these
reductions have been reflected in the pro forma statements of operations. With
respect to other potential cost savings, management has not and cannot quantify
these savings until completion of the Acquisitions of the Founding Companies. It
is anticipated that these savings will be offset by costs related to the
Company's new corporate management and by the costs associated with being a
public company. However, because these costs cannot be accurately quantified at
this time, they have not been included in the pro forma financial information.
The unaudited pro forma financial data presented herein do not purport to
represent what the Company's financial position or results of operations would
have actually been had such events occurred at the beginning of the periods
presented, as assumed, or to project the Company's financial position or results
of operations for any future period or the future results of the Founding
Companies. The unaudited pro forma financial statements should be read in
conjunction with the other financial statements and notes thereto included
elsewhere in this Prospectus. Also see "Risk Factors" included elsewhere herein.

F-4
<PAGE> 60

VESTCOM INTERNATIONAL, INC.

PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
POST PRO FORMA
FOUNDING PRO FORMA MERGER FOR
VESTCOM COMPANIES TOTAL ADJUSTMENTS PRO FORMA ADJUSTMENTS OFFERING
----------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.... $ 719,092 $ 1,611,351 $ 2,330,443 -- $ 2,330,443 $ 10,009,645 $12,340,088
Accounts receivable, net..... -- 11,772,578 11,772,578 -- 11,772,578 -- 11,772,578
Due from related parties..... -- 850,865 850,865 $ (553,768) 297,097 -- 297,097
Postage receivable........... -- 1,076,356 1,076,356 -- 1,076,356 -- 1,076,356
Notes receivable............. -- 130,860 130,860 -- 130,860 -- 130,860
Supplies inventory........... -- 1,776,225 1,776,225 -- 1,776,225 -- 1,776,225
Prepaid postage.............. -- 628,780 628,780 -- 628,780 -- 628,780
Prepaid expenses and other... -- 843,585 843,585 -- 843,585 -- 843,585
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total current assets....... 719,092 18,690,600 19,409,692 (553,768) 18,855,924 10,009,645 28,865,569
Property and Equipment, Net.... 7,341 19,070,818 19,078,159 -- 19,078,159 -- 19,078,159
Goodwill....................... -- 392,052 392,052 43,592,370 43,984,422 -- 43,984,422
Other Assets................... 1,483,478 393,142 1,876,620 -- 1,876,620 (1,483,478) 393,142
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total assets........... $ 2,209,911 $38,546,612 $40,756,523 $43,038,602 $83,795,125 $ 8,526,167 $92,321,292
=========== =========== =========== =========== =========== =========== ============
Current Liabilities:
Short-term borrowings........ -- $ 2,463,154 $ 2,463,154 -- $ 2,463,154 $ (2,463,154) --
Current portion of long-term
debt and capital lease
obligations................ -- 4,036,405 4,036,405 -- 4,036,405 (3,116,287) $ 920,118
Due to related parties....... $ 1,292,732 1,302,985 2,595,717 $ (553,768) 2,041,949 (2,041,949) --
Accounts payable and accrued
expenses................... 532,487 7,704,479 8,236,966 1,400,000 9,636,966 (532,487) 9,104,479
Pro forma cash due Founding
Companies.................. -- -- -- 18,423,390 18,423,390 (18,423,390) --
Postage advance.............. -- 2,020,327 2,020,327 -- 2,020,327 -- 2,020,327
Deferred income taxes........ -- -- -- 2,158,781 2,158,781 -- 2,158,781
Other liabilities............ -- 417,360 417,360 -- 417,360 -- 417,360
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total current
liabilities.............. 1,825,219 17,944,710 19,769,929 21,428,403 41,198,331 (26,577,267) 14,621,065
Long-Term Debt and Capital
Lease Obligations............ -- 10,726,313 10,726,313 -- 10,726,313 (4,862,566) 5,863,747
Pledged Stock.................. -- 375,000 375,000 (375,000) -- -- --
Deferred Income Taxes.......... -- 127,584 127,584 -- 127,584 -- 127,584
Deferred Charges and Other
Liabilities.................. -- 530,407 530,407 1,825,000 2,355,407 -- 2,355,407
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total liabilities.......... 1,825,219 29,704,014 31,529,233 22,878,403 54,407,636 (31,439,833) 22,967,803
Stockholders Equity:
Common stock................. 5,481,501 44,206 5,525,707 26,366,721 31,892,428 39,966,000 71,858,428
Preferred stock.............. -- 170,206 170,206 2,421,664 2,591,870 -- 2,591,870
Additional paid-in capital... -- 1,272,299 1,272,299 (1,272,299) -- -- --
Subscriptions receivable..... -- (100,476) (100,476) 100,476 -- -- --
Retained earnings............ (5,096,809) 9,636,491 4,539,682 (9,636,491) (5,096,809) -- (5,096,809)
----------- ----------- ----------- ----------- ----------- ----------- ------------
384,692 11,022,726 11,407,418 17,980,071 29,387,489 39,966,000 69,353,489
Less -- treasury stock......... -- (2,216,613) (2,216,613) 2,216,613 -- -- --
Cumulative translation
adjustments.................. -- 36,485 36,485 (36,485) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total stockholders'
equity................... 384,692 8,842,598 9,227,290 20,160,199 29,387,489 39,966,000 69,353,489
----------- ----------- ----------- ----------- ----------- ----------- ------------
Total liabilities and
stockholder's
equity............... $ 2,209,911 $38,546,612 $40,756,523 $43,038,602 $83,795,125 $ 8,526,167 $92,321,292
=========== =========== =========== =========== =========== =========== ============
</TABLE>

See accompanying notes to unaudited pro forma financial statements

F-5
<PAGE> 61

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
FOUNDING PRO FORMA PRO FORMA
VESTCOM COMPANIES TOTAL ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................................ -- $65,287,014 $65,287,014 -- $65,287,014
Cost of revenues........................................ -- 43,422,326 43,422,326 -- 43,422,326
---------- ----------- ----------- ----------- -----------
Gross profit.......................................... -- 21,864,688 21,864,688 -- 21,864,688
Selling, general and administrative expenses............ $ 1,633,042 18,260,881 19,893,923 $(4,377,545)(e) 15,516,378
Goodwill amortization................................... -- -- -- 1,492,769(f) 1,492,769
---------- ----------- ----------- ----------- -----------
Income (loss) from operations........................... (1,633,042) 3,603,807 1,970,765 2,884,776 4,855,541
Other income (expense):
Interest expense...................................... (3,444,917) (895,218) (4,340,135) 4,340,135(g) --
Interest and other income............................. -- 190,339 190,339 -- 190,339
---------- ----------- ----------- ----------- -----------
Income before provision for income taxes................ (5,077,959) 2,898,928 (2,179,031) 7,224,911 5,045,880
Provision for income taxes.............................. -- 162,339 162,339 2,453,121(h) 2,615,460
---------- ----------- ----------- ----------- -----------
Net income.............................................. (5,077,959) 2,736,589 (2,341,370) 4,771,790 2,430,420
========== =========== =========== =========== ===========
Net income per share.................................... (j) $ .31
===========
Weighted average shares used in computing pro forma net
income per share...................................... (j) 7,826,815
===========
</TABLE>

See accompanying notes to unaudited pro forma financial statements

F-6
<PAGE> 62

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
FOUNDING PRO FORMA PRO FORMA
VESTCOM COMPANIES ADJUSTMENTS COMBINED
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues......................................... -- $16,193,424 -- $16,193,424
Cost of revenues................................. -- 10,407,997 -- 10,407,997
-------- ----------- --------- -----------
Gross profit................................... -- 5,785,427 -- 5,785,427
Selling, general and administrative expenses..... -- 4,238,124 $(577,826)(e) 3,660,298
Goodwill amortization............................ -- -- 362,468(f) 362,468
-------- ----------- --------- -----------
Income (loss) from operations.................... -- 1,547,303 215,358 1,762,661
Other income (expense):
Interest expense............................... -- (140,242) 140,242(g) --
Interest and other income...................... -- 15,281 -- 15,281
-------- ----------- --------- -----------
Income before provision for income taxes......... -- 1,422,342 355,600 1,777,942
Provision for income taxes....................... -- 66,417 789,747(h) 856,164
-------- ----------- --------- -----------
Net income....................................... -- $ 1,355,925 $(434,147) $ 921,778
======== =========== ========= ===========
Net income per share............................. (j) $ .12
===========
Weighted average shares used in computing pro
forma net income per share..................... (j) 7,826,815
===========
</TABLE>

See accompanying notes to unaudited pro forma financial statements

F-7
<PAGE> 63

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
FOUNDING PRO FORMA PRO FORMA
VESTCOM COMPANIES TOTAL ADJUSTMENTS COMBINED
-------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues..................................... -- $18,430,295 $18,430,295 $ (123,559)(i) $18,306,736
Cost of revenues............................. -- 11,648,416 11,648,416 (123,559)(i) 11,524,857
-------- ---------- ----------- ----------- ----------
Gross profit............................... -- 6,781,879 6,781,879 -- 6,781,879
Selling, general and administrative
expenses................................... $ 3,897 4,650,233 4,654,130 (577,826)(e) 4,076,304
Goodwill amortization........................ -- -- -- 363,270(f) 363,270
-------- ---------- ----------- ----------- ----------
Income (loss) from operations................ (3,897) 2,131,646 2,127,749 214,556 2,342,305
Other income (expense):
Interest expense........................... (26,813) (347,522) (374,335) 374,335(g) --
Interest and other income.................. 11,860 (7,461) 4,399 -- 4,399
-------- ---------- ----------- ----------- ----------
Income before provision for income taxes..... (18,850) 1,776,663 1,757,813 588,891 2,346,704
Provision for income taxes................... -- 90,360 90,360 993,629(h) 1,083,989
-------- ---------- ----------- ----------- ----------
Net income................................... $(18,850) $ 1,686,303 $ 1,667,453 (404,738) 1,262,715
======== ========== =========== =========== ==========
Net income per share......................... (j) $ .16
==========
Weighted average shares used in computing pro
forma net income per share................. (j) 7,826,815
==========
</TABLE>

See accompanying notes to unaudited pro forma financial statements

F-8
<PAGE> 64

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)

1. VESTCOM INTERNATIONAL, INC. BACKGROUND:

Vestcom International, Inc. (Vestcom) was incorporated to create an
international provider of computer output and document management services.
Vestcom has conducted no operations to date and will acquire the Founding
Companies concurrently with the consummation of the Offering.

2. HISTORICAL FINANCIAL STATEMENTS:

The historical financial statements represent the financial position and
results of operations of the Founding Companies and were derived from the
respective financial statements where indicated. All Founding Companies have a
December 31 year-end or they have been converted to a December 31 year-end. The
historical financial statements have been included in accordance with Securities
and Exchange Commission (SEC) Staff Accounting Bulletin No. 80.

3. ACQUISITION OF FOUNDING COMPANIES:

Concurrent with the consummation of the Offering, Vestcom will acquire
substantially all of the net assets of the Founding Companies. All of the
acquisitions of the Founding Companies will be accounted for using the purchase
method of accounting, with Vestcom being treated as the accounting acquiror for
financial statement purposes.

The following table sets forth for each Founding Company the consideration
to be paid its common stockholders in (i) cash and (ii) shares of Common Stock.
For purposes of computing the estimated purchase price for accounting purposes,
the value of the shares is determined using an estimated fair value of $10.80
per share (or $30.8 million), which represents a discount of ten percent from
the assumed initial public offering price of $12 due to restrictions on the sale
and transferability of the shares issued.

<TABLE>
<CAPTION>
SHARES OF
FOUNDING COMPANY COMMON STOCK(1) CASH
---------------------------------------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Computer Output(2)............................ 297,028 $1,592
Comvestrix.................................... 943,643 4,771
COS Information(3)............................ 239,988 1,036
DMS........................................... 1,049,760 5,307
EIS(4)........................................ 114,000 1,018
Image(5)...................................... 76,923 3,000
Mystic........................................ 130,769 1,700
</TABLE>

(2) An additional earn-out of up to $1,500,000 may be paid, $420,012 of which
would be paid in cash and the remainder of which would be paid in Common
Stock (89,999 shares if the initial public offering price is $12.00 per
share), depending on Computer Output's calendar 1997 revenues and net income
before interest and taxes ("EBIT"), except for interest on any capital
equipment purchases made after the beginning of the earn-out period.

F-9
<PAGE> 65

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

valued at $13.00 per share. Such shares would be exchangeable into up to
137,307 shares of Common Stock (assuming a maximum .85 Canadian dollar
conversion rate), depending on COS Information's calendar 1997 EBIT, except
for interest on any capital equipment purchases made after the beginning of
the earn-out period. See "Canadian Acquisition."

(4) An additional earn-out of up to $6,000,000 may be paid, $1,680,009 of which
would be paid in cash and the remainder of which would be paid by delivery
of shares of a class of the Company's Preferred Stock convertible into up to
359,999 shares of Common Stock if the initial public offering price is
$12.00 per share, with the amount of cash and the conversion ratio based on
EIS' EBIT, except for interest on any capital equipment purchases made after
the beginning of the earn-out period, for the two year period beginning on
the first day of the fiscal quarter within which the Offering is
consummated.

(5) An additional earn-out of up to $4,499,997 may be paid, $700,007 of which
would be paid in cash and the remainder of which would be paid by delivery
of shares of a class of the Company's Preferred Stock convertible into up to
316,666 shares of Common Stock if the initial public offering price is
$12.00 per share, with the amount of cash and the conversion ratio based on
Image's EBIT, except for interest on any capital equipment purchases made
after the beginning of the earn-out period, for the one year period
beginning on the first day of the fiscal quarter within which the Offering
is consummated.

The estimated purchase price for the Acquisitions is subject to certain
purchase price adjustments at and following consummation. See "Certain
Transactions".

Of the estimated total purchase price of $49.2 million (based on the fair
value of the cash and the shares to be issued) in the Acquisitions, $5.2 million
has been allocated to the assets acquired and liabilities assumed.

Based upon management's analysis, it is anticipated that the historical
carrying value of the Founding Companies' assets and liabilities will
approximate fair value. The amount allocated to goodwill is $44.0 million.
Management has not identified any other material tangible or identifiable
intangible assets of the Founding Companies to which a portion of the purchase
price could reasonably be allocated.

F-10
<PAGE> 66

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

4. UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS:

The following tables summarize unaudited pro forma combined balance sheet
adjustments:

<TABLE>
<CAPTION>
PRO FORMA POST- MERGER POST- MERGER POST- MERGER POST- MERGER
ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENT ADJUSTMENTS
(a) (b) (c) (d) (TOTAL)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents..................... -- 40,916,991 (12,483,956) (18,423,390) 10,009,645
Due from related parties...................... (553,768) -- -- -- --
Goodwill...................................... 43,592,370 -- -- -- --
Other assets.................................. -- (1,483,478) -- -- (1,483,478)
Short-term borrowings......................... -- -- 2,463,154 -- 2,463,154
Current portion of long-term debt and capital
lease obligations........................... -- -- 3,116,287 -- 3,116,287
Due to related parties........................ 553,768 -- 2,041,949 -- 2,041,949
Pro forma cash due Founding Companies......... (18,423,390) -- -- 18,423,390 18,423,390
Accounts payable and accrued expenses......... (1,400,000) 532,487 -- -- 532,487
Deferred income taxes......................... (2,158,781) -- -- -- --
Long-term debt and capital lease
obligations................................. -- -- 4,862,566 -- 4,862,566
Pledged stock................................. 375,000
Other liabilities............................. (1,825,000) -- -- -- --
Common stock.................................. (26,366,721) (39,966,000) -- -- (39,966,000)
Preferred stock............................... (2,421,664) -- -- -- --
Additional paid-in capital.................... 1,272,299 -- -- -- --
Subscriptions receivable...................... (100,476) -- --
Retained earnings............................. 9,636,491 -- -- -- --
Treasury stock................................ (2,216,613) -- -- -- --
Cumulative translation adjustments............ 36,485 -- -- -- --
----------- ----------- ----------- ----------- -----------
0 0 0 0 0
=========== =========== =========== =========== ===========
</TABLE>

- ---------------
(a) Records the purchase of the Founding Companies, including the elimination of
inter-company balances, and the estimated S Corporation distributions of $.5
million and the accrual of advisory fees payable to Oppenheimer & Co., Inc.

Other liabilities have been provided for the termination of the DMS leases
pursuant to the contractual terms of the Acquisition of DMS.

Common Stock includes the stock to be issued to the Founding Companies and
elimination of the original common stock of the Founding Companies.

Preferred Stock includes the stock to be issued to Lirpaco (239,988 shares
at $10.80 per share) and elimination of the original preferred stock on
Lirpaco's books.

(b) Records the proceeds from the issuance of 3,850,000 shares of Vestcom Common
Stock, net of underwriting discounts of $3.2 million and estimated offering
costs of $3.0 million. Offering costs primarily consist of accounting fees,
legal fees and printing expenses.

(c) Records the repayment of all debt, including related party debt, and capital
lease obligations with proceeds from the Offering.

(d) Records the cash portion to be paid to the Founding Companies in connection
with the Acquisitions.

F-11
<PAGE> 67

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

5. UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS:

(e) Adjusts compensation to the level the owners of certain of the Founding
Companies have agreed to receive subsequent to the Acquisitions. Amounts
include:

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1996 HISTORICAL CONTRACTUAL ADJUSTMENT
--------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Salaries..................................... $4,283,932 $2,206,188(i) $2,077,744
Perks........................................ 185,700 -- 185,700
Rent adjustments............................. 963,223 683,612(ii) 279,611
Life insurance............................... 101,448 -- 101,448
Forgiveness of debt.......................... 100,000 -- 100,000
Consideration lower than initial public
offering price for shares issued in
December 1996(iii)......................... 1,633,042 -- 1,633,042
---------- ---------- ----------
$7,267,345 $2,889,800 $4,377,545
========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 1996 HISTORICAL CONTRACTUAL ADJUSTMENT
--------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Salaries..................................... $ 956,433 $ 520,297(i) $ 436,136
Perks........................................ 46,425 -- 46,425
Rent adjustments............................. 240,806 170,903(ii) 69,903
Life insurance............................... 25,362 -- 25,362
---------- ---------- ----------
$1,269,026 $ 691,200 $ 577,826
========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, 1997 HISTORICAL CONTRACTUAL ADJUSTMENT
--------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Salaries..................................... $ 956,433 $ 520,297(i) $ 436,136
Perks........................................ 46,425 -- 46,425
Rent adjustments............................. 240,806 170,903(ii) 69,903
Life insurance............................... 25,362 -- 25,362
---------- ---------- ----------
$1,269,026 $ 691,200 $ 577,826
========== ========== ==========
</TABLE>

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

(i) Amounts to be paid as salaries to Founding Company shareholders
pursuant to employment agreements to be executed at the closing of the
Acquisitions of the Founding Companies.

(ii) Amounts to be paid pursuant to amended leases to be executed at the
closing of the Acquisitions between entities controlled by Founding
Company shareholders and the Company.

(iii) Reflects the reduction in compensation expense related to the
non-recurring non-cash Charge recorded by Vestcom related to Common
Stock issued to management and consultants of the Company. The
issuances of Common Stock were made in contemplation of the
Consolidation and no future issuances of this nature are anticipated.

(f) Records pro forma goodwill amortization expense using a 30-year estimated
life.

(g) Records the decrease in interest expense based on pro forma adjustments to
debt and capital leases, including a $3.4 million reduction related to the
non-recurring, non-cash charge recorded by Vestcom for the Common Stock
issued in December 1996.

(h) Records the incremental provisions for federal and state income taxes
relating to the compensation differential and other pro forma adjustments as
well as the conversion from an S-corp to a C-corp of Comvestrix, DMS, Image,
Computer Output, and Mystic.

(i) Eliminates inter-company sales.

(j) Upon completion of the Offering, the number of shares to be used in
computing pro forma income per share from continuing operations consists of
(i) 1,124,336 shares issued to the initial investors in Vestcom, (ii)
2,852,111 shares to be issued as consideration in the Acquisitions
(including 239,988 shares which may be issued upon the conversion of an
equal number of shares of Vestcom's Canadian subsidiary to be issued in
connection with the Acquisition of a Founding Company located in Canada),

F-12
<PAGE> 68

VESTCOM INTERNATIONAL, INC. AND FOUNDING COMPANIES

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)

(iii) the 3,850,000 Shares being offered hereby, and (iv) 368 shares assumed
to have been issued for consideration lower than the assumed initial public
offering price. Such number excludes (x) 577,500 shares issuable upon
exercise of the Underwriters' over-allotment option and (y) 700,000 shares
of Common Stock reserved for issuance under the Company's 1997 Equity
Compensation Program (the "Stock Option Plan"), and (z) up to an aggregate
of 903,971 additional shares which may be issued in connection with the
Acquisitions of four Founding Companies pursuant to certain earn-out
provisions if specified revenue and earnings thresholds are achieved.

<TABLE>
<S> <C>
Shares issued to initial investors................................ 1,124,336
Shares issued in initial public offering.......................... 3,850,000
Shares issued to acquire Founding Companies....................... 2,852,111
Shares assumed to have been issued for consideration lower than
the initial public offering price, as per SAB No. 83............ 368
---------
Shares estimated to be outstanding................................ 7,826,815
=========
</TABLE>

6. STOCKHOLDERS' EQUITY

Total stockholders' equity reconciles to pro forma stockholders' equity as
follows:

<TABLE>
<S> <C>
Total stockholders' equity...................................... $ 9,227,290
Acquisition of Founding Companies............................... 30,802,797
Less: Founding Companies' equity................................ (8,842,598)
Less: Organization costs........................................ (1,800,000)
-----------
Proforma stockholders' equity................................... $29,387,489
==========
</TABLE>

F-13
<PAGE> 69

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Vestcom International, Inc.:

We have audited the accompanying balance sheet of Vestcom International,
Inc. (a New Jersey corporation), as of December 31, 1996, and the related
statements of operations, stockholders' equity and cash flows from inception
(September 19, 1996) through December 31, 1996. 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 Vestcom International, Inc.
as of December 31, 1996 and the results of its operations and its cash flows
from inception (September 19, 1996) through December 31, 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 25, 1997 (except
with respect to Note 3
as to which the date is
March 17, 1997)

F-14
<PAGE> 70

VESTCOM INTERNATIONAL, INC.

BALANCE SHEET
AS OF DECEMBER 31, 1996

ASSETS

<TABLE>
<S> <C>
CASH AND CASH EQUIVALENTS, (including restricted cash of $850,000)............ $ 1,344,758
DEFERRED OFFERING COSTS....................................................... 392,664
----------
Total assets........................................................ $ 1,737,422
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable to related parties............................................ $ 1,292,732
Accrued expenses............................................................ 320,230
----------
Total liabilities................................................... 1,612,962
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000,000 shares authorized; 1,295,192 shares
issued and outstanding................................................... 5,481,501
Preferred stock, no par value; 3,000,000 shares authorized; no shares issued
or outstanding........................................................... --
Subscriptions receivable.................................................... (279,082)
Accumulated deficit......................................................... (5,077,959)
----------
Total stockholders' equity.......................................... 124,460
----------
Total liabilities and stockholders' equity.......................... $ 1,737,422
==========
</TABLE>

The accompanying notes to financial statements
are an integral part of this balance sheet.

F-15
<PAGE> 71

VESTCOM INTERNATIONAL, INC.

STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996

<TABLE>
<S> <C>
REVENUES........................................................................ $ --
COST OF REVENUES................................................................ --
-----------
Gross profit.......................................................... --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 1,633,042
-----------
Loss from operations.................................................. (1,633,042)
OTHER EXPENSES -- Interest expense.............................................. 3,444,917
-----------
Net loss.............................................................. $(5,077,959)
===========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-16
<PAGE> 72

VESTCOM INTERNATIONAL, INC.

STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------------- SUBSCRIPTIONS ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE DEFICIT EQUITY
--------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
SEPTEMBER 19, 1996............... -- $ -- $ -- $ -- $ --
Issuance of common stock......... 791,346 39,965 -- -- 39,965
Issuance of common stock......... 503,846 5,441,536 (279,082) -- 5,162,454
Net loss......................... -- -- -- (5,077,959) (5,077,959)
--------- ---------- --------- ----------- -----------
BALANCE AT
DECEMBER 31, 1996................ 1,295,192 $5,481,501 $(279,082) $(5,077,959) $ 124,460
========= ========== ========= =========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-17
<PAGE> 73

VESTCOM INTERNATIONAL, INC.

STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1996) TO DECEMBER 31, 1996

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $(5,077,959)
Adjustments to reconcile net income to net cash used in operating
activities --
Discount on issuance of stock.............................................. 5,074,233
Changes in operating assets (increase) decrease in -- Deferred offering
costs..................................................................... (392,664)
Changes in operating liabilities increase (decrease) in -- Accrued
expenses.................................................................. 320,230
-----------
Net cash used in operating activities................................. (76,160)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable................................................... 1,292,732
Sale of common stock.......................................................... 128,186
-----------
Net cash provided by financing activities............................. 1,420,918
-----------
Net increase in cash and cash equivalents............................. 1,344,758
CASH AND CASH EQUIVALENTS, beginning of period.................................. --
-----------
CASH AND CASH EQUIVALENTS, end of period........................................ $ 1,344,758
===========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-18
<PAGE> 74

VESTCOM INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Vestcom International, Inc. (a New Jersey corporation) ("Vestcom" or the
"Company"), was formed in September 1996 to create an international provider of
computer output and document management services. The Company's primary strategy
is to consolidate similar and complementary companies in the highly fragmented
computer output and document management services industry through acquisitions.

Vestcom intends to acquire seven companies (the "Acquisitions"), complete
an initial public offering (the "Offering") of its common stock and, subsequent
to the Offering, continue to acquire, through merger or purchase, similar
companies to expand its operations. In March 1997, Vestcom filed a registration
statement on Form S-1 for the initial public offering of its common stock.

Vestcom's primary assets at December 31, 1996, are cash, receivables and
deferred offering costs. Vestcom has not conducted any operations, and all
activities to date have related to the Acquisitions and the Offering. Cash was
generated from related parties for the initial capitalization of the Company
(see Note 4). There is no assurance that the Acquisitions discussed above and in
Note 7 will be completed and that Vestcom will be able to generate future
operating revenues. Funding for the deferred offering costs has been provided by
the parties described in Note 4. Vestcom is dependent upon the Offering to fund
the amounts due to such parties, the pending acquisitions and future operations.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Restricted
cash of $850,000 is held in escrow at December 31, 1996 and may only be used to
pay expenses associated with the formation of the Company, the Acquisitions, and
the Offering.

Deferred Offering Costs

The Company has deferred all costs of raising capital. These costs will be
offset against the capital generated by the Offering.

Income Taxes

The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109.
Under this method, deferred income taxes are recorded based upon differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are received or settled.

The Company has recorded a full valuation allowance against all deferred
tax assets due to the uncertainty of ultimate realizability. Accordingly, no
income tax benefits have been recorded for current year losses.

F-19
<PAGE> 75

VESTCOM INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

New Accounting Pronouncements

Effective September 19, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, in the event that facts and circumstances indicate that
property and equipment, and intangible or other assets, may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future cash flows associated with the asset is compared to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow value was necessary. Adoption of this standard did not have
a material effect on the financial position or results of operations of the
Company.

As of September 19, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation," will be effective for the Company. SFAS No. 123 permits, but does
not require, a fair value-based method of accounting for employee stock option
plans which results in compensation expense recognition when stock options are
granted. As permitted by SFAS No. 123, the Company will provide pro forma
disclosure of net income and earnings per share, as applicable, in the notes to
future consolidated financial statements.

(3) NOTES PAYABLE

On September 19, 1996, the Company issued Promissory Notes to related
parties in the aggregate amount of $160,035. The principal and interest are due
on the earlier of the Offering, or June 30, 1997. On December 31, 1996, the
Company issued Senior Notes to related parties in the aggregate amount of
$1,132,697. The principal and interest are due and payable on the earlier of the
Offering, or June 30, 1997. All notes bear interest at a rate equal to the
fluctuating interest rate announced by a certain bank as its prime rate (8 1/4%
at December 31, 1996). The Senior Notes include notes payable to Oppenheimer &
Co., Inc. ("Oppenheimer"), Opco Senior Executive Partnership, L.P. ("OSEP") (an
Oppenheimer affiliate), Richard D. White (a managing director of Oppenheimer who
will become a director of Vestcom upon consummation of the Offering), Comvestrix
Corp. ("Comvestrix") (one of the Founding Companies), an entity controlled by
Gary J. Marcello (president of a Founding Company), and Mr. Howard April
(president of a Founding Company) in the principal amounts of $432,495.53,
$108,123.88, $72,082.59, $399,996.26, $79,999.16 and $39,999.58, respectively.
In the event the Company is unable to pay the notes in full when due, the
noteholders have agreed to extend the due date of the notes to the earlier of
the Offering or December 31, 1998. In addition, to the extent the Company's net
assets are inadequate to satisfy the notes in full at December 31, 1998, the
noteholders have agreed not to take any action to collect on such notes.

(4) INITIAL CAPITALIZATION

The Company was initially capitalized with $1.7 million, $200,000 of which
was funded in September 1996 and the remaining $1.5 million of which was funded
in December 1996. The $200,000 was comprised of $160,035 of promissory notes
provided by Comvestrix and Peter J. McLaughlin (Executive Vice President of
Vestcom) and $39,965 of equity, represented by 791,346 shares of common stock,
provided by the stockholders of Comvestrix and Mr. McLaughlin. The 791,346
shares include 512,446 shares which were issued to Joel Cartun (President, Chief
Executive Officer and a director of Vestcom and Comvestrix), 11,127 shares which
were issued to Leslie M. Abcug (Vice President -- Finance and Administration of
Vestcom and Comvestrix) and 197,837 shares which were issued to Mr. McLaughlin.

The $1.5 million was raised in a private placement of stock and notes to
Oppenheimer, OSEP, Mr. White, Comvestrix, the stockholders of Comvestrix
(including Mr. Cartun and Mr. Abcug), Mr. Marcello's company and Mr. April's
company. Mr. Marcello and Mr. April will become directors of Vestcom upon the
consummation of the Offering.

The $1.5 million was comprised of 503,846 shares of common stock of
Vestcom, and notes in the aggregate principal amount of $1,132,697. Shares
issued included 229,773, 57,443, 38,296, 118,444, 27,436, 13,718 and 2,572
shares of Common Stock to Oppenheimer, OSEP, Mr. White, Mr. Cartun, Mr.
Marcello's

F-20
<PAGE> 76

VESTCOM INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

entity, Mr. April and Mr. Abcug, respectively. In connection with the sale of
the 503,846 shares of common stock, the Company recorded a non-recurring,
non-cash charge to compensation and interest expense of $5.1 million,
representing the difference between the amount paid for the shares and the
estimated fair value of the shares at the date of sale.

(5) RELATED PARTY TRANSACTION

The Company has signed a definitive agreement to acquire Comvestrix, a
related company through common ownership, to be effective with the Offering.
Comvestrix will be acquired for a total consideration consisting of 943,643
shares of common stock and approximately $4.8 million in cash which will be paid
out of the net proceeds of the Offering.

Mr. McLaughlin received $74,400 from Vestcom in 1997 for consulting
services rendered to Vestcom during 1996, which is included in deferred offering
costs in the accompanying balance sheet. In addition, upon the consummation of
the Offering, Vestcom has agreed to pay McLaughlin & Tonra, a partnership in
which Mr. McLaughlin held a 50% interest, the sum of $75,000 in payment of
consulting services rendered by that firm in connection with the Acquisitions
and the Offering.

(6) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

Merger Agreements

Vestcom and separate wholly-owned subsidiaries have signed definitive
agreements to acquire by merger seven companies (the Founding Companies) to be
effective with the Offering. The Founding Companies are Comvestrix Corp., Morris
County Direct Mail Services, Inc. and related companies, Computer Output
Systems, Inc., Electronic Imaging Services, Inc., Image Printing Systems Inc.,
Lirpaco and subsidiary and Mystic Graphic Systems, Inc. The aggregate
consideration that will be paid by Vestcom to acquire the Founding Companies is,
subject to working capital adjustments and earnouts, approximately $18.4 million
in cash and 2,852,111 shares of Vestcom common stock.

Credit Facility

In March 1997, the Company received a commitment letter from a bank
providing for a $30 million bank credit facility to be used for acquisitions,
working capital and other corporate purposes. This credit facility is contingent
upon the Offering occurring.

Acquisition and Offering Costs

Subsequent to December 31, 1996, the Company has incurred additional costs,
including professional fees and travel, associated with the acquisition of the
Founding Companies and the Offering. Accordingly, accrued liabilities have
increased to approximately $1.2 million as of February 28, 1997.

Stock Option Plan

In March 1997, the Company approved the 1997 Equity Compensation Program
(the "Stock Option Plan") which provides for the granting or awarding of stock
options and stock appreciation rights to nonemployee directors, officers and
other key employees and consultants (including officers of the Founding
Companies). The number of shares authorized and reserved for issuance under the
Plan is limited to the greater of 700,000 shares or 10 percent of the number of
shares of common stock outstanding. In general, the terms of the option awards
(including vesting schedules) will be established by the Company's Board of
Directors or a Compensation Committee.

The Stock Option Plan also provides for automatic option grants to
directors who are not otherwise employed by Vestcom or its subsidiaries. Upon
commencement of service, a nonemployee director will receive a nonqualified
option to purchase 10,000 shares of common stock, and continuing nonemployee
directors will

F-21
<PAGE> 77

VESTCOM INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

receive annual options to purchase 5,000 shares of common stock. Options granted
to nonemployee directors become fully exercisable one year after the date of
grant. Nonemployee directors' options have a term of ten years from the date of
grant.

Upon consummation of the Acquisitions and the Offering, options covering an
aggregate of 288,046 shares of common stock will be outstanding under the Stock
Option Plan, including (i) options to purchase 10,000 shares of common stock
which will have been granted to each of Mr. White, Fred S. Lafer, Stephen R.
Bova and Leonard J. Fassler, (ii) options to purchase 15,000 shares of common
stock which will have been granted to Mr. April and (iii) options to purchase an
additional 233,046 shares of common stock which will have been granted to other
employees of Vestcom and its subsidiaries. All of these options will expire ten
years after the date of grant (except for Mr. April's options, which will expire
on January 2, 2001) and have an exercise price, subject to adjustment, equal to
the initial public offering price of the Common Stock in the Offering. Such
options will be exercisable annually in 25% increments beginning with the first
anniversary of the date of grant, except for the options granted to Messrs.
White, April, Lafer, Bova and Fassler, which become fully exercisable one year
after the date of grant.

Employment Agreements

Mr. Cartun and Mr. McLaughlin have each entered into an employment
agreement with the Company. Mr. Cartun's will commence on the consummation of
the Offering and the Acquisitions and Mr. McLaughlin's agreement commenced on
March 1, 1997. Both agreements will continue for a term of three years following
the consummation of the Offering. Pursuant to their respective agreements, Mr.
Cartun will serve as President and Chief Executive Officer of the Company at an
annual base salary of $200,000 and Mr. McLaughlin will serve as Executive Vice
President of the Company at an annual base salary of $144,000.

Undesignated Stock

In March, 1997, the Company filed a restated Certificate of Incorporation,
to eliminate the Preferred Stock and create a class of 10,000,000 shares of
Undesignated Stock.

New Accounting Standard

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share". This statement supersedes APB Opinion No. 15,
"Earnings per Share" and simplifies the computation of earnings per share
("EPS"). Primary EPS is replaced with a presentation of basic EPS. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Fully diluted EPS is replaced with diluted EPS. Diluted EPS reflects the
potential dilution if certain securities are converted. SFAS No. 128 requires
dual presentation of basic and diluted EPS by entities that issue any securities
other than ordinary common stock. SFAS No. 128 will be effective for financial
statements for both interim and annual periods ending after December 15, 1997,
and requires retroactive restatement of all EPS data presented. The Company
plans to adopt the statement on December 31, 1997. The Company does not expect
the effect of adopting SFAS No. 128 to have a material impact on its EPS
calculations, and, if adopted currently, SFAS No. 128 would not have a material
impact on the Company's reported EPS.

F-22
<PAGE> 78

VESTCOM INTERNATIONAL, INC.

CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
DECEMBER 31, 1996 MARCH 31, 1997 MARCH 31, 1997
----------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS...................... $ 1,344,758 $ 719,092 $ 719,092
PROPERTY AND EQUIPMENT, net.................... -- 7,341 7,341
DEFERRED OFFERING COSTS........................ 392,664 1,483,478 1,483,478
----------- ----------- ------------
Total assets......................... $ 1,737,422 $ 2,209,911 $ 2,209,911
=========== =========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable to related parties............. $ 1,292,732 $ 1,292,732 $ 1,292,732
Pro forma cash due to Founding Companies..... -- -- 18,423,390
Accrued expenses............................. 320,230 532,487 532,487
----------- ----------- ------------
Total liabilities.................... 1,612,962 1,825,219 20,248,609
----------- ----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock................................. 5,481,501 5,481,501 5,481,501
Pro forma distributions to Founding
Companies................................. -- -- (18,423,390)
Subscriptions receivable..................... (279,082) -- --
Accumulated deficit.......................... (5,077,959) (5,096,809) (5,096,809)
----------- ----------- ------------
Total stockholders' equity........... 124,460 384,692 (18,038,698)
----------- ----------- ------------
Total liabilities and stockholders'
equity............................. $ 1,737,422 $ 2,209,911 $ 2,209,911
=========== =========== ============
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these balance sheets

F-23
<PAGE> 79

VESTCOM INTERNATIONAL, INC.

CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997

<TABLE>
<S> <C>
REVENUES........................................................................ $ --
COST OF REVENUES................................................................ --
--------
Gross profit.......................................................... --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.................................... 3,897
--------
Loss from operations.................................................. (3,897)
OTHER INCOME (EXPENSE)
Interest expense.............................................................. (26,813)
Interest and other income..................................................... 11,860
--------
Net loss.............................................................. $(18,850)
========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-24
<PAGE> 80

VESTCOM INTERNATIONAL, INC.

CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997

<TABLE>
<CAPTION>
1997
-----------
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $ (18,850)
Adjustments to reconcile net income to net cash used in operating
activities --
Depreciation and amortization.............................................. 246
Changes in operating assets (increase) decrease in -- Deferred offering
costs..................................................................... (1,090,814)
Changes in operating liabilities increase (decrease) in-- Accrued
expenses.................................................................. 212,257
-----------
Net cash used in operating activities................................. (897,161)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment......................................... (7,587)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of subscriptions receivable........................................ 279,082
-----------
Net decrease in cash and cash equivalents............................. (625,666)
CASH AND CASH EQUIVALENTS, beginning of period.................................. 1,344,758
-----------
CASH AND CASH EQUIVALENTS, end of period........................................ $ 719,092
===========
</TABLE>

The accompanying notes to condensed financial statements
an integral part of these statements.

F-25
<PAGE> 81

VESTCOM INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the financial statements and footnotes
thereto for the period ended December 31, 1996, included elsewhere in this
Registration Statement.

The pro forma balance sheet as of March 31, 1997, reflects a distribution
of the cash consideration of $18,423,390 to be received by the Founding Company
stockholders in connection with the Acquisitions. The cash consideration of
$18,423,390 is to be funded from the proceeds of the Offering discussed above.

(2) NATURE OF BUSINESS

Vestcom intends to acquire seven companies (the "Acquisitions"), complete
an initial public offering (the "Offering") of its common stock (taken together
"the Consolidation") and, subsequent to the Consolidation, continue to acquire,
through merger or purchase, similar companies to expand its operations. In March
1997, Vestcom filed a registration statement on Form S-1 for the initial public
offering of its common stock.

Vestcom's primary assets at March 31, 1997, are cash, and deferred offering
costs. Vestcom has not conducted any operations, and all activities to date have
related to the Acquisitions and the Offering. Cash was generated from related
parties for the initial capitalization of the Company. There is no assurance
that the Acquisitions discussed above will be completed and that Vestcom will be
able to generate future operating revenues. Vestcom is dependent upon the
Offering to fund the amounts due to related parties, the pending Acquisitions
and future operations.

(3) MERGER AGREEMENT

Vestcom and separate wholly-owned subsidiaries have signed definitive
agreements to acquire by merger seven companies (the "Founding Companies") to be
effective with the Offering. The Founding Companies are Comvestrix Corp., Morris
County Direct Mail Services, Inc. and related companies, Computer Output
Systems, Inc., Electronic Imaging Services, Inc., Image Printing Systems Inc.,
Lirpaco and subsidiary and Mystic Graphic Systems, Inc. The aggregate
consideration that will be paid by Vestcom to acquire the Founding Companies is,
subject to working capital adjustments and earnouts, approximately $18.4 million
in cash and 2,852,111 shares of Vestcom common stock.

F-26
<PAGE> 82

VESTCOM INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

(4) CREDIT FACILITY

(5) STOCK OPTION PLAN

(6) EMPLOYMENT AGREEMENTS

(7) CAPITAL STOCK

In March, 1997, the Company filed a restated Certificate of Incorporation,
to eliminate the Preferred Stock and create a class of 10,000,000 shares of
Undesignated Stock.

In May 1997, Oppenheimer relinquished to Vestcom 170,856 shares of common
stock.

(8) NEW ACCOUNTING STANDARD

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share". This statement supersedes APB Opinion No. 15,
"Earnings per Share" and simplifies the computation of earnings per share
("EPS"). Primary EPS is replaced with a presentation of basic EPS. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Fully diluted EPS is replaced with diluted EPS. Diluted EPS reflects the
potential dilution if certain securities are converted. SFAS No. 128 requires
dual presentation of basic and diluted EPS by entities that issue any securities
other than ordinary common stock. SFAS No. 128 will be effective for financial
statements for both interim and annual periods ending after December 15, 1997,
and requires retroactive restatements of all EPS data presented. The Company
plans to adopt the statement on December 31, 1997. The Company does not expect
the effect of adopting SFAS No. 128 to have a material impact on its EPS
calculations, and, if adopted currently, SFAS No. 128 would not have a material
impact on the Company's reported EPS.

F-27
<PAGE> 83

VESTCOM INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

(9) PREPAID EXPENSES

In connection with the filing of the Registration Statement discussed in
Note 2, the Company has recorded Deferred Offering Costs of approximately
$1,483,000 as of March 31, 1997. Such amount, which represents fees of the
Company's professionals and consultants in connection with the Offering, will be
charged against equity upon successful completion of the Offering. If the
Offering is not successful such amounts will be expensed.

(10) COMMITMENTS AND CONTINGENCIES

In May, 1997 the Company entered into an agreement with Oppenheimer & Co.,
Inc. ("Oppenheimer") pursuant to which the Company agreed to pay Oppenheimer an
aggregate amount of up to $1.8 million for advisory services provided by
Oppenheimer. Such amount is payable only upon the successful completion of the
Consolidation. In addition, Vestcom has agreed to reimburse Oppenheimer for up
to $75,000 of out-of-pocket expenses related to such services.

F-28
<PAGE> 84

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Comvestrix Corp.:

We have audited the accompanying balance sheets of Comvestrix Corp. (a
Delaware corporation) as of December 31, 1995 and 1996, and the related
statements of income, stockholders' equity, and cash flows for the years ended
December 31, 1994, 1995 and 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Comvestrix Corp. as of
December 31, 1995 and 1996 and the results of its operations and its cash flows
for the years ended December 31, 1994, 1995 and 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 12, 1997

F-29
<PAGE> 85

COMVESTRIX CORP.

BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 150,832 $ 106,610
Accounts receivable, net of allowance for doubtful accounts of
$103,548 and $111,724 in 1995 and 1996, respectively......... 3,258,311 4,135,168
Postage receivable.............................................. 130,448 832,303
Due from Vestcom................................................ -- 527,056
Supplies inventory.............................................. 401,375 417,869
Prepaid postage................................................. 920,937 885,123
Prepaid expenses and other current assets....................... 235,920 126,761
----------- -----------
Total current assets.................................... 5,097,823 7,030,890
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization.................................................... 4,061,339 4,385,047
OTHER ASSETS...................................................... 132,875 105,750
----------- -----------
Total assets............................................ $ 9,292,037 $11,521,687
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings........................................... $ 1,000,000 $ 1,900,000
Current portion of long-term debt............................... 626,315 785,472
Current portion of capital lease obligations.................... 255,657 --
Accounts payable and accrued expenses........................... 1,752,836 2,461,042
Advanced postage................................................ 397,182 888,809
Other current liabilities....................................... 150,345 135,810
----------- -----------
Total current liabilities............................... 4,182,335 6,171,133
LONG-TERM DEBT.................................................... 1,017,380 682,611
DEFERRED LEASE EXPENSES........................................... 324,176 380,297
DEFERRED INCOME TAXES............................................. 35,000 3,157
----------- -----------
Total liabilities....................................... 5,558,891 7,237,198
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.00125 par value; 6,500,000 shares authorized;
5,900,000 and 6,000,000 shares issued; 3,634,000 and
3,734,000 shares outstanding in 1995 and 1996,
respectively................................................. 7,375 7,500
Additional paid-in capital...................................... 232,988 355,863
Subscriptions receivable........................................ (4,500) (106,297)
Retained earnings............................................... 4,935,663 5,465,803
----------- -----------
5,171,526 5,722,869
Less -- Treasury stock, 2,266,000 shares at cost................ (1,438,380) (1,438,380)
----------- -----------
Total stockholders' equity.............................. 3,733,146 4,284,489
----------- -----------
Total liabilities and stockholders' equity.............. $ 9,292,037 $11,521,687
=========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-30
<PAGE> 86

COMVESTRIX CORP.

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES............................................ $16,605,558 $19,298,468 $21,446,745

COST OF REVENUES.................................... 9,902,000 10,610,825 12,329,784
----------- ----------- -----------
Gross profit.............................. 6,703,558 8,687,643 9,116,961

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 6,423,696 7,052,765 7,282,491
----------- ----------- -----------
Income from operations.................... 279,862 1,634,878 1,834,470
----------- ----------- -----------

OTHER INCOME (EXPENSE):
Interest expense.................................. (44,025) (58,515) (140,804)
Interest and other income......................... 3,626 44,890 63,051
Contract settlement income........................ -- 475,250 --
----------- ----------- -----------
(40,399) 461,625 (77,753)
----------- ----------- -----------
Income before provision (benefit) for
income taxes............................ 239,463 2,096,503 1,756,717
----------- ----------- -----------
PROVISION (BENEFIT) FOR INCOME TAXES................ (122,000) 79,277 9,298
----------- ----------- -----------
Net income................................ $ 361,463 $ 2,017,226 $ 1,747,419
=========== =========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-31
<PAGE> 87

COMVESTRIX CORP.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------------ PAID-IN SUBSCRIPTIONS RETAINED ---------------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL RECEIVABLE EARNINGS SHARES AMOUNT EQUITY
---------- ------ ---------- ------------- ----------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1994................... 590,000 $7,375 $232,988 $ (39,610) $ 3,865,219 197,600 $1,200,000 $ 2,865,972

Purchase of treasury
stock................ -- -- -- -- -- 29,000 238,380 (238,380)
Collection of
subscriptions
receivable........... -- -- -- 30,430 -- -- -- 30,430
Net income............. -- -- -- -- 361,463 -- -- 361,463
--------- ------ -------- --------- ----------- --------- ---------- -----------

BALANCE AT DECEMBER 31,
1994................... 590,000 7,375 232,988 (9,180) 4,226,682 226,600 1,438,380 3,019,485

Recapitalization of
common stock......... 5,310,000 -- -- -- -- 2,039,400 -- --
Collection of
subscriptions
receivable........... -- -- -- 4,680 -- -- -- 4,680
Net income............. -- -- -- -- 2,017,226 -- -- 2,017,226
Distributions to
stockholders......... -- -- -- -- (1,308,245) -- -- (1,308,245)
--------- ------ -------- --------- ----------- --------- ---------- -----------

BALANCE AT DECEMBER 31,
1995................... 5,900,000 7,375 232,988 (4,500) 4,935,663 2,266,000 1,438,380 3,733,146

Issuance of common
stock................ 100,000 125 122,875 (123,000) -- -- -- --
Collection of
subscriptions
receivable........... -- -- -- 21,203 -- -- -- 21,203
Net income............. -- -- -- -- 1,747,419 -- -- 1,747,419
Distributions to
stockholders......... -- -- -- -- (1,217,279) -- -- (1,217,279)
--------- ------ -------- --------- ----------- --------- ---------- -----------

BALANCE AT DECEMBER 31,
1996................... 6,000,000 $7,500 $355,863 $(106,297) $ 5,465,803 2,266,000 $1,438,380 $ 4,284,489
========= ====== ======== ========= =========== ========= ========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-32
<PAGE> 88

COMVESTRIX CORP.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 361,463 $ 2,017,226 $ 1,747,419
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization................... 898,606 1,004,901 1,143,391
Provision for doubtful accounts................. 6,352 16,875 8,176
Deferred income tax provision................... -- 35,000 (31,843)
Gain on sale of property........................ -- -- (2,598)
Changes in operating assets (increase) decrease
in --
Accounts receivable.......................... (271,441) (204,876) (885,033)
Postage receivable........................... (92,560) 53,599 (701,855)
Supplies inventory........................... (20,575) (157,406) (16,494)
Prepaid postage.............................. (104,396) (601,788) 35,814
Prepaid expenses and other assets............ (107,372) (78,664) 136,284
Changes in operating liabilities increase
(decrease) in --
Accounts payable and accrued expenses........ 937,583 (97,085) 708,206
Advanced postage............................. 252,917 (279,438) 491,627
Other current liabilities.................... (121,954) 17,818 (14,535)
Deferred charges............................. 225,041 99,135 56,121
---------- ----------- -----------
Net cash provided by operating
activities.............................. 1,963,664 1,825,297 2,674,680
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................ (928,338) (1,983,186) (1,473,761)
Proceeds from sale of equipment...................... -- -- 9,260
---------- ----------- -----------
Net cash used in investing activities........ (928,338) (1,983,186) (1,464,501)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings............................ (225,000) 500,000 900,000
Proceeds from long-term borrowings................... 355,000 1,524,000 507,000
Principal payments on long-term debt and capital
leases obligations................................ (909,888) (528,077) (938,269)
Due from Vestcom..................................... -- -- (527,056)
Collection of subscriptions receivable............... 30,430 4,680 21,203
Repurchase of common stock........................... (238,380) -- --
Distributions to stockholders........................ -- (1,308,245) (1,217,279)
---------- ----------- -----------
Net cash provided by (used in) financing
activities................................. (987,838) 192,358 (1,254,401)
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents... 47,488 34,469 (44,222)
CASH AND CASH EQUIVALENTS, beginning of year........... 68,875 116,363 150,832
---------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year................. $ 116,363 $ 150,832 $ 106,610
========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for --
Interest........................................ $ 44,025 $ 49,858 $ 137,399
State income tax................................ 50 28,332 42,712
========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
Issuance of common stock evidenced by
subscriptions receivable........................ -- -- 123,000
========== =========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-33
<PAGE> 89

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Comvestrix Corp. (the "Company") is a Delaware corporation. The Company's
primary businesses are (i) the production and distribution of documents on
paper, microfiche, microfilm and compact disc, (ii) computer center document
outsourcing services, (iii) mailing services and (iv) forms management.

The Company and its stockholders intend to enter into a definitive
agreement with Vestcom International, Inc. ("Vestcom"), pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Vestcom's common stock (the "Acquisition") concurrent with the
consummation of the initial public offering (the "Offering") of the common stock
of Vestcom.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Revenues are recognized when the services are rendered. Revenues are
presented net of postage charges in the income statement as customers advance
the Company cash to be used to purchase postage for related projects.

Cash and Cash Equivalents

Cash and cash equivalents include money market accounts and all highly
liquid debt instruments purchased with original maturities of three months or
less.

Supplies Inventory

Supplies inventory consists of paper, toner, developer and other disposable
chemicals, film and micrographic chemicals, and packaging materials. Supplies
are valued at cost, which approximates market, with cost determined using the
first-in-first-out method.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are capitalized and amortized over the
shorter of the estimated useful lives of the assets or the terms of the related
leases.

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
Federal corporate income taxes on its taxable income. Instead, the stockholders
are liable for individual Federal income taxes on their respective shares of

F-34
<PAGE> 90

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the Company's taxable income. Accordingly, no provision for Federal corporate
income taxes has been made in the accompanying financial statements.

The Company was subject to state corporate income tax for 1994, but elected
S corporation status for 1995 state income tax purposes. The Company's state
taxable income is included in each stockholder's individual state income tax
return. The Company is liable for a limited state income tax.

Deferred state income tax results from the Company filing its tax returns
on the cash basis and its financial statements on the accrual basis, as well as
the use of different methods of depreciation for financial statement and income
tax reporting purposes.

For purposes of preparing these financial statements, a pro forma provision
for Federal and state income taxes has been provided on the income statement as
if the Company was a C corporation for the year ended December 31, 1996.

New Accounting Pronouncement

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment, and
intangible or other assets, may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the assets is compared to the asset's
carrying amount to determine if a write-down to market value or discounted cash
flow value was necessary. Adoption of this standard did not have a material
effect on the financial position or results of operations of the Company.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentration of Credit Risk," consist primarily of trade accounts receivable.
The Company's customers are concentrated in the United States, primarily in the
financial, pharmaceutical and telecommunication industries. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends, and other information.

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
1995 1996 (YEARS)
----------- ----------- ------------
<S> <C> <C> <C>
Software..................................... $ 570,979 $ 662,059 3-5
Machinery and equipment...................... 8,218,062 9,126,941 5-7
Furniture and fixtures....................... 955,085 1,095,725 10
Leasehold improvements....................... 499,195 955,904 8-10
Construction in progress..................... 223,219 --
----------- -----------
10,446,540 11,840,629
Less -- Accumulated depreciation and
amortization............................... (6,405,201) (7,455,582)
----------- -----------
Property and equipment, net.................. $ 4,061,339 $ 4,385,047
=========== ===========
</TABLE>

F-35
<PAGE> 91

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Leased equipment under capital leases (included above) consists of the
following at December 31:

<TABLE>
<CAPTION>
1995 1996
--------- ---
<S> <C> <C>
Equipment......................................................... $ 642,902 $--
Less -- Accumulated amortization.................................. (183,686) --
--------- ---
$ 459,216 $--
========= ===
</TABLE>

The equipment previously under capital lease was purchased by the Company
during 1996.

Depreciation and amortization expense on property and equipment charged to
operations for the years ended December 31, 1994, 1995 and 1996 was $898,606,
$1,004,901 and $1,143,391, respectively.

(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consists of the following at December
31:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Accounts payable............................................ $ 444,939 $1,292,925
Accrued salary and bonuses.................................. 726,239 794,143
Accrued production, rent and maintenance.................... 360,588 199,349
Other accruals.............................................. 221,070 174,625
---------- ----------
$1,752,836 $2,461,042
========== ==========
</TABLE>

(5) SHORT-TERM BORROWINGS

The Company has a revolving line of credit with a bank, that provides for
borrowings of up to $300,000 for equipment purchases, which is secured by the
specific equipment, and an additional $2,250,000 for working capital
requirements, which is secured by accounts receivable. Borrowings under the line
of credit bear interest at the bank's prevailing prime rate (8 1/4% at December
31, 1996) and are repayable and renewable on May 31, 1997. The unused line was
$650,000 at December 31, 1996.

F-36
<PAGE> 92

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) LONG-TERM DEBT

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Equipment loan payable to a financial institution, bearing interest
at the prime rate (8 1/4% at December 31, 1996) plus 1/2%, not to
exceed 8 1/2%. Principal is payable in monthly installments of
$9,861 beginning November 1, 1994; collateralized by specific
equipment. Final payment is due in October 1997. ................. $ 226,806 $ 108,472
Equipment loan payable to a financial institution, bearing interest
at the prime rate (8 1/4% at December 31, 1996), not to exceed
12%. Principal is payable in monthly installments of $6,500
beginning April 1, 1995; collateralized by specific equipment.
Final payment is due February 7, 1998. ........................... 175,500 97,500
Various equipment loans payable to a financial institution bearing
interest from 7 3/4% to 8 1/4%. Principal amounts are payable in
aggregate monthly installments of $49,916 maturing July 1998
through November 1999. ........................................... 1,241,389 1,262,111
---------- ----------
1,643,695 1,468,083
Less -- Current maturities.......................................... (626,315) (785,472)
---------- ----------
$1,017,380 $ 682,611
========== ==========
</TABLE>

At December 31, 1996 the aggregate amounts of annual principal maturities
of long-term obligations are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 785,472
1998..................................................................... 569,889
1999..................................................................... 112,722
----------
Total.......................................................... $1,468,083
==========
</TABLE>

The Company's debt agreements require the maintenance of certain ratios
related to working capital, debt compared to equity, and retained earnings. The
Company was in compliance with all such ratios as of December 31, 1996.

(7) SUBSCRIPTIONS RECEIVABLE FROM STOCKHOLDERS

Subscriptions receivable from stockholders at December 31, 1995 were
evidenced by a 9% promissory note which matured in December 1996. Subscriptions
receivable from stockholders at December 31, 1996 were evidenced by 6%
promissory notes from various stockholders with aggregate annual principal
installments totaling $26,525 maturing in January 2001.

(8) INCOME TAXES

During 1994, the Company utilized a $178,000 state net operating loss
carryforward. Accordingly, the 1994 current state tax provision has been reduced
by approximately $16,000 which reflects the tax benefit of such net operating
loss carryforward.

In 1994, the deferred state tax provision has been reduced by the effect of
the tax rate differential between C corporation status and S corporation status
for state income tax purposes (see Note 2).

F-37
<PAGE> 93

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Deferred state taxes primarily relate to property. No valuation allowance
has been recorded as the Company believes it will realize all such assets in
future years.

(9) STOCKHOLDERS' EQUITY

Effective December 31, 1995, the Company recapitalized its common stock in
a 10-for-1 stock split. Accordingly, authorized, issued, outstanding and
treasury shares were increased for 1995 in a ratio of 10-to-1 from 1994. Also,
the par value of common stock was decreased for 1995 in a ratio of 10-to-1 from
1994.

During 1996, the Company issued and sold 100,000 shares of stock to five
long-term employees of the Company. The consideration for the stock consisted of
promissory notes (see Note 7).

(10) COMMITMENTS AND CONTINGENCIES:

Operating Leases

The Company leases office premises, warehouse space and a portion of its
machinery and equipment under operating leases expiring at varying dates through
2001. Its offices are leased from an entity that is 50% owned by the Company's
president ("related party lease") (see Note 11).

At December 31, 1996 the minimum annual rental commitment of the Company,
including the required funding of a capital improvements escrow account, under
existing agreements (including related party lease) is as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 749,468
1998..................................................................... 687,074
1999..................................................................... 686,960
2000..................................................................... 673,487
2001..................................................................... 217,064
----------
Total minimum payments......................................... $3,014,053
==========
</TABLE>

Rent expense (including lease escalations) charged to operations for the
years ended December 31, 1994, 1995 and 1996 was $2,282,794, $2,234,340 and
$2,236,280, respectively.

Litigation

The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.

F-38
<PAGE> 94

COMVESTRIX CORP.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(11) RELATED PARTY TRANSACTIONS

The Company leases certain office space from an entity that is 50% owned by
its president. This lease requires the Company to make payments into an escrow
account to be used for specific improvements to the premises. Such amounts are
included in other assets in the accompanying financial statements. The minimum
future annual rental payments to related parties are as follows:

Related party rent expense for the years ended December 31, 1994, 1995 and
1996 was $661,635, $363,472 and $628,083, respectively.

On September 19, 1996, the Company loaned Vestcom $120,036 as part of
Vestcom's initial capitalization. Additionally, the Company loaned Vestcom
$399,996 in December 1996. The loans bear interest at a rate equal to the
fluctuating interest rate announced by a certain bank as its prime rate (8 1/4%
at December 31, 1996) and are due and payable on the earlier of the Offering or
June 30, 1997. The Company has unreimbursed advances to Vestcom of $7,024 for
working capital needs which are included in due from Vestcom in the accompanying
balance sheet. In the event Vestcom is unable to pay the notes in full when due,
the Company has agreed to extend the due date of the notes to the earlier of the
Offering or December 31, 1998. In addition, to the extent Vestcom's net assets
are inadequate to satisfy the notes in full at December 31, 1998, the Company
has agreed not to take any action to collect on such notes.

(12) EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) deferred compensation plan. The plan
provides for the Company to make a discretionary matching contribution
determined as a percentage of employees' contributions. Contributions to this
plan for the years ended December 31, 1994, 1995 and 1996 were $39,641, $43,477
and $61,465, respectively.

(13) SUBSEQUENT EVENTS

Effective January 1, 1997, the Company entered into a capital lease with
Xerox on a portion of its Xerox production equipment. The term of the lease is
for five years and the minimum monthly payments will be $129,838.

(14) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS (UNAUDITED)

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom providing for the Acquisition of the Company
by Vestcom.

Prior to the closing of the Acquisition, the Company will make
distributions in respect of the Company's estimated S Corporation accumulated
adjustment account at the time of closing.

F-39
<PAGE> 95

COMVESTRIX CORP.

CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 106,610 $ 437,020
Accounts receivable, net.................................... 4,135,168 4,237,718
Other current assets........................................ 2,789,112 2,258,794
----------- ------------
Total current assets................................ 7,030,890 6,933,532
PROPERTY AND EQUIPMENT, net................................... 4,385,047 10,376,516
OTHER ASSETS.................................................. 105,750 199,412
----------- ------------
Total assets........................................ $11,521,687 $ 17,509,460
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings....................................... $ 1,900,000 $ 900,000
Current portion of long term debt and capital lease
obligation............................................... 785,472 2,126,007
Other current liabilities................................... 3,485,661 3,363,791
----------- ------------
Total current liabilities........................... 6,171,133 6,389,798
LONG-TERM DEBT AND CAPITAL LEASES OBLIGATIONS................. 682,611 5,685,442
DEFERRED EXPENSES............................................. 383,454 533,564
----------- ------------
Total liabilities................................... 7,237,198 12,608,804
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock................................................ 7,500 7,500
Additional-paid in capital.................................. 355,863 355,863
Subscriptions receivable.................................... (106,297) (100,476)
Retained earnings........................................... 5,465,803 6,076,149
----------- ------------
5,722,869 6,339,036
Less-Treasury stock......................................... (1,438,380) (1,438,380)
----------- ------------
Total stockholders' equity.......................... 4,284,489 4,900,656
----------- ------------
Total liabilities and stockholders' equity.......... $11,521,687 $ 17,509,460
=========== ============
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these balance sheets.

F-40
<PAGE> 96

COMVESTRIX CORP.

CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES................................................ $5,459,932 $6,050,629
COST OF REVENUES........................................ 3,045,629 3,211,054
---------- ----------
Gross Profit.................................. 2,414,303 2,839,575
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............ 1,823,986 2,054,436
---------- ----------
Income from operations........................ 590,317 785,139
---------- ----------
OTHER INCOME (EXPENSE)
Interest Expense...................................... (31,898) (160,188)
Interest and other income............................. 9,858 1,045
---------- ----------
Income before provision for income taxes...... 568,277 625,996
---------- ----------
PROVISION FOR INCOME TAXES.............................. 3,008 15,650
---------- ----------
Net income.................................... $ 565,269 $ 610,346
========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-41
<PAGE> 97

COMVESTRIX CORP.

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 565,269 $ 610,346
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization................................. 259,978 459,059
Changes in operating assets (increase) decrease in --
Accounts receivable...................................... (235,308) (102,550)
Other current assets..................................... (150,325) 530,318
Other assets............................................. (401,392) (93,662)
Changes in operating liabilities increase (decrease) in --
Other current liabilities................................... 2,335,071 (121,870)
Deferred charges............................................ (21,226) 150,110
----------- ----------
Net cash provided by operating activities................ 2,352,067 1,431,751
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............................ (69,044) (203,007)
Proceeds from sale of equipment.................................. -- 2,700
----------- ----------
Net cash used in investing activities.................... (69,044) (200,307)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on borrowings....................................... (1,738,596) (906,855)
Collection of subscriptions receivable........................... 1,080 5,821
Distributions to stockholders.................................... (336,054) --
----------- ----------
Net cash used in financing activities.................... (2,073,570) (901,034)
----------- ----------
Net increase in cash and cash equivalents................ 209,453 330,410
CASH AND CASH EQUIVALENTS, beginning of period..................... 150,832 106,610
----------- ----------
CASH AND CASH EQUIVALENTS, end of period........................... $ 360,285 $ 437,020
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Capital lease obligations incurred............................... -- $6,250,221
=========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-42
<PAGE> 98

COMVESTRIX, CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the financial statements and footnotes
thereto for the year ended December 31, 1996, included elsewhere in this
Registration Statement.

In March 1997, the Company and its stockholders entered into a definitive
agreement with Vestcom International, Inc. (Vestcom) pursuant to which the
Company will merge with Vestcom. All outstanding shares of the Company will be
exchanged for cash and shares of Vestcom's common stock concurrent with the
consummation of the initial public offering of the common stock of Vestcom.

(2) ACQUISITION OF EQUIPMENT

Effective January 1, 1997, the Company entered into a capital lease on a
portion of its production equipment. The term of the lease is for five years and
the minimum monthly payments will be $129,838. In connection therewith the
Company recorded a capital lease liability of $6,250,221.

F-43
<PAGE> 99

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Morris County Direct Mail Services, Inc.
and related companies:

We have audited the accompanying combined balance sheets of Morris County
Direct Mail Services, Inc. (a New Jersey corporation) and related companies as
of December 31, 1995 and 1996, and the related combined statements of income,
stockholders' equity, and cash flows for the years ended December 31, 1994, 1995
and 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Morris County Direct Mail
Services, Inc. and related companies as of December 31, 1995 and 1996 and the
results of their operations and their cash flows for the years ended December
31, 1994, 1995 and 1996 in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 12, 1997

F-44
<PAGE> 100

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 534,459 $ 572,714
Accounts receivable, net of allowance for doubtful accounts of
$211,000 and $203,000 in 1995 and 1996, respectively........... 1,336,698 2,647,434
Postage receivable................................................ 1,019,560 330,730
Notes receivable.................................................. -- 100,000
Due from related parties.......................................... 190,088 266,775
Prepaid expenses and other current assets......................... 115,785 175,594
---------- ----------
Total current assets...................................... 3,196,590 4,093,247
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization...................................................... 1,867,808 1,504,158
GOODWILL AND OTHER INTANGIBLE ASSETS................................ -- 396,184
OTHER ASSETS........................................................ 19,417 131,488
---------- ----------
Total assets.............................................. $5,083,815 $6,125,077
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................. $ -- $ 160,000
Current portion of long-term debt................................. 227,935 460,709
Current portion of capital lease obligations...................... 20,025 21,098
Due to related parties............................................ 685,384 1,231,590
Accounts payable.................................................. 370,551 686,646
Accrued expenses.................................................. 400,907 474,354
Advanced postage.................................................. 1,425,423 612,332
---------- ----------
Total current liabilities................................. 3,130,225 3,646,729
LONG-TERM DEBT...................................................... 343,686 933,646
CAPITAL LEASE OBLIGATIONS........................................... 27,166 15,836
DUE TO RELATED PARTIES.............................................. 666,001 --
DEFERRED INCOME TAXES............................................... 12,200 11,420
---------- ----------
Total liabilities......................................... 4,179,278 4,607,631
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock Morris County Direct Mail Services, Inc., no par
value; 2,500 shares authorized; 130 and 1,075 shares issued and
outstanding in 1995 and 1996, respectively..................... 16,000 16,000
First Class Presort, Inc., no par value; 2,000 shares
authorized; 199 shares issued and outstanding................. 1,990 1,990
Quality Control Printing, Inc., no par value; 2,500 shares
authorized; 100 shares issued and outstanding................. 2,000 2,000
Additional paid-in capital --
Morris County Direct Mail Services, Inc........................ 59,500 59,500
First Class Presort, Inc....................................... 123,268 123,268
Retained earnings................................................. 1,103,279 1,716,188
---------- ----------
1,306,037 1,918,946
Less -- Treasury stock, 75 shares at cost of Morris County Direct
Mail Services, Inc............................................. (401,500) (401,500)
---------- ----------
Total stockholders' equity................................ 904,537 1,517,446
---------- ----------
Total liabilities and stockholders' equity................ $5,083,815 $6,125,077
========== ==========
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-45
<PAGE> 101

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES.............................................. $8,503,918 $9,422,646 $13,360,125
COST OF REVENUES...................................... 6,538,866 6,429,671 9,517,339
---------- ---------- -----------
Gross profit................................ 1,965,052 2,992,975 3,842,786
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 1,539,973 1,913,391 3,155,486
---------- ---------- -----------
Income from operations...................... 425,079 1,079,584 687,300
---------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest expense.................................... (126,394) (91,042) (159,402)
Interest and other income........................... 8,759 21,918 49,674
Net gain (loss) on sale of property and equipment... -- (114,694) 63,550
---------- ---------- -----------
(117,635) (183,818) (46,178)
---------- ---------- -----------
Income before provision (benefit) for income
taxes..................................... 307,444 895,766 641,122
---------- ---------- -----------
PROVISION (BENEFIT) FOR INCOME TAXES.................. (20,310) 30,936 28,213
---------- ---------- -----------
Net income.................................. $ 327,754 $ 864,830 $ 612,909
========== ========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-46
<PAGE> 102

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------- ADDITIONAL
PAID-IN
MORRIS COUNTY CAPITAL
DIRECT MAIL FIRST CLASS QUALITY CONTROL --------------
SERVICES, INC. PRESORT, INC. PRINTING, INC. MORRIS COUNTY
---------------- --------------- --------------- DIRECT MAIL
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SERVICES, INC.
------ ------- ------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1994................................ 130 $16,000 199 $1,990 100 $2,000 $ 59,500
Net income..................................... -- -- -- -- -- -- --
Distributions to stockholders.................. -- -- -- -- -- -- --
---- ------ --- ------ --- ------ -------
BALANCE AT DECEMBER 31, 1994..................... 130 16,000 199 1,990 100 2,000 59,500
Net income..................................... -- -- -- -- -- -- --
Distributions to stockholders.................. -- -- -- -- -- -- --
---- ------ --- ------ --- ------ -------
BALANCE AT DECEMBER 31, 1995..................... 130 16,000 199 1,990 100 2,000 59,500
Stock split.................................... 945 -- -- -- -- -- --
Net income..................................... -- -- -- -- -- -- --
---- ------ --- ------ --- ------ -------
BALANCE AT DECEMBER 31, 1996..................... 1,075 $16,000 199 $1,990 100 $2,000 $ 59,500
==== ====== === ====== === ====== =======

TREASURY STOCK TOTAL
FIRST CLASS RETAINED ------------------ STOCKHOLDERS'
PRESORT, INC. EARNINGS SHARES AMOUNT EQUITY
------------- ---------- ------ --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1994................................ $ 123,268 $ (52,326) 75 $(401,500) $ (251,068)
Net income..................................... -- 327,754 -- -- 327,754
Distributions to stockholders.................. -- (14,000) -- -- (14,000)
--
-------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1994..................... 123,268 261,428 75 (401,500) 62,686
Net income..................................... -- 864,830 -- -- 864,830
Distributions to stockholders.................. -- (22,979) -- -- (22,979)
--
-------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1995..................... 123,268 1,103,279 75 (401,500) 904,537
Stock split.................................... -- -- -- -- --
Net income..................................... -- 612,909 -- -- 612,909
--
-------- ---------- --------- ----------
BALANCE AT DECEMBER 31, 1996..................... $ 123,268 $1,716,188 75 $(401,500) $1,517,446
======== ========== == ========= ==========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-47
<PAGE> 103

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 327,754 $ 864,830 $ 612,909
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization....................... 334,690 392,397 587,727
Amortization of goodwill............................ -- -- 16,116
Provision for doubtful accounts..................... 46,467 55,260 25,693
Deferred income tax provision....................... (27,837) 566 (780)
(Gain) loss on sale of equipment.................... -- 114,694 (63,550)
Loss on write-off of leasehold improvements......... -- -- 496,876
Changes in operating assets (increase) decrease in--
Accounts receivables.............................. 29,024 213,194 (1,336,429)
Postage receivable................................ 5,472 (431,184) 688,830
Prepaid expenses and other assets................. (33,617) (19,595) (135,273)
Changes in operating liabilities increase (decrease)
in --
Accounts payable.................................. 111,364 (418,965) 316,095
Accrued expenses.................................. (8,140) (22,263) 73,447
Advanced postage.................................. (347,119) 317,309 (813,091)
--------- ----------- -----------
Net cash provided by operating activities...... 438,058 1,066,243 468,570
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.................. (159,691) (640,692) (482,403)
Proceeds from sale of property and equipment........... -- -- 175,000
Acquisition of companies............................... -- -- (762,300)
--------- ----------- -----------
Net cash used in investing activities.......... (159,691) (640,692) (1,069,703)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings.............................. (50,000) -- 160,000
Proceeds from long-term borrowings..................... 124,990 453,000 1,249,881
Principal payments on long-term debt and capital lease
obligations......................................... (493,484) (433,597) (437,404)
Issuance of notes receivable........................... -- -- (175,000)
Collection of notes receivable......................... -- -- 13,393
Net proceeds from affiliates........................... 70,240 (5,153) 48,313
Proceeds from stockholder loans........................ 155,711 143,784 31,015
Payments on stockholder loans.......................... (243,991) (251,802) (250,810)
Distributions to stockholders.......................... (14,000) (22,979) --
--------- ----------- -----------
Net cash provided by (used in) financing
activities................................... (450,534) (116,747) 639,388
--------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS....................................... $(172,167) $ 308,804 $ 38,255
CASH AND CASH EQUIVALENTS, beginning of year............. 397,822 225,655 534,459
--------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year................... $ 225,655 $ 534,459 $ 572,714
========= =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for
Interest............................................ $ 65,647 $ 41,739 $ 118,386
State income tax.................................... 6,408 14,707 41,121
========= =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Capital lease obligations incurred..................... 81,949 -- --
========= =========== ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-48
<PAGE> 104

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

The accompanying combined financial statements include the accounts of
Morris County Direct Mail Services, Inc., ("DMS"), Quality Control Printing,
Inc. ("QCP") and First Class Presort, Inc. ("FCP") (all New Jersey corporations)
(collectively, the "Company"). The Company's primary businesses are (i)
marketing materials fulfillment, (ii) mailing services, and (iii) forms
management.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Companies discussed in Note 1 are under the common control of one
stockholder. All significant intercompany transactions have been eliminated in
combination.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Revenues are recognized when the services are rendered. Revenues are
presented net of postage incurred as customers advance the Company cash to be
used to purchase postage for related projects.

Cash and Cash Equivalents

Cash and cash equivalents include money market accounts and all highly
liquid debt instruments purchased with original maturities of three months or
less.

Supplies Inventory

Supplies inventory consists of paper goods, printing items, and packaging
materials. Supplies are valued at cost, which approximates market, with cost
determined using the first-in-first-out method.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed
principally using an accelerated method which reflects the estimated useful
lives of the assets. Leasehold improvements and assets subject to capital lease
are capitalized and amortized over the shorter of the estimated useful lives of
the assets or the terms of the related leases.

During 1996, the Company decided to move to a new location. As a result,
net leasehold improvements of $496,878 became impaired and were written off.

F-49
<PAGE> 105

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code and, where applicable, State of New Jersey tax laws.
Under those provisions, the Company does not pay Federal corporate income taxes
on its taxable income and, where applicable, pays approximately a two percent
tax to the State of New Jersey, and is not allowed a net operating loss
carryover or carryback as a deduction. Instead, the Stockholders are liable for
individual Federal and, where applicable, State of New Jersey income taxes on
their respective shares of the Company's taxable income, or include their
respective shares of the Company's Federal net operating loss on their
individual tax returns. Accordingly, no provision for Federal corporate income
taxes has been made in the accompanying financial statements.

New Accounting Pronouncement

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," consist primarily of trade accounts receivable.
The Company's customers are concentrated in the Northeastern United States in
various industries. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends, and other information.

Acquisitions

Effective May 17, 1996, FCP acquired 100% of the outstanding shares of
stock in Regal Mail Service, Inc. ("Regal") for $159,800 in cash. Regal was
consolidated into FCP effective as of the date of acquisition. In connection
with the acquisition, which was accounted for as a purchase, FCP recorded
goodwill of $9,800.

Effective May 23, 1996, QCP acquired 100% of the outstanding shares of
stock in Stuyvesant Press, Inc. ("Stuyvesant") for $602,500. Consideration paid
by QCP included $294,000 in cash and $228,500 in notes payable. Stuyvesant was
consolidated into QCP effective as of the date of acquisition. In connection
with the acquisition, which was accounted for as a purchase, QCP recorded
goodwill and a covenant not to compete of $402,500.

Goodwill and Other Intangible Assets

Goodwill and the covenant not to compete are being amortized over 15 years
using the straight-line method. Accumulated amortization at December 31, 1996
was $16,116.

F-50
<PAGE> 106

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
1995 1996 (YEARS)
---------- ---------- ---------
<S> <C> <C> <C>
Transportation equipment......................... $ 367,351 $ 401,093 5-7
Machinery and equipment.......................... 1,836,615 2,306,921 5-10
Equipment under capital lease.................... 1,132,949 1,132,949 5-10
Leasehold improvements........................... 634,905 --
---------- ---------- ----
3,971,820 3,840,963
Less -- Accumulated depreciation and 2,104,012 2,336,805
amortization...................................
---------- ---------- ----
Property and equipment, net...................... $1,867,808 $1,504,158
========== ========== ====
</TABLE>

Leased equipment under capital leases (included above) consists of the
following as of December 31:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Equipment................................................... $1,132,949 $1,132,949
Less -- Accumulated amortization............................ 542,269 663,443
---------- ----------
$ 590,680 $ 469,506
========== ==========
</TABLE>

Depreciation and amortization expense on property and equipment charged to
operations for the years ended December 31, 1994, 1995 and 1996 was $334,690,
$392,397 and $587,727, respectively.

Gross leasehold improvements of $735,233 and accumulated depreciation of
$238,357 were written off in 1996. The loss of $496,876 is included in cost of
revenues.

At December 31, 1996 minimum annual payments under capital lease including
interest are as follows:

<TABLE>
<S> <C>
1997..................................................................... $22,598
1998..................................................................... 14,009
1999..................................................................... 3,609
-------
Total minimum payments......................................... 40,216
Less -- Amounts representing interest.................................... 3,282
-------
Net minimum payments........................................... 36,934
Less -- Current portion of capital lease obligations..................... 21,098
-------
Long-term portion of capital lease obligations................. $15,836
=======
</TABLE>

The interest rate on the capitalized lease is 5.5% and is imputed based on
the fair market value of the equipment at the inception of the lease.

(4) SHORT-TERM BORROWINGS

The Company has a $200,000 line of credit with a bank for the purchase of
equipment with interest at the prime rate (8 1/4% at December 31, 1996) plus
.75%. The Company also has a $225,000 working capital line of credit with
interest at prime plus .25%. At December 31, 1996, $160,000 was outstanding
under the equipment line.

F-51
<PAGE> 107

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
Various notes payable to a financial institution with monthly
installments totaling $49,251 plus interest between 7.90% and the
prime rate (8.25%) plus .75%, secured by equipment, maturing
between January 1996 and May 2001.................................. $571,621 $1,058,077
Various notes payable to third parties in monthly installments of
$11,145 plus interest between 10.90% and 15% maturing between June
1997 and June 2003................................................. -- 336,278
-------- ----------
571,621 1,394,355
Less -- Current maturities........................................... 227,935 460,709
-------- ----------
$343,686 $ 933,646
======== ==========
</TABLE>

At December 31, 1996 the aggregate amounts of annual principal maturities
of long-term obligations (excluding capital lease obligations) are as follows:

<TABLE>
<S> <C>
1997................................................................. $ 460,709
1998................................................................. 420,894
1999................................................................. 194,764
2000................................................................. 141,954
2001................................................................. 85,009
Thereafter........................................................... 91,025
----------
Total...................................................... $1,394,355
==========
</TABLE>

(6) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office premises, warehouse space and a portion of its
machinery and equipment under operating leases expiring at varying dates through
2004. Its offices are leased from an entity where the controlling interest is
held by the Company's president ("related party lease") (see Note 7).

At December 31, 1996 the minimum annual rental commitment of the Company
under existing agreements (including related party lease) is as follows:

<TABLE>
<S> <C>
1997................................................................. $ 708,966
1998................................................................. 589,630
1999................................................................. 500,424
2000................................................................. 376,000
2001................................................................. 144,000
Thereafter........................................................... 240,000
----------
Total minimum payments..................................... $2,559,020
==========
</TABLE>

Rent expense (including lease escalations) charged to operations for the
years ended December 31, 1994, 1995 and 1996 was $783,326, $668,154 and
$852,570, respectively.

F-52
<PAGE> 108

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Litigation

Guarantees

The Company has guaranteed several loans made by various financial
institutions to related parties which are majority owned by its president. The
total amount outstanding on these guaranteed loans at December 31, 1996 was
$4,969,794.

(7) RELATED PARTY TRANSACTIONS

Leased Office Space

The Company leases certain office space from entities in which the
controlling interest is held by its president. The minimum future annual rental
payments to related parties are as follows:

<TABLE>
<S> <C>
1997................................................................. $ 667,000
1998................................................................. 564,917
1999................................................................. 492,000
2000................................................................. 376,000
2001................................................................. 144,000
Thereafter........................................................... 240,000
----------
$2,483,917
==========
</TABLE>

Related party rent expense for the years ended December 31, 1994, 1995 and
1996 was $760,468, $639,768 and $777,112, respectively.

Notes Receivable

The Company has a note receivable from Regal's former owner as a result of
FCP's acquisition of Regal during 1996 (Note 2). The note bears interest at 5%
and will be repaid over three years, expiring May 17, 1999 through services
provided to FCP by the former owner.

Notes Payable

Three stockholders of the Company have loaned certain amounts to the
Company. The notes are due on demand and bear interest at 6.5%. Interest expense
on such notes for the years ended December 31, 1994, 1995 and 1996 was $60,746,
$49,303 and $41,016, respectively.

(8) EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) deferred compensation plan. The plan
provides for the Company to make a discretionary basic contribution determined
as a percentage of eligible employees' salaries and a discretionary matching
contribution determined as a percentage of employees' contributions.
Contributions of $24,555, $25,553 and $10,317 were made by the Company in 1994,
1995 and 1996, respectively.

F-53
<PAGE> 109

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(9) MAJOR CUSTOMERS

The Company has one customer which accounted for 14%, 11% and 10% of
revenues for the years ended December 31, 1994, 1995 and 1996, respectively.
Amounts receivable from this customer at December 31, 1995 and 1996 were $52,088
and $151,507, respectively.

(10) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom providing for the Acquisition of the Company
by Vestcom.

Prior to the closing of the Acquisition, the Company will make
distributions in respect of the Company's estimated S Corporation accumulated
adjustment account at the time of closing.

F-54
<PAGE> 110

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

CONDENSED COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
------------------ ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 572,714 $ 286,917
Accounts receivable, net................................... 2,647,434 3,200,679
Other current assets....................................... 873,099 1,206,031
---------- -----------
Total current assets............................... 4,093,247 4,693,627
PROPERTY AND EQUIPMENT, net.................................. 1,504,158 1,522,974
GOODWILL..................................................... 396,184 392,052
OTHER ASSETS................................................. 131,488 73,958
---------- -----------
Total assets....................................... $6,125,077 $ 6,682,611
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings...................................... $ 160,000 $ 150,000
Current portion of long-term debt and capital lease
obligations............................................. 481,807 492,845
Other current liabilities.................................. 3,004,922 3,067,309
---------- -----------
Total current liabilities.......................... 3,646,729 3,710,154
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS................. 949,482 1,100,880
DEFERRED EXPENSES............................................ 11,420 11,420
---------- -----------
Total liabilities.................................. 4,607,631 4,822,454
---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock............................................... 19,990 19,990
Additional paid-in capital................................. 182,768 182,768
Retained earning........................................... 1,716,188 2,058,899
---------- -----------
1,918,946 2,261,657
Less -- Treasury stock..................................... (401,500) (401,500)
---------- -----------
Total stockholders' equity......................... 1,517,446 1,860,157
---------- -----------
Total liabilities and stockholders' equity......... $6,125,077 $ 6,682,611
========== ===========
</TABLE>

The accompanying notes to condensed combined financial statements
are an integral part of these balance sheets

F-55
<PAGE> 111

MORRIS COUNTY DIRECT MAIL SERVICES, INC.
AND RELATED COMPANIES

CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES............................................................ $ 3,207,230 $ 3,363,493
COST OF REVENUES.................................................... 2,122,112 2,194,825
----------- -----------
Gross Profit.............................................. 1,085,118 1,168,668
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................ 695,781 781,869
----------- -----------
Income from operations.................................... 389,337 386,799
----------- -----------
OTHER INCOME (EXPENSE):
Interest Expense.................................................. (13,989) (39,014)
Interest and other income......................................... 5,114 9,205
----------- -----------
Income before provision for income taxes.................. 380,462 356,990
----------- -----------
PROVISION FOR INCOME TAXES.......................................... 15,786 14,280
----------- -----------
Net income................................................ $ 364,676 $ 342,710
=========== ===========
</TABLE>

The accompanying notes to condensed combined financial statements
are an integral part of these statements.

F-56
<PAGE> 112

MORRIS COUNTY DIRECT MAIL SERVICES, INC. AND RELATED COMPANIES

CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 364,676 $ 342,710
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Depreciation and amortization..................................... 109,596 166,985
Changes in operating assets and liabilities (increase) decrease
in --
Accounts receivable............................................. (443,487) (553,245)
Other current assets............................................ 807,857 (302,072)
Other assets.................................................... 1,201 61,662
Changes in operating liabilities increase (decrease) in --
Other current liabilities....................................... (689,266) 62,387
---------- ----------
Net cash provided by (used in) operating activities.......... 150,577 (221,573)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................ (170,884) (185,800)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings......................................... 33,742 152,436
Issuance of notes receivable......................................... -- (30,860)
---------- ----------
Net cash provided by financing activities.................... 33,742 121,576
---------- ----------
Net increase (decrease) in cash and cash equivalents......... 13,435 (285,797)
CASH AND CASH EQUIVALENTS, beginning of period......................... 534,459 572,714
---------- ----------
CASH AND CASH EQUIVALENTS, end of period............................... $ 547,894 $ 286,917
========== ==========
</TABLE>

The accompanying notes to condensed combined financial
statements are an integral part of these statements.

F-57
<PAGE> 113

MORRIS COUNTY DIRECT MAIL SERVICES, INC.
AND RELATED COMPANIES

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of management
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. For further
information, refer to the financial statements and footnotes thereto for the
year ended December 31, 1996, included elsewhere in this Registration Statement.

In March 1997, the Company and its stockholders entered into a definitive
agreement with Vestcom International, Inc. (Vestcom) pursuant to which the
Company will merge with Vestcom. All outstanding shares of the Company will be
exchanged for cash and shares of Vestcom common stock concurrent with the
consummation of the initial public offering of the common stock of Vestcom.

F-58
<PAGE> 114

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Lirpaco Inc. and subsidiary:

We have audited the accompanying consolidated balance sheets of Lirpaco
Inc. (a Canadian Corporation) and subsidiary as of July 31, 1995 and 1996 and
December 31, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years ended July 31, 1995 and 1996
and the five-month period ended December 31, 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lirpaco Inc. as of July 31,
1995 and 1996 and December 31, 1996 and the results of its operations and its
cash flows for the years ended July 31, 1995 and 1996 and the five-month period
ended December 31, 1996 in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 17, 1997

F-59
<PAGE> 115

LIRPACO INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1995 AND 1996, AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
JULY 31
----------------------- DECEMBER 31,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ -- $ 86,226 $ 88,198
Accounts receivable, net of allowance for doubtful
accounts of $4,080, $35,015 and $35,132,
respectively......................................... 1,032,467 729,505 743,380
Due from related party.................................. -- 42,963 19,474
Supplies inventory...................................... 141,936 130,412 129,439
Prepaid expenses and other current assets............... 83,600 75,788 73,076
---------- ---------- ----------
Total current assets............................ 1,258,003 1,064,894 1,053,567
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization........................................ 438,698 443,944 661,901
DEFERRED CHARGES.......................................... 10,379 3,030 --
---------- ---------- ----------
Total assets.................................... $1,707,080 $1,511,868 $1,715,468
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt....................... $ 42,045 $ 21,495 $ 51,752
Accounts payable and accrued liabilities................ 1,343,964 824,396 675,274
Income taxes payable.................................... 40,562 10,075 36,299
---------- ---------- ----------
Total current liabilities....................... 1,426,571 855,966 763,325
LONG-TERM DEBT............................................ 7,693 -- 245,166
DEFERRED INCOME TAXES..................................... -- 38,620 26,474
---------- ---------- ----------
Total liabilities............................... 1,434,264 894,586 1,034,965
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A common shares, voting, no par value, unlimited
amount authorized, 100 issues and outstanding........ 102 102 102
Class B common shares, nonvoting, no par value,
unlimited amount authorized, no shares issued and
outstanding.......................................... -- -- --
Class C preferred shares, noncumulative, no par value,
nonparticipating, voting, unlimited amount
authorized, no shares issued and outstanding......... -- -- --
Class D preferred shares, noncumulative, no par value,
nonparticipating, nonvoting, unlimited amount
authorized, no shares issued and outstanding......... -- -- --
Class E preferred shares, noncumulative, no par value,
nonparticipating, voting, unlimited amount
authorized, 417,082 shares issued and outstanding.... 102 102 102
Class F preferred shares, noncumulative, no par value
nonparticipating, nonvoting, unlimited amount
authorized, 166,566 shares issued and outstanding.... 170,104 170,104 170,104
Retained earnings....................................... 87,985 424,707 474,943
Cumulative translation adjustments...................... 14,523 22,267 35,252
---------- ---------- ----------
Total stockholders' equity...................... 272,816 617,282 680,503
---------- ---------- ----------
Total liabilities and stockholders' equity...... $1,707,080 $1,511,868 $1,715,468
========== ========== ==========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-60
<PAGE> 116

LIRPACO INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JULY 31, 1995 AND 1996
AND THE FIVE MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
JULY 31 DECEMBER 31
----------------------- -----------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES........................................ $3,914,089 $4,987,369 $2,058,250 $1,973,842
COST OF REVENUES................................ 2,657,407 3,220,847 1,370,548 1,331,274
---------- ---------- ---------- ----------
Gross profit.......................... 1,256,682 1,766,522 687,702 642,568
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 1,088,835 1,325,318 534,769 536,019
---------- ---------- ---------- ----------
Income from operations................ 167,847 441,204 152,933 106,549
OTHER EXPENSES:
Interest expense.............................. 47,496 27,516 13,444 4,126
Loss on sale of asset......................... -- -- -- 26,693
---------- ---------- ---------- ----------
Income before provision for income
taxes............................... 120,351 413,688 139,489 75,730
PROVISION FOR INCOME TAXES...................... 22,710 76,966 28,985 25,494
---------- ---------- ---------- ----------
Net income............................ $ 97,641 $ 336,722 $ 110,504 $ 50,236
========== ========== ========== ==========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-61
<PAGE> 117

LIRPACO INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1995 AND 1996
AND THE FIVE MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
(ACCUMULATED
PREFERRED STOCK COMMON STOCK DEFICIT) CUMULATIVE
------------------ ---------------- RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT EARNINGS ADJUSTMENTS TOTAL
------- -------- ------- ------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, August 1, 1994............. 583,648 $170,206 100 $102 $ (9,656) $12,276 $172,928
Net income........................ -- -- -- -- 97,641 -- 97,641
Translation adjustment............ -- -- -- -- -- 2,247 2,247
------- -------- --- ---- -------- ------- --------
BALANCE, July 31, 1995.............. 583,648 170,206 100 102 87,985 14,523 272,816
------- -------- --- ---- -------- ------- --------
Net income........................ -- -- -- -- 336,722 -- 336,722
Translation adjustment............ -- -- -- -- -- 7,744 7,744
------- -------- --- ---- -------- ------- --------
BALANCE, July 31, 1996.............. 583,648 170,206 100 102 424,707 22,267 617,282
Net income........................ -- -- -- 50,236 -- 50,236
Translation adjustment............ -- -- -- -- -- 12,985 12,985
------- -------- --- ---- -------- ------- --------
BALANCE, December 31, 1996.......... 583,648 $170,206 100 $102 $474,943 $35,252 $680,503
======= ======== === ==== ======== ======= ========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-62
<PAGE> 118

LIRPACO INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1995 AND 1996
AND THE FIVE MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996

<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
JULY 31 DECEMBER 31
--------------------- -----------------------
1995 1996 1995 1996
--------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 97,641 $ 336,722 $ 110,504 $ 50,236
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization......................... 118,767 113,074 49,796 59,516
Provision for doubtful accounts....................... -- 35,382 -- --
(Gain) loss on disposal of fixed assets............... (2,429) -- -- 26,693
Deferred income tax provision......................... 11,570 59,449 20,158 (12,146)
Changes in operating assets (increase) decrease in --
Accounts receivable................................. (340,924) 267,580 76,839 (13,875)
Supplies inventory.................................. (29,640) 11,524 (34,284) 973
Prepaid expenses and other current assets........... (49,959) (4,540) (135,332) (6,021)
Deferred charges.................................... 7,332 7,349 3,050 3,030
Changes in operating liabilities increase (decrease)
in --
Accounts payable and accrued liabilities............ 293,247 (519,568) (121,426) (149,122)
Income taxes payable................................ 40,562 (30,487) 81,754 26,224
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities..................................... 146,167 276,485 51,059 (14,492)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.................... (114,528) (118,320) (35,740) (304,166)
Proceeds from disposal of fixed assets................... 4,396 -- -- 7,349
--------- --------- --------- ---------
Net cash used in investing activities............ (110,132) (118,320) (35,740) (296,817)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings....................... -- -- -- 291,864
Principal payments on long-term debt..................... (13,616) (28,607) (11,656) (2,072)
Loan to related party.................................... -- (42,963) -- --
Collection of loan to related party...................... -- -- -- 23,489
Payment on loan from related party....................... (22,419) (369) (3,663) --
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities..................................... (36,035) (71,939) (15,319) 313,281
--------- --------- --------- ---------
Net increase in cash and cash equivalents........ -- 86,226 -- 1,972
CASH AND CASH EQUIVALENTS, beginning of period............. -- -- -- 86,226
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period................... $ -- $ 86,226 $ -- $ 88,198
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest.............................................. $ 47,496 $ 27,231 $ 13,309 $ 4,097
Income taxes.......................................... -- 32,878 -- --
========= ========= ========= =========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-63
<PAGE> 119

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Lirpaco Inc. (the "Company"), a Canadian corporation, is a holding company
with one subsidiary, COS INFORMATION INC., a Quebec Corporation. The Company's
primary businesses are (i) the production and distribution of computer-generated
labels, (ii) the production and distribution of documents on paper, microfiche,
microfilm and compact disc, (iii) demand publishing, (iv) mailing services and
(v) forms management. Its customer base is mainly comprised of businesses in and
around Montreal, Canada.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements have been prepared from records maintained in
Canada. The Company's financial statements are presented in accordance with the
generally accepted accounting principles of the United States of America. All
significant intercompany transactions have been eliminated in consolidation.

Foreign Currency

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Translation," income statement accounts are translated at
the average exchange rates in effect during the period, while assets and
liabilities are translated at the rates of exchange at the balance sheet date.
The resulting balance sheet translation adjustments are $2,247, $7,744 and
$12,985 for the years ended July 31, 1995 and 1996 and the five months ended
December 31, 1996, respectively.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Cash and Cash Equivalents

Cash and cash equivalents include money market accounts and all highly
liquid debt instruments purchased with original maturities of three months or
less.

Supplies Inventory

F-64
<PAGE> 120

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed
principally using an accelerated method over the estimated useful lives of the
assets. Leasehold improvements are capitalized and amortized over the shorter of
the estimated useful lives of the assets or the terms of the related leases.

Income Taxes

Income taxes are provided based on earnings reported for financial
statement purposes. The provision for income taxes differs from the amounts
currently payable because of timing differences in the recognition of certain
income and expense items for financial reporting and tax purposes. In accordance
with SFAS No. 109, the Company accounts for income taxes using an asset and
liability method. The asset and liability method requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between tax bases and financial reporting bases of assets
and liabilities, measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.

New Accounting Pronouncement

Effective January 1, 1995, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Accordingly, in the event that facts and circumstances indicate that
property and equipment, and intangible or other assets, may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the assets is
compared to the asset's carrying amount to determine if a write-down to market
value or discounted cash flow value was necessary. Adoption of this standard did
not have a material effect on the financial position or results of operations of
the Company.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risks" consist primarily of trade accounts receivable.
The Company's customers are concentrated in eastern Canada. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends, and other information.

F-65
<PAGE> 121

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at July 31, 1995 and 1996
and December 31, 1996:

<TABLE>
<CAPTION>
JULY 31 ESTIMATED
--------------------------- DECEMBER 31, USEFUL
1995 1996 1996 LIVES (YEARS)
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Machinery and equipment....... $ 1,926,410 $ 1,905,968 $ 1,522,185 10
Furniture and fixtures........ 117,499 130,074 148,566 10
Leasehold improvements........ 124,305 126,269 258,794 7
Computer hardware............. 221,281 284,840 300,282 6
Computer software............. 15,008 26,955 27,292 5
----------- ----------- -----------
2,404,503 2,474,106 2,257,119
Less -- Accumulated
depreciation and
amortization................ (1,965,805) (2,030,162) (1,595,218)
----------- ----------- -----------
Property and equipment, net... $ 438,698 $ 443,944 $ 661,901
=========== =========== ===========
</TABLE>

Leased equipment under capital leases (included above) consists of the
following at July 31, 1995 and 1996 and December 31, 1996.

<TABLE>
<CAPTION>
JULY 31
-------------------- DECEMBER 31,
1995 1996 1996
------- -------- ------------
<S> <C> <C> <C>
Equipment......................................... $32,199 $ 47,430 $ 47,430
Less -- Accumulated amortization.................. (8,413) (13,795) (17,574)
------- -------- --------
$23,786 $ 33,635 $ 29,856
======= ======== ========
</TABLE>

Depreciation and amortization expense on property and equipment charged to
operations for the years ended July 31, 1995 and 1996 and the five-month periods
ended December 31, 1995 (unaudited) and 1996 was $118,767, $113,074, $49,796 and
$59,516, respectively.

(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consists of the following at July 31,
1995 and 1996 and December 31, 1996:

<TABLE>
<CAPTION>
JULY 31
----------------------- DECEMBER 31,
1995 1996 1996
---------- -------- ------------
<S> <C> <C> <C>
Accounts payable................................ $ 860,995 $372,399 $420,115
Wages payable................................... 217,247 314,209 156,881
Sales taxes payable............................. 52,908 108,967 91,435
Customer advances............................... 118,443 600 6,843
Other........................................... 94,371 28,221 --
---------- -------- --------
$1,343,964 $824,396 $675,274
========== ======== ========
</TABLE>

F-66
<PAGE> 122

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

Long-term debt consists of the following at July 31, 1995 and 1996 and
December 31, 1996:

<TABLE>
<CAPTION>
JULY 31
------------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
<S> <C> <C> <C>
Various noninterest bearing equipment loans payable to
various companies for capital leases. Principal amounts
are payable in aggregate monthly installments of $2,225;
collateralized by specific equipment, maturing November
1996 through June 1997. ................................. $19,059 $19,423 $ 5,054
Equipment loan payable to a financial institution. Final
payment was made in September 1996. ..................... 30,679 2,072 --
Leasehold improvement loan payable to a financial
institution, bearing interest at 1/2% over the Daily
Floating Base interest rate (8 1/2% at December 31,
1996). The principal is payable in escalating monthly
installments of $2,554 to $5,472; collateralized by the
assets of the Company. The final payment is due in
December 2001. .......................................... -- -- 291,864
------- ------- --------
49,738 21,495 296,918
Less -- Current maturities................................. 42,045 21,495 51,752
------- ------- --------
$ 7,693 $ -- $245,166
======= ======= ========
</TABLE>

At December 31, 1996 the aggregate amounts of annual principal maturities
of long-term debt (including capital leases) are as follows:

F-67
<PAGE> 123

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) INCOME TAXES

The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
JULY 31 DECEMBER 31
------------------- ------------------------
1995 1996 1996
------- ------- 1995 --------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current tax expense
Federal................................ $ 67 $ 3,847 $ -- $ 27,077
Provincial............................. 11,073 13,670 8,827 10,563
------- ------- ------- -------
Total current.................. 11,140 17,517 8,827 37,640
------- ------- ------- -------
Deferred tax expense
Federal................................ 15,273 57,931 19,570 (8,533)
Provincial............................. (3,703) 1,518 588 (3,613)
------- ------- ------- -------
Total deferred................. 11,570 59,449 20,158 (12,146)
------- ------- ------- -------
Total provision................ $22,710 $76,966 $28,985 $ 25,494
======= ======= ======= =======
</TABLE>

The Canadian statutory tax rate is 18.87% on the first $147,000 of taxable
revenue. The Company pays taxes on its taxable income at this rate except as
modified for certain permanent differences.

(7) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases office premises, warehouse space and a portion of its
machinery and equipment under operating leases expiring at varying dates through
2001.

At December 31, 1996 the minimum annual rental commitment of the Company
under existing agreements are as follows:

<TABLE>
<S> <C>
1997.............................................. $405,260
1998.............................................. 298,559
1999.............................................. 138,079
2000.............................................. 65,597
2001.............................................. 50,267
--------
Total minimum payments.................. $957,762
========
</TABLE>

Rent expense including lease escalations charged to operations for the
years ended July 31, 1995 and 1996 and the five months ended December 31, 1995
(unaudited) and 1996 was $41,827, $41,135, $22,637 and $17,267, respectively.

Litigation

F-68
<PAGE> 124

LIRPACO INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(8) RELATED PARTY TRANSACTIONS

A stockholder had noninterest bearing loans outstanding to the Company in
the amounts of $0, $42,963 and $19,474 at July 31, 1995 and 1996, and December
31, 1996, respectively, included in due from related party in the accompanying
balance sheets. The loans were repaid in January 1997.

(9) EMPLOYEE BENEFIT PLAN

The Company maintains a profit sharing plan for all employees. The Plan
provides for the Company to contribute 30% of pretax income, net of certain
adjustments. Contributions to this plan for the years ended July 31, 1995 and
1996 and the five months ended December 31, 1995 (unaudited) and 1996 were
$88,605, $179,777, $62,349 and $38,365, respectively.

(10) MAJOR CUSTOMERS

The Company has one customer which accounted for 15.1% and 12.9% of sales
for the year ended July 31, 1996 and the five months ended December 31, 1996,
respectively, and another customer which represented 10.9% and 10.6% of sales
for the year ended July 31, 1996 and the five months ended December 31, 1996,
respectively.

(11) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

In March 1997, the Company and its stockholders entered into a definitive
agreement with Vestcom providing for the Acquisition of the Company by Vestcom.

F-69
<PAGE> 125

LIRPACO INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 88,198 $ 188
Accounts receivable, net................................... 743,380 848,888
Other current assets....................................... 221,989 220,297
---------- ----------
Total current assets............................... 1,053,567 1,069,373
PROPERTY AND EQUIPMENT net................................... 661,901 729,511
---------- ----------
Total assets....................................... $1,715,468 $1,798,884
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease
obligations............................................. $ 51,752 $ 76,534
Other current liabilities.................................. 711,573 661,532
---------- ----------
Total current liabilities.......................... 763,325 738,066
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS................. 245,166 301,996
DEFERRED EXPENSES............................................ 26,474 26,267
---------- ----------
Total liabilities.................................. 1,034,965 1,066,329
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock............................................... 102 102
Preferred Stock............................................ 170,206 170,206
Retained earnings.......................................... 474,943 525,762
Cumulative translation adjustments......................... 35,252 36,485
---------- ----------
Total stockholders' equity......................... 680,503 732,555
---------- ----------
Total liabilities and stockholders' equity......... $1,715,468 $1,798,884
========== ==========
</TABLE>

The accompanying notes to condensed financial statements are an integral part of
these balance sheets

F-70
<PAGE> 126

LIRPACO INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES.............................................................. $1,251,360 $1,129,888
COST OF REVENUES...................................................... 834,579 761,654
---------- ----------
Gross Profit................................................ 416,781 368,234
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......................... 291,490 291,194
---------- ----------
Income from operations...................................... 125,291 77,040
---------- ----------
OTHER INCOME (EXPENSE):
Interest Expense.................................................... (8,659) (3,847)
Interest and other income (expense)................................. -- (5,434)
---------- ----------
Income before provision for income taxes.................... 116,632 67,759
---------- ----------
PROVISION FOR INCOME TAXES............................................ 29,158 16,940
---------- ----------
Net income.................................................. $ 87,474 $ 50,819
========== ==========
</TABLE>

The accompanying notes to condensed financial statements are an integral part of
these statements.

F-71
<PAGE> 127

LIRPACO INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................................... $ 87,474 $ 50,819
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
Depreciation and amortization................................... 26,440 33,757
Changes in operating assets (increase) decrease in-
Accounts receivable........................................... 22,236 (105,508)
Other assets.................................................. 222,116 1,692
Changes in operating liabilities increase (decrease) in-
Other current liabilities..................................... (325,009) (50,041)
Deferred charges.............................................. 7,329 (207)
--------- ---------
Net cash provided by (used in) operating activities........ 40,586 (69,488)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.............................. (30,891) (101,367)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cumulative translation adjustment.................................. (1,888) 1,233
Net proceeds from borrowings....................................... (7,807) 81,612
--------- ---------
Net cash provided by (used in) financing activities........ (9,695) 82,845
--------- ---------
Net decrease in cash and cash equivalents.................. -- (88,010)
CASH AND CASH EQUIVALENTS, beginning of period....................... -- 88,198
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................. $ -- $ 188
--------- ---------
</TABLE>

The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.

F-72
<PAGE> 128

LIRPACO INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of management
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. For further
information, refer to the financial statements and footnotes thereto for the
year ended December 31, 1996, included elsewhere in this Registration Statement.

In March 1997, the Company and its stockholders entered into a definitive
agreement with Vestcom International, Inc. (Vestcom) pursuant to which the
Company will merge with Vestcom. All outstanding shares of the Company will be
exchanged for cash and shares of Vestcom common stock concurrent with the
consummation of the initial public offering of the common stock of Vestcom.

F-73
<PAGE> 129

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Computer Output Systems, Inc.:

We have audited the accompanying balance sheets of Computer Output Systems,
Inc. (a Connecticut corporation) as of December 31, 1995 and 1996, and the
related statements of income, stockholders' equity, and cash flows for the years
ended December 31, 1994, 1995 and 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Computer Output Systems,
Inc. as of December 31, 1995 and 1996 and the results of its operations and its
cash flows for the years ended December 31, 1994, 1995 and 1996 in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
January 24, 1997

F-74
<PAGE> 130

COMPUTER OUTPUT SYSTEMS, INC.

BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 95,468 $ --
Accounts receivable, net of allowance for doubtful accounts of
$7,500 and $5,000 in 1995 and 1996, respectively................ 721,721 964,035
Supplies inventory................................................. 35,191 176,211
Prepaid postage.................................................... 90,757 139,458
Prepaid expenses and other current assets.......................... 9,019 25,642
---------- ----------
Total current assets....................................... 952,156 1,305,346
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization....................................................... 459,723 472,003
OTHER ASSETS......................................................... 23,906 36,240
---------- ----------
Total assets............................................... $1,435,785 $1,813,589
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.................................. $ 60,000 $ 150,000
Current portion of capital lease obligations....................... 108,235 94,584
Accounts payable................................................... 354,215 566,064
Accrued expenses................................................... 63,870 88,720
Advanced postage................................................... 273,710 249,605
---------- ----------
Total current liabilities.................................. 860,030 1,148,973
LONG-TERM DEBT....................................................... 207,358 --
CAPITAL LEASE OBLIGATIONS............................................ 227,249 130,072
---------- ----------
Total liabilities.......................................... 1,294,637 1,279,045
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; 10,000 shares authorized, 100 shares
issued and outstanding.......................................... 10 10
Additional paid-in capital......................................... 732,470 732,470
Retained earnings.................................................. (591,332) (197,936)
---------- ----------
Total stockholders' equity................................. 141,148 534,544
---------- ----------
Total liabilities and stockholders' equity................. $1,435,785 $1,813,589
========== ==========
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-75
<PAGE> 131

COMPUTER OUTPUT SYSTEMS, INC.

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES............................................... $2,192,400 $3,542,048 $4,854,633
COST OF REVENUES....................................... 1,459,472 2,446,078 3,131,997
---------- ---------- ----------
Gross profit................................. 732,928 1,095,970 1,722,636
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................................. 681,638 979,211 1,195,057
---------- ---------- ----------
Income from operations....................... 51,290 116,759 527,579
---------- ---------- ----------
OTHER EXPENSE:
Interest expense..................................... 34,883 49,482 38,794
Other expense........................................ 15,540 -- --
---------- ---------- ----------
50,423 49,482 38,794
---------- ---------- ----------
Income before provision for income taxes..... 867 67,277 488,785
---------- ---------- ----------
PROVISION FOR INCOME TAXES............................. 250 7,365 51,353
---------- ---------- ----------
Net income................................... $ 617 $ 59,912 $ 437,432
========== ========== ==========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-76
<PAGE> 132

COMPUTER OUTPUT SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 (Note 1)........... 100 $ 10 $ 732,470 $(635,719) $ 96,761
Net income.................................. -- -- -- 617 617
--- ---- -------- --------- ---------
BALANCE AT DECEMBER 31, 1994.................. 100 10 732,470 (635,102) 97,378
Net income.................................. -- -- -- 59,912 59,912
Distributions to stockholders............... -- -- -- (16,142) (16,142)
--- ---- -------- --------- ---------
BALANCE AT DECEMBER 31, 1995.................. 100 10 732,470 (591,332) 141,148
Net income.................................. -- -- -- 437,432 437,432
Distributions to stockholders............... -- -- -- (44,036) (44,036)
--- ---- -------- --------- ---------
BALANCE AT DECEMBER 31, 1996.................. 100 $ 10 $ 732,470 $(197,936) $ 534,544
=== ==== ======== ========= =========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-77
<PAGE> 133

COMPUTER OUTPUT SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 617 $ 59,912 $ 437,783
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation and amortization...................... 86,342 105,145 132,812
Provision for doubtful accounts.................... 5,000 14,373 --
Loss on abandonment of leasehold improvements...... 9,358 -- --
Changes in operating assets (increase) decrease
in --
Accounts receivable.............................. (105,123) (333,798) (242,314)
Supplies inventory............................... (27,350) (7,841) (141,020)
Prepaid postage.................................. (34,549) (49,588) (48,701)
Prepaid expenses and other assets................ 740 (9,075) (28,956)
Changes in operating liabilities increase
(decrease) in --
Accounts payable................................. (23,017) 153,470 211,849
Accrued expenses................................. 12,345 38,851 24,850
Advanced postage................................. (66,212) 166,245 (24,105)
--------- --------- ---------
Net cash provided by (used in) operating
activities.................................. (141,849) 137,694 322,198
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES --
Acquisition of property and equipment................. (59,220) (33,927) (145,444)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings............................. -- 200,000 (50,000)
Principal payments on capital lease obligations....... (63,555) (99,040) (110,828)
Proceeds from loans from affiliated company........... 430,029 -- --
Repayment of loans from affiliated company............ (185,080) (73,442) (67,358)
Proceeds from (payments on) stockholder loans......... 30,000 (30,000) --
Distributions to stockholders......................... -- (16,142) (44,036)
--------- --------- ---------
Net cash provided by (used in) financing
activities.................................. 211,394 (18,624) (272,222)
--------- --------- ---------
Net (decrease) increase in cash and cash
equivalents................................. 10,325 85,143 (95,468)
CASH AND CASH EQUIVALENTS, beginning of year............ -- 10,325 95,468
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year.................. $ 10,325 $ 95,468 $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for --
Interest........................................... $ 38,871 $ 44,797 $ 38,329
State income tax................................... 250 250 19,004
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Capital lease obligations incurred.................... $(330,089) $(143,700) $ --
========= ========= =========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-78
<PAGE> 134

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

The Company was formed pursuant to a "Corporate Reorganization Agreement"
dated December 28, 1994, whereby Computer Output Systems, Inc. (an existing
Connecticut S Corporation) transferred and assigned the assets and liabilities
of its computer printing business to Hall-Cicchese Acquisition Corporation
(hereinafter referred to as "Acquisition Corp."). Computer Output Systems, Inc.
simultaneously surrendered its use of the corporate name "Computer Output
Systems, Inc.," thereby permitting Acquisition Corp. to adopt the use of the
corporate name "Computer Output Systems, Inc." (hereinafter referred to as the
"Company"). The effective date of this agreement, as agreed upon by the parties,
was January 1, 1994. The corporate reorganization essentially represented an
exchange of shares between entities under common control. Accordingly, the
assets and liabilities so transferred were accounted for at historical cost.

The Company's primary businesses are (i) the production and distribution of
documents on paper, (ii) computer center document outsourcing services, (iii)
marketing materials fulfillment, (iv) mailing services and (v) forms management.

The Company and its shareholders intend to enter into a definitive
agreement with Vestcom International, Inc. ("Vestcom"), pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash and
shares of Vestcom's common stock (the "Acquisition") concurrent with the
consummation of the initial public offering (the "Offering") of the common stock
of Vestcom.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue Recognition

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less.

Supplies Inventory

Supplies inventory consists primarily of paper and toner. Supplies are
valued at cost, which approximates market, with cost determined using the
first-in, first-out method.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets. Leasehold improvements and assets subject to capital lease are
capitalized and amortized over the lesser of the estimated useful life or the
remaining life of the building lease agreement. The Company accounts for fixed
asset additions under the half-year convention guidelines.

F-79
<PAGE> 135

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of equipment and leaseholds, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
Federal corporation income taxes on its taxable income. Instead, the
stockholders are liable for individual federal income taxes on their respective
shares of the Company's taxable income. Accordingly, no provision for Federal
corporate income taxes has been made in the accompanying financial statements.

New Accounting Pronouncement

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in
the event that facts and circumstances indicate that property and equipment, and
intangible or other assets, may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the assets is compared to the asset's
carrying amount to determine if a write-down to market value or discounted cash
flow value is necessary. Adoption of this standard did not have a material
effect on the financial position or results of operations of the Company.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," consist primarily of trade accounts receivable.
The Company's customers are concentrated in the northeast United States. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.

(3) PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
1995 1996 (YEARS)
--------- --------- ---------
<S> <C> <C> <C>
Furniture and fixtures............................ $ 37,622 $ 37,622 7
Computers and equipment........................... 680,805 641,132 5
Leasehold improvements............................ 25,492 96,045 10
--------- ---------
743,919 774,799
Less -- Accumulated depreciation and
amortization.................................... (284,196) (302,796)
--------- ---------
Property and equipment, net............. $ 459,723 $ 472,003
========= =========
</TABLE>

F-80
<PAGE> 136

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Leased equipment under capital leases (included above) consists of the
following at December 31:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Computers and equipment...................................... $ 500,289 $ 428,789
Less -- Accumulated depreciation............................. (130,835) (185,656)
--------- ---------
$ 369,454 $ 243,133
========= =========
</TABLE>

Depreciation and amortization expense was $86,342, $105,145 and $132,812
for the years ended December 31, 1994, 1995 and 1996, respectively.

At December 31, 1996 minimum annual payments under capital leases including
interest are as follows:

<TABLE>
<S> <C>
1997.............................................................. $105,473
1998.............................................................. 97,728
1999.............................................................. 47,747
--------
Total minimum payments.................................. 250,948
Less -- Amounts representing interest............................. (26,292)
--------
Net minimum lease payments.............................. 224,656
Less -- Current portion of capital lease obligations.............. 94,584
--------
Long-term portion of capital lease obligations.......... $130,072
========
</TABLE>

The interest rates on capitalized leases vary from 8% to 13% and are
imputed based on the fair market value of the equipment at the inception of the
lease.

(4) LONG-TERM DEBT

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Long-term debt consists of the following at December 31:
$300,000 line of credit with a financial institution. Secured by
substantially all of the assets of the Company. Interest is
payable monthly at prime (8 1/4% at December 31, 1996) plus 1%.
All outstanding balances due on December 19, 1997................. $200,000 $150,000
Unsecured loan from an affiliated company bearing interest at 10.25%,
payable in monthly principal installments of approximately $7,000.
Loan is subordinated to the line of credit........................ 67,358 --
-------- --------
267,358 150,000
Less -- Current maturities............................................. 60,000 150,000
-------- --------
$207,358 $ --
======== ========
</TABLE>

The line of credit agreement requires the maintenance of certain ratios
related to net worth and working capital. The Company was in compliance with
these covenants at December 31, 1996.

(5) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company and its affiliate, Halls Magazine Reports, Inc. ("Halls"), a
company of which Daniel Hall, president and stockholder of the Company is the
owner (see Note 6), share their leased office space. The lease expires on July
31, 2004. The Company has the option to extend the term of the lease for a
period of five years

F-81
<PAGE> 137

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

from the date upon which it would otherwise expire. The rent is fixed for the
term of the lease with scheduled increases on August 1, 1997 and August 1, 2000.
The Company is responsible for its proportionate share of all related occupancy
costs. The Company allocates 13% of this rental obligation to Halls.

The Company also leases equipment and vehicles under noncancellable
operating leases expiring through 1999.

At December 31, 1996 the minimum annual rental commitment of the Company
under existing agreements are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 409,473
1998..................................................................... 347,536
1999..................................................................... 323,274
2000..................................................................... 223,593
2001..................................................................... 228,843
Thereafter............................................................... 338,400
----------
Total minimum payments......................................... $1,871,119
==========
</TABLE>

Rental expense charged to operations amounted to $136,352, $172,080 and
$280,337 for the years ended December 31, 1994, 1995 and 1996, respectively.

Litigation

Restrictions on Sale of Common Stock

The common stock of the Company is subject to restrictions on sale,
assignment, pledge, transfer or other disposition pursuant to the stockholders'
agreement dated December 28, 1994.

Employment Contracts

The Company entered into ten year employment contracts dated December 28,
1994 with Daniel Hall and Timothy Cicchese. In addition to providing for base
compensation and bonuses based on profitability, the contracts provide for 24
months continuation of base salary and benefits if termination occurs prior to
the end of the contract. See Note 9 for discussion of termination of such
agreements.

(6) RELATED PARTY TRANSACTIONS

Loan from Affiliated Company

At December 31, 1995, the Company owed $67,358 to Halls. The loan was
repaid by the Company by December 31, 1996 through payments of a portion of
Halls' monthly business expenses such as office space, medical and dental
insurance, general insurance and long distance telephone. In addition, the
Company produced Halls' monthly reports to reduce the outstanding loan balance.
Services billed to Halls were $21,516, $19,253 and $21,433 for the years ended
December 31, 1994, 1995 and 1996, respectively. Interest on this loan amounted
to $14,484, $11,225 and $2,102 for the years ended December 31, 1994, 1995 and
1996, respectively.

At December 31, 1996, Halls owed the Company $26,509, which is included in
accounts receivable.

F-82
<PAGE> 138

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Loans from Stockholders

During the month of December 1994, Daniel Hall, president and stockholder,
and Timothy Cicchese, vice president and stockholder, each loaned the Company
$15,000. These loans were repaid in May 1995 with no interest.

(7) EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) deferred compensation plan. The plan
provides for the Company to contribute amounts equal to 33% of the contributions
made by employees up to 5% of their total annual salary. Company contributions
to this plan for the years ended December 31, 1994, 1995 and 1996 were $12,876,
$14,773 and $15,238, respectively.

(8) SIGNIFICANT CUSTOMER

During the years ended December 31, 1994, 1995 and 1996 one customer
accounted for $415,000, $1,077,000 and $1,412,000 of the Company's revenues,
respectively. This customer is a service bureau servicing many different
business accounts. The Company provides subcontracting services for over 70
different accounts for this customer. Accounts receivable from this customer as
of December 31, 1995 and 1996 were approximately $172,000 and $166,000,
respectively. Effective October 1, 1996, the Company and this customer entered
into a one year service agreement whereby the Company will provide document
generation and mailing services at prices specified in the agreement. The
Company intends to renew the contract without significant modification of the
original agreement.

(9) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom providing for the Acquisition of the Company
by Vestcom.

Prior to the closing of the Acquisition, the Company will make
distributions in respect of the Company's estimated S Corporation accumulated
adjustment account at the time of closing.

The employment contracts with Mr. Hall and Mr. Cicchese will be terminated
as part of the Acquisition.

F-83
<PAGE> 139

COMPUTER OUTPUT SYSTEMS, INC.

CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ -- $ 174,815
Accounts receivable, net.................................... 964,035 665,012
Other current assets........................................ 341,311 359,755
----------- ----------
Total current assets................................ 1,305,346 1,199,582
PROPERTY AND EQUIPMENT, net................................... 472,003 475,586
OTHER ASSETS.................................................. 36,240 38,916
----------- ----------
Total assets........................................ $ 1,813,589 $1,714,084
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings....................................... $ -- $ 250,000
Current portion of long-term debt and capital lease
obligations.............................................. 244,584 89,844
Other current liabilities................................... 904,389 673,441
----------- ----------
Total current liabilities........................... 1,148,973 1,013,285
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.................. 130,072 112,942
----------- ----------
Total liabilities................................... 1,279,045 1,126,227
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock................................................ 10 10
Additional paid-in capital.................................. 732,470 732,470
Retained earnings........................................... (197,936) (144,623)
----------- ----------
Total stockholders' equity.......................... 534,544 587,857
----------- ----------
Total liabilities and stockholders' equity.......... $ 1,813,589 $1,714,084
=========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these balance sheets.

F-84
<PAGE> 140

COMPUTER OUTPUT SYSTEMS, INC.

CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES............................................................ $ 1,190,336 $ 1,527,722
COST OF REVENUES.................................................... 749,266 1,005,264
----------- -----------
Gross Profit.............................................. 441,070 522,458
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................ 254,271 307,753
----------- -----------
Income from operations.................................... 186,799 214,705
----------- -----------
OTHER INCOME (EXPENSE):
Interest Expense.................................................. (11,051) (8,731)
Interest and other income......................................... -- 1,952
----------- -----------
Income before provision for income taxes.................. 175,748 207,926
----------- -----------
PROVISION FOR INCOME TAXES.......................................... 18,465 25,000
----------- -----------
Net income................................................ $ 157,283 $ 182,926
=========== ===========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-85
<PAGE> 141

COMPUTER OUTPUT SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................... $ 157,283 $ 182,926
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization.............................. 30,152 33,184
Changes in operating assets (increase) decrease in --
Accounts recievable...................................... 126,907 299,023
Other current assets..................................... 25,078 (18,444)
Other assets............................................. 700 (2,676)
Changes in operating liabilities increase (decrease) in --
Other current liabilities................................ (223,721) (230,948)
---------- ----------
Net cash provided by operating activities............. 116,399 263,065
---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment......................... (28,749) (36,767)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings.................................. (54,087) 78,130
Distributions to stockholders................................. -- (129,613)
---------- ----------
Net cash provided by (used in) financing activities... (54,087) (51,483)
---------- ----------

Net increase in cash and cash equivalents............. 33,563 174,815

CASH AND CASH EQUIVALENTS, beginning of period.................. 95,468 --
---------- ----------
CASH AND CASH EQUIVALENTS, ending of period..................... $ 129,031 $ 174,815
========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-86
<PAGE> 142

COMPUTER OUTPUT SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information refer to the financial statements and footnotes
thereto for the year ended December 31, 1996, included elsewhere in this
Registration Statement.

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom International, Inc. ("Vestcom") pursuant to
which the Company will merge with Vestcom. All outstanding shares of the Company
will be exchanged for cash and shares of Vestcom common stock concurrent with
the consummation of the initial public offering of the common stock of Vestcom.

F-87
<PAGE> 143

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------------------------------

To the Shareholders of
Electronic Imaging Services, Inc.:

We have audited the accompanying balance sheet of Electronic Imaging
Services, Inc. (a Delaware Corporation) as of December 31, 1996 and the related
statements of operations, stockholders' deficit and cash flows for the year then
ended. 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 audit.

We conducted our audit 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 audit provides 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 Electronic Imaging Services,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
has a working capital deficiency and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 17, 1997

F-88
<PAGE> 144

ELECTRONIC IMAGING SERVICES, INC.

BALANCE SHEET
AS OF DECEMBER 31, 1996

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 45,089
Accounts receivable, net of allowance for doubtful accounts of $37,017........ 826,655
Supplies inventory............................................................ 413,210
Other current assets.......................................................... 112,696
-----------
Total current assets.................................................. 1,397,650

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization........ 1,526,992

OTHER ASSETS.................................................................... 54,944
-----------
Total assets.......................................................... $ 2,979,586
===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Short-term borrowings......................................................... $ 662,575
Current portion of long-term debt............................................. 169,393
Current portion of capital lease obligations.................................. 232,863
Accounts payable.............................................................. 1,119,316
Accrued expenses.............................................................. 321,200
-----------
Total current liabilities............................................. 2,505,347

LONG-TERM DEBT.................................................................. 48,644

CAPITAL LEASE OBLIGATIONS....................................................... 768,504

DEFERRED INCOME TAXES........................................................... 86,740
PLEDGED STOCK................................................................... 375,000
-----------
Total liabilities..................................................... 3,784,235
-----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value; 2,000 shares authorized; 1,261 shares issued;
961 shares outstanding..................................................... 11
Accumulated deficit........................................................... (429,660)
-----------
(429,649)
Less -- Treasury stock, 150 shares at cost...................................... (375,000)
-----------
Total stockholders' deficit........................................... (804,649)
-----------
Total liabilities and stockholders' deficit........................... $ 2,979,586
===========
</TABLE>

The accompanying notes to financial statements
are an integral part of this balance sheet.

F-89
<PAGE> 145

ELECTRONIC IMAGING SERVICES, INC.

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
REVENUES......................................................................... $7,623,870
COST OF REVENUES................................................................. 6,272,144
----------
Gross profit........................................................... 1,351,726
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..................................... 1,840,958
----------
Loss from operations................................................... (489,232)
OTHER INCOME (EXPENSE):
Interest expense............................................................... (157,762)
Other income................................................................... 11,789
----------
(145,973)
----------
Net loss............................................................... $ (635,205)
==========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-90
<PAGE> 146

ELECTRONIC IMAGING SERVICES, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TREASURY STOCK
--------------- PAID-IN (ACCUMULATED ------------------
SHARES AMOUNT CAPITAL DEFICIT) SHARES AMOUNT TOTAL
------ ------ ---------- ------------ ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996............. 1,261 $ 13 $ 101,987 $ 478,556 -- $ -- $ 580,556
Purchase of treasury stock......... (240) -- -- 240 (600,000) (600,000)
Reissuance of treasury stock....... 90 -- -- (90) 225,000 225,000
Pledge of common stock............. (150) (2) (101,987) (273,011) -- -- (375,000)
Net loss........................... -- -- (635,205) -- -- (635,205)
----- ---- --------- ---------- --- --------- -----------
BALANCE, December 31, 1996........... 961 $ 11 $ -- $ (429,660) 150 $(375,000) $ (804,649)
===== ==== ========= ========== === ========= ===========
</TABLE>

The accompanying notes to financial statements
are an integral part of this statement.

F-91
<PAGE> 147

ELECTRONIC IMAGING SERVICES, INC.

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................................... $(635,205)
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization............................................. 297,192
Provision for doubtful accounts........................................... 33,923
Loss on write-down of property and equipment.............................. 21,968
Gain on sale of property.................................................. (15,629)
Changes in operating assets (increase) decrease in --
Accounts receivable..................................................... (132,397)
Supplies inventory...................................................... (137,494)
Other current assets.................................................... 61,755
Changes in operating liabilities increase (decrease) in --
Accounts payable........................................................ 530,454
Accrued expenses........................................................ 217,821
---------
Net cash provided by operating activities............................ 242,388
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment........................................ (194,500)
Proceeds from sale of property and equipment................................. 70,296
---------
Net cash used by investing activities................................ (124,204)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings.................................................... 469,000
Payments on long-term debt and capital lease obligations..................... (339,993)
Purchase of treasury stock................................................... (225,000)
---------
Net cash used by financing activities................................ (95,993)
---------
Net increase in cash and cash equivalents............................ 22,191
CASH AND CASH EQUIVALENTS, at beginning of year................................ 22,898
---------
CASH AND CASH EQUIVALENTS, at end of year...................................... $ 45,089
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for --
Interest.................................................................. $ 167,051
Income taxes.............................................................. 30,893
=========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
Capital lease obligations incurred........................................... $ 971,975
Purchase of treasury stock through issuance of notes payable................. 375,000
=========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-92
<PAGE> 148

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Electronic Imaging Services, Inc. ("EIS" or the "Company"), is a Delaware
corporation. The Company's primary businesses are (i) the production and
distribution of computer-generated labels, (ii) the production and distribution
of documents on paper, microfiche, microfilm and compact disc and (iii) forms
management.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered a loss from
operations, has a working capital deficit and has a net capital deficiency that
raises substantial doubt about its ability to continue as a going concern. As
discussed above, the Company intends to enter into the Acquisition with Vestcom.
However, no assurance can be given that the Acquisition will occur. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Revenues are recognized when the services are rendered.

Cash and Cash Equivalents

Cash and cash equivalents include money market accounts and all highly
liquid debt instruments purchased with original maturities of three months or
less.

Supplies Inventory

Inventories consist of paper, film and micrographic chemicals. Supplies are
valued at the lower of cost or market. Cost is determined by the first-in,
first-out method.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is calculated by
using the straight-line method over the estimated useful lives of the related
assets.

F-93
<PAGE> 149

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes

New Accounting Pronouncement

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet-Risk and Financial Instruments with
Concentrations of Credit Risk," consist primarily of trade accounts receivable.
The Company's customers are concentrated in the southern and eastern United
States. The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends,
and other information.

(3) PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1996:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
(YEARS)
---------
<S> <C> <C>
Furniture and fixtures.......................................... $ 146,458 10
Production equipment............................................ 2,365,483 5-7
Delivery equipment.............................................. 65,998 5
Leasehold improvements.......................................... 39,105 7
----------
2,617,044
Less -- Accumulated depreciation and amortization............... 1,090,052
----------
Property and equipment................................ $1,526,992
==========
</TABLE>

Leased equipment under capital leases (included above) consists of the
following at December 31, 1996:

<TABLE>
<S> <C>
Equipment................................................................ $1,381,584
Less -- Accumulated depreciation......................................... 314,672
----------
$1,066,912
==========
</TABLE>

F-94
<PAGE> 150

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation and amortization expense was $297,192 for the year ended
December 31, 1996. At December 31, 1996 minimum annual payments under capital
leases including interest are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 317,733
1998..................................................................... 317,733
1999..................................................................... 306,874
2000..................................................................... 192,781
2001..................................................................... 62,708
----------
Total minimum payments......................................... 1,197,829
Less -- Amount representing interest..................................... 196,462
----------
Net minimum lease payments..................................... 1,001,367
Less -- Current portion of capital lease obligation...................... 232,863
----------
Long-term portion of capital lease obligations................. $ 768,504
==========
</TABLE>

The interest rates on capitalized leases vary from 8.6% to 13.3% and are
imputed based on the fair market value of the equipment at the inception of the
lease.

(4) SHORT-TERM BORROWINGS

The Company has a line of credit with a bank that provides for maximum
borrowings of $750,000. Borrowings bear interest at 9.25% per annum, adjusted
periodically with interest payments only required monthly. The borrowings are
secured by accounts receivable, inventory and the personal guarantee of two
stockholders and are due April 30, 1997.

(5) LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1996:

<TABLE>
<S> <C>
Note payable to bank; 80% guaranteed by the U.S. Small Business
Administration; interest at 8%; payable in monthly installments of
$6,083, including interest; secured by fixed assets and the personal
guarantee of two stockholders; due September 1997 or immediately if the
Company is to merge with another company................................ $ 58,695
Notes payable of $375,000 to two stockholders, interest at 7.00% per
annum, due in semiannual installments on January 15 and July 15 of
$112,500 on each note through 1998, secured by Stock Pledge
Agreements.............................................................. 375,000
Notes payable to stockholders, interest at a rate of 10% per annum,
interest only payable monthly, due February 28, 1997.................... 66,000
Notes payable of $113,594 original principal to bank and finance company,
interest ranging from 4.8% to 9.75%, due in monthly installments of
$3,600, including interest; secured by accounts receivable, auto,
inventory and personal guarantees of two stockholders; due January, 1997
to December, 1999....................................................... 64,946
Note payable to supplier, interest at 7.99%, due in monthly installments
of $1,115, including interest, unsecured, due April, 1999............... 28,396
--------
593,037
Less -- Current maturities................................................ 394,393
--------
$198,644
========
</TABLE>

F-95
<PAGE> 151

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1996, the aggregate amounts of annual principal maturities
of long-term obligations (excluding capitals lease obligations) are as follows:

<TABLE>
<S> <C>
1997...................................................................... $394,393
1998...................................................................... 190,753
1999...................................................................... 7,891
2000...................................................................... --
2001...................................................................... --
--------
Total........................................................... $593,037
========
</TABLE>

(6) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company conducts its operations from facilities that are leased under
noncancellable operating leases expiring through March, 2002. The Company
maintains production equipment, office furniture, equipment and two automobiles
under long-term operating leases expiring through 2001.

Net future minimum rental payments required under operating leases for
facilities and equipment as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 874,885
1998..................................................................... 791,802
1999..................................................................... 412,556
2000..................................................................... 276,702
2001 and thereafter...................................................... 311,246
----------
Total minimum payments......................................... $2,667,191
==========
</TABLE>

Rent expense for all leases was $534,555 for the year ended December 31,
1996.

Litigation

(7) EMPLOYEE BENEFIT PLAN

The Company maintains a 401(k) deferred compensation plan. The plan
provides for the Company to make a discretionary matching contribution not to
exceed $1,500 per participant. Contributions to this plan for the year ended
December 31, 1996 were $4,749.

(8) MAJOR CUSTOMERS

The Company had sales to two customers which exceeded 10% of total sales,
one which accounted for 15.7% of total sales and another which accounted for
29.5%. Accounts receivable from these two customers at December 31, 1996 were
$171,213 and $181,881, respectively.

(9) STOCK REPURCHASE AGREEMENTS

The Company repurchased 240 shares of stock from two of the Company's four
stockholders in April 1996. The Company has the option to purchase up to an
additional 334 shares at $2,500 per share. After

F-96
<PAGE> 152

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1996, the purchase price increases at a rate of 7% per year through
December 31, 2001. By way of another agreement, an additional 140 shares at
$2,500 per share may be purchased through December 31, 1996 with an increase of
7% per year thereafter through December 31, 2002. In connection with the stock
repurchase and the option to repurchase shares of stock, the Company recorded
compensation expense of $90,000 in 1996.

(10) STOCK PLEDGE AGREEMENTS

The Company entered into two stock pledge agreements with stockholders on
April 24, 1996. One agreement requires the Company to repurchase 30 shares on
January 15 and July 15, 1997 and 1998. The other requires the Company to buy
back 15 shares on January 15 and July 15, 1997. As a result of the potential
Acquisition of the Company, the Stockholders agreed not to require the Company
to repurchase any shares on January 15, 1997. In connection therewith, such
pledged stock has been reclassified outside of stockholders' equity.

See Note 13 for discussion of termination of these agreements.

(11) STOCK BONUS COMPENSATION AGREEMENT

The Company has executed a Stock Bonus Compensation Agreement dated April
24, 1996, for a maximum issuance of 151 shares of the Company's common stock. As
of December 31, 1996, 90 shares had been issued under this agreement. In
connection with this transaction, the Company recorded compensation expense of
$333,200 in 1996.

(12) RELATED PARTY TRANSACTION

During 1996, the Company forgave a $100,000 note receivable from a
stockholder. This resulted in a charge to compensation expense which is included
in selling, general, and administrative expenses.

(13) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom providing for the Acquisition of the Company
by Vestcom.

The stock repurchase agreements and stock pledge agreements described in
Notes 9 and 10 will be terminated as part of the Acquisition.

F-97
<PAGE> 153

ELECTRONIC IMAGING SERVICES, INC.

CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term borrowings......................................... $ 662,575 $ 492,360
Current portion of long-term debt and capital lease
obligations................................................ 402,256 247,400
Other current liabilities..................................... 1,440,516 1,427,690
----------- ----------
Total current liabilities............................. 2,505,347 2,167,450
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.................... 817,148 819,844
DEFERRED EXPENSES............................................... 86,740 86,740
PLEDGED STOCK................................................... 375,000 375,000
----------- ----------
Total liabilities..................................... 3,784,235 3,449,034
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock.................................................. 11 11
Accumulated deficit........................................... (429,660) (401,236)
----------- ----------
(429,649) (401,225)
Less-Treasury stock........................................... (375,000) (375,000)
----------- ----------
Total stockholders' equity............................ (804,649) (776,225)
----------- ----------
Total liabilities and stockholders' equity............ $ 2,979,586 $2,672,809
=========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these balance sheets

F-98
<PAGE> 154

ELECTRONIC IMAGING SERVICES, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES.......................................................... $ 1,564,000 $ 2,254,520
COST OF REVENUES.................................................. 1,250,895 1,782,202
----------- -----------
Gross Profit............................................ 313,105 472,318

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...................... 331,940 361,767
----------- -----------
Income from operations.................................. (18,835) 110,551
----------- -----------
OTHER INCOME (EXPENSE):
Interest Expense................................................ (16,823) (48,986)
Interest and other income (expense)............................. 309 (14,651)
----------- -----------

Income before provision for income taxes................ (35,349) 46,914
----------- -----------

PROVISION FOR INCOME TAXES........................................ -- 18,490
----------- -----------
Net income (loss)....................................... $ (35,349) $ 28,424
=========== ===========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-99
<PAGE> 155

ELECTRONIC IMAGING SERVICES, INC.

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................. $ (35,349) $ 28,424
Adjustments to reconcile net income (loss) to net cash provided by
operating activities --
Depreciation and amortization................................... 29,037 78,909
Gain on sale of property........................................ -- 12,650
Changes in operating assets (increase) decrease in --
Accounts receivable........................................... (167,062) 102,967
Other current assets.......................................... (90,638) 62,609
Other assets.................................................. (7,770) 8,996
Changes in operating liabilities increase (decrease) in --
Other current liabilities..................................... 381,785 (12,826)
--------- ----------
Net cash provided by operating activities.................. 110,003 281,729
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.............................. (81,989) (4,443)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings....................................... (50,902) (322,375)
--------- ----------
Net increase (decrease) in cash and cash equivalents....... (22,888) (45,089)
CASH AND CASH EQUIVALENTS, beginning of period....................... 22,888 45,089
--------- ----------
CASH AND CASH EQUIVALENTS, end of period............................. $ -- $ --
========= ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-100
<PAGE> 156

ELECTRONIC IMAGING SERVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the financial statements and footnotes
thereto for the year ended December 31, 1996, included elsewhere in this
Registration Statement.

In February 1997, the Company, and its stockholders entered into a
definitive agreement with Vestcom International, Inc. (Vestcom) pursuant to
which the Company will merge with Vestcom. All outstanding shares of the Company
will be exchanged for cash and shares of Vestcom common stock concurrent with
the consummation of the initial public offering of the common stock of Vestcom.

F-101
<PAGE> 157

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Image Printing Systems, Inc.:

We have audited the accompanying balance sheets of Image Printing Systems,
Inc. (a Wisconsin corporation) as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1994, 1995, and 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Image Printing Systems, Inc.
as of December 31, 1995 and 1996, and the results of its operations and its cash
flows for the years ended December 31, 1994, 1995 and 1996 in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 7, 1997

F-102
<PAGE> 158

IMAGE PRINTING SYSTEMS, INC.

BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 61,835 $ 61,137
Accounts receivable, net of allowance for doubtful accounts of $0
and $63,868 in 1995 and 1996, respectively..................... 1,002,680 1,422,234
Supplies inventory................................................ 149,072 256,729
Prepaid postage................................................... 199,205 324,922
Prepaid expenses and other current assets......................... 163,028 77,738
---------- ----------
Total current assets...................................... 1,575,820 2,142,760
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization...................................................... 2,368,263 2,725,129
---------- ----------
Total assets.............................................. $3,944,083 $4,867,889
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................. $ 320,494 $ 795,494
Current portion of long-term debt................................. 597,290 311,812
Current portion of capital lease obligations...................... 29,159 156,282
Accounts payable.................................................. 780,237 1,022,927
Accrued expenses and other current liabilities.................... 730,309 841,956
---------- ----------
Total current liabilities................................. 2,457,489 3,128,471
---------- ----------
LONG-TERM DEBT...................................................... 592,702 331,271
CAPITAL LEASE OBLIGATIONS........................................... 686,201 1,102,539
---------- ----------
Total liabilities......................................... 3,736,392 4,562,281
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par value; 4,400 shares authorized; 1,559.25
shares issued; 1,386 shares outstanding........................ 15,593 15,593
Subscriptions receivable.......................................... (10,855) --
Retained earnings................................................. 204,686 291,748
---------- ----------
209,424 307,341
Less-Treasury stock, 173.25 shares, at par........................ (1,733) (1,733)
---------- ----------
Total stockholders' equity................................ 207,691 305,608
---------- ----------
Total liabilities and stockholders' equity................ $3,944,083 $4,867,889
========== ==========
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-103
<PAGE> 159

IMAGE PRINTING SYSTEMS, INC.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES................................................. $8,628,330 $8,061,927 $9,033,680
COST OF REVENUES......................................... 6,311,170 5,994,010 6,389,208
---------- ---------- ----------
Gross profit................................... 2,317,160 2,067,917 2,644,472
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............. 2,130,987 2,119,588 2,305,378
---------- ---------- ----------
Income (loss) from operations.................. 186,173 (51,671) 339,094
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense....................................... (311,977) (306,304) (259,784)
Other income, net...................................... 37,323 9,816 7,752
---------- ---------- ----------
(274,654) (296,488) (252,032)
---------- ---------- ----------
Net income (loss).............................. $ (88,481) $ (348,159) $ 87,062
========== ========== ==========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-104
<PAGE> 160

IMAGE PRINTING SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
------------------ SUBSCRIPTIONS RETAINED ---------------- STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE EARNINGS SHARES AMOUNT EQUITY
-------- ------- ------------- --------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.................. 1,599.25 $15,593 $ (11,155) $ 990,793 173.25 $(1,733) $ 993,448
Net loss.................................. -- -- -- (88,481) -- -- (88,481)
Distributions to Stockholders............. -- -- -- (105,881) -- -- (105,881)
-------- ------- -------- -------- ------ ------- --------
BALANCE AT DECEMBER 31, 1994................ 1,599.25 15,593 (11,155) 796,381 173.25 (1,733) 799,086
Collection of subscriptions receivable.... -- -- 300 -- -- -- 300
Net loss.................................. -- -- -- (348,159) -- -- (348,159)
Distributions to stockholders............. -- -- -- (243,536) -- -- (243,536)
-------- ------- -------- -------- ------ ------- --------
BALANCE AT DECEMBER 31, 1995................ 1,559.25 15,593 (10,855) 204,686 173.25 (1,733) 207,691
Write-off of subscriptions receivable..... -- -- 10,855 -- -- -- 10,855
Net income................................ -- -- -- 87,062 -- -- 87,062
-------- ------- -------- -------- ------ ------- --------
BALANCE AT DECEMBER 31, 1996................ 1,559.25 $15,593 $ -- $ 291,748 173.25 $(1,733) $ 305,608
======== ======= ======== ======== ====== ======= ========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-105
<PAGE> 161

IMAGE PRINTING SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................... $ (88,481) $ (348,159) $ 87,062
Adjustments to reconcile net income (loss) to net
cash provided by operating activities --
Depreciation and amortization..................... 796,062 715,497 636,035
Provision for doubtful accounts................... -- -- 63,868
(Gain) loss on sale of assets..................... -- 52,365 (762)
Loss on write-off of subscriptions receivable..... -- -- 10,855
Changes in operating assets (increase) decrease
in --
Accounts receivable............................. 186,772 (2,623) (483,422)
Supplies inventory.............................. (42,085) 42,776 (107,657)
Prepaid expenses and other current assets....... 36,264 18,514 (40,427)
Changes in operating liabilities increase
(decrease) in --
Accounts payable................................ (20,338) 226,918 242,690
Accrued expenses and other current
liabilities.................................. 174,529 2,933 111,647
--------- ----------- ---------
Net cash provided by operating activities.... 1,042,723 708,221 519,889
--------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................ (830,522) (397,256) (374,027)
Proceeds from sale of assets......................... -- 470,000 8,500
--------- ----------- ---------
Net cash provided by (used in) investing
activities................................. (830,522) 72,744 (365,527)
--------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings............................ 10,000 (29,506) 475,000
Proceeds from long-term borrowings................... 611,684 638,741 --
Principal payments on long-term debt and capital
lease obligations................................. (741,184) (1,119,674) (630,060)
Collection of subscriptions receivable............... -- 300 --
Distributions to stockholders........................ (105,881) (243,536) --
--------- ----------- ---------
Net cash used in financing activities........ (225,381) (753,675) (155,060)
--------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents................................ (13,180) 27,290 (698)
CASH AND CASH EQUIVALENTS, beginning of year........... 47,725 34,545 61,835
--------- ----------- ---------
CASH AND CASH EQUIVALENTS, end of year................. $ 34,545 $ 61,835 $ 61,137
========= =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for --
Interest.......................................... $ 307,745 $ 306,304 $ 261,812
========= =========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:
Capital lease obligations incurred................... -- -- $ 626,612
========= =========== =========
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-106
<PAGE> 162

IMAGE PRINTING SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

Image Printing Systems, Inc. (the "Company") is a Wisconsin corporation.
The Company's primary businesses are (i) the production and distribution of
documents on paper, microfiche, microfilm and compact disc, (ii) marketing
materials fulfillment, (iii) demand publishing, (iv) mailing services and (v)
forms management.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

Revenue Recognition

Cash and Cash Equivalents

Cash and cash equivalents include money market accounts and all highly
liquid debt instruments purchased with original maturities of three months or
less.

Supplies Inventory

Inventories consist of paper and other supplies and work in process and are
valued at the lower of cost or market. Cost is determined by the first-in,
first-out method.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed
utilizing the straight-line method. The assets are depreciated over their
estimated useful lives.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
Federal or state corporation income taxes on its income. Instead, the
stockholders are liable for individual Federal and state income taxes on their
respective

F-107
<PAGE> 163

IMAGE PRINTING SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

shares of the Company's taxable income. Accordingly, no provision for Federal or
state corporate income taxes has been made in the accompanying financial
statements.

New Accounting Pronouncement

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk, as defined by SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," consist primarily of trade accounts receivable.
The Company's customers are concentrated in the Midwestern United States and its
primary customers are financial institutions and local governments and agencies.
The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other
information.

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
1995 1996 (YEARS)
----------- ----------- ---------
<S> <C> <C> <C>
Land and building.............................. $ 756,749 $ 756,749 19
Machinery and equipment........................ 6,001,691 6,968,637 7
Office equipment, furniture and fixtures....... 597,761 604,465 7
Leasehold improvements......................... 339,213 353,702 7-19
----------- -----------
7,695,414 8,683,553
Less -- Accumulated depreciation and
amortization.............................. (5,327,151) (5,958,424)
----------- -----------
Property and equipment, net.......... $ 2,368,263 $ 2,725,129
=========== ===========
</TABLE>

The Company leases its principal location under a capitalized lease
expiring July 31, 2008. The property is leased from stockholders of the Company
("related party lease") (see Note 7). The annual rent is $120,000, and the
lessor has the option to increase the rent by the lesser of 4% per year or the
percentage increase in the Consumer Price Index. The lease also requires
contingent rental payments based on the current year real estate taxes levied on
the property. The real estate tax expense totaled $24,918, $22,290 and $22,633
for the years ended December 31, 1994, 1995 and 1996, respectively. The Company
is also obligated to pay all

F-108
<PAGE> 164

IMAGE PRINTING SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

repairs, maintenance and utilities on the property. In addition, the Company
leases certain equipment under capitalized leases. Capital leases (included
above) consist of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
--------- ----------
<S> <C> <C>
Land and building........................................... $ 756,749 $ 756,749
Machinery and equipment..................................... 90,000 626,612
--------- ----------
846,749 1,383,361
Less -- Accumulated depreciation and amortization........... (309,062) (372,202)
--------- ----------
$ 537,687 $1,011,159
========= ==========
</TABLE>

Depreciation and amortization expense charged to operations totaled
$796,062, $715,497 and $636,035 for the years ended December 31, 1994, 1995 and
1996, respectively.

At December 31, 1996 minimum annual payments under capital leases including
interest are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 306,238
1998..................................................................... 306,238
1999..................................................................... 248,672
2000..................................................................... 236,964
2001..................................................................... 207,723
After 2001............................................................... 790,000
----------
Total minimum payments......................................... 2,095,835
Less -- Amounts representing interest.................................... 837,014
----------
Net minimum payments........................................... 1,258,821
Less -- Current portion of capital lease obligations..................... 156,282
----------
Long-term portion of capital leases obligations.......................... $1,102,539
==========
</TABLE>

The interest rates on capitalized leases vary from 7.9% to 17.6% and are
imputed based on the fair market value of the equipment at the inception of the
lease.

(4) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following at
December 31:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accrued salary and bonus....................................... $158,277 $180,861
Postage deposit................................................ 531,979 599,929
Other current liabilities...................................... 40,053 61,166
-------- --------
$730,309 $841,956
======== ========
</TABLE>

(5) SHORT-TERM BORROWINGS

The Company has an $850,000 secured line of credit with a bank which
expires September 30, 1997. The line is secured by a general security agreement
and personal guarantees of the stockholders of the Company totaling $700,000.
The line bears interest at a rate of prime (8 1/4% at December 31, 1996) plus
3/4%.

F-109
<PAGE> 165

IMAGE PRINTING SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) LONG-TERM DEBT

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Various equipment loans payable to a financial institution, bearing
interest at 1% above the prime rate (8 1/4% at December 31, 1996).
Principal amounts are payable in aggregate monthly installments of
$33,076 maturing February 1997 through August 1999; collateralized
by specific equipment and secured by personal guarantees of
stockholders...................................................... $ 725,024 $ 391,043
Various equipment loans payable to vendors bearing interest at rates
between 9.5% and 14%. Principal amounts are payable in aggregate
monthly installments of $18,802 maturing January 1997 through
October 1998; collateralized by specific equipment................ 395,028 198,360
Equipment loan payable to a financial institution bearing interest
at 6%. Principal is payable in monthly installments of $1,939
beginning November 1993 through October 1996 and $2,403
thereafter; collateralized by specific equipment. Final payment is
due on December 31, 1998.......................................... 69,940 53,680
---------- ---------
1,189,922 643,083
Less -- Current maturities.......................................... (597,290) (311,812)
---------- ---------
$ 592,702 $ 331,271
========== =========
</TABLE>

At December 31, 1996, the aggregate amounts of annual principal maturities
of long-term obligations (excluding capital leases) are as follows:

(7) COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases warehouse and operating facilities under a month to
month lease, which currently requires monthly payments of $9,545. The Company is
also committed under various operating leases for equipment and automobiles.
These leases run for periods of one to five years and have monthly payments
ranging from $90 to $871.

At December 31 the minimum annual rental commitment of the Company under
existing agreements are as follows:

<TABLE>
<S> <C>
1997....................................................................... $34,980
1998....................................................................... 31,408
1999....................................................................... 18,899
2000....................................................................... 6,751
-------
Total minimum payments........................................... $92,038
=======
</TABLE>

The above building leases also require the lessee to pay for taxes and/or
maintenance, insurance and utilities on the properties.

F-110
<PAGE> 166

IMAGE PRINTING SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$302,903, $302,999 and $267,509, respectively.

Buy Sell Agreements

The Company has the option to purchase all of the shares owned by certain
stockholder employees should the individuals leave the employ of the Company or
cease to be actively involved in the business.

Litigation

(8) RELATED PARTY TRANSACTIONS

The Company has a capitalized real estate lease with the stockholders of
the Company for its principal location. The annual rental is $120,000 and the
expiration date is July 31, 2008 (Note 3). The lessor has the option to increase
the rent by the lesser of 4% per year or the percentage increase in the Consumer
Price Index.

The stockholders were indebted to Image Printing Systems, Inc. on
unsecured, noninterest bearing demand notes originally dated September 10, 1984
in the amount of $10,855, which were included in subscriptions receivable as of
December 31, 1995 and written off in 1996.

(9) EMPLOYEE BENEFIT PLAN

The Company has a profit sharing plan (401(k)) covering all employees who
are at least 19 years of age and have completed at least one year of service.
Contributions are accrued and paid at the discretion of management. Currently,
the Company has elected to match employee contributions at the rate of 50% for
the first 4% of compensation deferred. The Company contributed $12,059, $44,006
and $36,613 to the plan for the years ended December 31, 1994, 1995 and 1996,
respectively.

(10) EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED)

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom providing for the Acquisition of the Company
by Vestcom.

Prior to the closing of the Acquisition, the Company will make
distributions in respect of the Company's estimated S Corporation accumulated
adjustment account at the time of closing.

F-111
<PAGE> 167

IMAGE PRINTING SYSTEMS, INC.

CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term borrowings....................................... $ 795,494 $ 645,494
Current portion of long-term debt and capital lease
obligations.............................................. 468,094 765,125
Other current liabilities................................... 1,864,883 1,728,218
----------- ----------
Total current liabilities........................... 3,128,471 3,138,837
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS.................. 1,433,810 1,925,139
----------- ----------
Total liabilities................................... 4,562,281 5,063,976
----------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
Common stock................................................ 15,593 15,593
Retained earnings........................................... 291,748 597,684
----------- ----------
307,341 613,277
Less -- Treasury stock...................................... (1,733) (1,733)
----------- ----------
Total stockholders' equity.......................... 305,608 611,544
----------- ----------
Total liabilities and stockholders' equity.......... $ 4,867,889 $5,675,520
=========== ==========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these balance sheets.

F-112
<PAGE> 168

IMAGE PRINTING SYSTEMS, INC.

CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>

REVENUES............................................................ $2,576,125 $2,879,898
COST OF REVENUES.................................................... 1,801,253 1,956,261
---------- ----------
Gross Profit.............................................. 774,872 923,637
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................ 601,391 563,557
---------- ----------
Income from operations.................................... 173,481 360,080
---------- ----------
OTHER INCOME (EXPENSE):
Interest expense.................................................. (33,121) (53,257)
Other income, net................................................. -- (887)
---------- ----------
Net income................................................ $ 140,360 $ 305,936
========== ==========
</TABLE>

The accompanying notes to condensed financial
statements are an integral part of these statements.

F-113
<PAGE> 169

IMAGE PRINTING SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... 140,360 305,936
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization..................................... 150,840 167,284
Loss on write-off of subscriptions receivable..................... 10,855 --
Changes in operating assets (increase) decrease in --
Accounts receivable............................................. (448,041) (200,343)
Other current assets............................................ 191,800 342,167
Other assets.................................................... (105,766) (15,908)
Changes in operating liabilities increase (decrease) in --
Other current liabilities....................................... 168,162 (136,665)
-------- --------
Net cash provided by operating activities.................... 108,210 462,471
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................................ (24,172) (139,706)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings......................................... 49,327 (127,956)
-------- --------
Net increase in cash and cash equivalents.................... 133,365 194,809
CASH AND CASH EQUIVALENTS, beginning of period......................... 61,835 61,137
-------- --------
CASH AND CASH EQUIVALENTS, end of period............................... 195,200 255,946
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations incurred................................... $ -- $766,316
======== ========
</TABLE>

The accompanying notes to condensed financial statements
are an integral part of these statements.

F-114
<PAGE> 170

IMAGE PRINTING SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the financial statements and footnotes
thereto for the year ended December 31, 1996, included elsewhere in this
Registration Statement.

In February 1997, the Company and its stockholders entered into a
definitive agreement with Vestcom International, Inc. (Vestcom) pursuant to
which the Company will merge with Vestcom. All outstanding shares of the Company
will be exchanged for cash and shares of Vestcom's common stock concurrent with
the consummation of the initial public offering of the common stock of Vestcom.

F-115
<PAGE> 171

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

NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.

------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 14
Use of Proceeds....................... 15
Capitalization........................ 16
Dividend Policy....................... 17
Dilution.............................. 18
Selected Financial Data............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 29
Management............................ 37
Principal Stockholders................ 43
Certain Transactions.................. 44
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 50
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 53
Index to Financial Statements......... F-1
</TABLE>

------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

3,850,000 SHARES

VESTCOM
INTERNATIONAL, INC.

COMMON STOCK
--------------------

PROSPECTUS
--------------------

OPPENHEIMER & CO., INC.
PRUDENTIAL SECURITIES INCORPORATED
, 1997

======================================================
<PAGE> 172

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses to be paid by the Company
(other than underwriting compensation expected to be incurred) in connection
with the offering described in this Registration Statement. All of such amounts
(except the SEC Registration Fee, the NASD Filing fee and the Nasdaq National
Market Application and Listing fee) are estimated.

<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 17,442
NASD Filing Fee.................................................. 6,256
Nasdaq National Market Application and Listing Fee............... 37,494
Blue Sky Fees and Expenses....................................... 25,000*
Printing and Engraving Costs..................................... 350,000*
Legal Fees and Expenses.......................................... 900,000*
Accounting Fees and Expenses..................................... 1,500,000*
Transfer Agent and Registrar Fees and Expenses................... 3,500*
Miscellaneous.................................................... 160,308*
----------
Total....................................................... $3,000,000
==========
</TABLE>

- ---------------
* Estimated

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Subsection (2) of Section 3-5, Title 14A of the New Jersey Business
Corporation Act empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a corporate agent (i.e., a
director, officer, employee or agent of the corporation or a director, officer,
trustee, employee or agent of another related corporation or enterprise),
against reasonable costs (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal proceedings, had no
reasonable cause to believe that such conduct was unlawful.

Subsection (3) of the Section 3-5 empowers a corporation to indemnify a
corporate agent against reasonable costs (including attorneys' fees) incurred by
him in connection with any proceeding by or in the right of the corporation to
procure a judgment in its favor which involves such corporate agent by reason of
the fact that he is or was a corporate agent if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct unless and only to the extent that the Superior
Court of New Jersey or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.

Subsection (4) of Section 3-5 provides that to the extent that a corporate
agent has been successful in the defense of any action, suit or proceeding
referred to in subsections (2) and (3) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including fees
attorneys') incurred by him in connection therewith; subsection (8) of Section
3-5 provides that indemnification provided for by Section 3-5 shall not be
deemed exclusive of any rights to which the indemnified party may be entitled;
and subsection (9) of Section 3-5 empowers a corporation to purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or expenses incurred by him in any such
capacity or

II-1
<PAGE> 173

arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities and expenses under Section 3-5.

The Registrant's Certificate of Incorporation contains the following
provision regarding indemnification:

"Every person who is or was a director or officer of the corporation
shall be indemnified by the corporation to the fullest extent allowed by
law, including the indemnification permitted by N.J.S. 14A:3-5(8), against
all liabilities and expenses imposed upon or incurred by that person in
connection with any proceeding in which that person may be made, or
threatened to be made, a party, or in which that person may become involved
by reason of that person being or having been a director or officer or of
serving or having served in any capacity with any other enterprise at the
request of the corporation, whether or not that person is a director or
officer or continues to serve the other enterprise at the time the
liabilities or expenses are imposed or incurred. During the pendency of any
such proceeding, the corporation shall, to fullest extent permitted by law,
promptly advance expenses that are incurred from time to time, by a
director or officer in connection with the proceeding, subject to the
receipt by the corporation of an undertaking as required by law."

The Registrant's Certificate of Incorporation contains the following
provision regarding certain limitations on the liability of directors and
officers:

"A director or an officer of the corporation shall not be personally
liable to the corporation or its shareholders for the breach of any duty
owed to the corporation or its shareholders except to the extent that an
exemption from personal liability is not permitted by the New Jersey
Business Corporation Act."

The Registrant is in the process of obtaining directors' and officers'
liability insurance providing coverage of up to $10.0 million.

The Underwriting Agreement filed as Exhibit 1.1 hereto provides that the
Underwriters named therein will indemnify and hold harmless the Company and each
director, officer or controlling person of the Company from and against certain
liabilities, including liabilities under the Securities Act. The Underwriting
Agreement also provides that such Underwriters will contribute to certain
liabilities of such persons under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since the Registrant's incorporation in September 1996, the Registrant has
issued and sold the following unregistered securities.

1. In September 1996, the Registrant issued and sold 791,346 shares of
Common Stock to investors at an aggregate price of $39,965.

2. In December 1996, the Registrant issued and sold 503,846 shares of
Common Stock to investors at an aggregate price of $367,303. In May 1997,
Oppenheimer & Co., Inc. relinquished to the Registrant 170,856 of such
shares thereby increasing the average price it paid for its remaining
58,917 shares to $2.84 per share.

The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act. The recipients of securities in each such transaction have
acknowledged their intention to hold the securities for investment only and not
with a view to sell them in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Registrant.

Concurrently with the completion of this Offering, the Company will issue
2,852,111 shares of Common Stock in connection with the acquisition of seven
businesses. This transaction will be effected without registration of the shares
of Common Stock under the Securities Act in reliance upon the exemptions
provided by Section 4(2) of the Securities Act. There were no underwriters for
this issuance or for any issuance referred to above.

II-2
<PAGE> 174

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement, as amended.*
2.1 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Computer Output Acquisition Corp., Computer Output
Systems, Inc. and the Stockholders named therein.
2.2 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Comvestrix Acquisition Corp., Comvestrix Corp. and the
Stockholders named therein.
2.3 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Electronic Imaging Acquisition Corp., Electronic
Imaging Services, Inc. and the Stockholders named therein.
2.4 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Imaging Printing Acquisition Corp., Image Printing
Systems, Inc. and the Stockholders named therein.
2.5 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Direct Mail Services Acquisition Corp., Quality
Control Printing Acquisition Corp., First Class Presort Acquisition Corp., Morris
County Direct Mail Services, Inc., Quality Control Printing, Inc., First Class
Presort, Inc. and the Stockholders named therein.
2.6 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and among
Vestcom International, Inc., Mystic Graphic Acquisition Corp., Mystic Graphic
Systems, Inc. and the Stockholders named therein.
2.7 -- Share Purchase Agreement dated March 10, 1997 by and among Vestcom International,
Inc., LIRPACO Acquisition Corp., LIRPACO Inc. and the Stockholders named therein.
3.1 -- Restated Certificate of Incorporation of Vestcom International, Inc.
3.2 -- By-laws of Vestcom International, Inc.
3.3 -- Form of Certificate of Amendment creating classes of preferred stock.
4.1 -- Form of certificate evidencing ownership of Common Stock of Vestcom International,
Inc.
5.1 -- Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
10.1 -- Vestcom International, Inc. 1997 Equity Compensation Program.
10.2 -- Employment Agreement, dated as of March 10, 1997, by and between Vestcom
International, Inc. and Joel Cartun.
10.3 -- Employment Agreement, dated March 1, 1997, by and between Vestcom International,
Inc. and Peter J. McLaughlin.
10.4 -- Employment Agreement. dated as of March 10, 1997, between DMS and Gary J. Marcello.
10.5 -- Employment Agreement, dated as of March 10, 1997, between COS Information and
Howard April.
10.6 -- Employment Agreement, dated as of March 10, 1997, between Comvestrix and Leslie M.
Abcug.
10.7 -- Note and Stock Purchase Agreement, dated December 31, 1996, between Vestcom
International, Inc. and certain investors.
10.8 -- Letter Agreement, between Oppenheimer & Co., Inc. and Vestcom International, Inc.**
10.9 -- Employment Letter Agreement, dated May 21, 1997, between Vestcom International,
Inc. and Harvey Goldman.
21.1 -- List of subsidiaries of Vestcom International, Inc.
23.1 -- Consent of Arthur Andersen LLP.*
23.2 -- Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. (contained in Exhibit
5.1).
</TABLE>

II-3
<PAGE> 175

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------
<C> <C> <S>
23.3 -- Consent of Richard D. White.
23.4 -- Consent of Gary J. Marcello.
23.5 -- Consent of Howard April.
23.6 -- Consent of Fred S. Lafer.
23.7 -- Consent of Leonard J. Fassler.
23.8 -- Consent of Stephen R. Bova.
23.9 -- Consent of Gartner Group.
24.1 -- Power of Attorney.
24.2 -- Power of Attorney for Harvey Goldman.
27.1 -- Financial Data Schedule.
</TABLE>

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

* Filed with Amendment No. 4.

** To be filed by Amendment.

All other exhibits were previously filed.

(b) Financial Statement Schedules

The following financial statement schedules were previously filed with
respect to Comvestrix, the deemed acquiror for accounting purposes.

<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- ----------------------------------------------
<C> <S>
II. Valuation and Qualifying Accounts
</TABLE>

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 176

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to its registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Township of
Lyndhurst, State of New Jersey, on June 30, 1997.

VESTCOM INTERNATIONAL, INC.

By: /s/ JOEL CARTUN
------------------------------------------
Joel Cartun
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registrant's registration statement has been signed by the
following persons in the capacities indicated on June 30, 1997.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------ -----------------------------------------------

<S> <C>
/s/ JOEL CARTUN President, Chief Executive Officer (Principal
- ------------------------------------------ Executive Officer) and Director
Joel Cartun

/s/ PETER J. MCLAUGHLIN Director
- ------------------------------------------
Peter J. McLaughlin

/s/ HARVEY GOLDMAN Executive Vice President, Chief Financial
- ------------------------------------------ Officer and Treasurer (Principal Financial and
Harvey Goldman Accounting Officer)
</TABLE>

II-5
<PAGE> 177

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------------- ----
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement, as amended.*.................................
2.1 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Computer Output Acquisition Corp.,
Computer Output Systems, Inc. and the Stockholders named therein.............
2.2 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Comvestrix Acquisition Corp., Comvestrix
Corp. and the Stockholders named therein.....................................
2.3 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Electronic Imaging Acquisition Corp.,
Electronic Imaging Services, Inc. and the Stockholders named therein.........
2.4 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Imaging Printing Acquisition Corp., Image
Printing Systems, Inc. and the Stockholders named therein....................
2.5 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Direct Mail Services Acquisition Corp.,
Quality Control Printing Acquisition Corp., First Class Presort Acquisition
Corp., Morris County Direct Mail Services, Inc., Quality Control Printing,
Inc., First Class Presort, Inc. and the Stockholders named therein...........
2.6 -- Agreement and Plan of Reorganization, dated as of February 28, 1997, by and
among Vestcom International, Inc., Mystic Graphic Acquisition Corp., Mystic
Graphic Systems, Inc. and the Stockholders named therein.....................
2.7 -- Share Purchase Agreement dated March 10, 1997 by and among Vestcom
International, Inc., LIRPACO Acquisition Corp., LIRPACO Inc. and the
Stockholders named therein...................................................
3.1 -- Restated Certificate of Incorporation of Vestcom International, Inc..........
3.2 -- By-laws of Vestcom International, Inc........................................
3.3 -- Form of Certificate of Amendment creating classes of preferred stock.........
4.1 -- Form of certificate evidencing ownership of Common Stock of Vestcom
International, Inc...........................................................
5.1 -- Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A...................
10.1 -- Vestcom International, Inc. 1997 Equity Compensation Program.................
10.2 -- Employment Agreement, dated as of March 10, 1997, by and between Vestcom
International, Inc. and Joel Cartun..........................................
10.3 -- Employment Agreement, dated March 1, 1997, by and between Vestcom
International, Inc. and Peter J. McLaughlin..................................
10.4 -- Employment Agreement. dated as of March 10, 1997, between DMS and Gary J.
Marcello.....................................................................
10.5 -- Employment Agreement, dated as of March 10, 1997, between COS Information and
Howard April.................................................................
10.6 -- Employment Agreement, dated as of March 10, 1997, between Comvestrix and
Leslie M. Abcug..............................................................
10.7 -- Note and Stock Purchase Agreement, dated December 31, 1996, between Vestcom
International, Inc. and certain investors....................................
10.8 -- Letter Agreement between Oppenheimer & Co., Inc. and Vestcom International,
Inc.**.......................................................................
</TABLE>
<PAGE> 178

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------------- ----
<C> <C> <S> <C>
10.9 -- Employment Agreement, dated May 21, 1997, between Vestcom International, Inc.
and Harvey Goldman...........................................................
21.1 -- List of subsidiaries of Vestcom International, Inc...........................
23.1 -- Consent of Arthur Andersen LLP.*.............................................
23.2 -- Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. (contained in
Exhibit 5.1).................................................................
23.3 -- Consent of Richard D. White..................................................
23.4 -- Consent of Gary J. Marcello..................................................
23.5 -- Consent of Howard April......................................................
23.6 -- Consent of Fred S. Lafer.....................................................
23.7 -- Consent of Leonard J. Fassler................................................
23.8 -- Consent of Stephen R. Bova...................................................
23.9 -- Consent of Gartner Group.....................................................
24.1 -- Power of Attorney (included on the signature page hereof)....................
24.2 -- Power of Attorney for Harvey Goldman.
27.1 -- Financial Data Schedule......................................................
</TABLE>

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

* Filed with Amendment No. 4.

** To be filed by Amendment.

All other exhibits were previously filed.

<PAGE> 1
Exhibit 1.1

3,850,000 Shares

Vestcom International, Inc.

Common Stock

UNDERWRITING AGREEMENT

________, 1997

Oppenheimer & Co., Inc.
Prudential Securities Incorporated
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281

On behalf of the Several
Underwriters named in
Schedule I attached hereto.

Gentlemen:

Vestcom International, Inc., a New Jersey corporation (the
"Company"), proposes to sell to you and the other underwriters named in Schedule
I to this Agreement (the "Underwriters"), for whom you are acting as
Representatives, an aggregate of 3,850,000 shares (the "Firm Shares") of the
Company's common stock, no par value (the "Common Stock"). In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 577,500 shares (the "Option Shares") of Common Stock from it for the
purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the "Shares."
<PAGE> 2
1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:

(a) The Company agrees to sell to each of the Underwriters,
and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at $____ per share (the "Initial Price"),
the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I to this Agreement.

(b) The Company grants to the several Underwriters an option
to purchase, severally and not jointly, all or any part of the Option
Shares at the Initial Price. The number of Option Shares to be
purchased by each Underwriter shall be the same percentage (adjusted by
the Representatives to eliminate fractions) of the total number of
Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on or
before 12:00 noon, New York City time, on the business day before the
Firm Shares Closing Date (as defined below), and only once thereafter
within 30 days after the date of this Agreement, in each case upon
written or telegraphic notice, or verbal or telephonic notice confirmed
by written or telegraphic notice, by the Representatives to the Company
no later than 12:00 noon, New York City time, on the business day
before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case
may be, setting forth the number of Option Shares to be purchased and
the time and date (if other than the Firm Shares Closing Date) of such
purchase.

2. Delivery and Payment. Delivery by the Company of the Firm
Shares to the Representatives for the respective accounts of the Underwriters,
and payment of the purchase price by certified or official bank check or checks
payable in immediately available funds to the Company, shall take place at the
offices of Oppenheimer & Co., Inc., at Oppenheimer Tower, World Financial
Center, New York, New York 10281, at 10:00 a.m., New York City time, on the
third business day following the date of this Agreement, provided, however, that
if the Shares sold hereunder are priced after 4:30 p.m., New York time, on any
business day, payment and delivery in respect of the Firm Shares shall take
place on the fourth business day following the date of this Agreement; if it is
determined that settlement within the foregoing time frame is not feasible, then
payment and delivery in respect of the Firm Shares shall occur at such time on
such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representatives (such
time and date of delivery and payment are called the "Firm Shares Closing
Date").

In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Option Shares to the Representatives
for the respective accounts of the Underwriters and payment of the purchase
price by certified or official bank check or checks payable

- 2 -
<PAGE> 3
in immediately available funds to the Company shall take place at the offices of
Oppenheimer & Co., Inc. specified above at the time and on the date (which may
be the same date as, but in no event shall be earlier than, the Firm Shares
Closing Date) specified in the notice referred to in Section 1(b) (such time and
date of delivery and payment are called the "Option Shares Closing Date"). The
Firm Shares Closing Date and the Option Shares Closing Date are called,
individually, a "Closing Date" and, together, the "Closing Dates."

Certificates evidencing the Shares shall be registered in such
names and shall be in such denominations as the Representatives shall request at
least two full business days before the Firm Shares Closing Date or, in the case
of Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, at least one
full business day before the Firm Shares Closing Date (or the Option Shares
Closing Date in the case of the Option Shares).

3. Registration Statement and Prospectus; Public Offering. The
Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
________), including a preliminary prospectus relating to the Shares, and has
filed with the Commission the registration statement and such amendments thereto
as may have been required to the date of this Agreement. Copies of such
registration statement (including all amendments thereto) and of the related
preliminary prospectus have heretofore been delivered by the Company to you. The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Securities Act for the purpose of registering
additional Shares, which registration shall be effective upon filing with the
Commission. The term "Registration Statement" means the Registration Statement
as amended at the time and on the date it becomes effective (the "Effective
Date"), including all exhibits and information, if any, deemed to be part of the
Registration Statement pursuant to Rule 424(a), Rule 430A and Rule 462(b) of the
Rules. The term "preliminary prospectus" means any preliminary prospectus (as
described in Rule 430 of the Rules) included at any time as a part of the
Registration Statement. The term "Prospectus" means the prospectus in the form
first used to confirm sales of the Shares (whether such prospectus was included
in the Registration Statement at the time of effectiveness or was subsequently
filed with the Commission pursuant to Rule 424(b) of the Rules) or the
preliminary prospectus forming part of the Registration Statement at the time it
was declared effective together with the term sheet permitted under Rule 434(b)
and filed with the Commission pursuant to Rule 424(b), as applicable.

The Company understands that the Underwriters propose to make
a public offering of the Shares, as set forth in and pursuant to the Prospectus,
as soon after the Effective Date and the date of this Agreement as the
Representatives deem advisable. The Company hereby confirms that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).

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<PAGE> 4
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Underwriter as follows:

(a) On the Effective Date the Registration Statement complied,
and on the date of the Prospectus, on the date any post-effective
amendment to the Registration Statement or any related registration
statement filed with the Commission pursuant to Rule 462(b) of the
Rules shall become effective, on the date any supplement or amendment
to the Prospectus is filed with the Commission and on each Closing
Date, the Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) will comply in all material respects
with the applicable provisions of the Securities Act and the Rules; the
Registration Statement did not, as of the Effective Date, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and on the other dates referred to
above neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. When any related preliminary prospectus was
first filed with the Commission (whether filed as part of the
Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement
thereto was first filed with the Commission, such preliminary
prospectus as amended or supplemented (i) complied in all material
respects with the applicable provisions of the Securities Act and the
Rules, except for the financial statements of certain of the Founding
Companies (as hereinafter defined) which may have omitted certain
information as originally filed, but which financial statements
complied in all material respects with the applicable provisions of the
Securities Act and the Rules at the time that the Registration
Statement was declared effective and (ii) did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The Company makes no representation or
warranty as to any information contained in or omitted from (x) the
paragraphs with respect to stabilization or affiliate transactions on
the inside front cover page of the Prospectus and (y) the statements
contained under the caption "Underwriting" in the Prospectus. The
Company acknowledges that such statements constitute the only
information furnished in writing by the Representatives on behalf of
the several Underwriters specifically for inclusion in the Registration
Statement, any preliminary prospectus or the Prospectus.

(b) All contracts and other documents required to be filed as
exhibits to the Registration Statement have been filed with the
Commission as exhibits to the Registration Statement.

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<PAGE> 5
(c) The financial statements of the Company and the Founding
Companies set forth on Schedule II hereto (each a "Founding Company"
and collectively, the "Founding Companies") (including all notes
thereto) included in the Registration Statement and Prospectus fairly
present the financial position, the results of operations,
stockholders' equity and cash flows and the other information purported
to be shown therein of the Company and the Founding Companies at the
respective dates and for the respective periods to which they apply;
and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a
fair presentation of the results for such periods have been made. There
are no schedules required to be included in the Registration Statement
in order to present fairly in all material respects the information
required to be stated therein; and the historical financial information
and statistical data set forth in the Prospectus under the captions
"Summary Individual Founding Company Financial Data," "Capitalization,"
and "Selected Financial Data" are fairly stated in all material
respects in relation to the financial statements from which they have
been derived. The pro forma financial data included in the Registration
Statement and the Prospectus present fairly the information shown
therein, comply in all material respects with the requirements of the
Act and the Rules and Regulations with respect to pro forma financial
statements, have been properly compiled on the pro forma basis
described therein and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.

(d) Arthur Andersen LLP, whose reports are filed with the
Commission as a part of the Registration Statement, is and, during the
periods covered by their reports, was an independent public accountant
as required by the Securities Act and the Rules.

(e) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of New Jersey. Each of the Company's subsidiaries (the "Subsidiaries")
and each of the Founding Companies has been duly incorporated or formed
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation or organization. The Company has no
subsidiary or subsidiaries other than as set forth on Schedule III and
does not control, directly or indirectly, any other corporation,
partnership, joint venture, association or other business organization.
Each of the Company, the Subsidiaries and the Founding Companies is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or
properties (owned, leased or licensed) or the nature of its business
makes such qualification necessary, except for such jurisdictions where
the failure to so qualify individually or in the aggregate would not
have a material adverse effect on the assets or properties, business,
results of operations or condition (financial or otherwise) of the
Company, the Subsidiaries and the Founding Companies, taken as a whole,
and neither the Company, the Subsidiaries nor any of the Founding
Companies has received any claim or notice from any official

- 5 -
<PAGE> 6
authority in any jurisdiction that it is required to be qualified or
licensed to do business in any such jurisdiction in which it is not so
qualified or licensed. Except as disclosed in the Registration
Statement and the Prospectus, neither the Company, the Subsidiaries nor
any of the Founding Companies owns, leases or licenses any asset or
property or conducts any business outside the United States of America.
Each of the Company, the Subsidiaries and the Founding Companies has
all requisite corporate power and authority, and all necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits of and from all governmental or regulatory bodies or any other
person or entity, to own, lease and license its assets and properties
and conduct its businesses as now being conducted and as described in
the Registration Statement and the Prospectus, except for such
authorizations, approvals, consents, orders, licenses, certificates and
permits which, if not obtained, would not have a material adverse
effect on the assets or properties, business, results of operations or
condition (financial or otherwise) of the Company, the Subsidiaries and
the Founding Companies, taken as a whole; no such authorization,
approval, consent, order, license, certificate or permit contains a
materially burdensome restriction other than as disclosed in the
Registration Statement and the Prospectus; and the Company has all such
corporate power and authority, and such authorizations, approvals,
consents, orders, licenses, certificates and permits to enter into,
deliver and perform this Agreement and to issue and sell the Shares
(except as may be required under the Securities Act and state and
foreign Blue Sky laws).

(f) No patents, trademarks, service marks, copyrights,
licenses and other similar rights (collectively, the "Intangibles") are
material for the conduct of the business of the Company, the
Subsidiaries and the Founding Companies as now being conducted and as
described in the Registration Statement and the Prospectus. Neither the
Company, the Subsidiaries nor any of the Founding Companies has
infringed, is infringing or has received any notice of infringement of,
any Intangible of any other person and neither the Company, the
Subsidiaries nor any of the Founding Companies knows of any basis
therefor except for such infringements which individually or in the
aggregate would not have a material adverse effect on the assets or
properties, business, results of operations or financial condition of
the Company, the Subsidiaries or the Founding Companies, taken as a
whole.

(g) Each of the Company, the Subsidiaries and the Founding
Companies has good and marketable title in fee simple to each of the
items of personal property which are reflected in the financial
statements referred to in Section 4(c) or are referred to in the
Registration Statement and the Prospectus as being owned by it and
valid and enforceable leasehold interests in each of the items of real
and personal property which are referred to in the Registration
Statement and the Prospectus as being leased by it, in each case free
and clear of all liens, encumbrances, claims, security interests and
defects, other than those described in the Registration Statement and
the Prospectus and those liens which will be released upon the
repayment of debt within 120 days of the Firm Shares Closing Date.

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<PAGE> 7
(h) Except as disclosed in the Registration Statement and the
Prospectus, there is no litigation or governmental or other proceeding
or investigation before any court or before or by any public body or
board pending or, to the Company's, the Subsidiaries' and the Founding
Companies' knowledge, threatened against, or involving the assets,
properties or businesses of, the Company, the Subsidiaries or the
Founding Companies, which, if determined adversely to the Company, any
of the Subsidiaries or any of the Founding Companies, would materially
adversely affect the value or the operation of the assets or properties
of the Company, the Subsidiaries and the Founding Companies, taken as a
whole, or the business, results of operations or financial condition of
the Company, the Subsidiaries and the Founding Companies, taken as a
whole, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement.

(i) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
described therein, there has not been any material adverse change or
any material adverse development or event involving a prospective
material change in the assets or properties, earnings, business affairs
or business prospects, results of operations or condition (financial or
otherwise) of the Company, the Subsidiaries and the Founding Companies,
taken as a whole, whether or not arising from transactions in the
ordinary course of business; neither the Company, the Subsidiaries nor
any of the Founding Companies has entered into any transaction, other
than in the ordinary course of business, that is material to the
Company, the Subsidiaries and the Founding Companies, taken as a whole,
neither the Company, the Subsidiaries nor any of the Founding Companies
has sustained any material loss or interference with its assets,
businesses or properties from fire, explosion, earthquake, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action, order
or decree. Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, except as reflected in the
Registration Statement and the Prospectus, neither the Company, the
Subsidiaries nor any of the Founding Companies has undertaken any
liability or obligation, direct or contingent, except for liabilities
or obligations undertaken in the ordinary course of business.

(j) Each agreement listed in the Exhibits to the Registration
Statement is in full force and effect and is valid and enforceable by
the Company or one of the Subsidiaries in accordance with its terms,
assuming the due authorization, execution and delivery thereof by each
of the other parties thereto and except as the enforcement of such
agreement may be limited by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium or other similar laws
relating to or affecting creditors' rights generally and by general
principles of equity regardless of whether considered in a proceeding
in equity or at law. Neither the Company, the Subsidiaries nor any of
the Founding Companies, nor any other party is in default in the
observance or performance of any term or obligation to be performed by
it under any such agreement,

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<PAGE> 8
and no event has occurred which with notice or lapse of time or both
would constitute such a default, which default or event would have a
material adverse effect on the assets or properties, business, results
of operations or condition (financial or otherwise) of the Company, the
Subsidiaries and the Founding Companies, taken as a whole. No default
exists under any of the agreements listed in the exhibits to the
Registration Statement, and no event has occurred which with notice or
lapse of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition, by the
Company or any of the Founding Companies of any of such agreements to
which the Company or any of the Founding Companies is a party or by
which any of them or their properties or businesses may be bound or
affected, which default or event would have a material adverse effect
on the assets or properties, business, results of operations or
condition (financial or otherwise) of the Company, the Subsidiaries and
the Founding Companies, taken as a whole.

(k) Neither the Company nor any of the Founding Companies is
in violation of any term or provision of its charter or by-laws or of
any franchise, license, permit, judgment, decree, order, statute, rule
or regulation, where the consequences of such violation would have a
material adverse effect on the assets or properties, business, results
of operations or condition (financial or otherwise) of the Company, the
Subsidiaries and the Founding Companies, taken as a whole.

(l) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the
transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares) will give rise to a
right to terminate or accelerate the due date of any payment due under,
or conflict with or result in the breach of any term or provision of,
or constitute a default (or any event which with notice or lapse of
time or both would constitute a default) under, or require any consent
or waiver under, or result in the execution or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company, the
Subsidiaries or any of the Founding Companies which would be material
to the Company, the Subsidiaries or any of the Founding Companies taken
as a whole, pursuant to the terms of, any indenture, mortgage, deed of
trust, note or other agreement or instrument to which the Company, the
Subsidiaries or any of the Founding Companies, is a party or by which
any of them or their properties or businesses is bound, or any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation applicable to the Company or any of the Subsidiaries, or
violate any provision of the charter or by-laws of the Company, the
Subsidiaries or any of the Founding Companies, except for such consents
or waivers that have already been obtained and are in full force and
effect and liens and breaches that arise from change in control
provisions in documents evidencing obligations that are to be paid off
or satisfied within 120 days after the Firm Shares Closing Date.

(m) The Company has an authorized and outstanding pro forma
capitalization as set forth under the caption "Capitalization" in the
Prospectus as of the date specified

- 8 -
<PAGE> 9
therein. All of the outstanding shares of Common Stock and Preferred
Stock (as defined below) have been duly and validly authorized and have
been duly and validly issued and are fully paid and nonassessable and
none of them was issued in violation of any preemptive or other similar
statutory right. The Shares, when issued and sold pursuant to this
Agreement, will be duly and validly issued, fully paid and
nonassessable and none of them will be issued in violation of any
preemptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and no
commitment, plan or agreement to issue, any share of stock of the
Company or any security convertible into, or exercisable or
exchangeable for, stock of the Company. The Common Stock, the
undesignated common stock and the preferred stock (the "Preferred
Stock"), and the Shares conform to all statements in relation thereto
contained in the Registration Statement and the Prospectus.

(n) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
described or referred to therein, neither the Company nor any of the
Founding Companies has (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money,
except as described in Schedule ___ to the Reorganization Agreements
(as hereinafter defined) with respect to equipment financing, (ii)
entered into any transaction not in the ordinary course of business or
(iii) declared or paid any dividend or made any distribution on any
shares of its stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its
stock.

(o) No holder of any security of the Company has any right to
have any security owned by such holder included in the Registration
Statement or to demand separate registration of any security owned by
such holder during the period ending 180 days from the date of this
Agreement. The Company has obtained from all officers and directors of
the Company and the stockholders of the Founding Companies named in
Schedule II hereto (the "Stockholders"), who together hold _________
shares of Common Stock, their enforceable written agreement that for a
period of at least 180 days from the date of this Agreement they will
not, without the prior written consent of Oppenheimer & Co., Inc.,
offer to sell, distribute, pledge, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or encumber, or exercise
any registration rights with respect to, any shares of Common Stock or
any securities convertible into, exercisable for, or exchangeable for
any shares of Common Stock owned by them now or hereafter acquired
directly by such holder or with respect to which such holder has or
hereafter acquires the power of disposition, otherwise than (i) the
issuance of the Common Stock pursuant to the Registration Statement,
(ii) the issuance of shares of Common Stock pursuant to the exercise of
outstanding options under the Company's existing stock option plans,
(iii) the grant of options under the Company's existing stock option
plans, (iv) in connection with an acquisition by the Company of another
entity pursuant to which the Company sells or transfers any of its
shares of Common Stock to a third party as part or

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<PAGE> 10
all of the purchase price of such entity; provided, however, that prior
to any sale or transfer, such third party shall have agreed in writing
with Oppenheimer & Co., Inc. that it will not offer to sell,
distribute, pledge, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, or encumber, or exercise any
registration rights with respect to, such shares of Common Stock (or
any securities convertible into, exercisable for or exchangeable for
such Common Stock) for the remainder of the 180 days after the date of
this Agreement, (v) the filing of a shelf registration statement by the
Company registering an additional 2,000,000 shares of Common Stock for
use by the Company as consideration in future acquisitions, (vi) the
sale or transfer by the Company of shares of Common Stock in connection
with the hiring of officers or directors not previously employed by the
Company; provided, however, that prior to any sale or transfer, such
officer or director shall have agreed in writing with Oppenheimer &
Co., Inc. that he or she will not offer to sell, distribute, pledge,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, or encumber, or exercise any registration rights with
respect to, such shares of Common Stock (or any securities convertible
into, exercisable for or exchangeable for such Common Stock) for the
remainder of the 180 days after the date of this Agreement, (vii) the
filing by the Company of a registration statement on Form S-8
registering up to an additional 700,000 shares of Common Stock issuable
upon exercise of options granted under the Company's existing stock
option plans, or (viii) with the prior written consent of Oppenheimer &
Co., Inc. The Company hereby agrees that it will not consent to the
sale, distribution, pledge, grant of any option for the sale of, or
other disposition or encumbrance of, or exercise of any registration
right with respect to, any shares of Common Stock subject to the
above-described lock-ups, without the prior written consent of
Oppenheimer & Co., Inc. As of the date hereof, all other shares of
Common Stock which are outstanding or issuable upon the exercise of
stock options or warrants or the conversion of debt instruments
constitute "restricted securities" within the meaning of Rule 144 under
the Securities Act and the Rules.

(p) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and
performance of this Agreement and the issuance and sale of the Shares.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes and will constitute the legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except (A) as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether considered in proceedings in equity or at law) and
(B) to the extent that rights to indemnity or contribution under this
Agreement may be limited by federal, state or foreign securities laws
or the public policy underlying such laws.

(q) Each of the Company, the Subsidiaries and the Founding
Companies is conducting its business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all

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<PAGE> 11
applicable local, state and federal environmental laws and regulations,
except where the failure to be so in compliance would not have a
material adverse effect on the assets or properties, business, results
of operations or financial condition of the Company, the Subsidiaries
and the Founding Companies, taken as a whole.

(r) No transaction has occurred between or among the Company
and any of its officers or directors or any affiliate or affiliates of
any such officer or director that is required to be described in and is
not described in the Registration Statement and the Prospectus.

(s) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be
expected to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of
any of the Shares.

(t) The Company and each of the Founding Companies has filed
all federal, state, local and foreign tax returns which are required to
be filed through the date hereof, or has received extensions thereof,
and has paid or accrued all taxes shown on such returns and all
assessments received by it.

(u) The Shares have been approved for quotation on the
National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market, subject to official notice of issuance.

(v) Effective as of the Closing, the Company, the Subsidiaries
and each of the Founding Companies will be insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged; neither the Company, the Subsidiaries nor any of the
Founding Companies has been refused any insurance coverage sought or
applied for; and neither the Company nor any of the Founding Companies
that had insurance prior to the Firm Shares Closing Date has any reason
to believe that it would not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business.

(w) The Company, the Subsidiaries and each of the Founding
Companies will adopt a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's authorizations and are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles; (ii) access
to assets is permitted only in accordance with management's
authorization; and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

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<PAGE> 12
(x) The Company has not distributed and, prior to the later of
(i) the Closing Date and (ii) the completion of the distribution of the
Shares, will not distribute any offering material in connection with
the offering and sale of the Shares other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other materials,
if any, permitted by the Act.

The representations and warranties contained in this Section 4
regarding the Founding Companies apply to the Founding Companies as they
presently exist and as they will exist immediately following the closing of the
transactions described in those certain Agreements and Plans of Reorganization,
each dated as of ____________, 1997, by and among the Company and the Founding
Companies and certain other parties (collectively, the "Reorganization
Agreements").

5. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters under this Agreement are several and not joint.
The respective obligations of the Underwriters to purchase the Shares are
subject to each of the following terms and conditions:

(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(A)(a).

(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall be in effect, and no
order suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings for such purpose shall be pending
before or threatened by the Commission, and any requests for additional
information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Representatives.

(c) The representations and warranties of the Company
(including those representations and warranties which relate to the
Subsidiaries and the Founding Companies) contained in this Agreement
and in the certificates delivered pursuant to Section 5(d) shall be
true and correct when made and on and as of each Closing Date as if
made on such date and the Company shall have performed all covenants
and agreements and satisfied all the conditions contained in this
Agreement required to be performed or satisfied by it at or before such
Closing Date.

(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the chief executive or chief operating officer and the
chief financial officer or chief accounting officer of the Company
signing on the behalf of the Company, to the effect that the signers of
such certificate have carefully examined the Registration Statement,
the Prospectus and this Agreement and that the representations and
warranties of the Company in this Agreement are true and correct on and
as of such Closing Date with the same effect as if made on

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<PAGE> 13
such Closing Date and the Company has performed all covenants and
agreements and satisfied all conditions contained in this Agreement
required to be performed or satisfied by it at or prior to such Closing
Date.

(e) The Representatives shall have received at the time this
Agreement is executed and on each Closing Date a letter or letters
signed by Arthur Anderson LLP, addressed to the Representatives and
dated, respectively, the date of this Agreement and each such Closing
Date, in form and substance satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that:

(i) in their opinion the audited financial statements
and financial statement schedules, if any, and pro forma
financial statements included in the Registration Statement
and the Prospectus and reported on by them comply as to form
in all material respects with the applicable accounting
requirements of the Securities Act and the Rules;

(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus
under the headings "Summary Individual Founding Company
Financial Data" and "Selected Financial Data," carrying out
certain procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter, a reading of the minutes of
the meetings of the stockholders and directors of the Company
and the Subsidiaries, and inquiries of certain officials of
the Company and the Subsidiaries who have responsibility for
financial and accounting matters of the Company and the
Subsidiaries as to transactions and events subsequent to the
date of the latest audited financial statements, nothing came
to their attention which caused them to believe that:

(A) the amounts in "Summary Individual
Founding Company Financial Data" and "Selected
Financial Data" included in the Registration
Statement and the Prospectus do not agree with the
corresponding amounts in the audited [and unaudited]
financial statements from which such amounts were
derived; or

(B) the audited financial statements as of
and for the years ended [December 31, 1996 and
December 31, 1995] included in the Registration
Statement (i) do not comply in form in all material
respects with the applicable accounting requirements
of the Securities Act and the Rules and (ii) are not
in conformity with generally accepted accounting

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<PAGE> 14
principles applied on a basis substantially
consistent with that of the audited financial
statements; or

(C) (i) with respect to the Company and the
Subsidiaries there were, at a specified date not more
than five business days prior to the date of the
letter, any increases in the short-term liabilities
and long-term liabilities of the Company or any of
the Subsidiaries or capital stock of the Company or
any of the Subsidiaries or decreases in working
capital (deficit) or total stockholders' equity
(deficit) of the Company or any of the Subsidiaries,
as compared with the amounts shown on the Company's
and each Subsidiary's audited December 31, 1996
balance sheet included in the Registration Statement
and the Prospectus, or (ii) for the period from
[December 31, 1996] to such specified date not more
than five business days prior to the date of the
letter, there were any increases in net losses except
for increases in net losses set forth in the
Registration Statement and the Prospectus, in which
case the Company shall deliver to the Representatives
a letter containing an explanation by the Company as
to the significance thereof unless said explanation
is not deemed necessary by the Representatives;

(iii) they have performed certain other procedures as
a result of which they determined that certain information of
an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information
derived from the general accounting records of the Company and
the Subsidiaries) set forth in the Registration Statement and
the Prospectus and specified by the Representatives agrees
with the accounting records of the Company and the
Subsidiaries; and

(iv) on the basis of a reading of the unaudited pro
forma financial statements included in the Registration
Statement and the Prospectus (the "pro forma financial
statements"); carrying out certain specified procedures;
inquiries of certain officials of the Company and the
Subsidiaries who have responsibility for financial and
accounting matters; and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro
forma financial statements do not comply in form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of such statements.

References to the Registration Statement and the Prospectus in this
paragraph (e) are to such documents as amended and supplemented at the
date of the letter.

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<PAGE> 15
(f) The Representatives shall have received on each Closing
Date from Lowenstein, Sandler, Kohl, Fisher & Boylan, P.C., counsel for
the Company, an opinion, addressed to the Representatives and dated
such Closing Date, and stating in effect that:

(i) The Company has been duly incorporated or
organized and is validly existing as a corporation in good
standing under the laws of the State of New Jersey. Each of
the Subsidiaries and the Founding Companies has been duly
incorporated or formed and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation or organization. The
Company, the Subsidiaries and each of the Founding Companies
is duly qualified as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the Company, the
Subsidiaries and the Founding Companies, taken as a whole.

(ii) Each of the Company, the Subsidiaries and the
Founding Companies has all requisite corporate power and
authority to own and lease its assets and properties and
conduct its business as now being conducted and as described
in the Registration Statement and the Prospectus; and the
Company has all requisite corporate power and authority and
all necessary governmental authorizations, approvals,
consents, orders, licenses, certificates and permits required
pursuant to federal law, the General Corporation Law of the
State of New Jersey, and all other necessary authorizations,
approvals, consents, orders, licenses, certificates and
permits either called for by any contracts or other documents
of which such counsel has knowledge or which are, to such
counsel's knowledge, otherwise required, to enter into,
deliver and perform this Agreement and to issue and sell the
Shares, other than those required under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission
thereunder, and state and foreign Blue Sky laws.

(iii) The Company has authorized and issued of record
capital stock as set forth under the caption "Capitalization"
in the Prospectus as of the date specified therein; the
certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the
Company; all of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and have been
duly and validly issued and are fully paid and nonassessable
and none of them was issued in violation of any preemptive or
other similar statutory right. All of the issued and
outstanding shares of capital stock of, or other ownership
interests in each of the Subsidiaries have been duly and
validly authorized and issued and are fully paid and
non-assessable, and are owned by the Company, free and clear
of any security interests, claims, liens, encumbrances or
adverse interests of any nature and, to such counsel's
knowledge, no options,

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<PAGE> 16
warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any
obligations into any shares of capital stock of the
Subsidiaries are outstanding, except as described in or
contemplated by the Registration Statement, including the
exhibits thereto. The Shares, when issued and sold pursuant to
this Agreement, will be duly and validly issued, fully paid
and nonassessable and none of them will have been issued in
violation of any preemptive or other similar statutory right.
Except as disclosed in the Registration Statement and the
Prospectus, to such counsel's knowledge, there is no
outstanding option, warrant or other right calling for the
issuance of, and no commitment, plan or agreement to issue,
any share of stock of the Company or any security convertible
into, or exercisable or exchangeable for, stock of the
Company. The Common Stock, the Preferred Stock and the Shares
conform to all statements in relation thereto contained in the
Registration Statement and the Prospectus in all material
respects.

(iv) All necessary corporate action has been duly and
validly taken by the Company to authorize the execution,
delivery and performance of this Agreement. This Agreement has
been duly and validly executed and delivered by the Company
and constitutes and will constitute the legal, valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms except (A) as such
enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (whether
considered in proceedings in equity or at law) and (B) to the
extent that rights to indemnity or contribution under this
Agreement may be limited by federal, state or foreign
securities laws or the public policy underlying such laws.

(v) Neither the execution, delivery and performance
of this Agreement by the Company nor the consummation of any
of the transactions contemplated hereby (including, without
limitation, the issuance and sale by the Company of the
Shares) will (i) give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict
with or result in the breach of any term or provision of, or
constitute a default (or any event which with notice or lapse
of time, or both, would constitute a default) under, or
require any consent or waiver under, or result in the
execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company, the Subsidiaries
or any of the Founding Companies pursuant to the terms of, any
agreement filed as an exhibit to the Registration Statement
and to which the Company, the Subsidiaries or any of the
Founding Companies is a party or by which any of them or their
properties or businesses is bound, or any franchise, license,
permit, judgment, decree, order, statute, rule or regulation
of which such counsel has knowledge and applicable to the
Company or any of the Subsidiaries, except for such
terminations,

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<PAGE> 17
accelerations, conflicts, breaches, defaults and events which
would not, individually or in the aggregate, result in a
material adverse effect on the assets or properties, business,
results of operations or financial condition of the Company,
the Subsidiaries and the Founding Companies, taken as a whole,
or (ii) violate any provision of the charter or by-laws of the
Company, the Subsidiaries or any of the Founding Companies.

(vi) Each of the Agreements and Plan of
Reorganization with respect to the Founding Companies (which
have been filed with the Commission as exhibits to the
Registration Statement) has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
obligation of the Company; the Certificates or Articles of
Merger referred to in such Agreements and Plans of
Reorganization, assuming the due filing thereof with the
appropriate regulatory authorities, will cause the statutory
merger of each of the Founding Companies with the respective
Subsidiaries of the Company that are parties thereto.

(vii) To such counsel's knowledge, no default exists,
and no event has occurred which with notice or lapse of time
or both would constitute a default, in the due performance and
observance of any term, covenant or condition, of any
indenture, mortgage, deed of trust, note or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or their
assets or properties or businesses is bound or affected which
default would have a material adverse effect on the assets or
properties, business, results of operations or financial
condition of the Company and the Subsidiaries.

(viii) To such counsel's knowledge, neither the
Company nor any of the Subsidiaries is in violation of any
term or provision of its charter or by-laws or of any
franchise, license, permit, judgment, decree, order, statute,
rule or regulation, where the consequences of such violation
would have a material adverse effect on the assets or
properties, businesses, results of operations or condition
(financial or otherwise) of the Company and the Subsidiaries,
taken as a whole.

(ix) No consent, approval, authorization or order of
any court or governmental agency or body is required for the
performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby, except
such as have been obtained under the Securities Act and such
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the several Underwriters and as such may be required under the
rules of the National Association of Securities Dealers, Inc.
with respect to the underwriting arrangements reflected in
this Agreement.

(x) Except as described in the Registration Statement
and the Prospectus, to such counsel's knowledge, there is no
litigation or governmental

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<PAGE> 18
or other proceeding or investigation before any court or
before or by any public body or board pending or threatened
(and such counsel does not know of any basis therefor)
against, or involving the assets, properties or businesses of,
the Company or any of the Subsidiaries which, if determined
adversely to the Company or any of the Subsidiaries, would
materially adversely affect the value or the operation of any
such assets or properties or the business, results of
operations or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole.

(xi) The agreement of each of the Company and
officers and directors of the Company (a form of which Lock-Up
Agreement is attached hereto as Schedule IV) has been duly and
validly delivered by such persons and constitutes a legal,
valid and binding obligation of each such person enforceable
against each such person in accordance with its terms, except
as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and
by general equitable principles (whether considered in
proceedings in equity or at law). All shares of Common Stock
which are outstanding or issuable upon the exercise of stock
options or warrants or the conversion of debt instruments of
which such counsel has knowledge either (i) are subject to a
written agreement obtained by the Company pursuant to Section
4(o) of this Agreement or (ii) constitute "restricted
securities" within the meaning of Rule 144 under the
Securities Act and the Rules.

(xii) The statements in the Prospectus under the
captions "Risk Factors -- Potential Effects of Shares Eligible
for Future Sale on Price of Stock;" "--Effect of Certain
Charter Provisions;" "Certain Transactions;" "Description of
Capital Stock;" and "Shares Eligible for Future Sale" insofar
as such statements constitute a summary of documents referred
to therein or matters of law, are fair summaries of the
material provisions thereof and accurately present in all
material respects the information required by the Rules with
respect to such documents and matters. All contracts and other
documents required to be filed as exhibits to, or described
in, the Registration Statement of which such counsel has
knowledge have been so filed with the Commission or are fairly
described in the Registration Statement, as the case may be.

(xiii) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or
supplement thereto (except for the financial statements and
notes and other financial and statistical data included
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the
requirements of the Securities Act and the Rules.

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<PAGE> 19
(xiv) The Registration Statement has become effective
under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or, to the best of such counsel's knowledge, are
threatened or contemplated.

(xv) The Shares to be sold under this Agreement to
the Underwriters have been duly approved for listing on the
Nasdaq National Market.

To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the State of New Jersey, the General Corporation Law of New Jersey and the
federal laws of the United States; provided that such counsel shall state that
in their opinion that they have no basis to believe that it would be inadvisable
for them or the Underwriters to rely on such other opinions. In rendering the
opinion set forth in (i) above as to the qualification of the Company and each
of the Founding Companies as foreign corporations, the Company may rely upon
certificates of officers of the Company or the Founding Companies as to the
jurisdictions in which the Company or the Founding Companies own property or
conduct their respective businesses. In rendering the opinion set forth in (iii)
above concerning the due authorization, issuance and ownership of the issued and
outstanding shares of capital stock of the Subsidiaries, such counsel may rely
upon opinions of local counsel as to matters of law other than the laws of the
State of New Jersey except that such counsel may rely on the opinion of New
Jersey counsel to Direct Mail Services, Inc. In rendering the opinion set forth
in (iv) above concerning the validity, binding effect and enforceability of this
Agreement, which is governed by the laws of State of New York, such counsel may
assume that the relevant laws of the State of New York do not differ materially
from the corresponding laws of the State of New Jersey; provided, however, that
such counsel shall state that they have no knowledge of any difference between
the relevant laws of such states. Copies of such certificates and other opinions
shall be furnished to the Representatives and counsel for the Underwriters.

In addition, such counsel shall state that such counsel has
participated in conferences with certain officers of, and with the accountants
and counsel for, the Company and the Subsidiaries and representatives of the
Representatives concerning the preparation of the Registration Statement, the
preliminary prospectus and the Prospectus and related matters, and although such
counsel has made certain inquiries and investigations in connection with the
preparation of the Registration Statement, such counsel did not independently
verify the accuracy or completeness of the statements made therein or in the
preliminary prospectus or in the Prospectus and the limitations inherent in the
role of outside counsel are such that such counsel cannot and does not assume
responsibility for or pass on the accuracy and completeness of such statements,
except insofar as such statements relate to such counsel. On the basis of the
foregoing, such counsel shall state that its work in connection with this matter
did not disclose any information that caused such counsel to believe that the
Registration Statement at the time it became effective (except with respect to
the financial statements and notes and schedules thereto and other financial and
statistical data,

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<PAGE> 20
as to which such counsel need make no statement) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus as of its date and as of the date of such letter, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (other than
financial statements and other information of a statistical, accounting, or
financial nature which are or should be contained therein, as to which such
counsel shall express no view).

(g) The Representatives shall receive on each Closing Date
from the counsel of each of the Stockholders, an opinion, addressed to
the Representatives and dated such Closing Date, and stating in effect
that the agreement of each of the Stockholders (a form of which Lock-Up
Agreement is attached hereto as Schedule IV) has been duly and validly
delivered by such persons and constitutes a legal, valid and binding
obligation of each such person enforceable against each such person in
accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether considered in proceedings in equity or at
law).

(h) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representatives
and their counsel and the Underwriters shall have received from Morgan,
Lewis & Bockius LLP a favorable opinion, addressed to the
Representatives and dated such Closing Date, with respect to the
Shares, the Registration Statement and the Prospectus, and such other
related matters, as the Representatives may reasonably request, and the
Company shall have furnished to Morgan, Lewis & Bockius LLP such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters.

(i) The Representatives shall have received on each Closing
Date a certificate, including exhibits thereto, addressed to the
Representatives and dated such Closing Date, of the Secretary or an
Assistant Secretary of the Company, signed in such officer's capacity
as such officer, as to the (i) certificate of incorporation and bylaws
of the Company, (ii) resolutions authorizing the execution and delivery
of the Registration Statement, this Agreement and the performance of
the transactions contemplated by this Agreement, the Registration
Statement, the Prospectus and the offering of the Shares, (iii) form of
Common Stock certificate and the number of shares of Common Stock
outstanding and (iv) incumbency of the person or persons authorized to
execute and deliver the Registration Statement, this Agreement and any
other documents contemplated by the offering of the Shares.

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<PAGE> 21
(j) The Representatives shall have received on each Closing
Date certificates of the Secretaries of State of each State where the
Company or any of the Subsidiaries is incorporated and doing business
as to the good standing of the Company or such Subsidiary, if
applicable, qualification of the Company or such Subsidiary to do
business as a foreign corporation, if applicable, and filing of annual
reports. In addition, the Representatives shall have received copies of
all charter documents of the Company and each of the Subsidiaries
certified by the Secretary of State of the state of such corporation's
incorporation.

6. Covenants of the Company.

(A) The Company covenants and agrees as follows:

(a) The Company shall prepare the Prospectus in a form
approved by the Representatives and file such Prospectus pursuant to
Rule 424(b) under the Securities Act not later than the Commission's
close of business on the second business day following the execution
and delivery of this Agreement, or, if such second business day would
be more than fifteen business days after the Effective Date of the
Registration Statement or any post-effective amendment thereto, such
earlier date as would permit such Prospectus to be filed without filing
a post-effective amendment as set forth in Rule 430A(a)(3) under the
Securities Act, and shall promptly advise the Representatives (i) when
the Registration Statement shall have become effective, (ii) when any
amendment thereof or any related registration statement filed with the
Commission pursuant to Rule 462(b) of the Rules shall have become
effective, (iii) of any request by the Commission for any amendment of
the Registration Statement or the Prospectus or for any additional
information, (iv) of the prevention or suspension of the use of any
preliminary prospectus or the Prospectus or of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (v) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company shall not
file any amendment of the Registration Statement or amendment or
supplement to the Prospectus unless the Company has furnished the
Representatives a copy for its review prior to filing and shall not
file any such proposed amendment or supplement to which the
Representatives reasonably object. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.

(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or if it shall

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<PAGE> 22
be necessary to amend or supplement the Prospectus to comply with the
Securities Act or the Rules, the Company promptly shall prepare and
file with the Commission, subject to the second sentence of paragraph
(a) of this Section 6(A), an amendment or supplement which shall
correct such statement or omission or an amendment which shall effect
such compliance.

(c) The Company shall make generally available to its security
holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at
the end of the fiscal quarter of the Company during which the Effective
Date occurs (or 90 days if such 12-month period coincides with the
Company's fiscal year), an earnings statement (which need not be
audited) of the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Securities Act or Rule
158 of the Rules.

(d) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments
thereof) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and all amendments thereof and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies of any
preliminary prospectus and the Prospectus and any amendments thereof
and supplements thereto as the Representatives may reasonably request.

(e) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and sale
under the laws of such jurisdictions as the Representatives may
designate and shall maintain such qualifications in effect so long as
required for the distribution of the Shares; provided, however, that
the Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or subject
itself to taxation as doing business in any jurisdiction.

(f) For a period of five years after the date of this
Agreement, the Company shall supply to the Representatives, and to each
other Underwriter who may so request in writing, copies of such
financial statements and other periodic and special reports as the
Company may from time to time distribute generally to the holders of
any class of its capital stock and to furnish to the Representatives a
copy of each annual or other report it shall be required to file with
the Commission.

(g) Without the prior written consent of Oppenheimer & Co.,
Inc., for a period of 180 days after the date of this Agreement, the
Company shall not issue, offer to sell or register with the Commission,
distribute, pledge, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, or encumber, or exercise any
registration rights with respect to, any shares of Common Stock or any
securities

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<PAGE> 23
convertible into, exercisable for, or exchangeable for any shares of
Common Stock, otherwise than (i) the issuance of the Common Stock
pursuant to the Registration Statement, (ii) the issuance of shares of
Common Stock pursuant to the exercise of outstanding options under the
Company's existing stock option plans, (iii) the grant of options under
the Company's existing stock option plans, (iv) in connection with an
acquisition by the Company of another entity pursuant to which the
Company sells or transfers any of its shares of Common Stock to a third
party as part or all of the purchase price of such entity; provided,
however, that prior to any sale or transfer, such third party shall
have agreed in writing with Oppenheimer & Co., Inc. that it will not
offer to sell, distribute, pledge, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or encumber, or exercise
any registration rights with respect to, such shares of Common Stock
(or any securities convertible into, exercisable for or exchangeable
for such Common Stock) for the remainder of the 180 days after the date
of this Agreement, (v) the filing of a shelf registration statement by
the Company registering an additional 2,000,000 shares of Common Stock
for use by the Company as consideration in future acquisitions, (vi)
the sale or transfer by the Company of shares of Common Stock in
connection with the hiring of officers or directors not previously
employed by the Company; provided, however, that prior to any sale or
transfer, such officer or director shall have agreed in writing with
Oppenheimer & Co., Inc. that he or she will not offer to sell,
distribute, pledge, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, or encumber, or exercise any
registration rights with respect to, such shares of Common Stock (or
any securities convertible into, exercisable for or exchangeable for
such Common Stock) for the remainder of the 180 days after the date of
this Agreement, (vii) the filing by the Company of a registration
statement on Form S-8 registering up to an additional 700,000 shares of
Common Stock issuable upon exercise of options granted under the
Company's existing stock option plans, or (viii) with the prior written
consent of Oppenheimer & Co., Inc.

(h) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and by
the Nasdaq National Market (including any required registration under
the Exchange Act). For a period of five years after the date of this
Agreement, the Company shall use its best efforts to maintain the
inclusion of the Common Stock in the Nasdaq National Market System (or
on a national securities exchange).

(i) The Company shall use its best efforts to do and perform
all things required or necessary to be done and performed under this
Agreement by the Company prior to the Firm Shares Closing Date or any
Option Closing Date, as the case may be, and to satisfy all conditions
precedent to the delivery of the Shares.

(B) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses of the
Company incident to the public offering of the Shares and

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<PAGE> 24
the performance of the obligations of the Company under this Agreement including
those relating to (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the Registration
Statement and the Prospectus, and the printing, filing and distribution of this
Agreement; (ii) the preparation and delivery of certificates for the Shares to
the Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 6(A)(e), including the fees and
disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing, distribution and
shipment of preliminary and supplementary Blue Sky memoranda; (iv) the
furnishing (including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold; (v) the filing fees of the National
Association of Securities Dealers, Inc. in connection with its review of the
terms of the public offering; (vi) the furnishing (including costs of shipping
and mailing) to the Representatives and to the Underwriters of copies of all
reports and information required by Section 6(A)(f); and (vii) inclusion of the
Shares for quotation on the Nasdaq National Market.

7. Indemnification.

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto, or arise out
of or are based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arise out of or are based upon
any misrepresentation or breach of any representation or warranty by
the Company contained in this Agreement; provided, however, that such
indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) on account of any losses, claims,
damages or liabilities arising from the sale of the Shares to any
person by such Underwriter (i) if such untrue statement or omission or
alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with
information furnished in writing to the Company by the Representatives
on behalf of any Underwriter specifically for use therein or, (ii) as
to any

- 24 -
<PAGE> 25
preliminary prospectus, with respect to any Underwriter, to the extent
that any such loss, claim, damage or liability of such Underwriter
results from an untrue statement of a material fact contained in, or
the omission of a material fact from, such preliminary prospectus,
which untrue statement or omission was corrected in the Prospectus, if
such Underwriter sold Shares to the person alleging such loss, claim,
damage or liability without sending or giving, at or prior to the
written confirmation of such sale, a copy of the Prospectus, unless
such failure resulted from the failure of the Company to deliver copies
of the Prospectus to such Underwriter on a timely basis to permit such
sending or giving. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.

(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, each director of the Company,
and each officer of the Company who signs the Registration Statement,
to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in any
preliminary prospectus, the Registration Statement or the Prospectus,
or any amendment thereof or supplement thereto, contained in the last
paragraph of the cover page, in the paragraph relating to stabilization
on the inside front cover page of the Prospectus and the statements
with respect to the public offering of the Shares under the caption
"Underwriting" in the Prospectus; provided, however, that the
obligation of each Underwriter to indemnify the Company (including any
controlling person, director or officer thereof) shall be limited to
the net proceeds received by the Company from such Underwriter.

(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served. No indemnification provided for in Section 7(a) or
7(b) shall be available to any party who shall fail to give notice as
provided in this Section 7(c) if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related
and was prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after

- 25 -
<PAGE> 26
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment of counsel by such indemnified party
has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in
which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying parties shall not have employed counsel to assume the
defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent.

8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 7(a) and 7(b) is due in accordance with its terms but for any reason is
held to be unavailable from the Company or the Underwriters, the Company and the
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting any contribution
received by the Company from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who may also be liable for contribution) to which the Company and
one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Shares or, if
such allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 7 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus, bear to
(y) the underwriting discounts received by the Underwriters, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company and
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement or omission or

- 26 -
<PAGE> 27
alleged omission of a material fact related to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter (except as may be provided
in the Master Agreement Among Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) in the immediately preceding sentence of this Section 8. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Section, notify such party or parties from whom contribution may be sought, but
the failure so to notify such party or parties from whom contribution may be
sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this Section. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written consent. The
Underwriters' obligations to contribute pursuant to this Section 8 are several
in proportion to their respective underwriting commitments and not joint.

9. Termination. This Agreement may be terminated with respect
to the Shares to be purchased on a Closing Date by the Representatives by
notifying the Company at any time

(a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if there has been any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company, whether or not arising in
the ordinary course of business which, in the judgment of the
Representatives, materially impairs the investment quality of the
securities; (ii) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted the
securities markets; (iii) if there has occurred any new outbreak or
material escalation of major hostilities or other major national or
international calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the judgment of
the Representatives, inadvisable to proceed with the offering; (iv) if
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in

- 27 -
<PAGE> 28
the United States is such as to make it, in the judgment of the
Representatives, inadvisable or impracticable to market the Shares; (v)
if trading in the Shares has been suspended by the Commission or
trading generally on the New York Stock Exchange, Inc. or on the
American Stock Exchange, Inc. has been suspended or limited, or minimum
or maximum ranges for prices for securities shall have been fixed, or
maximum ranges for prices for securities have been required, by said
exchanges or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental or regulatory
authority; or (vi) if a banking moratorium has been declared by any
state or federal authority, or

(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.

If this Agreement is terminated pursuant to any of its
provisions, the Company shall not be under any liability to any Underwriter, and
no Underwriter shall be under any liability to the Company, except that (y) if
this Agreement is terminated by the Representatives or the Underwriters because
of any failure, refusal or inability on the part of the Company to comply with
the terms or to fulfill any of the conditions of this Agreement, the Company
will, upon the request of the Representatives, reimburse the Underwriters for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) incurred by them in connection with the proposed purchase and sale of
the Shares or in contemplation of performing their obligations hereunder and (z)
no Underwriter who shall have failed or refused to purchase the Shares agreed to
be purchased by it under this Agreement, without some reason sufficient
hereunder to justify cancellation or termination of its obligations under this
Agreement, shall be relieved of liability to the Company or to the other
Underwriters for damages occasioned by its failure or refusal.

10. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representatives may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,

(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be

- 28 -
<PAGE> 29
increased pursuant to this Section 10 by more than one-ninth of such
number of Shares without the written consent of such Underwriter, or

(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to an additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representatives to purchase
such Shares upon the terms set forth in this Agreement.

In any such case, either the Representatives or the Company
shall have the right to postpone the applicable Closing Date for a period of not
more than five business days in order that necessary changes and arrangements
(including any necessary amendments or supplements to the Registration Statement
or Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 6(B),
7, 8 and 9. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.

11. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(B), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.

This Agreement has been and is made for the benefit of the
Underwriters and the Company and their respective successors and assigns, and,
to the extent expressed herein, for the benefit of persons controlling any of
the Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.

All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the

- 29 -
<PAGE> 30
Representatives, c/o Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial
Center, New York, New York 10281 Attention: Richard D. White, and (b) if to the
Company, to its agent for service as such agent's address appears on the cover
page of the Registration Statement.

- 30 -
<PAGE> 31
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

Please confirm that the foregoing correctly sets forth the
agreement among us.

Very truly yours,

VESTCOM INTERNATIONAL, INC.

By
---------------------------
Name:
Title:

Confirmed:

OPPENHEIMER & CO., INC.

PRUDENTIAL SECURITIES INCORPORATED

Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.

By Oppenheimer & Co., Inc.

By
---------------------------
Name:
Title: Managing Director

- 31 -
<PAGE> 32
SCHEDULE I

<TABLE>
<CAPTION>
Number of
Firm Shares to
Name Be Purchased
---- --------------
<S> <C>
Oppenheimer & Co., Inc................................
Prudential Securities Incorporated....................

---------
TOTAL 3,850,000
</TABLE>

- i -
<PAGE> 33
SCHEDULE II

Founding Companies State of Incorporation
- ------------------ ----------------------

Comvestrix Corp.
Direct Mail Services, Inc.
Computer Output Services, Inc.
Electronic Imaging Services, Inc.
COS Information, Inc.
Image Printing Systems
Mystic Graphic Systems, Inc.

- ii -
<PAGE> 34
SCHEDULE III

Subsidiary State of Incorporation
- ---------- ----------------------

- iii -
<PAGE> 35
SCHEDULE IV

Form of Lockup Agreement

- iv -

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

To Vestcom International, Inc.:

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
Registration Statement File No. 333-23519.

/s/ ARTHUR ANDERSEN LLP
--------------------------------------

Roseland, New Jersey

June 30, 1997