<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VESTCOM INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
-------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[VESTCOM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
VESTCOM INTERNATIONAL, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Vestcom International, Inc. (the "Company" or "Vestcom") will be held at the
Radisson Suite Hotel, 350 Route 3 West, Mill Creek Drive, Secaucus, New Jersey
07094, on Thursday, May 28, 1998 at 9:00 a.m., to consider and act upon the
following:
1. The election of six directors to serve for a period of one year and
thereafter until their successors shall have been duly elected and shall have
qualified.
2. The ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for 1998.
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 10,
1998 as the date for determining the stockholders of record entitled to receive
notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Sheryl Bernstein Cilenti
Sheryl Bernstein Cilenti
Secretary
Lyndhurst, New Jersey
April 28, 1998
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE> 3
VESTCOM INTERNATIONAL, INC.
1100 VALLEY BROOK AVENUE
LYNDHURST, NEW JERSEY 07071
-------------------------
PROXY STATEMENT
-------------------------
The following statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Vestcom International, Inc.
(the "Company" or "Vestcom"), a New Jersey corporation. Such proxies are to be
used at the Company's Annual Meeting of Stockholders (the "Annual Meeting") to
be held at the Radisson Suite Hotel, 350 Route 3 West, Mill Creek Drive,
Secaucus, New Jersey 07094, on Thursday, May 28, 1998 commencing at 9:00 a.m.
This Proxy Statement and the enclosed form of proxy are first being sent to
stockholders on or about April 28, 1998.
STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of the Company's Common Stock, no par value (the
"Common Stock"), at the close of business on April 10, 1998 (the record date
fixed by the Board of Directors) will be entitled to receive notice of, and to
vote at, the Annual Meeting. At the close of business on the record date, there
were 8,483,811 shares of Common Stock outstanding and entitled to vote at the
Annual Meeting (including voting rights attributable to the shares of a Vestcom
subsidiary in Canada). Each such share is entitled to one vote.
VOTING; REVOCATION OF PROXY; QUORUM AND VOTE REQUIRED
A form of proxy is enclosed for use at the Annual Meeting if a
stockholder is unable to attend in person. Each proxy may be revoked at any time
before it is exercised by giving written notice to the Secretary of the Meeting
or by submitting a duly executed, later-dated proxy. All shares represented by
valid proxies pursuant to this solicitation (and not revoked before they are
exercised) will be voted as specified in the form of proxy. If the proxy is
signed but no specification is given, the shares will be voted FOR the Board's
nominees for election to the Board of Directors and FOR the ratification of
Arthur Andersen LLP as the Company's independent public accountants for 1998. A
majority of the shares outstanding on the record date will constitute a quorum
for purposes of the Annual Meeting. Assuming that a quorum is present, the
election of directors will be effected by a plurality vote and the ratification
of auditors will require the affirmative vote of a majority of the votes cast
with respect to such proposal. For purposes of determining the votes cast with
respect to any matter presented for consideration at the Annual Meeting, only
those votes cast "for" or "against" are included. Abstentions and broker
non-votes are counted only for the purpose of determining whether a quorum is
present at the Annual Meeting.
COSTS OF SOLICITATION
The entire cost of soliciting these proxies will be borne by the
Company. In following up the original solicitation of the proxies by mail, the
Company may make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to the beneficial
owners of the Common Stock and may reimburse them for their expenses in so
doing. If necessary, the Company may also use its officers and their assistants
to solicit proxies from the stockholders, either personally or by telephone or
special letter.
PRINCIPAL STOCKHOLDERS
Based upon information available to the Company, the only stockholders
known by the Company to beneficially own more than 5% of the outstanding Common
Stock as of April 10, 1998 are (i) Joel Cartun, (ii) Gary J. Marcello, (iii)
Dresdner RCM Global Investors LLC, RCM Limited L.P. and RCM General Corporation
(the "RCM Group"), (iv) Dresdner Bank AG ("Dresdner"), (v) J.&W. Seligman & Co.
Incorporated ("Seligman") and William C. Morris, the owner of a majority of the
outstanding voting
-2-
<PAGE> 4
securities of Seligman and (vi) Brookside Capital Partners Fund, L.P.
("Brookside"). For information concerning the holdings of Mr. Cartun and Mr.
Marcello, see "Proposal One -- Election of Directors -- Security Ownership of
Management." Pursuant to filings made by the respective holders with the
Securities and Exchange Commission (the "SEC"), the RCM Group, Dresdner,
Seligman and Brookside owned the following number of shares of the Company's
Common Stock as of April 10, 1998:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED CLASS
- ------------------------------------ ------------------------- ----------
<S> <C> <C>
Dresdner RCM Global Investors LLC 833,500(A) 9.98%
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, California 94111
Dresdner Bank AG (B) (B)
Jurgen-Ponto-Platz 1
60301 Frankfurt, Germany
J. & W. Seligman & Co. Incorporated 504,700(C) 6.05%
William C. Morris
100 Park Avenue
New York, New York 10017
Brookside Capital Partners Fund, L.P. 781,000(D) 9.25%
Two Copley Place
Boston, MA 02116
</TABLE>
- ----------
(A) Dresdner RCM Global Investors LLC ("Dresdner RCM"), RCM Limited L.P. ("RCM
Limited") and RCM General Corporation ("RCM General") have sole voting power
with respect to 702,000 shares of Common Stock and sole dispositive power
with respect to 833,500 shares of Common Stock. RCM Limited is the managing
agent of Dresdner RCM, an investment advisor registered under the Investment
Advisors Act of 1940. RCM General is the general partner of RCM Limited.
(B) Dresdner, an international banking organization, is the parent of Dresdner
RCM. Dresdner has indicated in its filing with the SEC that it has
beneficial ownership of the 833,500 shares described in footnote (A) above,
representing 9.98% of the class, only to the extent that Dresdner may be
deemed to have beneficial ownership of securities deemed to be beneficially
owned by Dresdner RCM.
(C) Seligman has indicated in its filing with the SEC that these shares are
beneficially owned by investment advisory accounts and registered investment
companies under its management as of February 28, 1998. The filing with the
SEC further indicates that William C. Morris, as the owner of a majority of
the outstanding voting securities of Seligman, may be deemed to beneficially
own the shares reported by Seligman.
(D) Brookside has indicated in its filing with the SEC that it has the sole
power to vote and dispose of these shares.
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<PAGE> 5
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and 10% shareholders to file with the
Securities and Exchange Commission certain reports regarding such persons'
ownership of the Company's securities. The Company is required to disclose any
failures to file such reports on a timely basis. There were no untimely filings
for the year ended December 31, 1997.
PROPOSAL ONE
ELECTION OF DIRECTORS
The holders of the Common Stock will elect six directors at the Annual
Meeting, each of whom will be elected for a one year term. Unless a stockholder
either indicates "withhold authority" on his proxy or indicates on his proxy
that his shares should not be voted for certain nominees, it is intended that
the persons named in the proxy will vote for the election of the persons named
in the table below to serve until the expiration of their terms and thereafter
until their successors shall have been duly elected and shall have qualified.
Discretionary authority is also solicited to vote for the election of a
substitute for any of said nominees who, for any reason presently unknown,
cannot be a candidate for election.
The Company's By-laws provide that the Board of Directors will consist
of not less than one nor more than 21 members, the actual number to be
determined by the Board from time to time. Upon the consummation of Vestcom's
initial public offering (the "IPO") on August 4, 1997, the Board consisted of
seven members. The Board has named six nominees for election at the Annual
Meeting, and proxies cannot be voted for more than six persons at the Annual
Meeting. The Board and its Nominating Committee are currently exploring possible
candidates for a seventh Board member. If the Board appoints a seventh member
after the 1998 Annual Meeting, such person may only serve until the 1999 Annual
Meeting of Shareholders, at which time he or she may be nominated by the Board
and, if nominated, will be voted on by the stockholders.
The table below sets forth the names and ages (as of April 1, 1998) of
each of the nominees, the other positions and offices presently held by each
such person within the Company, the period during which each such person has
served on the Board of Directors of the Company, the expiration of their
respective terms if elected and the principal occupations and employment of each
such person during the past five years. In each instance in which dates are not
provided in connection with a nominee's business experience, such nominee has
held the position indicated for at least the past five years.
<TABLE>
<CAPTION>
EXPIRATION
DIRECTOR OF TERM
NAME AND AGE SINCE IF ELECTED BUSINESS EXPERIENCE
- ------------ ----- ---------- -------------------
<S> <C> <C> <C>
Joel Cartun, 58 1996 1999 Chairman of the Board of Vestcom (August 1997 to
present); President and Chief Executive Officer of
Vestcom (from Vestcom's incorporation in September
1996 to present); President of Comvestrix Corp.
("Comvestrix"), a subsidiary of Vestcom.
Stephen R. Bova, 51 1997 1999 President of the Global Banking Division of
Electronic Data Systems Corporation (a provider of
technical and information services) (November 1996
to present); President of the Global Financial
Division of Alltel Information Services, Inc. (a
provider of software and information services)
(prior years to November 1996).
</TABLE>
-4-
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Leonard J. Fassler, 66 1997 1999 Consultant to GE Capital Information Technology
Systems, Inc. (an international computer reselling
and integration company affiliated with General
Electric) (August 1996 to present); Co-Chairman of
AmeriData Technologies, Inc. (an international
computer integration and support company) (prior
years to July 1996).
Brendan Keating, 43 -- 1999 Executive Vice President and Chief Operating
Officer of Vestcom and Chief Operating Officer of
Comvestrix (October 1997 to present); Vice
President of Bowne & Co., Inc. (a financial
printing company) (1991 to October 1997); President
of Bowne Business Communications (1993 to 1995);
Vice President of Operations of Bowne of New York
City, Inc. (1985 to 1991).
Fred S. Lafer, 69 1997 1999 President of the Taub Foundation (a charitable
foundation) (1994 to present); Senior Vice
President and Secretary of Automatic Data
Processing, Inc. (a provider of employer, financial
and data services) (prior years to 1996).
Richard D. White, 44 1997 1999 Managing Director of CIBC Capital Partners
(February 1998 to present); Managing Director of
CIBC Oppenheimer Corp (successor to Oppenheimer &
Co., Inc. and referred to herein as "Oppenheimer")
(prior years to February 1998). Mr. White is also
a director of Midway Games Inc.
</TABLE>
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<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1998 by (i) each current
director and each nominee for director of the Company; (ii) each Named Officer
(as defined herein) of the Company; and (iii) all current executive officers,
directors and nominees for director of the Company as a group. Unless otherwise
indicated, each of the named stockholders possesses sole voting and investment
power with respect to the shares beneficially owned. Shares covered by stock
options are not included in the table below since none of such options are
exercisable by June 1, 1998.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
STOCKHOLDER NUMBER PERCENT
----------- ------ -------
<S> <C> <C>
Joel Cartun(1)........................................ 1,461,198(2) 17.2%
Gary J. Marcello(1)................................... 549,178(3) 6.5
Peter J. McLaughlin................................... 172,837 2.0
Harvey Goldman........................................ 5,000 *
Brendan Keating....................................... 2,500 *
Leslie M. Abcug....................................... 31,628 *
Stephen R. Bova....................................... 105,900 1.2
Leonard J. Fassler.................................... 3,500(4) *
Fred S. Lafer......................................... 2,100(5) *
Richard D. White...................................... 100,000(6) 1.2
Howard April.......................................... 141,464(7) 1.7
All current executive officers, directors and
nominees for director as a group (14 persons)......... 2,697,558 31.8
</TABLE>
- ----------
*Less than one percent.
(1) The business address of Mr. Cartun and Mr. Marcello is c/o Vestcom
International, Inc., 1100 Valley Brook Avenue, Lyndhurst, New Jersey 07071.
(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 27,436 shares held by a family partnership and 67,227 shares held
by a foundation.
(4) Includes 1,000 shares held by Mr. Fassler's wife. Mr. Fassler disclaims
beneficial ownership of such shares.
(5) Includes 1,200 shares held by family trusts of which Mr. Lafer is trustee.
(6) Includes 61,704 shares held in the aggregate by Oppenheimer and an affiliate
of Oppenheimer. Mr. White is a Managing Director of an affiliate of
Oppenheimer. Mr. White disclaims beneficial ownership of these 61,704
shares.
(7) Includes 127,746 exchangeable shares of a Vestcom subsidiary in Canada,
which are convertible into 127,746 shares of Common Stock. Mr. April also
has an interest in one share of Vestcom's Class B Preferred Stock, which
entitles him to vote on any matter submitted to the holders of the Common
Stock as though he owned 127,746 shares of Common Stock.
There were 8,483,811 shares of Common Stock outstanding on April 1, 1998.
-6-
<PAGE> 8
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Vestcom was founded in September 1996. Concurrently with the
consummation of Vestcom's IPO on August 4, 1997, Vestcom acquired seven computer
output and document management service companies (the "Founding Companies"),
each of which became a subsidiary of Vestcom. The Company did not commence
operations until August 1997. The following table sets forth, for the fiscal
year ended December 31, 1997, the annual and long-term compensation of the
Company's Chief Executive Officer and the four other most highly compensated
executive officers during the year ended December 31, 1997 (the "Named
Officers"). The amounts shown reflect compensation received from the Company
and, with respect to Messrs. Cartun and Abcug, Comvestrix Corp., one of the
Founding Companies.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------------------------- ------------
COMMON
SHARES
SUBJECT TO
NAME AND OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION(B) GRANTED(#) COMPENSATION (C)
------------------ ---- ------ -------- --------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun.............. 1997 $ 211,568 $ 30,000 $ -- -- $ 5,427
Chairman of the Board,
President and Chief
Executive Officer of
Vestcom and Comvestrix
(a Founding Company)
Brendan Keating(D)....... 1997 39,615 -- -- 100,000 --
Executive Vice President
and Chief Operating Officer
of Vestcom, and Chief
Operating Officer of
Comvestrix
Harvey Goldman(E)........ 1997 105,231 -- -- 50,000 --
Executive Vice President,
Chief Financial Officer
and Treasurer of Vestcom
Peter J. McLaughlin(F)... 1997 119,077 -- -- -- --
Executive Vice President
of Vestcom
Leslie M. Abcug.......... 1997 110,006 7,000 -- 4,000 3,477
Vice President-Finance
and Administration of
Vestcom and Comvestrix
</TABLE>
- ----------
(A) Represents bonuses paid during 1997 by Comvestrix prior to Vestcom's IPO.
(B) No Named Officer received personal benefits from the Company in excess of
10% of such individual's reported salary and bonus. Amounts below the
threshold are not included in the table.
(C) Includes contributions made by the Company of $2,282 for Mr. Cartun and
$1,458 for Mr. Abcug to the Company's 401(k) plan to match 1997 pre-tax
elective deferral contributions (included under "Salary") made by such
persons to such plan. Also includes $3,145 and $2,019 paid by the Company as
premiums for life insurance for Mr. Cartun and Mr. Abcug, respectively.
(D) Mr. Keating joined the Company in October 1997.
(E) Mr. Goldman joined the Company in May 1997.
(F) Mr. McLaughlin became an employee of the Company in March 1997. For a
description of certain consulting fees paid to Mr. McLaughlin for consulting
services rendered prior to March 1997, see "Certain Transactions."
-7-
<PAGE> 9
EMPLOYMENT AGREEMENTS
Each of the Named Officers has entered into an employment agreement
with the Company or one of its subsidiaries. Mr. Cartun, Mr. McLaughlin and Mr.
Keating have each entered into an employment agreement with Vestcom, and Mr.
Abcug has entered into an employment agreement with Comvestrix, each of which
commenced on August 4, 1997 upon the consummation of the Company's IPO and the
acquisitions of the Founding Companies (other than Mr. McLaughlin's agreement,
which commenced on March 1, 1997 and Mr. Keating's agreement, which commenced on
October 13, 1997). Mr. Keating's employment agreement is for a term of two years
and each of the employment agreements with Messrs. Cartun, McLaughlin, and Abcug
is for a term of three years.
Pursuant to their respective agreements, Mr. Cartun will serve as
President of the Company at an annual base salary of $200,000, Mr. McLaughlin
will serve as an Executive Vice President of the Company at an annual base
salary of $144,000, Mr. Keating will serve as Executive Vice President and Chief
Operating Officer of the Company at an annual base salary of $200,000 (plus a
guaranteed annual bonus of 35-50% of his annual salary, based on performance)
and Mr. Abcug will serve as an Executive Officer of Comvestrix at an annual base
salary of $110,000. Each of Messrs. Cartun, McLaughlin, Keating and Abcug 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. Pursuant to Mr.
Keating's employment agreement, upon joining the Company, he was granted an
option to purchase 100,000 shares of Common Stock at an exercise price of
$21.625 per share.
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, the
employment agreements for Messrs. Cartun, McLaughlin and Abcug provide that if
the employee has not received sufficient prior notice (as described in the
respective employment agreements) 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.
Mr. Keating's employment agreement provides that in the event of a
Change in Control of the Company, if he has not received sufficient prior notice
(as described in the employment agreement) that his employment will be
continued, he will be entitled to receive a lump-sum severance payment of
$300,000 if the Change in Control occurs during the first 12 months after Mr.
Keating's employment with the Company commences and $200,000 if the Change in
Control occurs after such first twelve months. Mr. Keating's employment
agreement also provides that in the event of a Change in Control, Mr. Keating
may elect to terminate his employment, in which case he will be entitled to
receive a lump-sum severance payment of $200,000.
The employment agreements for Messrs. Cartun, McLaughlin and Abcug also
provide 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 one times
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 described above also contains certain
non-competition covenants which will continue for one year following termination
of employment. Each employment agreement also contains certain
anti-solicitation, anti-raiding and confidentiality provisions.
-8-
<PAGE> 10
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 (as described in the
employment agreement) 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 $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. Pursuant to his employment
agreement, upon consummation of the Company's IPO, Mr. Goldman was granted an
option to purchase 50,000 shares of Common Stock at an exercise price of $13.00
per share (the initial public offering price).
STOCK OPTIONS
The following table contains information regarding the grant of stock
options to the Named Officers during the year ended December 31, 1997. In
addition, in accordance with rules adopted by the SEC, the following table sets
forth the hypothetical gains or "option spreads" that would exist for the
respective options assuming rates of annual compound price appreciation in the
Company's Common Stock of 5% and 10% from the date the options were granted to
their final expiration date.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (A)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF
COMMON SHARES GRANTED TO EXERCISE STOCK PRICE
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION APPRECIATION FOR
NAME OPTIONS GRANTED FISCAL 1997 SHARE ($/sh.) DATE OPTION TERM
---- --------------- ----------- ------------- ---- -----------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun............... -- -- $ -- -- $ -- $ --
Brendan Keating........... 100,000 24.7% 21.625 10/05/07 1,359,998 3,446,468
Harvey Goldman............ 50,000 12.4% 13.00 08/03/07 408,781 1,035,932
Peter J. McLaughlin....... -- -- -- -- -- --
Leslie M. Abcug........... 4,000 1.0% 13.00 08/03/07 32,702 82,875
</TABLE>
- ----------
(A) The options granted to Messrs. Keating, Goldman and Abcug were
granted under the Company's 1997 Equity Compensation Program (the "Stock Option
Plan"). Options generally are granted at exercise prices equal to the fair
market value of the Common Stock on the grant date and typically vest in 25%
increments commencing one year after the date of grant. The committee which
administers the Stock Option Plan may accelerate the vesting of any option upon
the occurrence of a change in control event (as defined in the Stock Option
Plan). The options granted to Messrs. Goldman and Abcug in 1997 were granted
upon the consummation of the Company's IPO at the initial public offering price.
Mr. Keating's option was granted to him upon his joining the Company at an
exercise price equal to fair market value on the grant date.
No stock options were exercisable by the Named Officers during the year
ended December 31, 1997. The following table provides information concerning the
number of shares of the Company's Common Stock covered by both exercisable and
non-exercisable stock options held by the Named Officers at December 31, 1997.
Also reported are the values for "in-the-money" options, which represent the
positive spread between the exercise prices of existing options and $22.375, the
closing sale price of the Company's Common Stock on December 31, 1997. On April
15, 1998, the closing sale price of the Company's Common Stock on the Nasdaq
National Market was $9.625.
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<PAGE> 11
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Shares
Number Underlying Unexercised Value of Unexercised
of Shares Options at In-the-Money Options at
Acquired on Value Year-End(#) Year-End($)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun.................. -- $ -- -- -- $ -- $ --
Brendan Keating.............. -- -- -- 100,000 -- 75,000
Harvey Goldman............... -- -- -- 50,000 -- 468,750
Peter J. McLaughlin.......... -- -- -- -- -- --
Leslie M. Abcug.............. -- -- -- 4,000 -- 37,500
</TABLE>
ARRANGEMENTS WITH DIRECTORS
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 also receives 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. The
options become fully exercisable one year after the date of grant. Directors of
the Company are reimbursed for out-of-pocket expenses incurred in their capacity
as directors of the Company.
THE BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
The Board of Directors of the Company held two meetings from the
consummation of the IPO through December 31, 1997. The Board's Audit Committee,
which is responsible for reviewing significant audit and accounting principles,
policies and practices and for meeting with the Company's independent
accountants, met one time during the year ended December 31, 1997. The Audit
Committee presently consists of Leonard J. Fassler and Richard D. White.
In February 1998, the Board established a Nominating Committee, composed
of Joel Cartun and Fred S. Lafer. The Committee has not established any
procedures for considering nominees recommended by stockholders.
The Board has established a general Compensation Committee to, among other
things, administer the Company's Stock Option Plan. The Compensation Committee
presently consists of Stephen R. Bova and Fred S. Lafer and held one meeting
during the Company's most recent fiscal year.
During the year ended December 31, 1997, each member of the Company's Board
of Directors was present for 75% or more of the aggregate of the total meetings
of the Board and each Board committee on which he serves.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions are made by the members of the Compensation
Committee. During the fiscal year ended December 31, 1997, Stephen R. Bova and
Fred S. Lafer served as members of the Compensation Committee. Neither Mr.
Lafer nor Mr. Bova has ever served as an employee or officer of Vestcom or any
of its subsidiaries.
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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 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 included 593,509 shares issued to the former stockholders of Comvestrix
proportionately to their Comvestrix stockholdings (including 512,446 shares
which were issued to Joel Cartun (Chairman of the Board, 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 bore interest at the prime rate, were paid in
full upon the consummation of the IPO.
The $1.5 million was raised in a private placement of stock and notes
to Oppenheimer, Opco Senior Executive Partnership, L.P. ("OSEP") (an Oppenheimer
affiliate), Richard D. White (then a managing director of Oppenheimer, and now a
managing director of an affiliate of Oppenheimer, who became a director of
Vestcom upon the consummation of the IPO), 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 became directors
of the Company upon the consummation of the IPO, and Mr. Marcello is a 5%
shareholder of the Company.) The $1.5 million was comprised of 503,846 shares of
Common Stock of Vestcom, sold at a price of approximately $.73 per share (which
the Board determined was fair market value at such time), and notes in the
aggregate principal amount of $1,132,697 bearing interest at the prime rate. The
notes were paid in full upon the consummation of the IPO. The price for the
stock was the subject of arms' length negotiations. In such $1.5 million
financing, Vestcom issued notes and Common Stock, including (i) notes payable to
Oppenheimer, OSEP, Mr. White, Comvestrix, Gary J. Marcello's entity, and Mr.
April in the principal amounts of $432,495.53, $108,123.88, $72,082.59,
$399,996.26, $79,997.16 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. As the
issuance price was less than the initial public offering price, the Company
recorded a non-recurring non-cash charge to compensation of approximately $1.6
million, attributable to Mr. Cartun ($1,193,000), Mr. Marcello ($276,000), Mr.
Abcug ($25,000) and Mr. April ($138,000). In May and July 1997, Oppenheimer
returned to Vestcom an aggregate of 225,512 shares of Common Stock.
Mr. McLaughlin received an aggregate of $99,200 from Vestcom in 1997
for consulting services rendered to Vestcom during 1996 and 1997. In addition,
upon the consummation of the acquisitions of the Founding Companies, Vestcom
paid 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 such acquisitions.
Through April 15, 1998, the Company has paid Oppenheimer an aggregate
of $1.5 million for advisory services rendered in connection with Vestcom's
acquisitions. Through an agreement entered into in May 1997, Vestcom has agreed
to pay Oppenheimer an additional $600,000 in three quarterly installments during
the remainder of 1998 for advisory services rendered. In addition, Vestcom has
reimbursed Oppenheimer $75,000 for out-of-pocket expenses related to such
services.
Acquisitions. Concurrently with the consummation of the IPO, Vestcom
acquired by merger with Vestcom subsidiaries all of the issued and outstanding
capital stock of the Founding Companies (except for a Canadian Founding Company,
which was acquired by a stock purchase of its holding company rather than a
merger), at which time each Founding Company became a wholly-owned subsidiary of
the Company. The aggregate consideration that was paid by Vestcom to acquire the
Founding Companies consisted of (i) approximately $18.4 million in cash and (ii)
2,852,111 shares of Common Stock (or 34.2% of the outstanding
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shares after completion of the acquisitions of the Founding Companies and the
IPO), for an aggregate value of approximately $55.5 million. In connection with
the acquisitions, the Company assumed all of the indebtedness of the Founding
Companies. Portions of such debt had been guaranteed by certain stockholders of
the Founding Companies in the aggregate amount of $1.3 million. All of these
guarantees have been released or the loans repaid. The Company has repaid
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, in the aggregate amount of approximately $12.5 million. Such amount
includes sums which were repaid to stockholders of the Founding Companies,
including approximately $1,126,000 which was repaid to Gary J. Marcello and
companies he controls.
The Company consented to the distribution of cash to those Founding
Companies that were S Corporations prior to the consummation of the IPO,
including Comvestrix and Direct Mail Services ("DMS"), in an amount equal to the
balance of each such Founding Company's Accumulated Adjustment Account ("AAA")
as of the consummation of the acquisitions (which reduced 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. In connection
with the acquisition of Comvestrix, Joel Cartun received $4,129,610 and 815,308
shares of Common Stock and Leslie Abcug received $90,813 and 17,929 shares of
Common Sock. In connection with the acquisition of DMS, Mr. Marcello received
$3,271,303 and 538,774 shares of Common Stock. In connection with the
acquisition of COS Information, Mr. April received $502,640 and 127,746 shares
of a Vestcom subsidiary in Canada which are exchangeable into 127,746 shares of
Common Stock.
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
current lease expires in 2001. Comvestrix's related party rent expense for this
property for the period from August 1, 1997 to December 31, 1997 was $232,000.
The current annual rent is $394,000 per year (exclusive of building operating
expenses and real estate tax), which the Company believes to be the fair market
rental value of the property.
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 period from
August 1, 1997 to December 31, 1997 was $286,000. The current annual rent for
all of these properties is approximately $825,000 per year (inclusive of real
estate taxes), which the Company believes to be the fair market rental value of
the property. The Company has entered into a lease for alternative space to
certain of the space currently utilized by DMS and leased from Mr. Marcello. In
connection with the 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.
Other
Gary Marcello and two other officers and shareholders of DMS previously
made loans to DMS in the form of demand notes bearing interest at a rate of 6.5%
per annum. Subsequent to the consummation of the IPO, the Company repaid such
loans, including $441,000 which was repaid to Gary Marcello and $685,000 which
was repaid to companies affiliated with Mr. Marcello.
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Company Policy
Future transactions with affiliates of the Company are anticipated to
be minimal, are required to be approved by the Fairness Committee of the Board
of Directors and by a majority of the full 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to rules adopted by the SEC designed to enhance disclosure of
corporate policies regarding executive compensation, the Company has set forth
below a report of its Compensation Committee regarding compensation policies as
they affect Mr. Cartun and the other Named Officers.
The Company did not conduct any operations prior to August 1997 when it
consummated its IPO and simultaneously acquired the Founding Companies. As part
of the acquisitions of the Founding Companies, the Company entered into
employment agreements with certain senior officers of the Founding Companies
(including Joel Cartun and Leslie Abcug). In addition, the Company entered into
employment agreements with Harvey Goldman and Peter J. McLaughlin prior to the
IPO. Brendan Keating entered into an employment agreement with the Company in
October 1997. See "Employment Agreements". These employment agreements were
generally the result of arms-length negotiations.
Accordingly, when the Compensation Committee was formed upon the
consummation of the Company's IPO in August 1997, all of the Company's Named
Officers (except Mr. Keating) were subject to employment agreements which fixed
the salaries and benefits to be granted to them.
The Compensation Committee views compensation of executive officers as
having three distinct parts, a current compensation program, a set of standard
benefits and a long-term benefit. The current compensation element focuses upon
the executive officer's salary and is designed to provide competitive
reimbursement for services rendered. The Company's standard benefit package
consists primarily of the matching portion of the Company's 401(k) Plan, health
and insurance benefits and eligibility for bonuses based upon performance of the
specific individual and the Company. The long-term benefit element is reflected
in the grants of stock options.
Stock options granted to executive officers of the Company have been
granted at a price equal to fair market value on the date of grant. Accordingly,
such options will gain appreciable value if, and only if, the market value of
the Common Stock increases. The Compensation Committee believes that the
issuance of stock options at fair market value provides incentives to employees
to maximize the Company's performance and to assure continued affiliation with
the Company.
The Compensation Committee believes that an appropriate compensation
program can help in promoting strong earnings performance if it reflects an
appropriate balance between providing current rewards to executive officers
while at the same time effectively controlling cash compensation costs. It is
the Committee's objective to continue monitoring the Company's compensation
program to assure that this balance is maintained.
By: Stephen R. Bova
Fred S. Lafer
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STOCKHOLDER RETURN COMPARISON
Set forth below is a line-graph presentation comparing the cumulative
stockholder return on the Company's Common Stock, on an indexed basis, against
the cumulative total returns of the NASDAQ Market Index and a Peer Group
consisting of FYI Incorporated, Lason Inc. and Ikon Office Solutions, Inc. for
the period from July 30, 1997 (the date the Company's Common Stock first began
trading on the Nasdaq National Market) (July 30, 1997 = 100) through December
31, 1997. The Company's management considers the companies included in the Peer
Group to be those companies whose primary businesses are most similar to the
business of the Company. The performance of the Company's Common Stock reflected
below is not necessarily indicative of future performance. On April 15, 1998,
the closing sale price of the Company's Common Stock on the Nasdaq National
Market was $9.625.
COMPARISON OF TOTAL RETURN SINCE JULY 30, 1997
AMONG VESTCOM INTERNATIONAL, INC. COMMON STOCK,
NASDAQ MARKET INDEX AND PEER GROUP
<TABLE>
<CAPTION>
Measurement Period 07/30/97 07/31/97 08/29/97 09/30/97 10/31/97 11/28/97 12/31/97
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Vestcom International, Inc. ....... $100.00 $102.31 $100.00 $117.69 $111.54 $124.62 $137.69
Peer Group ........................ 100.00 100.32 90.43 89.92 97.91 104.52 96.98
Nasdaq Market Index ............... 100.00 100.00 99.63 105.60 100.30 100.73 99.06
Assumes $100 invested on July 30, 1997
Assumes dividends reinvested
Fiscal year ending December 31, 1997
</TABLE>
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
DESCRIBED ABOVE.
PROPOSAL TWO
RATIFICATION OF AUDITORS
The Board of Directors has appointed Arthur Andersen LLP as the
Company's independent public accountants for the year ending December 31, 1998.
Arthur Andersen LLP has served as the Company's independent public accountants
since Vestcom's incorporation in September 1996. Although the appointment of
independent public accountants is not required to be approved by stockholders,
the Board of Directors believes stockholders should participate in the selection
of the Company's independent public accountants. Accordingly, the stockholders
will be asked at the Annual Meeting to ratify the Board's appointment of Arthur
Andersen LLP as the Company's independent public accountants for the year ending
December 31, 1998.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions of the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP.
OTHER MATTERS
At the time that this Proxy Statement was mailed to stockholders,
management was not aware that any matter other than the election of directors
and the ratification of auditors would be presented for action at the Annual
Meeting. If other matters properly come before the Annual Meeting, it is
intended that shares represented by proxies will be voted with respect to those
matters in accordance with the best judgment of the persons voting them.
If a stockholder intends to present a proposal at the next Annual
Meeting of Stockholders, the proposal must be received by the Company in writing
no later than December 28, 1998 in order for such proposal to be eligible for
inclusion in the Company's Proxy Statement and form of proxy for next year's
meeting.
By Order of the Board of Directors
/s/ Sheryl Bernstein Cilenti
Sheryl Bernstein Cilenti, Secretary
Dated: April 28, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31,
1997, INCLUDING FINANCIAL STATEMENTS, ACCOMPANIES THIS PROXY STATEMENT. THE
ANNUAL REPORT IS NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL OR AS A
COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION IS TO BE MADE.
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VESTCOM INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS.
MAY 28, 1998
The undersigned hereby appoints Joel Cartun and Harvey Goldman, and
each of them, attorneys and proxies, with power of substitution in each of them,
to vote for and on behalf of the undersigned at the annual meeting of the
stockholders of the Company to be held on May 28, 1998, and at any adjournment
thereof, upon matters properly coming before the meeting, as set forth in the
related Notice of Meeting and Proxy Statement, both of which have been received
by the undersigned. Without otherwise limiting the general authorization given
hereby, said attorneys and proxies are instructed to vote as follows:
1. Election of the Board's nominees for Director. (The Board of
Directors recommends a vote "FOR".)
[ ] FOR ALL NOMINEES LISTED TO THE RIGHT [ ] WITHHOLD AUTHORITY TO
VOTE FOR ALL NOMINEES
LISTED TO THE RIGHT
Nominees: Joel Cartun, Stephen R. Bova, Leonard J. Fassler, Brendan
Keating, Fred S. Lafer and Richard D. White.
INSTRUCTION: To withhold authority to vote for any individual nominee
listed to the right, write the nominee's name in the space provided below.
________________________________________________________________________________
2. Ratification of Arthur Andersen LLP as independent public
accountants for 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon all such other matters as may properly come before the meeting
and/or any adjournment or adjournments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED FOR EACH OF THE BOARD'S NOMINEES AND FOR PROPOSAL TWO.
Dated:_________________, 1998
Signed:
_______________________________________
_______________________________________
Please sign this proxy and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend.
Please sign exactly as your name appears hereon. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc.
For an account in the name of two or more persons, each should sign, or if one
signs, he should attach evidence of his authority.
