<PAGE>
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 Section240.14a-11(c) or Section240.14a-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:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[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
Wednesday, May 26, 1999 at 9:00 a.m., to consider and act upon the following:
1. The election of seven directors to serve for a period of one year and
thereafter until their successors shall have been duly elected and shall
have qualified.
2. A proposal to amend the Company's 1997 Equity Compensation Program to
authorize the issuance of additional shares of common stock under the
Program.
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 9, 1999 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 27, 1999
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>
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 Wednesday, May 26, 1999 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 27, 1999.
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 9, 1999 (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 9,056,806 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 approval of the
amendment to the Company's 1997 Equity Compensation Program. 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 approval of the
amendment to the Equity Compensation Program 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 9, 1999 are (i) Joel Cartun, (ii) Gary J. Marcello, (iii)
Dresdner RCM Global Investors LLC, Dresdner RCM Global Investors US Holdings
LLC, RCM Limited L.P. and RCM General Corporation (the "RCM Group"), (iv)
Dresdner Bank AG ("Dresdner"), (v) Brookside Capital Partners Fund, L.P.
("Brookside") and (vi) AMVESCAP PLC and its subsidiaries ("AMVESCAP"). For
information concerning the holdings of Mr. Cartun, see "Proposal One--Election
of
2
<PAGE>
Directors--Security Ownership of Management." Pursuant to filings made by the
respective holders with the Securities and Exchange Commission (the "SEC"),
Gary Marcello, the RCM Group, Dresdner, Brookside and Amvescap owned the
following number of shares of the Company's Common Stock as of December 31,
1998:
<TABLE>
<CAPTION>
Percent of
Name and Address of Beneficial Owner Shares Beneficially Owned Class
- ---------------------------------------------- --------------------------- -------------
<S> <C> <C>
Brookside Capital Partners Fund, L.P. 1,150,700(A) 13.09%
Two Copley Place
Boston, MA 02116
Dresdner RCM Global Investors LLC 867,200(B) 9.87%
Dresdner RCM Global Investors US Holdings LLC
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, California 94111
Dresdner Bank AG (C) (C)
Jurgen-Ponto-Platz 1
60301 Frankfurt, Germany
Gary J. Marcello 541,170(D) 6.2%
1 Penny Lane
Boonton, New Jersey 07005
AMVESCAP PLC 447,400(E) 5.09%
11 Devonshire Square
London EC2M 4YR
England and
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
</TABLE>
- ------------
(A) Brookside has indicated in its filing with the SEC that it has the sole
power to vote and dispose of these shares.
(B) Dresdner RCM Global Investors LLC and Dresdner RCM Global Investors US
Holdings LLC have sole voting power with respect to 707,740 shares of
Common Stock and sole dispositive power with respect to 867,200 shares of
Common Stock. The RCM Group's filing with the SEC indicates that RCM
Global Investors LLC ("Dresdner RCM") is an investment adviser and a
wholly owned subsidiary of Dresdner RCM Global Investors US Holdings LLC,
and that until July 8, 1998, RCM Limited L.P. served as managing agent of
Dresdner RCM. The filing further indicates that RCM General Corporation is
the general partner of RCM Limited L.P. According to the filing, RCM
Limited L.P. and RCM General Corporation have beneficial ownership of the
securities reported only to the extent they may be deemed to have
beneficial ownership of the securities beneficially owned by Dresdner RCM.
(C) Dresdner, an international banking organization, is the parent of Dresdner
RCM Holdings.
(D) Includes 445,323 shares with respect to which Mr. Marcello has sole voting
and sole dispositive power and 95,847 shares (comprised of 1,184 shares
held by a family trust, 27,436 shares held by a family partnership and
67,227 shares held by a foundation) with respect to which Mr. Marcello
shares voting and dispositive power.
(E) AMVESCAP has shared voting and dispositive power with respect to these
shares. AMVESCAP's filing with the SEC indicates that these securities
were acquired by various subsidiaries of AMVESCAP PLC, and that the
securities are held on behalf of other persons who have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, such securities.
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, 1998.
3
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The holders of the Common Stock will elect seven 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. The Board currently consists of seven members.
The table below sets forth the names and ages (as of April 1, 1999) 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, 59 1996 2000 Chairman of the Board of Vestcom (August 1997 to present);
Chief Executive Officer of Vestcom (from Vestcom's incorporation
in September 1996 to present); President of Vestcom (from
Vestcom's incorporation in 1996 to March 1999); Chief Executive
Officer of Comvestrix Corp. (now known as Vestcom Mid-Atlantic,
Inc. ("VMA")) (from its incorporation in 1969 to present);
President of VMA (1969 to October 1998).
Stephen R. Bova, 52 1997 2000 Managing Director, International Operations, Intelligroup, Inc. (a
computer services company) (January 1999 to present); President
of the Global Banking Division of Electronic Data Systems
Corporation (a provider of technical and information services)
(November 1996 to December 1998); President of the Global
Financial Division of Alltel Information Services, Inc. (a provider
of software and information services) (prior years to November
1996).
Leonard J. Fassler, 67 1997 2000 Co-Chairman of Interliant, Inc. (a web-hosting company)
(December 1997 to present); Consultant to GE Capital Information
Technology Systems, Inc. (an international computer reselling
and integration company affiliated with General Electric)
(August 1996 to January 1999); Co-Chairman of AmeriData
Technologies, Inc. (an international computer integration and
support company) (prior years to July 1996).
Brendan Keating, 44 1998 2000 President of Vestcom (March 1999 to present); Chief Operating
Officer of Vestcom (October 1997 to present); Executive Vice
President of Vestcom (October 1997 to March 1999); Vice President
of Bowne & Co., Inc. (a financial printing company) (1991
to October 1997); Vice President of Operations of Bowne of New
York City, Inc. (1985 to 1991); President of Bowne Business
Communications (1993 to 1995).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Expiration
Director of Term
Name and Age Since if Elected Business Experience
- ------------------------ ---------- ------------ -------------------------------------------------------------------
<S> <C> <C> <C>
Fred S. Lafer, 70 1997 2000 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).
Robert J. Levenson, 57 1998 2000 Executive Vice President of First Data Corporation (a transaction
and information processing company) (1993 to present). Mr. Levenson
is also a director of First Data Corporation, Superior Telecom
Inc. and Emisphere Technologies, Inc.
Richard D. White, 45 1997 2000 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 "CIBC Oppenheimer") (prior
years to February 1998). Mr. White is also a director of
Midway Games Inc.
</TABLE>
Security Ownership of Management
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 1, 1999 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 included in the table below to the extent that they are exercisable
by June 1, 1999.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
---------------------------------
Stockholder Number Percent
- ------------------------------------------------------------------------ -------------------- ----------
<S> <C> <C>
Joel Cartun ............................................................ 1,474,198(1) 16.3%
Peter J. McLaughlin .................................................... 172,837 1.9
Harvey Goldman ......................................................... 28,500(2) *
Brendan Keating ........................................................ 16,250(3) *
Robert Rogus ........................................................... 117,938(4) 1.3
Stephen R. Bova ........................................................ 148,000(5) 1.6
Leonard J. Fassler ..................................................... 13,500(6) *
Fred S. Lafer .......................................................... 12,100(7) *
Robert J. Levenson ..................................................... 10,100(8) *
Richard D. White ....................................................... 110,000(9) 1.2
All current executive officers, directors and nominees for director as a
group (10 persons) .................................................... 1,991,235(10) 21.8
</TABLE>
- ------------
*Less than one percent.
(1) 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.
(2) Includes 12,500 shares issuable upon the exercise of stock options.
(3) Includes 8,750 shares issuable upon the exercise of stock options.
(4) Includes 1,000 shares issuable upon the exercise of stock options. Mr.
Rogus is no longer considered an executive officer of the Company
(effective January 1, 1999) and, accordingly, his holdings are not
included in the total for all current executive officers, directors and
nominees.
(5) Includes 10,000 shares issuable upon the exercise of stock options.
5
<PAGE>
(6) Includes 1,000 shares held by Mr. Fassler's wife. Mr. Fassler disclaims
beneficial ownership of such shares. Also includes 10,000 shares issuable
upon the exercise of stock options.
(7) Includes 1,200 shares held by family trusts of which Mr. Lafer is trustee.
Also includes 10,000 shares issuable upon the exercise of stock options.
(8) Includes 600 shares held by Mr. Levenson's wife as custodian for the
benefit of her children.
(9) Includes 61,704 shares held in the aggregate by CIBC Oppenheimer and an
affiliate of CIBC Oppenheimer. Mr. White is a Managing Director of CIBC
Capital Partners, an affiliate of CIBC Oppenheimer. Mr. White disclaims
beneficial ownership of these 61,704 shares. Also includes 10,000 shares
issuable upon the exercise of stock options. Pursuant to Mr. White's
employment arrangement with CIBC Oppenheimer, any economic benefit derived
from these options must be contributed by him to CIBC Oppenheimer.
(10) Includes an aggregate of 66,000 shares issuable upon the exercise of stock
options. Excludes shares owned by Robert Rogus, as he is no longer
considered an executive officer of Vestcom.
There were 9,056,806 shares of Common Stock outstanding on April 1, 1999.
Summary of Cash and Certain Other Compensation
Vestcom was founded in September 1996. Concurrently with the consummation
of Vestcom's initial public offering (the "IPO") on August 4, 1997, Vestcom
acquired seven companies in the document services industry (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 years ended December 31, 1998 and 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, 1998
(the "Named Officers"). The amounts shown reflect compensation received from
the Company and, with respect to Messrs. Cartun and Rogus for the year ended
December 31, 1997, from VMA.
6
<PAGE>
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 Compensation(B) Granted(#) Compensation (C)
- -------------------------------- ------ ----------- --------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun .................... 1998 $196,728 $ -- -- -- $11,481
Chairman of the Board 1997 211,568 30,000(A) -- -- 5,427
and Chief Executive
Officer
Brendan Keating(D) ............. 1998 200,000 85,000 -- 95,000 3,804
President and Chief 1997 39,615 -- -- 100,000(E) --
Operating Officer
Harvey Goldman(F) .............. 1998 185,769 25,000 -- 25,000 3,871
Executive Vice 1997 105,231 -- -- 50,000 --
President, Chief
Financial Officer
and Treasurer
Peter J. McLaughlin(G) ......... 1998 152,265 15,000 -- -- 3,780
Executive Vice 1997 119,077 -- -- -- --
President
Robert Rogus ................... 1998 147,508 -- -- -- 3,548
Vice President-Sales 1997 149,411 81,816 -- 4,000 2,173
</TABLE>
- ------------
(A) Represents bonuses paid during 1997 by VMA 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) For 1998, includes contributions made by the Company of $3,751 for Mr.
Cartun, $3,804 for Mr. Keating, $3,871 for Mr. Goldman, $3,780 for Mr.
McLaughlin and $3,548 for Mr. Rogus to the Company's 401(k) plan to match
1998 pre-tax elective deferral contributions (included under "Salary")
made by such persons to such plan. Also includes $7,730 paid by the
Company as a premium for life insurance for Mr. Cartun.
(D) Mr. Keating joined the Company in October 1997.
(E) These options were canceled in August 1998.
(F) Mr. Goldman joined the Company in May 1997.
(G) Mr. McLaughlin became an employee of the Company in March 1997. In addition
to the amounts included in the table, in 1997 Mr. McLaughlin received an
aggregate of $99,200 for consulting services rendered to Vestcom during
1997 and 1996. Also in 1997, Vestcom paid a partnership in which Mr.
McLaughlin held a 50% interest $75,000 for consulting services.
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.
Rogus has entered into an employment agreement with VMA. Mr. Cartun's and Mr.
Rogus' employment agreements commenced on August 4, 1997 upon the consummation
of the Company's IPO and the acquisitions of the Founding Companies. Mr.
McLaughlin's agreement commenced on March 1, 1997 and Mr. Keating's agreement
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 Rogus terminates in August 2000.
7
<PAGE>
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. Effective June 1, 1998, Mr. Goldman's salary was increased to
$190,000.
Pursuant to their respective agreements, Mr. Cartun will serve as
President (now Chairman) and Chief Executive Officer 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 (which salary was
increased to $150,000 effective March 1, 1998), Mr. Keating will serve as
Executive Vice President (now 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. Rogus will serve as
an Executive Officer of VMA at an annual base salary of $150,000. Each of
Messrs. Cartun, McLaughlin, Keating, Goldman and Rogus are 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 executive is also entitled to a
car allowance of $850 per month.
Each of the term 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. McLaughlin and Rogus 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.
The employment agreements for Messrs. Cartun, McLaughlin and Rogus 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.
In January 1999, each of Messrs. Cartun, Keating and Goldman entered into
Change in Control Agreements with the Company, which superseded any change in
control provisions contained in their respective employment agreements.
Pursuant to the Change in Control Agreements, upon the occurrence of a "Trigger
Event", each of Messrs. Cartun, Keating and Goldman would be entitled to
receive a lump sum payment equal to two times the sum of his annualized base
salary immediately prior to the "Change in Control" and the annual bonus the
executive received during the full fiscal year immediately prior to the Change
in Control. In addition, upon a Change in Control, all stock options would
immediately become vested.
Pursuant to the Change in Control Agreements, a "Change in Control" will
be deemed to have occurred if (a) any person acquires 40% or more of the total
voting power of the Company's then outstanding securities, (b) in general, over
50% of the composition of the Board of Directors changes without the approval
of the existing directors, (c) there is a merger or reorganization of the
Company after which less than 75% of the voting power of the surviving entity
is owned by holders of the Company's securities prior to the transaction, or
(d) the stockholders of the Company approve a plan of complete liquidation.
A "Trigger Event" means either (i) termination of the executive's
employment at any time from the effective date of a Change in Control until 12
months after the Change in Control (other than for cause and other than a
termination by the executive for Good Reason (as defined)), or (ii) a failure,
upon a Change in Control, of the Company or a successor to continue the
executive's employment for at least 12 months with a salary and
8
<PAGE>
bonus at least equal to what the executive received immediately prior to the
Change in Control, or (iii) a failure, upon a Change in Control, for the
executive's employer to be a public company, or (iv) the executive's
termination of employment after failure of the Company or any successor to
acknowledge upon request the obligations set forth in the executive's
employment agreement and Change in Control Agreement.
Stock Options
The following table contains information regarding the grant of stock
options to the Named Officers during the year ended December 31, 1998. 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
Total Options at Assumed Annual Rates
Number of Common Granted to Exercise of Stock Price
Shares Underlying Employees in Price Per Expiration Appreciation for
Name Options Granted Fiscal 1998 Share ($/sh.) Date Option Term
- ----------------------------- ------------------- --------------- --------------- ------------ -----------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun ................. -- -- $ -- -- $ -- --
Brendan Keating ............. 35,000 13.8 10.125 3/15/08 222,775 564,725
Brendan Keating ............. 60,000 23.7 8.25 8/11/08 311,400 789,000
Harvey Goldman .............. 25,000 9.9 9.375 6/3/08 147,375 373,625
Peter J. McLaughlin ......... -- -- -- -- -- --
Robert Rogus ................ -- -- -- -- -- --
</TABLE>
- ------------
(A) The options granted to Messrs. Keating and Goldman 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). Options to purchase 100,000 shares of Common Stock
granted to Mr. Keating in 1997 were canceled in 1998.
During 1998, the Company canceled options previously granted to Mr.
Keating and granted new options to him. The following table provides certain
information with respect to these "repricings". No other repricings occurred
since the IPO. See "Compensation Committee Report on Executive Compensation".
Ten Year Option/SAR Repricings (A)
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Remaining
Options Time of Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended(#) Amendment($) Amendment($) Price($) Amendment
- ------------------------- ---------- ------------- -------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brendan Keating ......... 08/12/98 100,000 $ 8.25 $ 21.625 $ 8.25 9 years
President and Chief
Operating Officer
</TABLE>
- ------------
(A) On August 12, 1998, options covering 100,000 shares of Common Stock granted
to Mr. Keating in 1997 at an exercise price of $21.625 were canceled. Also
on August 12, 1998, Mr. Keating was granted options to purchase 60,000
shares at an exercise price of $8.25 per share, the then current market
price. On March 16, 1998, Mr. Keating was granted options covering 35,000
shares at an exercise price of $10.125 per share.
9
<PAGE>
No stock options were exercised by the Named Officers during the year
ended December 31, 1998. 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,
1998. Also reported are the values for "in-the-money" options, which represent
the positive spread between the exercise prices of existing options and $9.00,
the closing sale price of the Company's Common Stock on December 31, 1998. On
April 20, 1999, the closing sale price of the Company's Common Stock on the
Nasdaq National Market was $4.875.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Shares
Number of Underlying Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
on Exercise(#) Realized ($) Year-End (#) Year-End ($)
----------------- -------------- ------------------------------ -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun ................. -- $ -- -- -- $ -- $ --
Brendan Keating ............. -- -- 8,750 86,250 -- 45,000
Harvey Goldman .............. -- -- 12,500 62,500 -- --
Peter J. McLaughlin ......... -- -- -- -- -- --
Robert Rogus ................ -- -- 1,000 3,000 -- --
</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 entitled to reimbursement 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 11 meetings during 1998. 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 four times during 1998. 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, which met once during 1998. The Committee has
not established any formal 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 nine meetings
during 1998.
During the year ended December 31, 1998, 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, 1998, 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.
Certain Transactions
Joel Cartun, Vestcom's Chairman of the Board, has a 50% interest in the
partnership which owns the property used by Vestcom and VMA in Lyndhurst, New
Jersey. The partnership leases the property to VMA, pursuant to a lease which
expires in 2001. VMA's related party rent expense for this property for 1998
was $397,000.
10
<PAGE>
Gary Marcello, a greater than 5% shareholder of Vestcom, owns interests
ranging from 75% to 100% in the partnerships which own the properties leased by
VMA in Dover, New Jersey and previously leased in Scranton, Pennsylvania. The
current leases expire at various times through 2004. VMA's related party rent
expenses for these properties for 1998 was $605,000. Pursuant to a written
agreement with the owners, the lease obligations will cease in August 1999 if
certain conditions are met.
During 1998, pursuant to an agreement entered into in May 1997, Vestcom
paid CIBC Oppenheimer an aggregate of $1.8 million for advisory services.
Richard D. White, a director of Vestcom, is Managing Director of CIBC Capital
Partners, an affiliate of CIBC Oppenheimer. In addition, during 1998, Vestcom
paid CIBC Oppenheimer an advisory fee of $300,000 in connection with certain
acquisitions.
Company Policy
Future transactions with affiliates of the Company are anticipated to be
minimal, are generally 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.
Board Report on Executive Compensation
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to rules adopted by the SEC designed to enhance disclosure of
corporate policies regarding executive compensation, the following is a report
of the Compensation Committee of the Board of Directors regarding compensation
policies as they affect Mr. Cartun and the other Named Officers.
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 program. 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 insurance benefits and eligibility for annual bonuses based upon
performance of the specific individual and the Company. The long-term benefit
element is reflected in the grants of stock options.
All of the Named Officers are subject to employment agreements which fix
the salaries and benefits to be granted to them. In addition, Joel Cartun,
Harvey Goldman and Brendan Keating entered into change in control agreements in
early 1999. The Compensation Committee thought it was important for the Company
to enter into these agreements in order to provide security to these officers
in the event of a change in control (as defined in the agreements), to promote
their continued affiliation with the Company and to protect both the Company
and the shareholders by assuring continuity during a transition period related
to any change in control. The 1999 change in control agreements also reflect a
uniform approach in how the Company deals with change in control compensation,
replacing the disparate measures of benefits that these executives previously
would have been entitled to receive.
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. In recognition of the extraordinary efforts of
Brendan Keating in his position as Chief Operating Officer of the Company, in
1998 the Compensation Committee replaced stock options which were previously
granted to him, but which were no longer "in the money," and also granted
additional stock options to him. The Compensation Committee acknowledged that
the options previously granted to Mr. Keating at an exercise price which was
significantly "out of the money" did not provide an adequate incentive or
reward for Mr. Keating. Stock option grants were also made to Harvey Goldman in
1998 to reward his individual performance and contributions to the Company.
Mr. Cartun has not received stock option grants to date and his salary was
not increased during 1998 in recognition of the cash and Common Stock he
received upon Vestcom's acquisition of VMA in August 1997.
11
<PAGE>
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
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, 1998. 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.
COMPARISON OF TOTAL RETURN SINCE JULY 30, 1997
AMONG VESTCOM INTERNATIONAL, INC. COMMON STOCK,
NASDAQ MARKET INDEX AND PEER GROUP
<TABLE>
<CAPTION>
7/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Vestcom International, Inc. 100.00 117.69 137.69 64.23 56.92 56.92 55.38
Peer Group 100.00 89.93 96.98 120.13 62.55 38.40 45.91
Nasdaq Market Index 100.00 105.60 98.95 115.97 118.96 107.22 139.38
</TABLE>
Assumes $100 invested in July 30, 1997
Assumes dividend reinvested
Fiscal Year Ending Dec. 31, 1998
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
DESCRIBED ABOVE.
12
<PAGE>
PROPOSAL TWO
AMENDMENT TO 1997 EQUITY COMPENSATION
PROGRAM TO INCREASE
AUTHORIZED SHARES
In March 1997, the Board of Directors and stockholders of the Company
approved the Company's 1997 Equity Compensation Program (the "Plan"). The
purpose of the Plan is to attract and retain qualified directors, officers,
employees and consultants of the Company, to facilitate performance-based
compensation for key employees and to provide incentives for the participants
in the Plan to enhance the value of the Common Stock. Directors, officers and
other key employees of the Company and its subsidiaries are eligible to
participate in the Plan. Awards may also be granted to consultants providing
valuable services to the Company. The Plan authorizes the granting of incentive
stock options, supplemental stock options, stock appreciation rights,
performance shares and stock bonus awards.
Under the current terms of the Plan, the maximum number of shares of
Common Stock that may be subject to outstanding options and awards under the
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 then outstanding, provided, however, that options to
purchase no more than 700,000 shares of Common Stock may be granted as
incentive stock options.
On February 24, 1999, the Company's Board of Directors approved an
increase in the number of shares of Common Stock that may be subject to
outstanding options and awards under the Plan to the greater of 1,318,000 or
15% of the aggregate number of shares of the Company's Common Stock then
outstanding. In addition, the Board increased the maximum number of shares of
Common Stock that may be granted as incentive stock options under the Plan to
1,318,000.
At December 31, 1998, absent such amendment to the Plan, there were
367,409 shares available for the grant of new options under the Plan. The Board
approved the increase in the number of shares covered by the Plan because the
Board believes that a stock option program is an important factor in
attracting, retaining and motivating key employees and others who will dedicate
their maximum productive efforts toward the advancement of the Company. The
Board believes that the amendment increasing the number of authorized shares
under the Plan furthers these objectives by assuring continuing availability of
stock options and awards in appropriate circumstances.
The principal aspects of the Plan are summarized below:
Administration
The Plan is administered by the Compensation Committee (the "Committee")
of the Board of Directors. The current members of the Committee are Stephen R.
Bova and Fred S. Lafer. The Committee has the power to grant stock options and
awards under the Plan and is charged with general supervision of the Plan.
Eligibility
All employees, consultants and non-employee directors of the Company or
its subsidiaries (approximately 1,000 persons as of December 31, 1998) are
eligible to receive options and awards under the Plan. As discretion for the
grant of options and awards is vested in the Committee, the Company is unable,
at the present time, to determine the identity or number of officers,
directors, consultants and other employees who may be granted options or awards
under the Plan in the future.
Types of Options
The Committee may designate any option granted as either an incentive
stock option or a supplemental stock option, or the Committee may designate a
portion of the option as an incentive stock option and the remaining portion as
a supplemental stock option. Any portion of an option that is not designated as
an incentive stock option will be a supplemental stock option.
13
<PAGE>
The Plan also provides for automatic option grants to directors who are
not otherwise employed by the Company 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.
Types of Awards
Under the Plan, the Committee may grant stock appreciation rights and/or
performance shares and bonus shares of Common Stock. As of April 1, 1999, the
Company has not made any such grants.
Exercise Period
Subject to modification by the Committee, options granted to employees are
generally exercisable in 25% installments beginning one year after the date of
grant and continuing for each of the four years thereafter. Options granted
after October 1998 generally will be exercisable in 20% installments beginning
one year after the date of grant and continuing for each of the five years
thereafter. Options granted to non-employee directors become fully exercisable
one year after the date of grant.
Unless previously terminated by the Board of Directors, the Plan will
terminate on March 1, 2007. Such termination will have no impact upon options
granted prior to the termination date. The maximum term of all options granted
under the Plan is 10 years, provided, however, that any incentive stock option
granted to a person who is the beneficial owner of more than 10% of the
Company's capital stock shall cease to be exercisable five years after the date
such option is granted.
Exercise Price
Options and awards granted under the Plan will have an exercise or payment
price as established by the Committee, 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. If incentive stock options are granted
to a person who is the beneficial owner of more than 10% of the Company's
capital stock, such options may be granted only at a price of not less than
110% of the fair market value of shares covered by the option. If on the date
of grant the Common Stock is listed on a stock exchange or is quoted on the
automated quotation system of Nasdaq, the fair market value shall be the
closing sale price (or if such price is unavailable, the average of the high
bid price and the low asked price) on such date. If no such prices are
available, the fair market value shall be determined in good faith by the Board
of Directors in accordance with generally accepted valuation principles and
such other factors as the Board of Directors deems relevant. On April 20, 1999,
the closing sale price of a share of the Company's Common Stock on the Nasdaq
National Market System was $4.875.
Payment
Upon exercise or payment of an option or award, the participant will be
required to provide the payment price in full by certified or bank cashier's
check or in shares of Common Stock valued at fair market value on the date of
exercise. The Committee may, in its sole discretion, permit an optionee to make
"cashless exercise" arrangements. In connection with any exercise of options or
awards, the Company will have the right to collect or withhold from any
payments under the Plan all taxes required to be withheld under applicable law.
Transferability
Options and awards granted under the 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 and after the participant's death only by the participant's
executor, administrator or personal representative.
14
<PAGE>
Termination of Employment
If a participant ceases to be employed by or provide consulting services
to the Company or any subsidiary for cause, then all options shall terminate
immediately. In all other termination circumstances (except death or
disability), options may be exercised, to the extent exercisable on the date of
termination, until 30 days after the date of termination. If a participant dies
or becomes disabled while employed by or while rendering consulting services to
the Company or any subsidiary, then all options may be exercised, to the extent
exercisable on the date of death or termination, at any time within 1 year
after the date of death or termination.
Amendment and Termination
The 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 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.
Shares Subject to the Plan
Excluding the impact of the proposed amendment to the Plan, a total of
700,000 or 10% of the then outstanding shares (which ever is greater) of Common
Stock (subject to adjustment as described below) may be issued under the Plan.
As of December 31, 1998, no shares of Common Stock had been issued upon the
exercise of stock options under the Plan, options covering 511,450 shares (net
of lapsed and canceled shares) of Common Stock had been granted and were
outstanding, leaving 367,409 shares of Common Stock available (excluding the
effect of the amendment described herein) for future grants under the Plan.
Adjustments
The number of shares available for option grants and the shares covered by
options shall be adjusted equitably for stock splits, stock dividends,
recapitalizations, mergers and other changes in the Company's capital stock.
Comparable changes shall be made to the exercise price of outstanding options.
If any option should terminate for any reason without having been exercised in
full, the unpurchased shares will again become available for option grants.
Change In Control
The 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 Plan). In addition, the Committee may accelerate the
vesting of any other option or award upon the occurrence of a change in control
event.
Additional Limitation
No participant may receive incentive stock options that first become
exercisable in any calendar year in an amount exceeding $100,000.
Federal Income Tax Consequences
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE
APPLICATION OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX
CONSEQUENCES IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX
MATTERS. PARTICIPANTS ARE ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS BEFORE
EXERCISING AN OPTION OR DISPOSING OF ANY STOCK RECEIVED PURSUANT TO THE
EXERCISE OF ANY SUCH OPTION. IN ADDITION, THE FOLLOWING SUMMARY IS BASED
15
<PAGE>
UPON AN ANALYSIS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AS CURRENTLY
IN EFFECT, EXISTING LAWS, JUDICIAL DECISIONS, ADMINISTRATIVE RULINGS,
REGULATIONS AND PROPOSED REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE.
The Internal Revenue Code of 1986, as amended (the "Code"), treats
incentive stock options and supplemental stock options differently. However, as
to both, no income will be recognized to the optionee at the time of the grant
of an option, nor will the Company be entitled to a tax deduction at that time.
Upon the exercise of a supplemental stock option, the optionee will be
subject to ordinary income tax on the excess of the fair market value of the
stock on the exercise date over the exercise price. The Company will be
entitled to a tax deduction in an amount equal to the ordinary income
recognized by the optionee. If shares acquired upon such exercise are held for
more than one year before disposition, any gain on disposition of such shares
will be treated as long-term capital gain.
For incentive stock options, there is no tax to an optionee at the time of
exercise. However, the excess of the fair market value of the stock on the date
of exercise over the exercise price will be taken into account in determining
whether the "alternative minimum tax" will apply for the year of exercise. If
the shares acquired upon the exercise are held at least two years from the date
of grant and one year from the date of exercise, any gain or loss upon the sale
of such shares, if held as capital assets, will be long-term capital gain or
loss (measured by the difference between the sales price of the stock and the
exercise price). Under current law, a capital gain will be taxed at a rate
which may be less than the maximum rate of tax on ordinary income. If the
two-year and one-year holding period requirements are not met (a "disqualifying
disposition"), an optionee will recognize ordinary income in the year of
disposition in an amount equal to the lesser of (i) the fair market value of
the stock on the date of exercise minus the exercise price or (ii) the amount
realized on disposition minus the exercise price. The remainder of the gain
will be treated as long-term or short-term capital gain, depending upon whether
the stock has been held for more than twelve months. If an optionee makes a
disqualifying disposition, the Company will be entitled to a tax deduction
equal to the amount of ordinary income recognized by the optionee.
In general, if an optionee in exercising an option tenders shares of
Common Stock in partial or full payment of the option price, no gain or loss
will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an incentive stock option and the
tender is within two years from the date of grant or one year after the date of
exercise of the other option, the tender will be a disqualifying disposition of
the tendered shares.
As noted above, the exercise of an incentive stock option could subject
the optionee to the alternative minimum tax. The application of the alternative
minimum tax to any particular optionee depends upon the particular facts and
circumstances which exist with respect to the optionee in the year of exercise.
However, as a general rule, the amount by which the fair market value of the
Common Stock on the date of exercise of an option exceeds the exercise price of
the option will constitute an item of "adjustment" for purposes of determining
the alternative minimum tax that may be imposed. As such, this item will enter
into the tax base on which the alternative minimum tax is computed, and may
therefore cause the alternative minimum tax to become applicable in a given
year.
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required to approve the amendment to the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
COMPANY'S 1997 EQUITY COMPENSATION PROGRAM.
16
<PAGE>
Relationship With Independent Public Accountants
Arthur Andersen LLP has been selected as the Company's independent
accountants for 1999. Arthur Andersen LLP has served as the Company's
independent accountants since Vestcom's incorporation in September 1996.
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.
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 approval of the amendment to the Company's 1997 Equity Compensation
Program 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 27, 1999 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, and by March 12, 2000 in order for the proposal to be considered at
next year's Annual Meeting (but not included in the Proxy Statement for such
meeting).
By
Order of the Board of Directors
/s/ Sheryl Bernstein Cilenti
----------------------------
Sheryl Bernstein Cilenti, Secretary
Dated: April 27, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31,
1998, 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.
17
<PAGE>
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<PAGE>
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<PAGE>
VESTCOM INTERNATIONAL, INC.
1997 EQUITY COMPENSATION PROGRAM
(As Amended on February 24, 1999, Subject to Shareholder Approval)
1. Purposes. This Vestcom International, Inc. 1997 Equity Compensation
Program (the "Program") is intended to secure for Vestcom International, Inc.
(the "Corporation" or the "Company"), its direct and indirect present and
future subsidiaries, including without limitation any entity which the Company
reasonably expects to become a subsidiary (the "Subsidiaries") and its
stockholders, the benefits arising from ownership of the Corporation's Class A
Voting Common Stock, no par value ("Common Stock"), by those selected
directors, officers, key employees and consultants of the Corporation and the
Subsidiaries who are most responsible for future growth. The Program is
designed to help attract and retain superior individuals for positions of
substantial responsibility with the Corporation and the Subsidiaries and to
provide these persons with an additional incentive to contribute to the success
of the Corporation and the Subsidiaries.
2. Elements of the Program. In order to maintain flexibility in the award
of benefits, the Program is comprised of six parts -- the Incentive Stock
Option Plan ("Incentive Plan"), the Supplemental Stock Option Plan
("Supplemental Plan"), the Stock Appreciation Rights Plan ("SAR Plan"), the
Performance Share Plan ("Performance Share Plan"), the Stock Bonus Plan ("Stock
Bonus Plan") and the Independent Director Plan (the "Independent Director
Plan"). Copies of the Incentive Plan, Supplemental Plan, SAR Plan, Performance
Share Plan, Stock Bonus Plan and Independent Director Plan are attached hereto
as Parts I, II, III, IV, V and VI, respectively, and are collectively referred
to herein as the "Plans." The grant of an option, stock appreciation right,
performance share or stock bonus under one of the Plans shall not be construed
to prohibit the grant of an option, stock appreciation right, performance share
or stock bonus under any of the other Plans.
3. Applicability of General Provisions. Unless any Plan specifically
indicates to the contrary, all Plans shall be subject to the General Provisions
of the Program set forth below under the heading "General Provisions of Equity
Compensation Program."
GENERAL PROVISIONS OF EQUITY COMPENSATION PROGRAM
Article 1. Administration. The Program shall be administered by the Board
of Directors of the Corporation (the "Board" or the "Board of Directors") or
any duly created committee appointed by the Board and charged with the
administration of the Program. The Board, or any duly appointed committee, when
acting to administer the Program, is referred to as the "Program
Administrator". Any action of the Program Administrator shall be taken by
majority vote at a meeting or by unanimous written consent of all members
without a meeting. No Program Administrator or member of the Board of the
Corporation shall be liable for any action or determination made in good faith
with respect to the Program or with respect to any option, stock appreciation
right, performance share or stock bonus granted thereunder. Notwithstanding any
other provision of the Program, administration of the Vestcom International,
Inc. Independent Director Plan, set forth as Part VI of this Program, shall be
self-executing in accordance with the terms of the Independent Director Plan,
and no Program Administrator shall exercise any discretionary functions with
respect to option grants made under such Independent Director Plan.
Article 2. Authority of Program Administrator. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrator shall have the authority: (a) to construe and interpret
the Program; (b) to define the terms used herein; (c) to prescribe, amend and
rescind rules and regulations relating to the Program; (d) to determine the
persons to whom options, stock appreciation rights, performance shares and
stock bonuses shall be granted under the Program; (e) to determine the time or
times at which options, stock appreciation rights, performance shares or stock
bonuses shall be granted under the Program; (f) to determine the number of
shares subject to any discretionary option or stock appreciation right under
the Program and the number of shares to be awarded as performance shares or
stock bonuses under the Program as well as the option price, and the duration
of each option, stock appreciation right, performance share and stock bonus,
and any other terms and conditions of options, stock appreciation rights,
performance shares and stock bonuses; and (g) to make any other determinations
necessary or advisable for the administration of the Program and to do
everything necessary or appropriate to administer the Program. All decisions,
determinations and interpretations made by the Program Administrator shall be
binding and conclusive on all participants in the Program and on their legal
representatives, heirs and beneficiaries.
<PAGE>
Article 3. Maximum Number of Shares Subject to the Program. The maximum
aggregate number of shares of Common Stock that may be subject to outstanding
stock options, stock appreciation rights, performance shares and stock bonuses,
determined immediately after the grant of any stock option, stock appreciation
right, performance share or stock bonus, shall not exceed the greater of
1,318,000 shares or 15% of the total number of shares of Common Stock
outstanding. Notwithstanding the foregoing, the number of shares that may be
delivered upon exercise of incentive stock options shall not exceed 1,318,000.
No one person participating in the Program may receive options, separately
exercisable stock appreciation rights or other awards for more than 100,000
shares of Common Stock per calendar year. All such shares may be issued under
any Plan which is part of the Program. If any of the options (including
incentive stock options) or stock appreciation rights granted under the Program
expire or terminate for any reason before they have been exercised in full, the
unissued shares subject to those expired or terminated options and/or stock
appreciation rights shall again be available for the purposes of the Program.
If the performance objectives associated with the grant of any performance
shares are not achieved within the specified performance objective period or if
the performance share grant terminates for any reason before the performance
objective date arrives, the shares of Common Stock associated with such
performance shares shall again be available for the purposes of the Program. If
any stock provided to a recipient as a stock bonus is forfeited, the shares of
Common Stock so forfeited shall again be available for purposes of the Program.
Any shares of Common Stock delivered pursuant to the Program may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
Article 4. Eligibility and Participation. All employees of the Corporation
and the Subsidiaries, including officers, whether or not directors of the
Corporation or the Subsidiaries, all consultants of the Corporation and the
Subsidiaries, whether or not directors of the Corporation or the Subsidiaries,
and all non-employee directors of the Corporation shall be eligible to
participate in the Program. The term "employee" shall include any person who
has agreed to become an employee and the term "consultant" shall include any
person who has agreed to become a consultant.
Article 5. Effective Date and Term of Program. The Program shall become
effective immediately upon approval of the Board of Directors and shareholders
of the Corporation. The Program shall continue in effect for a term of ten
years from the earlier of the date the Program is adopted by the Board of
Directors or the date it is approved by the shareholders, unless sooner
terminated by the Board of Directors of the Corporation.
Article 6. Adjustments. Subject to the provisions of Articles 18 and 19
and the terms of the Independent Director Plan, in the event that the
outstanding shares of Common Stock of the Corporation are hereafter increased,
decreased, changed into or exchanged for a different number or kind of shares
or securities through merger, consolidation, combination, exchange of shares,
other reorganization, recapitalization, reclassification, stock dividend, stock
split or reverse stock split (an "Adjustment Event"), an appropriate and
proportionate adjustment shall be made by the Program Administrator in the
maximum number and kind of shares as to which options, stock appreciation
rights and performance shares may be granted under the Program. A corresponding
adjustment changing the number or kind of shares allocated to unexercised
options, stock appreciation rights, performance shares and stock bonuses or
portions thereof, which shall have been granted prior to any such Adjustment
Event, shall likewise be made. Any such adjustment in outstanding options and
stock appreciation rights shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the option or stock
appreciation right but with a corresponding adjustment in the price for each
share or other unit of any security covered by the option or stock appreciation
right. In making any adjustment pursuant to this Article 6, any fractional
shares shall be disregarded. Notwithstanding the foregoing, no adjustment shall
be made in the number of shares subject to options to be granted after an
Adjustment Event to an Independent Director (as defined in the Independent
Director Plan) upon such person's becoming an Independent Director and on each
subsequent Anniversary Date (as defined in the Independent Director Plan); it
being the intent of the Independent Director Plan that the 10,000 share initial
option grant and the 5,000 share subsequent option grants remain fixed
notwithstanding subsequent Adjustment Events.
Article 7. Termination and Amendment of Program and Awards. No options,
stock appreciation rights, performance shares or stock bonuses shall be granted
under the Program after the termination of the Program. The Program
Administrator may at any time amend or revise the terms of the Program or of
any outstanding option, stock appreciation right, performance share or stock
bonus issued under the Program, provided, however,
<PAGE>
that any shareholder approval necessary or desirable in order to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or with
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
other applicable law or regulation shall be obtained. No amendment, suspension
or termination of the Program or of any outstanding option, stock appreciation
right, performance share or stock bonus shall, without the consent of the
person who has received an option, stock appreciation right, performance share
or stock bonus, impair any of that person's rights or obligations under any
option, stock appreciation right, performance share or stock bonus granted
under the Program prior to such amendment, suspension or termination without
that person's written consent.
Article 8. Privileges of Stock Ownership. Notwithstanding the exercise of
any option granted pursuant to the terms of the Program or the achievement of
any performance objective specified in any performance share granted pursuant
to the terms of the Program, no person shall have any of the rights or
privileges of a stockholder of the Corporation in respect of any shares of
stock issuable upon the exercise of his or her option or achievement of his or
her performance objective until certificates representing the shares have been
issued and delivered. No adjustment shall be made for dividends or any other
distributions for which the record date is prior to the date on which any stock
certificate is issued pursuant to the Program.
Article 9. Reservation of Shares of Common Stock. The Corporation, during
the term of the Program, will at all times reserve and keep available such
number of shares of its Common Stock as shall be sufficient to satisfy the
requirements of the Program.
Article 10. Tax Withholding. The exercise of any option, stock
appreciation right or performance share and the grant of any stock bonus under
the Program are subject to the condition that, if at any time the Corporation
shall determine, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities under any state or federal law is necessary or
desirable as a condition of, or in any connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then, in such event, the
exercise of the option, stock appreciation right or performance share or the
grant of such stock bonus or the elimination of the risk of forfeiture relating
thereto shall not be effective unless such withholding tax or other withholding
liabilities shall have been satisfied in a manner acceptable to the
Corporation.
Article 11. Employment; Service as a Consultant or Director. Nothing in
the Program gives to any person any right to continued employment by the
Corporation or the Subsidiaries or to continued service as a consultant to or
director of the Corporation or limits in any way the right of the Corporation,
the Subsidiaries or the Corporation's shareholders at any time to terminate or
alter the terms of that employment or service.
Article 12. Investment Letter; Restrictions on Obligation of the
Corporation to Issue Securities; Restrictive Legend. Any person acquiring
Common Stock or other securities of the Corporation pursuant to the Program, as
a condition precedent to receiving the shares of Common Stock or other
securities, may be required by the Program Administrator to submit a letter to
the Corporation stating that the shares of Common Stock or other securities are
being acquired for investment and not with a view to the distribution thereof.
The Corporation shall not be obligated to sell or issue any shares of Common
Stock or other securities pursuant to the Program unless, on the date of sale
and issuance thereof, the shares of Common Stock or other securities are either
registered under the Securities Act of 1933, as amended, and all applicable
state securities laws, or exempt from registration thereunder. All shares of
Common Stock and other securities issued pursuant to the Program shall bear a
restrictive legend summarizing any restrictions on transferability applicable
thereto including those imposed by federal and state securities laws.
Article 13. Covenant Against Competition. The Program Administrator shall
have the right to condition the award to an employee of the Corporation or the
Subsidiaries of any option, stock appreciation right, performance share or
stock bonus under the Program upon the recipient's execution and delivery to
the Corporation of an agreement not to compete with the Corporation during the
recipient's employment and for such period thereafter as shall be determined by
the Program Administrator. Such covenant against competition shall be in a form
satisfactory to the Program Administrator.
Article 14. Rights Upon Termination of Employment, Service as a Consultant
or Service as a Director. The terms of the Independent Director Plan shall
govern the rights of any holder of a stock option granted pursuant to such
Independent Director Plan in the event of termination of service as a director
for any reason.
<PAGE>
Notwithstanding any other provision of the Program, any option granted to an
individual who has agreed to become an employee or a consultant or to an
employee of any entity which the Company reasonably expects to become a
Subsidiary, shall immediately terminate if the Program Administrator
determines, in its sole discretion, that such person or entity, as the case may
be, will not become an employee, consultant or Subsidiary. If a recipient
ceases to be employed by or to provide consulting services or services as a
director to the Corporation or any Subsidiary, or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 424(a) of the Code applies, for any reason other
than death or disability, then, unless any other provision of the Program
provides for earlier termination:
(a) all options or stock appreciation rights (other than Naked Rights)
shall terminate immediately in the event the recipient's employment or
consulting services are terminated for cause and in all other circumstances
may be exercised, to the extent exercisable on the date of termination,
until 30 days after the date of termination; provided, however, that the
Program Administrator may, in its discretion, allow such options or stock
appreciation rights (other than Naked Rights) to be exercised (to the
extent exercisable on the date of termination) at any time within three
months after the date of termination;
(b) subject to Section 5(b) of the SAR Plan, all Naked Rights not
payable on the date of termination shall terminate immediately;
(c) all performance share awards shall terminate immediately unless the
performance objectives have been achieved and the performance objective
period has expired; and
(d) all stock bonuses which are subject to forfeiture shall be forfeited
as of the date of termination.
Article 15. Rights Upon Disability. If a recipient becomes disabled within
the meaning of Section 22(e)(3) of the Code while employed by or while
rendering consulting services or services as a director to the Corporation or
any Subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which Section 424(a) of
the Code applies), then, unless any other provision of the Program provides for
earlier termination:
(a) all options or stock appreciation rights (other than Naked Rights)
may be exercised, to the extent exercisable on the date of termination, at
any time within one year after the date of termination due to disability;
(b) all Naked Rights shall be fully paid by the Corporation as of the
date of disability;
(c) all performance share awards for which all performance objectives
have been achieved (other than continued employment or status as a
consultant on the Vesting Date) shall be paid in full by the Corporation;
all other performance shares shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be forfeited
as of the date of disability.
Article 16. Rights Upon Death of Optionee. If a recipient dies while
employed by or while rendering consulting services or services as a director to
the Corporation or any Subsidiary (or a corporation or a parent or subsidiary
of such corporation issuing or assuming a stock option in a transaction to
which Section 424(a) of the Code applies), then, unless any other provision of
the Program provides for earlier termination:
(a) all options or stock appreciation rights (other than Naked Rights)
may be exercised by the person or persons to whom the recipient's rights
shall pass by will or by the laws of descent and distribution, to the
extent exercisable on the date of death, at any time within one year after
the date of death unless any other provision of the Program provides for
earlier termination;
(b) all Naked Rights shall be fully paid by the Corporation as of the
date of death;
(c) all performance share awards for which all performance objectives
have been achieved (other than continued employment or status as a
consultant on the Vesting Date) shall be paid in full by the Corporation;
all other performance share awards shall terminate immediately; and
(d) all stock bonuses which are subject to forfeiture shall be forfeited
as of the date of death.
<PAGE>
Article 17. Non-Transferability. Options and stock appreciation rights
granted under the Program may not be sold, pledged, assigned or transferred in
any manner by the recipient otherwise than by will or by the laws of descent
and distribution and shall be exercisable (a) during the recipient's lifetime
only by the recipient and (b) after the recipient's death only by the
recipient's executor, administrator or personal representative, provided,
however that the Program Administrator may permit the recipient of a
non-incentive stock option to transfer the option to a family member or a trust
created for the benefit of family members. In the case of such a transfer, the
transferee's rights and obligations with respect to the option shall be
determined by reference to the recipient and the recipient's rights and
obligations with respect to the option had no transfer been made. The recipient
shall remain obligated pursuant to Articles 10 and 12 hereunder if required by
applicable law. Common Stock which represents either performance shares prior
to the satisfaction of the stated performance objectives and the expiration of
the stated performance objective periods or stock bonus shares prior to the
time that they are no longer subject to risk of forfeiture may not be sold,
pledged, assigned or transferred in any manner.
Article 18. Change in Control. All options granted pursuant to the
Independent Director Plan shall become immediately exercisable upon the
occurrence of a Change in Control Event. The Program Administrator shall have
the authority to provide, either at the time that any other option or any stock
appreciation right, performance share or stock bonus is granted or thereafter,
that such option or stock appreciation right shall become fully exercisable
upon the occurrence of a Change in Control Event or that all restrictions,
performance objectives, performance objective periods and risks of forfeiture
pertaining to a performance share or stock bonus award shall lapse upon the
occurrence of a Change in Control Event. As used in the Program, a "Change in
Control Event" shall be deemed to have occurred if:
(i) Any person, firm or corporation acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the Company
and immediately after such acquisition, the acquirer has Beneficial
Ownership of voting securities representing 50% or more of the total
voting power of all the then-outstanding voting securities of the
Company;
(ii) The individuals (A) who, as of the date of closing of the
Acquisitions described in the Company's registration statement
pertaining to its initial public offering constitute the Board (the
"Original Directors") or (B) who thereafter are elected to the Board and
whose election, or nomination for election, to the Board was approved by
a vote of at least 2/3 of the Original Directors then still in office
(such Directors being called "Additional Original Directors") or (C) who
are elected to the Board and whose election or nomination for election
to the Board was approved by a vote of at least 2/3 of the Original
Directors and Additional Original Directors then still in office, cease
for any reason to constitute a majority of the members of the Board;
(iii) The stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the Company or the
Company shall consummate any such transaction if stockholder approval is
not sought or obtained, other than any such transaction which would
result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by holders of outstanding
voting securities of the Company immediately prior to the transaction,
with the voting power of each such continuing holder relative to such
other continuing holders being not altered substantially in the
transaction; or
(iv) The stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or a substantial portion of the Company's assets
(i.e., 50% or more in value of the total assets of the Company).
Article 19. Mandatory Exercise. Upon the occurrence of or in anticipation
of a contemplated Change in Control Event, the Company may give a holder of an
option or stock appreciation right written notice requiring such person either
(a) to exercise within a period of time established by the Company after
receipt of the notice each option and stock appreciation right to the fullest
extent exercisable at the end of that period or (b) to surrender such option or
stock appreciation right or any unexercised portion thereof. Any portion of
such option or stock appreciation right which shall not have been exercised in
accordance with the provisions of the Program by the end of such period shall
automatically lapse irrevocably and the holder shall have no further rights
thereunder.
<PAGE>
Article 20. Method of Exercise. Any optionee may exercise his or her
option from time to time by giving written notice thereof to the Corporation at
its principal office together with payment in full for the shares of Common
Stock to be purchased. The date of such exercise shall be the date on which the
Corporation receives such notice. Such notice shall state the number of shares
to be purchased. The purchase price of any shares purchased upon the exercise
of any option granted pursuant to the Program shall be paid in full at the time
of exercise of the option by certified or bank cashier's check payable to the
order of the Corporation or, if permitted by the Program Administrator, by
shares of Common Stock which have been held by the optionee for at least six
months, or by a combination of checks and such shares of Common Stock. The
Program Administrator may, in its sole discretion, permit an optionee to make
"cashless exercise" arrangements, to the extent permitted by applicable law,
and may require optionees to utilize the services of a single broker selected
by the Program Administrator in connection with any cashless exercise. No
option may be exercised for a fraction of a share of Common Stock. If any
portion of the purchase price is paid in shares of Common Stock, those shares
shall be valued at their then Fair Market Value as determined by the Program
Administrator in accordance with Section 4 of the Incentive Plan.
Article 21. Ten-Year Limitations. Notwithstanding any other provision of
the Program, (a) no option may be granted pursuant to the Program more than ten
years after the date on which the Program was adopted by the Board of Directors
and (b) any option granted under the Program shall, by its terms, not be
exercisable more than ten years after the date of grant.
Article 22. Initial Public Offering. For purposes of this Program, the
term "Initial Public Offering" shall mean an initial public offering of shares
of Common Stock in a firm commitment underwriting registered with the
Securities and Exchange Commission in compliance with the provisions of the
Securities Act of 1933, as amended. All options granted hereunder prior to the
Initial Public Offering shall be conditional upon, and for all purposes
hereunder, deemed granted upon, the Initial Public Offering.
Article 23. Sunday or Holiday. In the event that the time for the
performance of any action or the giving of any notice is called for under the
Program within a period of time which ends or falls on a Sunday or legal
holiday, such period shall be deemed to end or fall on the next day following
such Sunday or legal holiday which is not a Sunday or legal holiday.
Article 24. Governing Law. The Program shall be governed by and construed
in accordance with the laws of the State of New Jersey.
<PAGE>
PLAN I
VESTCOM INTERNATIONAL, INC.
INCENTIVE STOCK OPTION PLAN
Section 1. General. This Vestcom International, Inc. Incentive Stock
Option Plan ("Incentive Plan") is Part I of the Corporation's Program. The
Corporation intends that options granted pursuant to the provisions of the
Incentive Plan will qualify and will be identified as "incentive stock options"
within the meaning of Section 422 of the Code. Unless any provision herein
indicates to the contrary, this Incentive Plan shall be subject to the General
Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
incentive stock options to any person eligible under Article 4 of the General
Provisions. The terms and conditions of options granted under the Incentive
Plan may differ from one another as the Program Administrator shall, in its
discretion, determine, as long as all options granted under the Incentive Plan
satisfy the requirements of the Incentive Plan.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Incentive Plan shall expire on the date
determined by the Program Administrator, but in no event shall any option
granted under the Incentive Plan expire later than ten years from the date on
which the option is granted. Notwithstanding the foregoing, any option granted
under the Incentive Plan to any person who owns more than 10% of the combined
voting power of all classes of stock of the Corporation or any Subsidiary shall
expire no later than five years from the date on which the option is granted.
Section 4. Purchase Price. The option price with respect to any option
granted pursuant to the Incentive Plan shall not be less than the Fair Market
Value of the shares on the date of the grant of the option; except that the
option price with respect to any option granted pursuant to the Incentive Plan
to any person who owns more than 10% of the combined voting power of all
classes of stock of the Corporation shall not be less than 110% of the Fair
Market Value of the shares on the date the option is granted. "Fair Market
Value" shall mean the fair market value of the Common Stock on the date of
grant or other relevant date. If on such date the Common Stock is listed on a
stock exchange or is quoted on the automated quotation system of NASDAQ, the
Fair Market Value shall be the closing sale price (or if such price is
unavailable, the average of the high bid price and the low asked price) on such
date. If no such closing sale price or bid and asked prices are available, the
Fair Market Value shall be determined in good faith by the Program
Administrator in accordance with generally accepted valuation principles and
such other factors as the Program Administrator reasonably deems relevant.
Section 5. Maximum Amount of Options in Any Calendar Year. The aggregate
fair market value (determined as of the time the option is granted) of the
Common Stock with respect to which incentive stock options are exercisable for
the first time by any employee during any calendar year (under the terms of the
Incentive Plan and all incentive stock option plans of the Corporation and the
Subsidiaries) shall not exceed $100,000.
Section 6. Exercise of Options. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Article 18 of the General
Provisions of the Program or otherwise by the Program Administrator with
respect to any one or more previously granted options, options may only be
exercised to the following extent during the following periods of employment:
Maximum Percentage of
Shares Covered by
Option Which May be
During Purchased
- --------------------------------------- ----------------------
First 12 months after grant 0
First 24 months after grant 25%
First 36 months after grant 50%
First 48 months after grant 75%
Beyond 48 months after grant 100%
<PAGE>
PLAN II
VESTCOM INTERNATIONAL, INC.
SUPPLEMENTAL STOCK OPTION PLAN
Section 1. General. This Vestcom International, Inc. Supplemental Stock
Option Plan ("Supplemental Plan") is Part II of the Corporation's Program. Any
option granted pursuant to this Supplemental Plan shall not be an incentive
stock option as defined in Section 422 of the Code. Unless any provision herein
indicates to the contrary, this Supplemental Plan shall be subject to the
General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
supplemental stock options to any person eligible under Article 4 of the
General Provisions. The terms and conditions of options granted under this
Supplemental Plan may differ from one another as the Program Administrator
shall, in its discretion, determine as long as all options granted under this
Supplemental Plan satisfy the requirements of this Supplemental Plan.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of this Supplemental Plan shall expire on the
date determined by the Program Administrator, but in no event shall any option
granted under this Supplemental Plan expire later than ten years from the date
on which the option is granted.
Section 4. Purchase Price. The option price with respect to any option
granted pursuant to this Supplemental Plan shall be determined by the Program
Administrator at the time of grant.
Section 5. Exercise of Options. Unless otherwise provided by the Program
Administrator at the time of grant or unless the installment provisions set
forth herein are subsequently accelerated pursuant to Article 18 of the General
Provisions of the Program or otherwise by the Program Administrator with
respect to any one or more previously granted options, options may only be
exercised to the following extent during the following periods:
Maximum Percentage of
Shares Covered by
Option Which May be
During Purchased
- --------------------------------------- ----------------------
First 12 months after grant 0
First 24 months after grant 25%
First 36 months after grant 50%
First 48 months after grant 75%
Beyond 48 months after grant 100%
<PAGE>
PLAN III
VESTCOM INTERNATIONAL, INC.
STOCK APPRECIATION RIGHTS PLAN
Section 1. General. This Vestcom International, Inc. Stock Appreciation
Rights Plan ("SAR Plan") is Part III of the Corporation's Program.
Section 2. Terms and Conditions. The Program Administrator may grant stock
appreciation rights to any person eligible under Article 4 of the General
Provisions. Stock appreciation rights may be granted either in tandem with
supplemental stock options or incentive stock options as described in Section 4
of this SAR Plan or as naked stock appreciation rights as described in Section
5 of this SAR Plan.
Section 3. Mode of Payment. At the discretion of the Program
Administrator, payments to recipients upon exercise of stock appreciation
rights may be made in (a) cash by bank check, (b) shares of Common Stock having
a fair market value (determined in the manner provided in Section 4 of the
Incentive Plan) equal to the amount of the payment, (c) a note in the amount of
the payment containing such terms as are approved by the Program Administrator
or (d) any combination of the foregoing in an aggregate amount equal to the
amount of the payment.
Section 4. Stock Appreciation Right in Tandem with Supplemental or
Incentive Stock Option. A SAR granted in tandem with a supplemental stock
option or an incentive stock option (in either case, an "Option") shall be on
the following terms and conditions:
(a) Each SAR shall relate to a specific Option or portion of an Option
granted under the Supplemental Stock Option Plan or Incentive Stock Option
Plan, as the case may be, and may be granted by the Program Administrator
at the same time that the Option is granted or at any time thereafter prior
to the last day on which the Option may be exercised.
(b) A SAR shall entitle a recipient, upon surrender of the unexpired
related Option, or a portion thereof, to receive from the Corporation an
amount equal to the excess of (i) the Fair Market Value (determined in
accordance with Section 4 of the Incentive Plan) of the shares of Common
Stock which the recipient would have been entitled to purchase on that date
pursuant to the portion of the Option surrendered over (ii) the amount
which the recipient would have been required to pay to purchase such shares
upon exercise of such Option.
(c) A SAR shall be exercisable only for the same number of shares of
Common Stock, and only at the same times, as the Option to which it
relates. SARs shall be subject to such other terms and conditions as the
Program Administrator may specify.
(d) A SAR shall lapse at such time as the related Option is exercised or
lapses pursuant to the terms of the Program. On exercise of the SAR, the
related Option shall lapse as to the number of shares exercised.
Section 5. Naked Stock Appreciation Right. SARs granted by the Program
Administrator as naked stock appreciation rights ("Naked Rights") shall be
subject to the following terms and conditions:
(a) The Program Administrator may award Naked Rights to recipients for
periods not exceeding ten years. Each Naked Right shall represent the right
to receive the excess of the Fair Market Value of one share of Common Stock
(determined in accordance with Section 4 of the Incentive Plan) on the date
of exercise of the Naked Right over the Fair Market Value of one share of
Common Stock (determined in accordance with Section 4 of the Incentive
Plan) on the date the Naked Right was awarded to the recipient.
(b) Unless otherwise provided by the Program Administrator at the time
of award or unless the installment provisions set forth herein are
subsequently accelerated pursuant to Article 18 of the General Provisions
of the Program or otherwise by the Program Administrator with respect to
any one or more previously granted Naked Rights, Naked Rights may only be
exercised to the following extent during the following periods of
employment or service as a consultant or director:
<PAGE>
Maximum Percentage
of Naked Rights Which
During May Be Exercised
- --------------------------------------- ----------------------
First 12 months after award 0%
First 24 months after award 25%
First 36 months after award 50%
First 48 months after award 75%
Beyond 48 months after award 100%
(c) The Naked Rights solely measure and determine the amounts to be paid
to recipients upon exercise as provided in Section 5(a). Naked Rights do
not represent Common Stock or any right to receive Common Stock. The
Corporation shall not hold in trust or otherwise segregate amounts which
may become payable to recipients of Naked Rights; such funds shall be part
of the general funds of the Corporation. Naked Rights shall constitute an
unfunded contingent promise to make future payments to the recipient.
<PAGE>
PLAN IV
VESTCOM INTERNATIONAL, INC.
PERFORMANCE SHARE PLAN
Section 1. General. This Vestcom International, Inc. Performance Share
Plan ("Performance Share Plan") is Part IV of the Corporation's Program. Unless
any provision herein indicates to the contrary, this Performance Share Plan
shall be subject to the General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
performance shares to any person eligible under Article 4 of the General
Provisions. Each performance share grant shall confer upon the recipient
thereof the right to receive a specified number of shares of Common Stock of
the Corporation contingent upon the achievement of specified performance
objectives within a specified performance objective period including, but not
limited to, the recipient's continued employment or status as a consultant
through the period set forth in Section 5 of this Performance Share Plan. At
the time of an award of a performance share, the Program Administrator shall
specify the performance objectives, the performance objective period or periods
and the period of duration of the performance share grant. Any performance
shares granted under this Plan shall constitute an unfunded promise to make
future payments to the affected person upon the completion of specified
conditions.
Section 3. Mode of Payment. At the discretion of the Program
Administrator, payments of performance shares may be made in (a) shares of
Common Stock, (b) a check in an amount equal to the Fair Market Value
(determined in the manner provided in Section 4 of the Incentive Plan) of the
shares of Common Stock to which the performance share award relates, (c) a note
in the amount specified above in Section 3(b) containing such terms as are
approved by the Program Administrator or (d) any combination of the foregoing
in the aggregate amount equal to the amount specified above in Section 3(b).
Section 4. Performance Objective Period. The duration of the period within
which to achieve the performance objectives shall be determined by the Program
Administrator. The period may not be less than one year nor more than ten years
from the date that the performance share is granted. The Program Administrator
shall determine whether performance objectives have been met with respect to
each applicable performance objective period. Such determination shall be made
promptly after the end of each applicable performance objective period, but in
no event later than 90 days after the end of each applicable performance
objective period. All determinations by the Program Administrator with respect
to the achievement of performance objectives shall be final, binding on and
conclusive with respect to each recipient.
Section 5. Vesting of Performance Shares. Unless otherwise provided by the
Program Administrator at the time of grant or unless the installment provisions
set forth herein are subsequently accelerated pursuant to Article 18 of the
General Provisions of the Program or otherwise by the Program Administrator
with respect to any one or more previously granted performance shares, the
Corporation shall pay to the recipient on the date set forth in Column 1 below
("Vesting Date") the percentage of the recipient's performance share award set
forth in Column 2 below.
Column 1 Column 2
Vesting Date Percentage
- ------------------------------ -----------
1 year from Date of Grant 25%
2 years from Date of Grant 25%
3 years from Date of Grant 25%
4 years from Date of Grant 25%
<PAGE>
PLAN V
VESTCOM INTERNATIONAL, INC.
STOCK BONUS PLAN
Section 1. General. This Vestcom International, Inc. Stock Bonus Plan
("Stock Bonus Plan") is Part V of the Corporation's Program. Unless any
provision herein indicates to the contrary, this Stock Bonus Plan shall be
subject to the General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrator may grant
bonuses in the form of shares of Common Stock to any person eligible under
Article 4 of the General Provisions. Each such stock bonus shall be forfeited
by the recipient in the event that the recipient's employment by or status as a
consultant or director with the Corporation terminates within the time periods
specified in Section 3 of this Stock Bonus Plan or within such other time
period as the Program Administrator also may provide at the time of grant. The
Program Administrator also may provide at the time of grant that the Common
Stock subject to the stock bonus shall be forfeited by the recipient upon the
occurrence of other events.
Section 3. Forfeiture of Bonus Shares. Unless otherwise provided by the
Program Administrator at the time of grant or unless the installment provisions
set forth herein are subsequently accelerated pursuant to Article 18 of the
General Provisions of the Program or otherwise by the Program Administrator
with respect to any one or more previously granted bonus shares, the percentage
set forth in Column 2 below of shares of Common Stock issued as a stock bonus
shall be forfeited and transferred back to the Corporation by the recipient
without payment of any consideration from the Corporation if the recipient's
employment by or status as a consultant or director with the Corporation is
terminated for any reason during the time periods specified in Column 1 below:
Column 1
Employment or Status Column 2
as a Consultant or Director Percentage of Bonus
Terminates Within Shares Which are Forfeitable
- ------------------------------------- -----------------------------
First 12 months after grant 100%
First 24 months after grant 75%
First 36 months after grant 50%
First 48 months after grant 25%
Beyond 48 months after grant 0%
Section 4. Rights as a Shareholder; Stock Certificates. A recipient shall
have rights as a shareholder with respect to any shares of Common Stock
received as a stock bonus represented by a stock certificate issued in his name
even though all or a portion of such shares remain subject to a risk of
forfeiture hereunder, except that shares subject to forfeiture shall not be
transferable. Stock certificates representing such shares which remain subject
to forfeiture together with a related stock power shall be held by the
Corporation and shall be canceled and returned to the Corporation's treasury if
thereafter forfeited. Stock certificates representing such shares which are
vested and no longer subject to forfeiture shall be delivered to the recipient.
<PAGE>
PLAN VI
VESTCOM INTERNATIONAL, INC.
INDEPENDENT DIRECTOR PLAN
Section 1. General. This Vestcom International, Inc. Independent Director
Plan ("Independent Director Plan") is Part VI of the Corporation's Program. Any
option granted pursuant to this Independent Director Plan shall not be an
incentive stock option as defined in Section 422 of the Code. Unless any
provision herein indicates to the contrary, this Independent Director Plan
shall be subject to the General Provisions of the Program.
Section 2. Definitions. As used in this Independent Director Plan, the
following definitions shall apply.
(a) "Anniversary Date" shall mean, for each Independent Director, the
date on which such Independent Director is first appointed or elected to
serve on the Board and each annual anniversary of such date on which such
person continues to serve on the Board as an Independent Director.
(b) "Employee" shall mean any person employed on a full-time basis by
the Company or any present or future Subsidiary of the Company.
(c) "Fair Market Value" shall have the meaning set forth in Section 4 of
the Incentive Plan.
(d) "Independent Director" shall mean any member of the Board who, on
any of such person's Anniversary Dates, shall not have served as an
Employee during the twelve months preceding such Anniversary Date.
(e) "New Independent Director" shall have the meaning set forth in
Section 4 of this Independent Director Plan.
(f) "Option" shall mean the right, granted pursuant to Section 4 of this
Independent Director Plan, to purchase one or more shares of Common Stock.
(g) "Subsidiary" shall mean any present or future corporation which
would be a "subsidiary corporation" as defined in Subsections 424(f) and
(g) of the Code.
Section 3. Eligibility. The only persons eligible to receive Options under
the Independent Director Plan shall be persons who, on their applicable
Anniversary Date, constitute Independent Directors.
Section 4. Automatic Grant. The Company shall grant to each Independent
Director who first becomes a director of the Company during the term of the
Independent Director Plan (a "New Independent Director") an Option to purchase
10,000 shares of Common Stock on the date of his first appointment or election
as a director of the Company. On the first Anniversary Date of each New
Independent Director's appointment or election as a director of the Company,
and on each subsequent Anniversary Date thereafter during the term of the
Independent Director Plan, the Company shall grant to such Independent Director
an Option to purchase 5,000 shares of Common Stock. Notwithstanding the
foregoing, each individual who agrees to become a New Independent Director
prior to the consummation of the Company's Initial Public Offering shall be
granted an Option to purchase 10,000 shares of Common Stock at an exercise
price equal to the initial public offering price per share. Such option grant
shall be conditional upon, and for all purposes hereunder be deemed granted
upon, the Initial Public Offering.
Section 5. Option Price. Subject to the provisions of Section 4 hereunder,
the exercise price per share of the Common Stock covered by each Option shall
be the Fair Market Value of a share of the Common Stock on the date the Option
is granted.
Section 6. Term of Options. Subject to earlier termination as provided in
Sections 8 and 9 of this Independent Director Plan and subject to the
provisions of Article 19 of the General Provisions of the Program, the term of
each Option shall be ten years from the date of grant.
<PAGE>
Section 7. Exercise of Options.
(a) An Option granted to an Independent Director under this Independent
Director Plan shall become fully exercisable as to 100% of the shares of
Common Stock covered thereby one year after the date of grant, subject to
acceleration as set forth in Article 18 of the General Provisions of the
Program.
(b) An Option may be exercised as to any or all full shares of Common
Stock as to which the Option is then exercisable.
(c) Except as provided in Sections 8 and 9 of this Independent Director
Plan, no Option may be exercised unless the holder thereof is then a
director of the Company.
Section 8. Termination of Relationship to the Company.
(a) In the event that any holder shall cease to be a director of the
Company, except as set forth in Section 9 below or upon removal for cause,
such Option (subject to the other provisions of this Independent Director
Plan) may be exercised (to the extent that the holder was entitled to
exercise at the termination of his service as a director) at any time
within three months after such termination, but not more than ten years
after the date on which such Option was granted.
(b) Other than as provided in Section 8(a), Options granted under this
Independent Director Plan shall not be affected by any change of duties or
position so long as the holder continues to be a director of the Company.
(c) Nothing in this Independent Director Plan or in any Option granted
pursuant to this Independent Director Plan shall confer upon any individual
any right to continue as a director of the Company, or affect the right of
the Company or its shareholders to terminate his directorship at any time.
(d) Upon the removal of an Independent Director for cause, any Option
previously granted to such person shall terminate immediately.
Section 9. Death or Disability of Holder. If a person to whom an Option
has been granted under this Independent Director Plan shall:
(a) die (i) while serving as a director of the Company or (ii) within
three months after the termination of such position other than termination
for cause, or
(b) become permanently and totally disabled within the meaning of
Section 22(e)(3) of the Code while serving as a director, then if the
Option was otherwise exercisable at the time of the happening of such
event, such Option may be exercised as set forth herein by the holder or,
in the event of death, by the person or persons to whom the holder's rights
under the Option pass by will or applicable law, or if no such person has
such right, by his executors or administrators. The period for exercise to
the extent provided in Section 8 shall be extended to one year in the case
of the permanent and total disability or two years in the case of the death
of the holder, but not more than 10 years after the date on which such
Option was granted.
<PAGE>
VESTCOM INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
May 26, 1999
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 26, 1999, 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 NOMINESS LISTED BELOW
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW:
Nominees: Joel Cartun, Stephen R. Bova, Leonard J. Fassler, Brendan Keating,
Fred S. Lafer, Robert J. Levenson and Richard D. White
INSTRUCTION: To withhold authority to vote for any individual nominee listed
above, write the nominee's name in the space provided below.
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2. APPROVAL OF AMENDMENT TO THE COMPANY'S 1997 EQUITY COMPENSATION PROGRAM.
/ / FOR / / AGAINST / / ABSTAIN
3. Upon all such other matters as may properly come before the meeting and/or
any adjournment or adjourments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.
(continued and to be signed on reverse side)
<PAGE>
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:___________________, 1999
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.
