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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Consent Revocation 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 Consent Revocation Statement
|_| Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Consent Revocation Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
VESTCOM INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Consent 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Vestcom Letterhead]
March 13, 2000
Dear Fellow Shareholder:
The Board of Directors of Vestcom International is writing to you today
to inform you that Harish Chopra, TimeTrust, Inc. and R-Squared Limited
(together referred to in this letter as the "Dissidents") are seeking to gain
control of your Company by removing five of the current members of YOUR Board of
Directors, without cause, and replacing them with their own hand-picked
nominees.
Your current Board of Directors and management are committed to
enhancing shareholder value for ALL shareholders. We have developed and executed
a strategic plan to improve the Company's profitability which has begun to yield
positive financial results in the fourth quarter of 1999.
For all of the reasons discussed in the materials included with this
letter, we strongly urge you to REJECT the solicitation made by the Dissidents
and NOT sign any gold consent card they send you.
In order to REJECT the Dissidents' proposals, the Board unanimously
recommends that you sign, date and mail the enclosed BLUE Consent Revocation
Card today. Even if you have previously signed the Dissidents' gold consent
card, you have every right to REVOKE YOUR CONSENT by voting the BLUE Consent
Revocation Card.
In order to be sure that you are revoking a prior consent, you must
either mark the "Revoke Consent" boxes on the BLUE Consent Revocation Card or
sign the BLUE Consent Revocation Card without marking any boxes. If you do not
mark any box for any one or more of the Dissidents' proposals on the BLUE
Consent Revocation Card and you sign and return the Card, you will be deemed to
have revoked any previously signed consent to any proposal you did not mark. If
the BLUE Consent Revocation Card is signed and returned, any previously executed
consent will be revoked unless the "Do Not Revoke Consent" box is marked.
Thank you for your continued interest and support.
Very truly yours,
Joel Cartun
Chairman of the Board
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CONSENT REVOCATION STATEMENT
BY THE BOARD OF DIRECTORS OF VESTCOM
INTERNATIONAL, INC. IN OPPOSITION TO THE
SOLICITATION OF CONSENTS BY HARISH K. CHOPRA,
TIMETRUST, INC. AND R-SQUARED LIMITED
This Consent Revocation Statement and the accompanying BLUE Consent
Revocation Card are being furnished by the Board of Directors of Vestcom
International, Inc., a New Jersey corporation ("Vestcom" or the "Company"), to
the holders of the outstanding shares of Vestcom's common stock in opposition to
the solicitation by Harish K. Chopra ("Chopra"), TimeTrust, Inc. ("TimeTrust")
and R-Squared Limited ("R-Squared" and, with Chopra and TimeTrust, the
"Dissidents").
The Dissidents are soliciting consents in favor of five separate
proposals (collectively, the "Dissidents' Proposals"), which are designed to
replace five of your seven duly elected directors with their slate of
underqualified nominees. We are asking you to OPPOSE the Dissidents' Proposals
because:
o Your current Board and management have developed and executed a
strategic plan to improve the Company's profitability which has begun
to yield positive results, such as:
o our revenues for the fourth quarter of 1999 increased to a record
$35.1 million, a 15.9% increase over the fourth quarter of 1998,
primarily as a result of internal growth;
o our gross profit increased by $2.2 million from the third quarter
of 1999 to the fourth quarter of 1999, and by $300,000 from the
fourth quarter of 1998 to the fourth quarter of 1999; and
o our EBITDA for the fourth quarter of 1999 was $4.8 million
(including a $700,000 restructuring credit), as compared to $3.8
million for the fourth quarter of 1998.
o Your Board believes that Vestcom is at a critical juncture and that
any change in our management could substantially jeopardize our
future growth and success.
o The Dissidents have not communicated any specific business plan.
o The Dissidents' past business experience in our industry is
extremely limited and unrelated to our core businesses.
o We believe that the Company's current Board, whom you elected, and
management are in the best position to evaluate the strategic
alternatives available to Vestcom and to decide on the courses of
action that are in the best interests of ALL of the shareholders.
We have retained CIBC World Markets to advise the Board in this
evaluation.
We unanimously oppose the consent solicitation by the Dissidents and
urge you NOT TO SIGN the Gold consent card that they sent to you.
Even if you previously signed and returned the Gold consent card, you
have every right to change your vote. We urge you to sign, date and mail the
enclosed BLUE Consent Revocation Card today in the postage-paid envelope
provided. Your prompt action is very important.
In order to be sure that you are revoking a prior consent, you must
either mark the "Revoke Consent" boxes on the BLUE Consent Revocation Card or
sign the BLUE Consent Revocation Card without marking any boxes. If you do not
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mark any box for any one or more of the Dissidents' Proposals on the BLUE
Consent Revocation Card and you sign and return the Card, you will be deemed to
have revoked any previously signed consent to any proposal you did not mark. If
the BLUE Consent Revocation Card is signed and returned, any previously executed
consent will be revoked unless the "Do Not Revoke Consent" box is marked.
If any of your shares are held in the name of a bank, broker or other
nominee, please contact the person responsible for your account today and direct
him or her to vote the BLUE Consent Revocation Card immediately.
This Consent Revocation Statement and the enclosed BLUE Consent
Revocation Card are first being mailed to shareholders beginning on or about
March 13, 2000.
If you have any questions or need assistance in voting your shares,
please contact the firm assisting the Company in this solicitation of consent
revocations:
Georgeson Shareholder Communications Inc.
17 State Street, 10th floor
New York, NY 10004
Toll-Free: (800) 223-2064
Fax: (212) 440-9009
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QUESTIONS AND ANSWERS ABOUT THIS REQUEST
FOR CONSENT REVOCATION
Q: WHO IS MAKING THE REQUEST FOR REVOCATION?
A: This Request is being made by your duly elected Board of
Directors.
Q: WHAT ARE WE ASKING YOU TO DO?
A: We are asking you to oppose the solicitation made by Mr. Chopra,
TimeTrust, Inc., a California corporation, and R-Squared Limited,
an Irish company based in the Cayman Islands. They are seeking to
gain control of your Board by replacing five of your seven duly
elected directors with their slate of underqualified hand-picked
nominees. To oppose them, you can withhold your consent from their
Proposals, or, if you have already given your consent, you can
revoke it.
Q: WHY ARE WE ASKING YOU TO REVOKE YOUR CONSENT?
A: We are asking you to oppose the Dissidents' Proposals because we
believe that your current Board and management are in the best
position to evaluate the strategic alternatives available to
Vestcom. We are committed to enhancing shareholder value for all
of Vestcom's shareholders. While current management has developed
and executed a strategic plan to improve the Company's
profitability, which has begun to yield positive results, the
Dissidents have no specific plans for improving shareholder value.
The Dissidents only speak in broad generalities that are not
applicable to Vestcom's business.
Q: WHO ARE THE DISSIDENTS' NOMINEES?
A: The Dissidents' nominees are Harish K. Chopra, Howard April,
Parker S. Kennedy, Frank E. Raab and Robert J. Verrilli, none of
whom are currently affiliated with Vestcom and, with the exception
of Mr. April who previously served on Vestcom's Board of
Directors, none of whom has had any experience in Vestcom's core
businesses. When Vestcom acquired Mr. April's company, Mr. April
was eligible to receive an earnout based on the future performance
of his company, which he continued to run as a subsidiary of
Vestcom. The subsidiary's performance was so poor that Mr. April
was not entitled to receive any part of the earnout. As a result
of this poor performance, the Company replaced Mr. April and his
management team.
The two current Vestcom directors whom the Dissidents are not
seeking to replace, Leonard Fassler and Stephen R. Bova, have not
consented to serving on a Board comprised of the Dissidents'
nominees. By letter dated March 7, 2000, Mr. Fassler informed the
Company that if the Dissidents' slate of nominees were elected to
Vestcom's Board, he would not continue to serve as a director of
Vestcom.
Q: WHO CAN WITHHOLD OR REVOKE THEIR CONSENT?
A: If you already sent in a Gold consent card, you can send in a BLUE
Consent Revocation Card to revoke your consent to one or more of
the Dissidents' Proposals. If you owned Vestcom shares on February
8, 2000, you have the right to send in a BLUE Consent Revocation
Card.
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Q: HOW MANY SHARES MUST BE VOTED IN FAVOR OF THE DISSIDENTS' PROPOSALS TO
IMPLEMENT THEM?
A: The Dissidents must receive consents from a majority of Vestcom's
outstanding shares for their Proposals to be adopted. As of
February 8, 2000, Vestcom had 9,056,806 shares of common stock
outstanding (including voting rights attributable to the shares of
a Vestcom subsidiary in Canada which are convertible into shares
of Vestcom's common stock). Each share is entitled to one vote.
Therefore, the affirmative vote of at least 4,528,404 shares is
necessary to effect the Dissidents' Proposals. Abstentions,
failures to vote and broker non-votes will have the same effect as
a "no" vote.
Q: WHEN WILL THE CONSENTS BE TABULATED?
A. The consents the Dissidents receive will be tabulated on April 7,
2000. Once the tabulation is completed, if the Dissidents were to
receive the required vote, Vestcom would promptly notify you, and
the Dissidents' Proposals would become effective 10 days after
that notice is sent to you, unless, however, sufficient Consent
Revocation Cards are received by the end of that 10-day period.
This means that you are able to revoke any prior consent until the
date communicated to you to be the effective date. We urge you to
mail your BLUE Consent Revocation Card today.
Q: WHAT SHOULD YOU DO TO REVOKE YOUR CONSENT?
A: Sign, date and return the enclosed BLUE Consent Card Revocation
TODAY to Georgeson in the postage paid envelope provided.
Q: WHO DO YOU CALL IF YOU HAVE QUESTIONS ABOUT THE CONSENT REVOCATION?
A: Please call Georgeson toll free at (800) 223-2064.
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OUR REASONS FOR OPPOSING THE DISSIDENTS' PROPOSALS
AND RECOMMENDING THAT YOU OPPOSE THEM TOO
Each of the Dissidents' five Proposals is designed to enable
the Dissidents to take control of your Vestcom Board. We believe that the
Dissidents' consent solicitation is an attempt to take complete control of
Vestcom without offering shareholders any value at all for their shares and
without presenting any specific plan for increasing shareholder value.
Vestcom's Board of Directors strongly believes that the
arguments set forth by the Dissidents are seriously flawed and misinformed. The
Dissidents are strangers to the Company and its core businesses.
The Board of Directors of the Company unanimously believes
that the Dissidents' Proposals are not in the best interests of the Company's
shareholders and urges shareholders to reject them. Your Board of Directors
requests that you sign, date and return the enclosed BLUE Consent Revocation
Card, whether or not you have previously signed and returned the Gold consent
card solicited by the Dissidents.
Your Board of Directors is, and has always been, committed to
increasing shareholder value for ALL shareholders. We have implemented several
long-term, strategic initiatives to enhance shareholder value. These initiatives
are now beginning to generate positive financial results. Our results of
operations for the fourth quarter of 1999 have begun to reflect the benefits of
our efforts. See "Improving Shareholder Value". We have:
o Substantially completed the consolidation and integration of our
businesses in the Mid-Atlantic and New England regions.
o Eliminated redundant personnel and facilities, modernized our
facilities, upgraded our technology, improved efficiencies and
increased our capacity.
o Significantly expanded our Internet offerings, providing additional
services for our clients to choose from and broadening our potential
client base.
o Improved the quality of our sales force by recruiting and hiring
experienced sales professionals, providing cross-training on all of
our service offerings and integrating the sales force by vertical
markets.
As your duly elected Board of Directors, it is our duty to identify
for you our deep and serious concerns about the Dissidents. We will describe
these concerns in greater detail later in this document, however, we have
highlighted a number of these below:
o Mr. Chopra and the Dissidents' other nominees have no valuable
experience in Vestcom's core businesses.
o The track record of the public corporation with which Mr. Chopra and
two other nominees of the Dissidents are currently associated is
poor, and is NOT a model to be followed.
o The Dissidents point to the industry experience of Howard April, one
of their nominees and formerly a director of Vestcom, whom Vestcom
removed as head of the Company's Montreal operations because of the
poor performance of that operation.
o Fiscal improvement demands carefully designed, specific measures like
the ones we implemented. Our operating results for the fourth quarter
of 1999 have begun to reflect the benefits of our efforts. The
Dissidents have no real plans. Their solicitation materials speak in
broad terms and hypothetical, conceptual strategies. The Dissidents
claim to know how to improve Vestcom's performance, but they have not
offered anything other than rhetoric and generalities.
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In addition, the Dissidents' Proposals could end up costing you money
for the following reasons:
Mr. Chopra claims that he is prepared to become CEO of the Company with
what he portrays as an altruistic offer to refuse any base salary for one year.
The Dissidents' consent solicitation materials provide, however, that he would
expect to receive an unspecified number of stock options in lieu of salary,
which will dilute your percentage ownership of the Company. Mr. Chopra also does
not describe what kind of compensation he would demand following the one year
period. In addition, the Dissidents' solicitation materials provide that only
Mr. Chopra and Mr. Verrilli, and none of the other nominees of the Dissidents,
have approved these executive employment matters.
If the Dissidents are successful, their solicitation materials indicate
that they may seek to have the Company reimburse them for their solicitation
expenses, which their materials estimate will be $275,000.
Mr. Chopra has indicated that if the Dissidents are successful, he
intends to remove some or all of Vestcom's executive management. Besides being
disruptive to the Company's business and diverting current management from its
continuing efforts to further implement our successful strategic plan, this
would cost the Company money. The Company's four executive officers have change
in control agreements which were entered into in January 1999 (except for Mr.
Helfand's agreement, which he entered into when he joined the Company in October
1999). The Board believed it was important to enter into these arrangements to
provide security for these officers so that they could focus on the various
strategic initiatives to improve the Company's profitability and enhance
shareholder value. Pursuant to these change in control agreements, if the
Dissidents are successful, a "change in control" of the Company will have
occurred. For a description of the payments that would be required under these
agreements if the executives' employment were terminated following a change in
control, see "Information About Us, The People Asking You To Revoke Your Consent
- -- Employment Agreements."
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BACKGROUND
Your Board of Directors and management have drawn upon their collective
industry-specific experience to develop strategies to improve Vestcom's
profitability. We have embarked upon a strategic program that has begun to
achieve positive financial results in the fourth quarter of 1999 which, we
believe, will increase shareholder value. We have serious concerns about the
Dissidents' ability to improve shareholder value without any real plans for
doing so, as compared to current management's industry-focused, ongoing program.
Our concerns stem from, among other things, the Dissidents' lack of industry
experience, poor track record and, in our view, lack of forthrightness about
their plans for the Company. In addition, as many of our recent shareholder
protective measures reflect, we do not want to see your Company undergo a change
of control without you receiving the fair value that we believe you are entitled
to receive. By electing to commence a consent solicitation to gain control of
your Company through the removal of your duly elected directors, the Dissidents
have embarked on a process which, although legal, will not pay you anything.
The original Schedule 13D filed by Mr. Chopra with the SEC in November
1999 did not disclose that he intended to replace Vestcom's Board. It stated
that the Dissidents "intend at a future date to seek representation on the board
of directors of Vestcom" and that no "specific plan or proposal regarding the
possibility of seeking representation on the board of directors or seeking
changes in the executive management of Vestcom" had been formulated. On December
27, 1999, Vestcom applied to the United States District Court for the District
of New Jersey for a temporary restraining order to, among other things, compel
Mr. Chopra to honestly state his intentions as required by the federal
securities laws. Two days later, on December 29, 1999, the Dissidents filed an
amended Schedule 13D which stated that they were seeking the removal of
Vestcom's current Board of Directors and may seek the removal of Vestcom's Chief
Executive Officer and/or President.
Indeed, the Dissidents' solicitation materials state that on December
16, 1999, the Dissidents were "ready, willing and able to undertake a
solicitation." The Dissidents did not disclose this intention in November 1999
or at any time in December 1999 until after Vestcom initiated litigation
demanding that Mr. Chopra disclose his intentions. Your current Board of
Directors and management view this chronology of events as indicative of a lack
of forthrightness on the part of the Dissidents, which is a concern to us.
IMPROVING SHAREHOLDER VALUE
During 1999, your current Board and management implemented several
long-term, strategic initiatives to enhance shareholder value. These initiatives
are focused on streamlining, consolidating and integrating the Company's
operations, improving efficiencies, increasing capacity and expanding new
service offerings, such as our Internet services, to position Vestcom for
enhanced profitability, growth and success. The results of these initiatives
have begun to be realized in our financial performance.
Some of the initiatives we have implemented, and the results we have
achieved or expect to achieve, are as follows:
o Our revenues for the fourth quarter of 1999 increased to a record
$35.1 million, a 15.9% increase over the fourth quarter of 1998,
primarily as a result of internal growth.
o Our gross profit increased by $2.2 million from the third quarter of
1999 to the fourth quarter of 1999, and by $300,000 from the fourth
quarter of 1998 to the fourth quarter of 1999.
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o Our "EBITDA" (earnings before interest, taxes, depreciation and
amortization) for the fourth quarter of 1999 was $4.8 million
(including a $700,000 restructuring credit), as compared to $3.8
million for the fourth quarter of 1998. Vestcom's EBITDA represents
the Company's operating cash flow.
o We have reduced the number of our production facilities from 34 at
the beginning of 1999 to 26 at the beginning of 2000.
o The consolidation and integration of facilities is expected to
generate increased efficiencies, quality and competitiveness, all
of which, we believe, will translate into increased revenues,
decreased costs and greater profitability.
o Using fewer, but bigger, more modern and technologically advanced
facilities should enable Vestcom to compete more effectively for
larger, more profitable projects from new and existing regional and
national accounts, and also improve our efficiency, turn-around
time and capacity.
o As part of our restructuring program, we eliminated redundant
personnel, which should reduce our costs and increase our
profitability, without sacrificing revenues.
o An example of our facility integration is the consolidation of
seven of our operations in the Mid-Atlantic region into two
significantly larger, more streamlined locations.
o We improved the quality of our sales force by recruiting and hiring
experienced sales professionals, providing cross-training on all of
our service offerings and integrating the sales force by vertical
markets.
o In 1999, we expanded our Internet capabilities:
o We are beginning to see the conversion of existing and new
customers into our Internet suite of products.
o Our Internet service offerings expand Vestcom's range of document
management and delivery services to include Internet-based
solutions, such as electronic bill presentment and payment, that
provide streamlined customer communications and an efficient,
secure distribution of business critical documents.
o Our web-based fulfillment services provide customers with the
ability to order products and marketing materials via the Internet.
o In 1999, we adopted our shareholder protection plan to protect
shareholder value, which New Jersey law expressly permits us to adopt
for this very reason.
o Your Board carefully considered adopting its shareholder protection
plan. Over 2,500 public companies have shareholder protection plans
which, like our plan, are designed to encourage a potential
acquirer to negotiate with the board of directors. A board of
directors, such as your Board, has a fiduciary duty to maximize
shareholder value for ALL shareholders. We reviewed current, widely
accepted empirical studies which clearly show that companies with
such plans receive a significantly greater takeover premium than
companies without them. This potential for increased shareholder
value was one of the compelling reasons that we considered in
taking our action.
o We have retained CIBC World Markets ("CIBC") as Vestcom's financial
advisor to assist the Board in its continuing review of strategic
alternatives to enhance shareholder value for all shareholders.
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We adopted a shareholder protection plan in December 1999 as part of
our strategy of enhancing shareholder value. Since the Board has a fiduciary
duty to all of Vestcom's shareholders to protect shareholder value, the purpose
of the shareholder protection plan is to encourage a potential acquirer to
negotiate with the Board of Directors concerning a possible takeover of the
Company. Vestcom's Board believed, and continues to believe, that the market
price of our common stock does not adequately reflect the intrinsic value of the
Company. This belief is shared by our financial advisors. The Board believed,
and continues to believe, that this undervaluation of our common stock made the
Company a vulnerable target for some person or group to take control of the
Company by using coercive tactics and/or making an inadequate offer.
Given our financial results, our Board of Directors commenced
a review of the Company's strategic alternatives in the summer of 1999. The
Board and management developed a strategic plan to improve the Company's
profitability. The Board of Directors was concerned that the Company would be a
vulnerable target for a coercive takeover until the Company was able to
implement its strategic plan and until the plan began to yield positive results.
When the market price of Vestcom's stock decreased even further in September and
October of 1999, this concern was heightened. The Board then adopted its
shareholder protection plan on December 16, 1999. As described elsewhere in this
con sent revocation statement, your Board and management have, in fact,
implemented a strategic plan which began to yield positive results in the fourth
quarter of 1999.
In sum, the Board believed that the shareholder protection
plan would provide it with the time it needed to complete its review of
strategic alternatives to enhance shareholder value. The Board also believed
that the plan would provide it with more negotiating leverage in seeking to
obtain a full and fair price from any potential bidder. Although the Board
consi dered that the shareholder protection plan might deter an acquisition
proposal or tender offer for the Company's common stock that might otherwise be
forthcoming, the Board believed that the advantages of the plan far outweighed
the disadvantages.
New Jersey corporate law specifically permits the adoption of
shareholder protection plans. Vestcom's plan provides that the plan can be
amended and the rights redeemed only by a vote of the Company's "independent
directors," which our plan defines to exclude the Company's management and any
director associated with a hostile bidder. This provision is significantly
different from the "dead hand" provision referred to by the Dissidents. Under
the Vestcom plan, it is only if the Board wishes to amend the plan or redeem the
rights in the absence of any proposed transaction (where the term "independent
director" would have no meaning because there is no proposed transaction to be
independent from), that a vote of "continuing directors," defined in our plan as
directors approved by the current Board, is required.
The Dissidents suggest that the shareholder protection plan will
entrench management. In fact, by excluding management from the definition of
"independent director," our plan provides that at the precise time when it is
most important to have a rights plan in place (i.e., when a bidder is expressing
interest in the Company), management will not be entitled to vote on matters
relating to the plan. Far from entrenching management, our plan leaves the
critical decisions to individuals who are truly independent of the bidder.
Vestcom's shareholder protection plan does not have a traditional "dead
hand" provision that gives the ability to redeem the issued rights solely to
"continuing directors". Vestcom's plan provides that in the case of a merger,
acquisition or other business combination, the "independent directors" (which,
as described above, exclude management and any director associated with a
bidder) have the ability to redeem the rights. Vestcom's Board of Directors
adopted this provision to ensure that when faced with a proposed merger or
acquisition, the Board would not have conflicts of interest arising from
directors who are beholden to the acquirer. Without this provision, an acquirer
would be able to fill the Board with its affiliates, who would in turn place a
rubber stamp on the acquirer's takeover proposal, thereby thwarting the goal of
protecting shareholder value.
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The Board adopted a "continuing director" provision to apply when the
Board is not confronted with a business combination. The Board was concerned
that without this protection, an acquirer, acting in a manner inconsistent with
its ownership reporting obligations under the federal securities laws, could
acquire 9.9% of Vestcom's stock with the intention of causing Vestcom to enter
into an undisclosed combination, remove the Board, cause the new Board to redeem
the rights and then cause Vestcom to enter into that undisclosed transaction. In
effect, the Board wanted to protect against an acquirer who keeps his intent to
engage in a business combination secret for the purpose of avoiding the
independent director provision.
At present, each of the members of Vestcom's Board of Directors is a
"continuing director."
Critics of continuing director provisions have suggested that these
provisions disadvantage shareholders because they may entrench management in
certain circumstances. We do not believe that Vestcom's shareholder protection
plan disadvantages shareholders because (a) as described above, "continuing
directors" can act to redeem the rights only in limited circumstances and (b)
there are only two directors on our Board who are also executive officers of the
Company.
Under the Vestcom shareholder protection plan, in the absence of a
pending business combination, only the "continuing directors" may redeem the
outstanding rights. Thus, if there were no continuing directors on the Vestcom
Board, in the absence of a pending business combination, the rights could not be
redeemed.
In the event that a business combination were pending, the rights can
be redeemed by the "independent directors" or, if there are no independent
directors, by the continuing directors. It is conceivable that with respect to a
particular business combination, no member of the Board would constitute an
independent director or a continuing director. In that instance, Vestcom might
not be able to consummate a business combination that its shareholders might
consider to be beneficial. However, that situation could be alleviated, and such
combination could be effected, by electing to the Board at that time a director
who would be independent. Such election could be made by the Vestcom Board or,
if all Board members were affiliated or associated with the acquirer, by the
shareholders, and would alleviate any disadvantage associated with the initial
failure to have any independent directors on the Board.
The Board also adopted several bylaw amendments in December 1999 to
protect shareholder value. The Board amended the bylaws to (a) eliminate the
right of 20% shareholders to call a special meeting of shareholders, (b) provide
procedures that must be followed by shareholders who seek to have the Company's
shareholders take corporate action by written consent and (c) provide advance
notification procedures for shareholders who want to nominate persons for
election to the Board or propose other business for consideration at a meeting
of shareholders. Since the Board of Directors owes a fiduciary duty to all
shareholders, while outside third parties who may seek to acquire the Company do
not, the purpose of the amendments is to encourage these parties to negotiate
with the Board and to establish clear procedures for parties to follow.
Under the Company's bylaws, a shareholder has the ability to ask the
CEO, President or full Board of Directors (which owes a fiduciary duty to the
Company's shareholders) to call a special meeting and under New Jersey law,
shareholders can ask a court to call a special meeting. Depending upon the
circumstances, the Board may have a fiduciary obligation to call a special
meeting upon a shareholder's request. If the Board failed to call a special
meeting upon a shareholder's request, the shareholder could wait until the next
annual meeting to present his or her questions, concerns or proposals, since New
Jersey corporate law requires that an annual meeting of shareholders be held
each year. In addition, Section 14A:5-3 of the New Jersey Business Corporation
Act provides that upon the application of not less than 10% of a corporation's
outstanding shares, the court, for good cause shown, may order a special meeting
of shareholders. New Jersey courts have not provided guidance as to what
constitutes "good cause shown" under the statute. The Company's plan does not
preclude shareholders from aggregating their shares for purposes of reaching the
10% limit.
Thus, while the bylaw amendments may limit the ability of a shareholder
to call a special meeting, they do not eliminate that right, and shareholders
still have a range of alternatives. By requiring shareholders to follow specific
procedures, the amendments could make it more difficult for shareholders to
remove the Company's current Board of Directors. With respect to the Dissidents,
however, this is not the case. The Dissidents could have waited until the
Company's annual meeting, held in late spring, to present their proposals,
rather than commencing a consent solicitation a few months earlier. In fact, the
Dissidents have submitted the same proposals for consideration at this year's
annual meeting, thereby causing the Company to incur the costs associated with
this consent revocation process, and then the annual meeting and regular proxy
solicitation costs a couple of months later.
-10-
<PAGE>
Prior to the adoption of the shareholder protection plan and the bylaw
amendments described above, the only provision in Vestcom's certificate of
incorporation or bylaws that could be deemed to have a potential anti-takeover
effect is the Board's ability, pursuant to Vestcom's certificate of
incorporation, to issue common stock and preferred stock without shareholder
action. The existence of this "blank-check" common stock and preferred stock
could render more difficult or discourage an attempt to obtain control of
Vestcom by means of a tender offer, merger, proxy contest or otherwise. In
addition, the New Jersey Shareholder Protection Act prohibits certain persons
from engaging in business combinations with the Company.
The Board adopted the shareholder protection plan and the bylaw
amendments described above on December 16, 1999 (except for the bylaw amendment
eliminating the right of 20% shareholders to call a special meeting, which was
adopted on December 3, 1999) to protect shareholder value by encouraging
potential bidders to discuss their proposals with Vestcom's Board. These actions
were not taken in response to any particular group or individual, including Mr.
Chopra, but, as described above, were designed to encourage potential bidders to
negotiate with the Board. In fact, at the time the Board took these actions, Mr.
Chopra's intentions were vague and unclear. Mr. Chopra did not disclose that he
planned to replace Vestcom's Board with his nominees until he filed an amendment
to his Schedule 13D on December 29, 1999.
THE DISSIDENTS
The Dissidents' Nominees Have Inadequate Experience and Knowledge of Our
Industry
The Dissidents' nominees for the Board are Messrs. Chopra, April,
Kennedy, Raab and Verrilli. Their lack of knowledge about Vestcom's core
businesses is apparent.
The Dissidents' consent solicitation materials state that if the
Dissidents are successful, Vestcom's management would be headed by Mr. Chopra.
The Dissidents report that Mr. Chopra founded DataTree Corporation, "a document
imaging and database management systems company," and served as its CEO from
inception until 1998, when he sold DataTree, a private company, to First
American Financial Corp., a public corporation. The Dissidents further report
that Mr. Chopra resigned as President of DataTree in July 1999, and currently
serves as its Chairman of the Board. They report that Mr. Verrilli served as CFO
of DataTree for six months in 1999.
Mr. Chopra has no experience as the chief executive officer of a public
company and no experience running a large company similar in size to Vestcom.
The following list highlights some of the differences between DataTree, at the
time Mr. Chopra sold it to First American, and Vestcom, at the present time.
<TABLE>
<CAPTION>
DataTree When Sold By Mr. Chopra to
First American.(1) Vestcom Now
- ---------------------------------------- -------------------------------------------------------
<S> <C>
Year ended September 30, 1997 revenues: Year ended December 31, 1999 revenues: $130.2 million
$8.4 million
Employees as of March 31, 1998: Employees as of December 31, 1999: approximately 1,000
approximately 140
Production Facilities as of May 19, 1998: (2) Production Facilities as of February 1, 2000: 26
</TABLE>
- --------
(1) Information concerning DataTree was obtained from Amendment No. 1 to
First American's Registration Statement on Form S-4, as filed with the SEC on
May 19, 1998.
-11-
<PAGE>
In addition, according to our research, DataTree primarily images and
databases public real estate records for municipalities, and largely serves the
title insurance industry. DataTree does not provide the value-added document and
information management solutions or serve the markets that Vestcom does.
Messrs. Kennedy and Raab have backgrounds in the insurance industry,
not our industry. Mr. Kennedy is President of First American, and Mr. Raab, now
78, was previously president of Insurance Company of North America. According to
information provided by the Dissidents, Mr. Raab has been a business consultant
for the last five years. The Dissidents do not disclose what businesses he has
consulted to, however.
According to publicly available information, First American provides
real-estate related financial and information services to real property buyers
and mortgage lenders, including title insurance, tax monitoring, mortgage credit
reporting, property data services, flood certification, field inspection
services, appraisal services, mortgage loan origination and servicing systems,
mortgage document preparation and home warranty services. First American also
provides credit and various database related services to automobile dealers,
consumer lenders, employers and property management companies, as well as
investment, trust and thrift services. First American's businesses clearly are
very different from Vestcom's core businesses.
Mr. Chopra apparently has chosen Howard April as his source of
industry-specific expertise. Mr. April was an owner of one of the original seven
founding companies that formed Vestcom, and served on Vestcom's Board from
August 1997 until May 1998. When Vestcom acquired Mr. April's company, Mr. April
was eligible to receive an earnout based on the future performance of his
company, which he continued to run as a subsidiary of Vestcom. The subsidiary's
performance was so poor that Mr. April was not entitled to receive any part of
the earnout. As a result of this poor performance, the Company replaced Mr.
April and his management team.
Neither insurance underwriting nor imaging public records for local
database storage purposes is the business conducted by the Company. The
Dissidents are asking you to accept them without any meaningful industry
experience. As reflected in your Board members' backgrounds described later in
this document, your present Board of Directors has substantial industry-specific
experience, and, we believe, knows your Company better than any of the
Dissidents or their slate of nominees.
The Dissidents Don't Understand Vestcom or Its Business
One of the Dissidents' stated goals is to pursue national accounts.
However, they criticize our current management for consolidating and integrating
many of the Company's smaller, older facilities into fewer, larger, more
technologically advanced facilities. These consolidations will, in fact, enable
us to better meet the demands of our larger national clients. To meet the
demands of these customers, we need large-scale production capacity, rapid and
high volume fulfillment capabilities, and cutting edge technology, which can be
provided more effectively in our newly equipped, larger facilities.
The Dissidents' solicitation materials cite decentralization
as another goal. The Dissidents clearly do not understand Vestcom's current
operating structure. Vestcom's current structure includes a small number of
executives at the holding company level, and allows day to day operating
decisions to be made by regional executives. In addition, Vestcom's sales
professionals are familiar with the various customer needs and market trends in
the various regions.
While it is easy to criticize what you do not know, the costs of acting
without the requisite knowledge can be severe. This is precisely the type of
strategic error that can occur if the Company is managed by people who know very
little about its industry.
-12-
<PAGE>
The Dissidents' Track Record Is Poor
Three of the Dissidents' nominees to your Board of Directors have
strong ties to First American: Parker S. Kennedy is the President of First
American, Harish K. Chopra is currently Chairman of the Board (formerly
President) of DataTree Corporation, a subsidiary of First American, and Robert
J. Verrilli was formerly the CFO of DataTree. In light of these ties to First
American, and the fact that these individuals are described by the Dissidents as
having outstanding corporate credentials to run your Company, you should be
aware of certain facts about First American's recent financial performance. We
have included a chart of First American's stock performance over the last 18
months, which is based on publicly available information. This chart shows a
precipitous decline in their stock price. We believe that this track record is
poor, and is not a model to be followed by Vestcom.
-13-
<PAGE>
FIRST AMERICAN FINANCIAL CORP.
STOCK PERFORMANCE
----------------------------------------------------------------------------
$35
31.416 31.5954
$30
29.3485
$25
$20
15.6053 17.6408
$15
13.3094 12.4375 11.875
$10
$5
$0
----------------------------------------------------------------------------
Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Jan-00
- --------------------------------------------------------------------------------
NO REAL PLANS FOR THE COMPANY
The Dissidents are asking you to support their slate of
nominees for the Board without having offered you a comprehensive,
industry-specific business plan. They are asking for your support without
telling you how they plan to increase shareholder value. In their solicitation
materials, which consisted of several dozen pages, their "business plan"
occupied less than one page. Their attempt at a business plan appears to call
for decentralizing operations, separating operations for national accounts,
centralizing certain corporate functions and exploiting technology. Nowhere do
they mention which operations they plan to decentralize, or which corporate
functions they plan to centralize. They do not tell you how they plan to make
their decisions, what national accounts they plan to pursue, or whether they
have an Internet strategy. It is possible that they are not providing any of
this detail because they have not yet undertaken this analysis, or because they
cannot undertake the analysis since they do not know or understand our industry
or our Company.
Our business strategies include tangible, ongoing changes and
initiatives that have been explained to shareholders over the last year and are
beginning to bear positive results. You can see the successful results of our
business plan by the facilities we have consolidated and integrated, our
Internet service offerings, our trained and motivated sales professionals, and
the Company's fourth quarter 1999 positive financial results. Our strategic,
industry-specific business plan has begun to yield positive results, while the
Dissidents have yet to show you any real plan at all.
THE ROUTE THE DISSIDENTS CHOSE TO ATTEMPT TO TAKE
CONTROL OF YOUR BOARD OF DIRECTORS WILL NOT RESULT
IN THE PAYMENT TO YOU OF ANY CONTROL PREMIUM
People who seek control of a company usually either make a
proposal to the board of directors to buy the company, or, if the board refuses
their proposal, they commence a tender offer for the outstanding shares. In
either case, a person trying to obtain control of a company this way usually
offers a control or sales premium to the shareholders, that is, they pay more
than market value for the shares. That excess price is called a control premium.
-14-
<PAGE>
In contrast, control premiums generally are not paid when a
change in management has occurred as a result of a consent solicitation. By
starting a consent solicitation to replace Vestcom's Board of Directors, the
Dissidents have chosen a way to gain control of the Company that, although
legal, does not include the payment of a control premium (or anything at all) to
shareholders.
Mr. Chopra has offered not to take any base salary for one
year. He expects, however, to receive an unspecified number of Company stock
options in lieu of salary, which will dilute your percentage ownership of the
Company. He does not state what kind of compensation he expects to receive after
such one year period. The Dissidents' solicitation materials provide that only
Mr. Chopra and Mr. Verrilli, and none of the other nominees of the Dissidents,
have approved these executive employment matters. In addition, Mr. Chopra only
extended this offer to himself, and does not mention any of the other members of
his new management team or their compensation arrangements.
The Dissidents also have indicated that they may seek
reimbursement from the Company for the costs they incur in making their
solicitation, which they state in their solicitation materials they expect to
aggregate approximately $275,000.
Mr. Chopra has indicated that, if the Dissidents are
successful, he intends to remove some or all of Vestcom's executive management.
Besides being disruptive to our business and diverting current management from
further implementing our successful strategic plan, this could cost the Company
money. The Company's four executive officers have change in control agreements.
The Board believed it was important to enter into these arrangements to provide
security for these officers so that they could focus on improving the Company's
profitability and enhancing shareholder value. Pursuant to these change in
control agreements, if the Dissidents are successful, a "change in control" of
the Company will have occurred. For a description of the payments that would be
required under these agreements if the executives' employment were terminated
following a change in control, see "Information About Us, The People Asking You
To Revoke Your Consent -- Employment Agreements."
Each of the Dissidents' Proposals is designed to enable the
Dissidents to take control of the Board that you elected by replacing a majority
of the Board with their own underqualified hand-picked nominees. We believe that
their consent solicitation is an attempt to pressure you without giving you the
opportunity to consider all of Vestcom's strategic alternatives. We believe that
this undue pressure created by the Dissidents is not in the Company's or your
best interests. The Dissidents' Proposals are:
(1) Remove five of the seven current Vestcom directors (other
than Stephen R. Bova and Leonard J. Fassler) and remove
any other director elected or appointed to the Vestcom
Board before the effective date of this shareholder action
other than the five nominees hand-picked by the
Dissidents.
(2) Elect the five nominees hand-picked by the Dissidents to
serve as directors of Vestcom (or, if any of those five
nominees is unable to serve as a director of Vestcom, any
other person designated as a nominee by the remaining
nominee or nominees).
(3) Amend Section 3.7 of Article III of the Vestcom by-laws to
provide that any vacancy or vacancies on the Vestcom Board
created as a result of the removal of any of the current
directors by Vestcom's shareholders may be filled only by
a majority vote of Vestcom's shareholders.
(4) Amend Section 3.2 of Article III of the Vestcom by-laws to
set the number of directors of Vestcom at seven.
-15-
<PAGE>
(5) Repeal any amendment to the Vestcom by-laws that is
adopted by the current Vestcom Board after December 16,
1999 and before these proposals become effective and the
nominees are seated.
For the reasons discussed above, we have determined that the
Dissidents' Proposals are not in the best interests of you or Vestcom. The above
discussion of reasons and factors considered by us is not intended to be
exhaustive, but does reflect the material information and factors we considered
in our review and analysis of the Dissidents' Proposals. In view of the variety
of factors and the amount of information considered, we did not find it
practicable to provide specific assessments of, quantify or otherwise assign any
relative weights to, the specific factors considered in determining to recommend
that you reject the Dissidents' Proposals. Our determination was made after we
considered all the factors taken as a whole. In addition, some of the members of
our Board of Directors may have given differing weights to different factors.
Throughout our deliberations regarding the Dissidents' Proposals, we received
advice from CIBC World Markets, Lowenstein Sandler PC, and Proskauer Rose LLP.
Proskauer Rose LLP was retained to advise the independent members of the Board
in connection with the Dissidents' Proposals and related matters.
We unanimously oppose the Dissidents' consent solicitation and
urge you NOT to sign the Gold consent card that they sent to you.
Even if you previously signed and returned the Gold consent
card, you have every right to change your vote. We urge you to sign, date and
mail the enclosed BLUE Consent Revocation Card in the postage-paid envelope
provided. Your prompt action is very important. Please return the BLUE Consent
Revocation Card today.
If any of your shares are held in the name of a bank, broker
or other nominee, please contact the person responsible for your account today
and direct him or her to vote the BLUE Consent Revocation Card immediately.
If you have any questions about giving your revocation of
consent or require assistance, please call Georgeson, the firm assisting the
Company in this request for revocations, at:
Georgeson Shareholder Communications Inc.
17 State Street, 10th floor
New York, NY 10004
Toll-Free: (800) 223-2064
Fax: (212) 440-9009
-16-
<PAGE>
PENDING LITIGATION
On December 17, 1999, Vestcom commenced an action in the
United States District Court for the District of New Jersey against Mr. Chopra
and two entities controlled by him, TimeTrust, Inc. and R-Squared Limited.
Vestcom alleged two claims: (i) the Schedule 13D filed by Mr. Chopra in November
1999 violated Section 13(d) of the Securities Exchange Act of 1934, as amended,
because it failed to provide appropriate disclosures to shareholders, especially
with respect to Mr. Chopra's intent to take control of the Company, oust current
management, and install himself as Chief Executive Officer and Chairman of the
Board; and (ii) Mr. Chopra had violated Section 14(a) of the Williams Act
because he had solicited Vestcom shareholders without complying with the proxy
solicitation rules. Vestcom contended that Mr. Chopra had violated these
shareholder-protection provisions of the federal securities laws in order to
advance his effort to take control of the Company.
On December 27, 1999, Vestcom applied to the Court for a
temporary restraining order barring defendants from any further contacts with
Vestcom shareholders, barring defendants from any further violation of the
federal securities laws, and compelling corrective disclosures to remedy the
Section 13(d) and Section 14(a) violations. Two days later, on December 29,
1999, Mr. Chopra filed an amended Schedule 13D that provided most, though not
all, of the disclosures which were omitted from the initial Schedule 13D. Mr.
Chopra subsequently contended that this corrected disclosure resolved the
Section 13(d) claim.
The Court scheduled a hearing on Vestcom's application for a
temporary restraining order for January 14, 2000. On January 6, 2000, Mr. Chopra
filed a counterclaim challenging the enforceability of the Shareholder Rights
Protection Agreement adopted by Vestcom's Board on December 16, 1999. Mr. Chopra
also applied for temporary restraints against the enforcement of the Shareholder
Rights Protection Agreement. Given Mr. Chopra's request for temporary
restraints, the Court adjourned the hearing date to January 28, 2000, at which
time the Court was to address both applications for temporary restraints.
Vestcom opposed Mr. Chopra's request for restraints, as New Jersey corporate law
specifically authorizes the adoption of shareholder protection agreements and
many commentators have recognized the important protections that such agreements
provide to shareholders against coercive and abusive takeover tactics. Several
days later, Mr. Chopra abandoned and withdrew his request for temporary
restraints against the Shareholder Rights Protection Agreement.
Effective January 24, 2000, a new SEC rule altered the legal
standards for the solicitation of shareholders prior to the filing of a proxy
statement. Among other things, the new SEC rule permits parties soliciting a
public company's shareholders, including the public company itself, to make
certain prescribed solicitations to those shareholders prior to filing a proxy
statement. This pre-filing solicitation was prohibited under prior law, except
in certain limited circumstances. Mr. Chopra filed solicitation materials with
the SEC on January 27, 2000 and on February 3, 2000 under this new rule. In view
of this new rule and Mr. Chopra's filings, Vestcom withdrew its application for
temporary restraints against Mr. Chopra.
The Company continues to believe, based on conversations with
several of its Board members and various other Vestcom shareholders, that prior
to the effective date of the SEC's new rule Mr. Chopra illegally solicited
Vestcom shareholders, although the Court has not made such a finding or
determination to date. Vestcom continues to seek a remedy for Mr. Chopra's
alleged violations of the federal securities laws, including (i) the
invalidation of any proxies or consents obtained by Mr. Chopra and (ii) the
dissemination of a corrective disclosure to all Vestcom shareholders.
The litigation remains pending. On February 22, 2000, Mr.
Chopra filed (i) a motion to dismiss Vestcom's claims and (ii) a motion for
summary judgment in favor of his claims regarding the Shareholder Rights
Protection Agreement. We intend to vigorously oppose those motions and to
continue pursuing this litigation in order to assure that any contest for
control of Vestcom is conducted in accordance with applicable law.
-17-
<PAGE>
OUTSTANDING VESTCOM SECURITIES
As of February 8, 2000, there were 9,056,806 shares of Vestcom
common stock outstanding (including voting rights attributable to the shares of
a Vestcom subsidiary in Canada which are convertible into shares of Vestcom
common stock).
THE CONSENT PROCEDURE
Under Section 14A:5-6(2) of the Business Corporation Act of
the State of New Jersey ("BCA"), unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at a meeting of
shareholders may be taken, other than the annual election of directors, without
a meeting, without prior notice and without a vote, upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
which would be necessary to authorize such action at a meeting at which all
shareholders entitled to vote were present. Vestcom's Certificate of
Incorporation does not prohibit shareholder actions by consent. Section 2.15.1
of Vestcom's current By-Laws provides that any action required to be taken under
the BCA may be taken without a meeting by written consent.
Both Section 14A:5-6(2)(a) of the BCA and Section 2.15.2 of
Vestcom's current By-Laws permit the Board to fix a record date for determining
the shareholders entitled to consent to the Dissidents' Proposals. The Board
also is authorized under Section 14A:5-6(2)(a) of the BCA to fix a date on which
consents are to be tabulated. Under Section 14A:5-7(1) of the BCA, the Record
Date to determine shareholders entitled to give a written consent may not be
more than 60 days before the tabulation date.
The Secretary of the Company is obligated under Section 2.15.3
of the By-Laws to designate an independent, qualified inspector with respect to
such consents and revocations. That inspector shall provide for the safekeeping
of the consents and revocations received by the Company, and conduct a
reasonable investigation for the purpose of ascertaining the validity of the
consents and all matters incident thereto, including without limitation, whether
the holders of shares having the requisite voting power to authorize or take the
action specified in the consents have given consent. If after such investigation
the inspector shall determine that any action purportedly taken by such consents
has been validly taken, the fact shall be certified on the records of the
Company kept for the purpose of recording the proceedings of meetings of
shareholders, and the consents shall be filed with such records.
Under Section 14A:5-25(5) of the BCA, each inspector is
required to take and sign an oath faithfully to execute the duties of inspector
with strict impartiality and according to the best of his ability. In addition
to the obligations mandated by the Company's By-Laws that are set forth above,
the inspectors are specifically obligated, under the BCA, to determine the
number of shares of the Company's common stock outstanding, the voting power of
each share, the validity and effect of consents and consent revocations, to
receive votes and consents, hear and determine all challenges and questions
arising in connection with the right to consent or revoke consent, count and
tabulate all consents and consent revocations and to determine the result, and
do such other acts as are proper to conduct the vote with fairness to all
shareholders.
To be effective, the unrevoked consents of the holders of not
less than a majority of the shares of common stock outstanding and entitled to
vote on the record date must be obtained within the time limit specified herein
to adopt each of the Dissidents' Proposals. Each share of common stock is
entitled to one vote per share. Since consents are required from holders as of
the record date of not less than a majority of the outstanding shares of the
common stock in order for each of the Dissidents' Proposals to be adopted, an
abstention from voting on any one of the Dissidents' Proposals or a broker
non-vote will have the practical effect of a vote against such Proposals.
A shareholder may revoke any previously signed consent by
signing, dating and returning a BLUE Consent Revocation Card accompanying this
Consent Revocation Statement in the postage paid envelope provided, and either
marking the "Revoke Consent" box, or not marking any boxes. In lieu of sending
the BLUE Consent Revocation Card to Georgeson in the enclosed envelope, you may
send it to the Company, marked "Attention: Secretary." If you do not indicate a
specific vote on the BLUE Consent Revocation Card with respect to any one or
more of the Dissidents' Proposals, your card will be used in accordance with the
Board's recommendation to revoke any consent with respect to any Proposal not
specifically voted on. If the BLUE Consent Revocation Card is signed and
returned, any previously executed consent will be revoked unless the "Do Not
Revoke Consent" box is marked.
-18-
<PAGE>
If the Dissidents obtain consents from a majority of the
outstanding shares for their Proposals, the Company will promptly deliver, after
the tabulation date, a notice to all shareholders, as required under Section
14A:5-6(2)(b) of the BCA, stating the proposed effective date of the Dissidents'
Proposals. If the Dissidents receive the requisite number of consents, the
effective date of the consents and of the Dissidents' Proposals would be 10 days
after the date such notice is given, unless a sufficient number of Consent
Revocation Cards are received by the date communicated to shareholders to be the
effective date.
We fixed the "Record Date" as February 8, 2000 and the
"Tabulation Date" as April 7, 2000. In accordance with Vestcom's current
By-Laws, the Secretary of the Company has designated CT Corporation System to
act as inspector with respect to the consents and consent revocations. The
Company has retained Georgeson to assist in communicating with shareholders in
connection with the Dissidents' solicitation and to assist in our efforts to
obtain consent revocations. If you have any questions about how to complete or
submit your BLUE Consent Revocation Card or any other questions, Georgeson will
be pleased to assist you. You may call Georgeson toll-free at 800-223-2064.
Shareholders are Urged to Deliver all BLUE Consent
Revocations Cards to:
Georgeson Shareholder Communications Inc.
17 State Street, 10th floor
New York, NY 10004
Toll-Free: (800) 223-2064
Fax: (212) 440-9009
If you are against the Dissidents' Proposals and have not
signed a Gold consent, you may show your opposition to the Dissidents' Proposals
by signing, dating and returning the enclosed BLUE Consent Revocation Card. This
will better enable the Company to keep track of how many shareholders oppose the
Dissidents' Proposals.
The Company requests that if you deliver your BLUE Consent
Revocation Card to the Company instead of Georgeson, that you also deliver a
photocopy to Georgeson, so that Georgeson will be aware of all revocations.
If any shares of common stock that you owned on the Record
Date were held for you in an account with a stock brokerage firm, bank nominee
or other similar "street name" holder, you are not entitled to vote such shares
directly, but rather must give instructions to the stock brokerage firm, bank
nominee or other "street name" holder to grant or revoke consent for the shares
of common stock held in your name. Accordingly, you should contact the person
responsible for your account and direct him or her to execute the enclosed BLUE
Consent Revocation Card on your behalf.
You are urged to confirm in writing your instructions to the
persons responsible for your account and provide a copy of those instructions to
the Company so that the Company will be aware of your instructions and ensure
that your instructions are followed.
-19-
<PAGE>
INFORMATION ABOUT US,
THE PEOPLE ASKING YOU
TO REVOKE YOUR CONSENT
The table below sets forth the names and ages (as of February
1, 2000) of each of Vestcom's directors, and the other positions and offices
presently held by each of the directors within the Company, the period during
which each such person has served on the Board of Directors of the Company, 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 director's business experience, such director has held the position indicated
for at least the past five years.
<TABLE>
<CAPTION>
Director
Name and Age Since Business Experience
- ------------------------- -------- -------------------
<S> <C> <C>
Joel Cartun, 60 1996 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(1) 1997 President and Chief Operating Officer of Staffmark, Inc. (a provider of human
resource and professional services) (September 1999 to present); Managing
Director, International Operations, Intelligroup, Inc. (a computer services
company) (January 1999 to November 1999); 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, 68(1) 1997 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, 45 1998 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).
Fred S. Lafer, 70 1997 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). Mr.
Lafer is also a director of Virtual Communities, Inc.
Robert J. Levenson, 58 1998 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., Emisphere
Technologies, Inc. and Virtual Communities, Inc.
Richard D. White, 46 1997 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>
- --------------
(1) These two directors are not subject to removal under the Dissidents'
Proposals.
-20-
<PAGE>
Board Meetings and Committees
The Board of Directors of the Company held 15 meetings during
1999. 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 2 times during 1999. 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 held no formal
meetings during 1999. The Company's current By-Laws establish formal procedures
for considering nominees recommended by shareholders.
The Board has a 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 7 meetings during 1999.
During the year ended December 31, 1999, 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, 1999, 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 previously 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 1999 was $720,210. Gary Marcello, a greater than 5%
shareholder of Vestcom, owns interests ranging from 75% to 100% in the
partnerships which own the properties previously leased by VMA in Dover, New
Jersey and previously leased in Scranton, Pennsylvania. VMA's related party rent
expenses for these properties for 1999 was $280,435. Pursuant to a written
agreement with the owners, the lease obligations ceased in August 1999.
In August 1999, Vestcom entered into an agreement with CIBC
World Markets for advisory services. Pursuant to that agreement, Vestcom is
obligated to pay CIBC World Markets $25,000 each calendar quarter for such
services. In 1999, Vestcom paid $25,000 to CIBC World Markets under this
agreement. In December 1999, Vestcom entered into another agreement with CIBC
World Markets pursuant to which it agreed to pay $25,000 for services rendered
in connection with the Company's adoption of its shareholder protection plan.
This amount will be paid in 2000. Richard D. White, a director of Vestcom, is a
Managing Director of CIBC Capital Partners, an affiliate of CIBC World Markets.
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.
Principal Shareholders
Based upon information available to the Company, the only
shareholders known by the Company to beneficially own more than 5% of the
outstanding common stock as of February 8, 2000 are (i) Joel Cartun, (ii) Gary
J. Marcello, (iii) Brookside Capital Partners Fund, L.P. ("Brookside"), (iv)
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<PAGE>
Dimensional Fund Advisors Inc. ("Dimensional"), and (v) R-Squared Limited,
TimeTrust, Inc. and Harish K. Chopra (the "Chopra Group"). For information
concerning the holdings of Mr. Cartun, see "Security Ownership of Management."
Pursuant to filings made by the respective holders with the SEC, Gary Marcello,
Brookside, Dimensional and the Chopra Group owned the following number of shares
of the Company's common stock as of February 8, 2000:
<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) 12.71%
Two Copley Place
Boston, MA 02116
Dimensional Fund Advisors Inc. 544,100(B) 6.01%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
R-Squared Limited 742,100(C) 8.19%
P.O. Box 1586 GT
Cardinal Avenue
George Town, Grand Cayman
British West Indies
Harish K. Chopra (C) (C)
TimeTrust, Inc.
1455 Frazee Road, Suite 420
San Diego, California 92108
Gary J. Marcello 884,117(D) 9.77%
1 Penny Lane
Boonton, New Jersey 07005
</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) Dimensional has indicated in its filing with the SEC that it has the sole
power to vote and dispose of these shares.
(C) R-Squared Limited has the sole voting power and the sole dispositive power
with respect to 527,100 shares of common stock. TimeTrust, Inc. has the sole
voting power and the sole dispositive power with respect to 184,500 shares
of common stock. Harish K. Chopra has the sole voting power and the sole
dispositive power with respect to 30,500 shares of common stock. TimeTrust,
Inc. is an investment company of which Mr. Chopra is the Chief Executive
Officer and President. Mr. Chopra and R-Squared Limited are the sole owners
of TimeTrust, Inc.
(D) Includes 441,738 shares with respect to which Mr. Marcello has sole voting
and sole dispositive power and 442,379 shares (comprised of 375,152 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.
-22-
<PAGE>
Security Ownership of Management
The following table sets forth information regarding the
beneficial ownership of the Company's common stock as of February 1, 2000 by (i)
each current director of the Company; (ii) each Named Officer (as defined
herein) of the Company; and (iii) all current executive officers and directors
of the Company as a group. Unless otherwise indicated, each of the named
shareholders 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 April 1, 2000.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
------------------
Shareholder Number Percent
----------- ------ -------
<S> <C> <C>
Joel Cartun........................................................................ 1,488,198(1) 16.4%
Brendan Keating.................................................................... 43,000(2) *
Stephen R. Bova.................................................................... 153,000(3) 1.7
Leonard J. Fassler................................................................. 18,500(4) *
Fred S. Lafer...................................................................... 22,100(5) *
Robert J. Levenson................................................................. 18,100(6) *
Richard D. White................................................................... 115,000(7) 1.3
Michael D. Helfand................................................................. 1,000 *
Sheryl B. Cilenti.................................................................. 12,700(8) *
All current executive officers, directors and nominees for director as a group
(9 persons)...................................................................... 1,871,598(9) 20.4%
</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 32,500 shares issuable upon the exercise of stock options.
(3) Includes 15,000 shares issuable upon the exercise of stock options.
(4) Includes 1,000 shares held by Mr. Fassler's wife. Mr. Fassler disclaims
beneficial ownership of such shares. Also includes 15,000 shares issuable
upon the exercise of stock options.
(5) Includes 1,200 shares held by family trusts of which Mr. Lafer is trustee.
Also includes 15,000 shares issuable upon the exercise of stock options.
(6) Includes 600 shares held by Mr. Levenson's wife as custodian for the benefit
of her children. Also includes 10,000 shares issuable upon the exercise of
stock options.
(7) Includes 61,704 shares held in the aggregate by CIBC World Markets and an
affiliate of CIBC World Markets. Mr. White is a Managing Director of CIBC
Capital Partners, an affiliate of CIBC World Markets. Mr. White disclaims
beneficial ownership of these 61,704 shares. Also includes 15,000 shares
issuable upon the exercise of stock options. Pursuant to Mr. White's
employment arrangement with CIBC, any economic benefit derived from these
options must be contributed by him to CIBC.
(8) Includes 11,700 shares issuable upon the exercise of stock options.
(9) Includes an aggregate of 114,200 shares issuable upon the exercise of stock
options.
-23-
<PAGE>
Summary of Cash and Certain Other Compensation
The Company did not commence operations until August 1997,
upon consummation of its initial public offering (the "IPO"). The following
table sets forth, for the fiscal years ended December 31, 1999, 1998 and 1997,
the annual and long-term compensation of the Company's Chief Executive Officer
and the other three executive officers of the Company at December 31, 1999 (the
"Named Officers").
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...................... 1999 $200,000 $ -- $-- -- $3,775
Chairman of the Board and 1998 196,728 -- -- -- 11,481
Chief Executive Officer 1997 211,568 30,000(A) -- -- 5,427
Brendan Keating(D)............... 1999 $200,000 $70,000 -- 50,000 $3,775
President and Chief Operating 1998 200,000 85,000 -- 95,000 3,804
Officer 1997 39,615 -- -- 100,000(E) --
Michael D. Helfand(F)............ 1999 $46,154 -- -- 50,000 --
Executive Vice President,
Chief Financial Officer and
Treasurer
Sheryl Bernstein Cilenti(G)...... 1999 $122,885 $20,000 -- 16,000 $1,558
Vice President, General 1998 103,923 20,000 -- 4,000 1,551
Counsel and Secretary 1997 24,231 -- -- 15,000 --
</TABLE>
- ------------------------
(A) Represents bonuses paid during 1997 by Vestcom Mid-Atlantic, Inc., a
subsidiary of Vestcom, 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 1999, represents contributions made by the Company of $3,775 for Mr.
Cartun, $3,775 for Mr. Keating and $1,558 for Ms. Cilenti to the Company's
401(k) plan to match 1999 pre-tax elective deferral contributions (included
under "Salary") made by such persons to such plan.
(D) Mr. Keating joined the Company in October 1997.
(E) These options were canceled in August 1998.
(F) Mr. Helfand joined the Company in October 1999. (G) Ms. Cilenti joined the
Company in October 1997.
Employment Agreements
Mr. Cartun entered into an employment agreement with Vestcom
which commenced on August 4, 1997, upon the consummation of the Company's IPO.
Mr. Cartun's employment agreement terminates in August 2000. Mr. Cartun serves
as Chairman and Chief Executive Officer at an annual base salary of $200,000.
Mr. Cartun's employment agreement provides that in the event
of a termination of employment by the Company without cause, Mr. Cartun 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
termination of employment as a result of his death or disability, he (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 time his then-current base salary, offset
by any payments made by the Company pursuant to any life insurance or disability
-24-
<PAGE>
policies. If employment terminates for cause or he terminates his employment for
reasons other than death or permanent disability, he will only be entitled to
receive earned but unpaid salary as of the date of termination.
Mr. Keating serves as President and Chief Operating Officer of
the Company at an annual base salary of $200,000. He was subject to a two year
employment agreement which terminated in October 1999, and is currently an
at-will employee. His employment agreement provided for a guaranteed annual
bonus of 35-50% of his annual salary, based on performance, during the two year
term of the agreement. The Company is required to provide Mr. Keating with four
months notice prior to any termination.
Ms. Cilenti, Vice President and General Counsel of the
Company, entered into a letter agreement with Vestcom in October 1997, pursuant
to which she serves as an at-will employee with a current salary of $135,000.
Mr. Helfand, Executive Vice President and Chief Financial
Officer of the Company, entered into a letter agreement with the Company in
September 1999, pursuant to which he serves as an at-will employee with a
current salary of $200,000. The letter agreement also provides that Mr. Helfand
will be entitled to earn a bonus of up to 50% of his annual salary for each of
2000 and 2001 (which will be pro-rated for calendar 1999) based on achieving
mutually agreed-upon goals and the Company's performance. Mr. Helfand is
guaranteed a minimum bonus of $50,000 in each of 2000 and 2001 (which will also
be pro-rated for calendar 1999, but payable in 2000). Mr. Helfand's agreement
provides that if he were terminated for any reason other than cause (as
defined), he would be entitled to receive six months severance.
All of the Named Officers 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 Named Officers has a Change in Control agreement
with the Company. Pursuant to these Change in Control agreements, upon the
occurrence of a "Trigger Event", the executive would be entitled to receive a
lump sum payment equal to two times the sum of his or her 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 shareholders 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 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.
Pursuant to these change in control agreements, if the
Dissidents are successful, a "change in control" of the Company will have
-25-
<PAGE>
occurred. If the employment of these executives were to be terminated during the
12 month period following the change in control, or if such employment were not
continued for 12 months with a salary and bonus at least equal to what each
executive received immediately prior to the change in control, each executive
would be entitled to receive the following lump sum payment: Joel Cartun -
$400,000; Brendan Keating - $540,000; Michael D. Helfand - $500,000; and Sheryl
Bernstein Cilenti - $310,000.
Stock Options
The following table contains information regarding the grant
of stock options to the Named Officers during the year ended December 31, 1999.
In addition, in accordance with rules adopted by the SEC, the following table
sets forth the hypothetical gains or "option spreads" that would exist for the
respective options assuming rates of annual compound price appreciation in the
Company's common stock of 5% and 10% from the date the options were granted to
their final expiration date.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants (A)
<TABLE>
<CAPTION>
Potential
Number of Common Realizable Value
Shares % of Total at Assumed Annual
Underlying Options Granted Rates of Stock
Options to Employees in Exercise Price Price Appreciation
Name Granted Fiscal 1999 Per Share ($/sh.) Expiration Date for Option Term
- ---- ------- ----------- ----------------- --------------- ---------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun.................. -- -- $ -- -- $ -- $ --
Brendan Keating.............. 50,000 12.5 3.094 11/22/09 97,290 246,550
Michael D. Helfand........... 50,000 12.5 2.875 10/03/09 90,403 229,100
Sheryl Bernstein Cilenti..... 11,000 2.7 5.375 3/10/09 37,183 94,230
Sheryl Bernstein Cilenti..... 5,000 1.2 3.094 11/22/09 9,729 24,655
</TABLE>
- -------------------
(A) The options granted to Messrs. Keating and Helfand and to Ms. Cilenti 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 20% 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).
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 have occurred since the
IPO.
<TABLE>
<CAPTION>
Ten Year Option/SAR Repricings (A)
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.
-26-
<PAGE>
No stock options were exercised by the Named Officers during
the year ended December 31, 1999. 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, 1999. Also reported are the values for "in-the-money" options,
which represent the positive spread between the exercise prices of existing
options and $3.50, the closing sale price of the Company's common stock on
December 31, 1999. On March 10, 2000, the closing sale price of the Company's
common stock on the Nasdaq National Market was $5.375.
-27-
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Shares
Number of Underlying Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
on Exercise(#) Realized ($) Year-End (#) Year-End ($)
-------------- ------------ ------------ ------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel Cartun.................. -- $-- -- -- $ -- $ --
Brendan Keating.............. -- -- 23,750 121,250 -- 20,300
Michael D. Helfand........... -- -- -- 50,000 -- 31,250
Sheryl Bernstein Cilenti..... -- -- 8,500 26,500 -- 2,030
</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.
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.
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.
Mr. Cartun did not receive any significant increase in salary
for 1999 from 1998. The decision not to raise his salary was based on the
Company's performance. Mr. Keating received a cash bonus and stock options in
1999 to reward his individual performance and contributions to the Company. Ms.
Cilenti received an increase in salary for 1999 as well as a cash bonus and
stock options to reward her individual performance and contributions to the
Company. Mr. Helfand received options upon his joining the Company in October
1999.
-28-
<PAGE>
All of the Named Officers have change in control agreements
which contain identical terms. The Compensation Committee thought it was
important for the Company to enter into these arrangements in order to provide
security to these officers in the event of a change in control (as defined) 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 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
Shareholder Return Comparison
Set forth below is a line-graph presentation comparing the
cumulative shareholder 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, 1999. 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.
-29-
<PAGE>
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 3/31/99 6/30/99 9/30/99 12/31/99
------- ------- -------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vestcom International, 100.00 117.69 137.69 64.23 56.92 56.92 55.38 30.00 21.54 16.15 21.54
Inc.
Peer Group 100.00 89.93 96.98 120.13 62.55 38.40 45.91 58.81 64.24 50.38 31.57
Nasdaq Market Index 100.00 105.60 98.95 115.97 118.96 107.22 139.38 155.72 169.44 172.20 254.33
</TABLE>
Assumes $100 invested in July 30, 1997
Assumes dividend reinvested
Fiscal Year Ended December 31, 1999
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934,
Vestcom's executive officers and directors, and persons who own more than ten
percent of Vestcom's common stock, are required to file reports of ownership and
changes in ownership with the SEC. These persons also are required by federal
securities regulations to give Vestcom copies of these reports. Management has
reported to us that, based solely on their review of reports filed for 1999, all
reporting requirements applicable to these persons were complied with for 1999.
SOLICITATION OF CONSENT REVOCATIONS
Consent revocations may be solicited by mail, telephone,
facsimile transmission or other electronic media and in person. Solicitation of
consent revocations may be made by directors, officers and regular employees of
Vestcom for which they will receive no additional compensation.
Georgeson will receive a fee of $15,000 for its services to
Vestcom in connection with the solicitation of the consent revocations, plus
reimbursement for reasonable out-of-pocket expenses. Vestcom has also agreed to
indemnify Georgeson for certain liabilities in connection with this
solicitation. Approximately 20 persons will be employed by Georgeson to solicit
shareholders.
Banks, brokers, custodians, nominees and fiduciaries will be
requested to forward solicitation material to beneficial owners of shares of
Vestcom common stock. Vestcom will reimburse banks, brokers, custodians,
nominees and fiduciaries for their reasonable expenses for sending solicitation
material to the beneficial owners.
The entire cost of soliciting the consent revocations,
including, without limitation, costs, if any, relating to advertising, printing,
fees of attorneys, financial advisors, proxy solicitors, accountants, public
relations, transportation, litigation and related expenses and filing fees, will
be borne by Vestcom. Vestcom estimates that total expenditures relating to the
Vestcom Board's solicitation of the consent revocations will be approximately
$325,000. Such costs do not include the amount normally expended for a
solicitation for an uncontested election of directors or costs represented by
salaries and wages of regular employees and officers. The portion of such costs
allocable solely to the solicitation of consent revocations to the Dissidents'
Proposals is not readily determinable. To date, approximately $60,000 has been
paid by Vestcom in connection with its solicitation of revocations of consents.
-30-
<PAGE>
ABSENCE OF APPRAISAL RIGHTS
Under New Jersey law, you do not have appraisal rights in
connection with our solicitation of consent revocations.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the SEC, each member of the
Vestcom Board and each executive officer of Vestcom may be deemed to be a
"participant" in Vestcom's solicitation of revocations of consent. In the event
each of these persons is deemed a "participant", and without acknowledging that
any such person is a "participant", we furnish the following information. Except
as set forth below, the principal business addresses of each director and
executive officer are 5 Henderson Drive, West Caldwell, New Jersey 07006. The
principal occupation of each director and executive officer is set forth in this
Revocation Statement under the sections entitled "Information About Us, The
People Asking You To Revoke Your Consent" and "Summary of Cash and Certain Other
Compensation", respectively. Information about the present ownership by
directors and executive officers and any of their respective "associates" of
Vestcom common stock is set forth under the section entitled "Security Ownership
of Management." Information about transactions by each director and executive
officer in Vestcom's common stock during the past two years can be found in such
director's or executive officer's filings under Section 16 of the Securities
Exchange Act of 1934, as amended, during that period. Information about related
party transactions involving directors and executive officers can be found under
the sections entitled "Certain Transactions" and "Employment Agreements". Except
as otherwise set forth in this Revocation Statement, none of the directors or
executive officers or any of their respective "associates" has any arrangement
or understanding with any person with respect to future employment or future
transactions with Vestcom.
Stephen R. Bova Robert J. Levenson
President and COO Executive Vice President
Staffmark, Inc. First Data Corp.
234 E. Millsap Road One Mack Centre Drive
Fayetteville, AR 72703 Paramus, NJ 07652
Leonard J. Fassler Richard D. White
Co-Chairman Managing Director
Interliant, Inc. CIBC Capital Partners
2 Manhattanville Road 425 Lexington Avenue
Purchase, NY 10577 9th Floor
New York, NY 10017
Fred S. Lafer
President
c/o Taub Foundation
300 Frank W. Burr Blvd.
Teaneck, NJ 07666
SHAREHOLDER PROPOSALS
If a shareholder intends to present a proposal at Vestcom's
next Annual Meeting of Shareholders (excluding proposals for nominations to the
Board of Directors, which are governed by the Company's By-Laws and must have
been received by February 26, 2000), the proposal must be received by March 12,
2000 in order for the proposal to be considered at the next Annual Meeting (but
not included in the proxy statement for such meeting). As reported in our proxy
statement for last year's Annual Meeting of Shareholders, shareholder proposals
must have been 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 the 2000 Annual Meeting.
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent
accountants for the year ended December 31, 1999 and are expected to serve in
that capacity for 2000.
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934, as amended.
The SEC maintains an Internet world wide web site that provides access, without
charge, to reports, proxy statements and other information about issuers, like
Vestcom, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
You also may obtain copies of these materials by mail from the
Public Reference Section of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. These
materials are also available from the SEC in person at any one of its public
reference rooms. Please call the SEC at l-800-SEC-0330 for further information
on its public reference rooms. You may read and copy this information at the
following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You can also obtain, without charge, reports, proxy statements
and other information, including without limitation, any information we may
incorporate by reference herein, about the Company, by contacting: Vestcom
International, Inc., 5 Henderson Drive, West Caldwell, New Jersey 07006, Attn:
Corporate Secretary, telephone: 973.882.7000, facsimile: 973.882.9724, or on the
Company's Internet world wide web site: http://www.vestcomintl.com.
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<PAGE>
CAUTION ABOUT FORWARD LOOKING STATEMENTS
This Consent Revocation Statement contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
that are based on the beliefs of the Company's management and Board of
Directors, as well as assumptions made by and information currently available to
the Company's management and Board of Directors. Such statements reflect the
current views of the Company or the Board of Directors with respect to future
events based on currently available information and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements.
Factors that could cause actual results to differ materially
from the Company's expectations include, but are not limited to, the following:
the ability of the Company to execute and manage the Company's growth strategy,
the results of the Company's investment spending, the ability to effectively
consolidate and integrate its production facilities and functions as part of the
Company's integration program, the ability to realize reduced overhead costs,
increased production capacity and operating efficiencies, improved financial
results, operational synergies and enhanced services at the newly consolidated
facilities, the ability of the Company to execute and manage its renewed
profitability and growth strategy, acceptance of the Company's products and
services, including Internet-related services, in the marketplace, the entrance
of new competitors into the marketplace, the ability to attract and retain key
customers, the ability to positively modify its revenue mix, variations in
quarterly results and the sufficiency of the Company's working capital, and
other factors which are described from time to time in the Company's public
filings with the Securities and Exchange Commission, news releases and other
communications. Also, when Vestcom uses the words "believes," "expects,"
"anticipates," "estimates," "plans," "intends," "objectives," "goals," "aims,"
"projects" or similar words or expressions, Vestcom is making forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
does not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
March 13, 2000 By Order of the Board of Directors
Sheryl Bernstein Cilenti, Secretary
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<PAGE>
IMPORTANT
1. If your shares are registered in your name, please sign, date and
mail the enclosed BLUE Consent Revocation Card to Georgeson in the postage-paid
envelope provided.
2. If you have previously signed and returned a Gold consent card to
the Dissidents, you have every right to change your vote. Only your latest dated
card will count. You may revoke any Gold consent card already sent to the
Dissidents by signing, dating and mailing the enclosed BLUE Consent Revocation
Card in the postage-paid envelope provided.
3. In order to be sure that you are revoking a prior consent, you must
either mark the "Revoke Consent" boxes on the BLUE Consent Revocation Card or
sign the BLUE Consent Revocation Card without marking any boxes. If you do not
mark any box for any one or more of the Dissidents' Proposals on the BLUE
Consent Revocation Card and you sign and return the Card, you will be deemed to
have revoked any previously signed consent to any proposal you did not mark. If
the BLUE Consent Revocation Card is signed and returned, any previously executed
consent will be revoked unless the "Do Not Revoke Consent" box is marked.
4. If your shares are held in the name of a brokerage firm, bank
nominee or other institution, only it can sign a BLUE Consent Revocation Card
with respect to your shares and only after receiving your specific instructions.
Accordingly, please sign, date and mail the enclosed BLUE Consent Revocation
Card in the postage-paid envelope provided. To ensure that your shares are
voted, you should also contact the person responsible for your account and give
instructions for a BLUE Consent Revocation Card to be signed representing your
shares.
5. After signing the enclosed BLUE Consent Revocation Card, do not sign
or return the Gold consent card. Do not even use the Dissidents' Gold consent
card to indicate your opposition to the Dissidents' Proposals.
If you have any questions above giving your revocation of consent or
require assistance, please call:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th floor
New York, NY 10004
Toll-Free: (800) 223-2064
Fax: (212) 440-9009
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<PAGE>
VESTCOM INTERNATIONAL, INC.
THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VESTCOM INTERNATIONAL, INC. ("VESTCOM") IN OPPOSITION TO THE CONSENT
SOLICITATION BY HARISH K. CHOPRA, TIMETRUST, INC. AND R-SQUARED LIMITED (the
"DISSIDENTS").
The undersigned, a holder of shares of common stock, par value $0.01 per share,
of Vestcom, is acting with respect to all the shares of common stock of Vestcom
held by the undersigned, and hereby revokes any and all consents that the
undersigned may have given in respect of the following proposals submitted by
the Dissidents:
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS OF VESTCOM UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"REVOKE CONSENT" ON EACH PROPOSAL SET FORTH BELOW. Please sign, date and
mail this consent revocation card today.
1. Remove five (Joel Cartun, Brendan Keating, Fred S. Lafer, Robert J.
Levenson, and Richard D. White) of the seven current Vestcom directors (other
than Stephen R. Bova and Leonard J. Fassler) and remove any other director
elected or appointed to the Vestcom Board before the effective date of this
shareholder action other than the five nominees hand-picked by the Dissidents.
[_] REVOKE CONSENT [_] DO NOT REVOKE CONSENT
INSTRUCTIONS: To revoke consent or withhold revocation of consent
to the removal of all the persons named in the above proposal,
check the appropriate box. If you wish to revoke the consent to the
removal of certain of the persons named above, but not all of them,
check the "Revoke Consent" box and write the name of each such
person as to whom you do not wish to revoke consent (i.e., the
persons you want removed) in the following space:_________________
________________________________________________________________ .
2. Elect the five nominees hand-picked by the Dissidents (Harish K.
Chopra, Howard April, Parker S. Kennedy, Frank E. Raab, Robert J. Verrilli) to
serve as directors of Vestcom (or, if any of those five nominees is unable to
serve as a director of Vestcom, any other person designated as a nominee by the
remaining nominee or nominees).
<PAGE>
[_] REVOKE CONSENT [_] DO NOT REVOKE CONSENT
INSTRUCTIONS: To revoke consent or withhold revocation of consent
to the election of all the persons named in the above proposal,
check the appropriate box. If you wish to revoke the consent to the
election of certain of the persons named above, but not all of
them, check the "Revoke Consent" box and write the name of each
such person as to whom you do not wish to revoke consent (i.e., the
persons you want elected) in the following space:_________________
________________________________________________________________ .
3. Amend Section 3.7 of Article III of the Vestcom By-Laws to provide
that any vacancy or vacancies on the Vestcom Board created as a result of the
removal of any of the current directors by Vestcom's shareholders may be filled
only by a majority vote of Vestcom's shareholders.
[_] REVOKE CONSENT [_] DO NOT REVOKE CONSENT
4. Amend Section 3.2 of Article III of the Vestcom By-Laws to set the
number of directors of Vestcom at seven.
[_] REVOKE CONSENT [_] DO NOT REVOKE CONSENT
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<PAGE>
5. Repeal any amendment to the Vestcom By-Laws that is adopted by the
current Vestcom Board after December 16, 1999 and before these proposals become
effective and the nominees are seated.
[_] REVOKE CONSENT [_] DO NOT REVOKE CONSENT
Note: The Dissidents have imposed the following condition on the adoption of
their Proposals: unless Proposals 1 and 2 are approved, none of the other
Proposals will become effective.
IF NO DIRECTION IS MADE WITH RESPECT TO ONE OR MORE OF THE FOREGOING PROPOSALS,
OR IF YOU MARK THE "REVOKE CONSENT" BOX WITH RESPECT TO ONE OR MORE OF THE
FOREGOING PROPOSALS, THIS REVOCATION OF CONSENT WILL REVOKE ALL PREVIOUSLY
EXECUTED CONSENTS WITH RESPECT TO SUCH PROPOSALS.
IF YOU DO NOT MARK ANY BOX FOR ANY ONE OR MORE OF THE FOREGOING PROPOSALS AND
YOU SIGN AND RETURN THIS CARD, YOU WILL BE DEEMED TO HAVE REVOKED ANY PREVIOUSLY
SIGNED CONSENT TO ANY PROPOSAL YOU DID NOT MARK. IF THE BLUE CONSENT REVOCATION
CARD IS SIGNED AND RETURNED, ANY PREVIOUSLY EXECUTED CONSENT WILL BE REVOKED
UNLESS THE "DO NOT REVOKE CONSENT" BOX IS MARKED.
Dated: _______________, 2000
------------------------------------------
Signature
------------------------------------------
Signature, if held jointly
------------------------------------------
Title of Authority
Please sign exactly as your name appears hereon. If shares are held jointly,
each stockholder should sign. When signing as attorney, executor, administrator,
trustee, guardian, corporate officer, etc., give full title as such. Please
sign, date and mail this Consent Revocation Card promptly in the enclosed
postage-paid envelope.
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<PAGE>
If you have any questions or need assistance, please contact Georgeson
Shareholder Communications Inc., which is assisting Vestcom in this solicitation
of consent revocations:
Georgeson Shareholder Communications Inc.
17 State Street, 10th floor
New York, NY 10004
Toll-Free: (800) 223-2064
Fax: (212) 440-9009
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