<PAGE>
PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED MARCH 2, 2000
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:
|X| Preliminary Consent Revocation Statement
|_| Confidential, for Use of the Commission only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Consent Revocation Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
VESTCOM INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------
<PAGE>
[Vestcom Letterhead]
March ___, 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.
Thank you for your continued interest and support.
Very truly yours,
Joel Cartun
Chairman of the Board
<PAGE>
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.
<PAGE>
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 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 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 , 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
-2-
<PAGE>
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.
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.
-3-
<PAGE>
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.
-4-
<PAGE>
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:
-5-
<PAGE>
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.
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
-6-
<PAGE>
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."
-7-
<PAGE>
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.
-8-
<PAGE>
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.
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
-9-
<PAGE>
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.
-10-
<PAGE>
We adopted a shareholder protection plan in December 1999 as part of our
strategy of enhancing shareholder value. 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. 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.
In addition, 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 considered 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
-11-
<PAGE>
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.
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. 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.
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.
-12-
<PAGE>
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:
$8.4 million $130.2 million
Employees as of March 31, 1998: Employees as of December 31, 1999:
approximately 140 approximately 1,000
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.
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
-13-
<PAGE>
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.
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
-14-
<PAGE>
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.
-15-
<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
-16-
<PAGE>
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.
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.
-17-
<PAGE>
(2) 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.
(3) Amend Section 3.2 of Article III of the Vestcom by-laws to set the
number of directors of Vestcom at seven.
(4) 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).
(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:
-18-
<PAGE>
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 STATE STREET, 10TH FLOOR
NEW YORK, NY 10004
TOLL-FREE: (800) 223-2064
FAX: (212) 440-9009
-19-
<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
-20-
<PAGE>
assure that any contest for control of Vestcom is conducted in accordance with
applicable law.
-21-
<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
-22-
<PAGE>
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 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.
-23-
<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).
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. and Emisphere Technologies, 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.
-24-
<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 $ . 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 $ . 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"),
-25-
<PAGE>
(iv) 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
-26-
<PAGE>
held by a family partnership and 67,227 shares held by a foundation) with
respect to which Mr. Marcello shares voting and dispositive power.
-27-
<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.
-28-
<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
policies. If employment terminates for cause or he terminates his employment for
-29-
<PAGE>
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.
-30-
<PAGE>
Pursuant to these change in control agreements, if the Dissidents are
successful, a "change in control" of the Company will have 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 -
$310,000.
Stock Options
The following table contains information regarding the grant of stock
options to the Named Officers during the year ended December 31, 1999. In
addition, in accordance with rules adopted by the SEC, the following table sets
forth the hypothetical gains or "option spreads" that would exist for the
respective options assuming rates of annual compound price appreciation in the
Company's common stock of 5% and 10% from the date the options were granted to
their final expiration date.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants (A)
<TABLE>
<CAPTION>
Potential
Realizable Value
Number of Common % of Total at Assumed Annual
Shares Options Granted Rates of Stock
Underlying to Employees in Exercise Price Price Appreciation
Name Options Granted Fiscal 1999 Per Share ($/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.
Ten Year Option/SAR Repricings (A)
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Remaining
Options Time of Time of New at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended(#) Amendment($) Amendment($) Price($) Amendment
---- ---- ---------- ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Brendan Keating........... 08/12/98 100,000 $8.25 $21.625 $8.25 9 years
President and Chief
Operating Officer
</TABLE>
- -------------------
(A) On August 12, 1998, options covering 100,000 shares of common stock
granted to Mr. Keating in 1997 at an exercise price of $21.625 were
canceled. Also on August 12, 1998, Mr. Keating was granted options to
purchase
-31-
<PAGE>
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.
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
___, 2000, the closing sale price of the Company's common stock on the Nasdaq
National Market was $_____.
-32-
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Shares
Number of Underlying Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
on Exercise(#) Realized ($) 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.
-33-
<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.
-34-
<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
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, no fees have been paid by Vestcom in connection
with its solicitation of revocations of consents.
-35-
<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.
-36-
<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:
<TABLE>
<S> <C> <C>
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
</TABLE>
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.
-37-
<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 ___, 2000 By Order of the Board of Directors
Sheryl Bernstein Cilenti, Secretary
-38-
<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.
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
-39-
<PAGE>
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED MARCH ___, 2000
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:
------------
<PAGE>
2. 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
3. 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
4. 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).
[_] 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:
------------
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 4 are approved, none of the other
Proposals will become effective.
-2-
<PAGE>
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.
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.
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
-3-
