SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Consent Statement
|_| Confidential, for Use of the Commission only (as permitted by rule
14a-6(e)(2))
|_| Definitive Consent Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to sec.240.14a-11(c) or Rule 14a-12
VESTCOM INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
HARISH K. CHOPRA, TIMETRUST, INC. -and- R-SQUARED LIMITED
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY; SUBJECT TO COMPLETION
FEBRUARY __, 2000
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CONSENT STATEMENT
OF
HARISH K. CHOPRA, TIMETRUST, INC., and R-SQUARED LIMITED
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To the Shareholders of Vestcom International, Inc.:
This Consent Statement and the enclosed GOLD consent card are from Harish
K. Chopra, TimeTrust, Inc., and R-Squared Limited (the "Solicitors," "we" or
"us"). Through this Consent Statement we are providing you with the opportunity
to replace five of the seven current directors of Vestcom International, Inc.
("Vestcom" or the "Company") with our nominees and to approve three other
proposals relating to Vestcom's by-laws that are described in this Consent
Statement. The Solicitors own more than 8% of the Company's common stock and are
asking all Vestcom shareholders to consent to all of our proposals by marking,
signing and dating the enclosed GOLD consent card and returning it in the
enclosed, postage-paid envelope, to our consent solicitor, Beacon Hill Partners,
as set forth in this Consent Statement.
This Consent Statement and the enclosed GOLD consent card are first being
furnished to the shareholders of Vestcom on or about February __, 2000.
WHY YOUR CONSENT TO OUR PROPOSALS IS IMPORTANT
We are soliciting your consent to our Proposals in order to address and
remedy what we believe to be critical issues of Vestcom's mismanagement, poor
stock performance, revenue and earnings stagnation and what we believe are the
Board's repeated fiduciary violations that improperly entrench management.
It is important that these issues be addressed now, because we believe the
Board and senior management have shown no sign that they are willing to
institute the changes necessary to improve Vestcom's commercial performance,
stock price and financial condition, or to otherwise increase shareholder value.
We also believe that because of the poor operational decisions that the Board
and senior management have made and the failed strategic business model they
continue to follow, Vestcom cannot afford to waste precious time while its
condition continues to weaken. Further, we believe actions taken by the current
Board entrench itself and senior management, and also disenfranchise you and
Vestcom's other shareholders. In our view, the current Board's actions are
on-going breaches of the Board's fiduciary obligations that will only make it
progressively more difficult to "turn around" the Company's performance,
financial condition and stock price.
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WE BELIEVE THAT BY CONSENTING TO OUR PROPOSALS THE SHAREHOLDERS OF VESTCOM
WILL ELECT A BOARD OF DIRECTORS THAT WILL SUBSTANTIALLY IMPROVE VESTCOM'S
BUSINESS AND MARKETPLACE PERFORMANCE, AND WILL THEREBY INCREASE THE VALUE OF THE
VESTCOM SHARES FOR THE BENEFIT OF ALL VESTCOM SHAREHOLDERS.
OUR PROPOSALS
We are asking all Vestcom shareholders to consent to the following five
actions (the 'Proposals"), as authorized by New Jersey law:
(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 those five nominees identified herein to be elected by this
consent;
(2) Elect the five nominees (the "Nominees") described in this Consent
Statement to serve as directors of Vestcom (or, if any such Nominee is unable to
serve as a director of Vestcom, any other person designated as a Nominee by the
remaining Nominee or Nominees);
(3) Amend Section 3.7 of Article III of the Vestcom by-laws to provide
that any vacancy or vacancies on the Vestcom Board created as a result of the
removal of any of the current directors by Vestcom's shareholders may be filled
only by a majority vote of Vestcom's shareholders;
(4) Amend Section 3.2 of Article III of the Vestcom by-laws to set the
number of directors of Vestcom at seven; and
(5) Repeal any amendment to the Vestcom by-laws that is adopted by the
current Vestcom Board between December 16, 1999 and the date on which these
Proposals become effective and the Nominees are seated.
Each of these Proposals will be effective on April 17, 2000 if on or prior
to April 7, 2000 (the "Consent Tabulation Date") we receive and deliver to
Vestcom consents of a majority of the shares of Vestcom common stock that are
issued and outstanding on February 8, 2000 (the "Consent Record Date"). The
Consent Record Date is the date fixed by Vestcom for determining the shares
entitled to give such consents and the Consent Tabulation Date was delayed by
Vestcom for a further 10 days to the April 17, 2000 date. (For the basis of
Vestcom's delay, please see CONSENT PROCEDURE on page __.)
WE RECOMMEND THAT YOU CONSENT TO EACH OF THE PROPOSALS.
Unless we get approval for Proposals 1 AND 2, none of the Proposals will
become effective. Approval of each of the Proposals requires the affirmative
consent of a majority of the shares of Vestcom common stock outstanding on the
Consent Record Date. The overall purpose of the Proposals is to elect the
Nominees to the Vestcom Board. If they are elected to the Board, we believe the
Nominees will act in the best interest of Vestcom's shareholders. The Nominees
(three of whom are independent of the Solicitors) have indicated that they
believe that the best interests of the Vestcom shareholders would be served by
removing five of the seven current Vestcom Board members and replacing them with
the Nominees.
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If the five current directors are removed and our Nominees are elected in
their place, we believe that the resulting seven member Board will redirect the
Company's management and operations with the aim of prudently enhancing
shareholder value. In our opinion, the current Board has enhanced management
benefits at shareholder expense. Of course, there is no assurance that our
Nominees, if elected, will succeed in their efforts.
We also expect that, if elected, our Nominees will consider terminating
Joel Cartun as Vestcom's Chairman and Chief Executive Officer and consider
terminating Brendan Keating as Vestcom's President. If terminated, we expect
that the new Board would appoint Harish Chopra to these positions. Mr. Chopra
has agreed to serve in these capacities without salary for the initial year of
employment. For that initial year, he would be compensated solely by the grant
of options to purchase Vestcom common stock at a per share exercise price equal
to fair market value at the date of grant. The number of options granted for the
initial year and subsequent employment arrangements would be set by the
independent directors of the Company. Other than Mr. Chopra and Robert J.
Verrilli (who is the chief financial officer of TimeTrust, one of the
Solicitors), at the date of this Consent Statement none of the Nominees have
agreed to the foregoing, executive employment matters.
Under the terms of so-called "change of control" agreements that Vestcom
entered into with each of Mr. Cartun and Mr. Keating in January 1999 (and with
Michael D. Helfand, Vestcom's Chief Financial Officer, in September 1999* ), if
five of Vestcom's present directors are removed and replaced with our Nominees
this would alone constitute a change in control of management of the Company
under the terms of their employment agreements. Nevertheless, other than
reconstituting the Board to consist of two management directors (Messrs. Chopra
and Verrilli) and five independent directors (Messrs. April, Bova, Fassler,
Kennedy, Raab), which we believe would improve the operational management of the
Company, there would not be any other adverse consequences to the Company of
which the Solicitors are aware.
1. However, if during the 12 months following the reconstitution of the
Board Mr. Cartun, Mr. Keating and/or Mr. Helfand* were to be terminated without
cause under one of the "trigger events" defined under the terms of the change of
control agreements, then the Company would be obligated to pay to each such
former executive two times the sum of his then-current base salary and prior
years' bonus. Because Mr. Cartun's and Mr. Keating's base salaries for 1998 are
$196,728 and $200,000 respectively, and Mr. Helfand's base salary is $200,000,
and because we expect that Mr. Cartun will receive a bonus for 1999, Mr.
Keating's 1998 bonus was $85,000 and Mr. Helfand has a guaranteed bonus of
$50,000, the severance payments to each such executive, if and when terminated
during such following 12 months, would equal or exceed $500,000. Vestcom's
working capital may be further reduced if the Board of Directors determines to
reimburse the Solicitors for the cost of their solicitation efforts. Were one or
more such event to occur, it would have the effect of a one time non- recurring
compensation charge to earnings and reducing the Company's working capital;
offset in part by Mr. Chopra's willingness to work for a year without being paid
a cash salary and the availability of up to $3 million of additional working
capital from one or more of the Solicitors on such terms as may be agreed to
with the independent directors of the Board.
Each of our Nominees has stated that, upon election to the Board, he
intends to act in accordance with his fiduciary obligations and apply his
experience and sound business judgment to managing
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*Michael D. Helfand, Vestcom's present Chief Financial Officer, has also
executed a change of control agreement with Vestcom, the terms of which are
substantially similar to the Cartun and Keating agreements, and which also
entitle Mr. Helfand to an estimated $500,000 or more in severance payments if he
were to be terminated without cause following a change of control of Vestcom.
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Vestcom's business. Based on our discussions with them, we also believe that our
Nominees, if elected to the Board, in conjunction with Mr. Chopra's leadership
will expeditiously seek to:
o Carefully analyze the prior strategic decisions made by Vestcom's
present Board and management to determine to what extent they have damaged
Vestcom's performance;
o Determine how best to reverse what they determine to be poor decisions
in order to provide a sound basis for sustained revenue and earnings growth; and
then
o With the active input and involvement of local management, formulate and
implement a new business strategy that in a controlled way completes the
integration of Vestcom's operating subsidiaries, builds on existing strengths,
and cost-effectively eliminates areas of weakness.
While each of our Nominees has stated that he intends to, in all cases,
act upon the basis of his own independent and informed business judgment, it is
our view that a new Board composed of our nominees and the two continuing
directors, Mr. Bova and Mr. Fassler, would carefully consider adopting a new
business strategy that emphasizes:
o Local empowerment of regional management.
o Limited centralization of only those selected corporate functions whose
effectiveness is actually enhanced by centralization.
o Creation of a separated, integrated operations center for National
Accounts.
o Development of new, technology-based service opportunities.
YOUR CONSENT IS IMPORTANT! TO CONSENT TO OUR PROPOSALS PLEASE DO THE
FOLLOWING:
o PROMPTLY SIGN AND RETURN THE ENCLOSED GOLD CONSENT CARD
o DO NOT RETURN ANY CARD SENT TO YOU BY VESTCOM MANAGEMENT
If your shares of Vestcom common stock are held in your own name, please
sign, DATE and mail the enclosed GOLD consent card today in the postage-paid
envelope provided or mail the completed card to Beacon Hill Partners at the
address below.
If your shares of Vestcom common stock are held in "Street-Name, "only
your bank or broker can execute a consent on your behalf, but only upon receipt
of your specific instructions. Please sign, DATE and mail the enclosed GOLD
consent instruction form to your bank or broker today in the postage-paid
envelope provided. To ensure that your consent is effective, please contact the
persons responsible for your account and instruct them to execute the GOLD
consent card on your behalf.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE IN EXECUTING OR
DELIVERING YOUR CONSENT, PLEASE WRITE TO OR CALL:
Beacon Hill Partners
90 Broad Street, 20th Floor
New York, New York 10004
Banks and Brokerage Firms Call Collect: (212) 843-8500
Shareholders Please Call: (800) 755-5001
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IF YOU DO NOTHING, THE EFFECT WILL BE A VOTE AGAINST THE PROPOSALS.
IN ORDER TO REMOVE AND REPLACE FIVE OF THE CURRENT DIRECTORS OF VESTCOM,
THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL OUTSTANDING SHARES IS NEEDED FOR
PROPOSAL 1 AND FOR PROPOSAL 2.
IN ORDER TO ASSURE THAT THE REMOVAL AND REPLACEMENT OF FIVE OF THE CURRENT
VESTCOM DIRECTORS CANNOT BE CIRCUMVENTED BY VESTCOM'S MANAGEMENT, THE
AFFIRMATIVE VOTE OF A MAJORITY OF ALL OUTSTANDING SHARES IS NEEDED FOR ALL FIVE
OF OUR PROPOSALS.
WE URGE YOU TO VOTE FOR EACH OF OUR FIVE PROPOSALS.
QUESTIONS AND ANSWERS ABOUT THIS CONSENT SOLICITATION
Q: WHO IS MAKING THE SOLICITATION?
A: This Solicitation is being made by Harish K. Chopra who is an experienced
business critical document imaging executive, R-Squared Limited
("R-Squared"), and TimeTrust, Inc., ("TimeTrust"), a company wholly-owned
by Mr. Chopra and R-Squared. Through TimeTrust, R-Squared and personally,
Mr. Chopra has acquired beneficial ownership of over 8% of Vestcom's
outstanding common stock.
Q: WHAT ARE WE ASKING YOU TO CONSENT TO?
A: You are being asked to consent to several proposals which would replace
five of Vestcom's current directors with directors independent of current
management who have indicated they intend to act in your best interest.
Stephen R. Bova and Leonard J. Fassler are currently independent directors
of Vestcom and our Proposals do not seek their removal. Although we desire
that each will continue in office as an independent director, none of the
Solicitors has any understanding or arrangement with either of Messrs.
Bova or Fassler and they have neither requested nor consented to be named
in this Consent Statement. However, Mr. Chopra believes that when properly
apprised of Vestcom's governance and operating issues, they would act in
the best interests of Vestcom's shareholders. If Messrs. Bova and Fassler
were to subsequently resign prior to the election of directors at the next
Annual Meeting, there still would be a sufficient number of directors to
constitute a quorum, thereby permitting the new Board to fully transact
business, and the resulting vacancies would be filled by the remaining
directors. However, if Messrs. Bova and Fassler were to resign, the
Company would at that time not have any "continuing directors" as that
term is defined in the Company's recently enacted Shareholder Rights Plan
(a so-call "poison pill"). (For more information concerning the effects of
a resignation of Mr. Bova and/or Mr. Fassler, please see WHY THE PENDING
LITIGATION IS IMPORTANT, at page __.)
Q: WHY ARE WE SOLICITING YOUR CONSENT?
A: We are soliciting your consent because we believe the current members of
Vestcom management are not acting, and will not act, in your best
interest. Specifically, we believe that:
o In January 1998 when Vestcom management acknowledged that its
consolidation plan for existing operations were over budget and
experiencing delays, and that two further acquisitions were
described as "not accretive", the Company's stock dropped from
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$18.875 per share to $7.25 per share, thereby losing over $102
million of market capitalization. One year later in January 1999,
Vestcom's stock price failed to recover and traded even lower
ranging from $8.50 to $6.625 per share, but Joel Cartun, who then
owned 1,474,198 shares, entrenched both himself and Brendan Keating
by putting in place change in control agreements that superceded
their August 1997 IPO employment agreements . The new agreements
permit them to be paid an estimated $500,000 each if a new board
were elected and their employment were subsequently terminated for
reasons other than cause. Later, in October 1999, Michael Helfand,
Vestcom's Chief Financial Officer was also given a change of control
agreement, to permit him to be paid an estimated $500,000 if a new
board were elected and his employment subsequently terminated for
other than cause.
o After the Board, in January 1999 provided Mr. Cartun and Mr. Keating
with change of control agreements that preserve their employment and
salaries, Vestcom's operating results and financial condition
continued to dramatically weaken, with stagnant revenues, growing
administrative costs, falling operating profits and, ultimately,
substantial operating losses.
o In late November 1999, after Mr. Chopra reported he had acquired
6.68% of Vestcom's shares and intended at a future date to seek
representation on Vestcom's Board or seek changes in Vestcom
management, Mr. Cartun sought, as a precondition to meeting with Mr.
Chopra--who was then Vestcom's 4th largest shareholder--that Mr.
Chopra agree for the next two years not to discuss with other
shareholders his ideas concerning the Company or to purchase any
more Vestcom shares. Mr. Chopra refused to so limit his shareholder
rights by entering into such an arrangement.
o On or about December 16, 1999, three weeks after Mr. Chopra's
reported ownership of 6.68% of Vestcom's common stock, the
Solicitors understand that Mr. Cartun was informed that Mr. Chopra
was arranging for four other Vestcom shareholders who in aggregate
held over 20% of the Vestcom shares (the percentage required under
Vestcom's then effective by-laws) to call a special meeting of
shareholders to assess management's stewardship of Vestcom and to
consider replacing the Vestcom Board. On December 16, 1999, the
Board amended Vestcom's by-laws to eliminate the ability of the
shareholders to call a special meeting, leaving that power only with
the Board, the Chairman (Mr. Cartun) or the President (Mr. Keating).
However, the New Jersey Business Corporation Act provides that in
the absence of a by-law permitting shareholders to call a special
meeting, any shareholder or group of shareholders holding at least
10% of a corporation's outstanding shares can, with the prior
approval of a state court judge, call a special meeting. However,
the Vestcom Board also adopted a Shareholder Protection Rights
Agreement dated December 17, 1999 (a so-called "Poison Pill"). When
it is triggered, the Poison Pill's provisions massively dilute the
stock ownership of persons who acquire 10% or more of Vestcom's
common stock. For this reason, we believe the Poison Pill was
designed by the current Board to make it economically prohibitive
for a shareholder to acquire 10% of Vestcom shares and for existing
Vestcom shareholders holding 10% or more of Vestcom shares to act
together as a group to seek to change management whether by calling
for a special meeting or otherwise acting in the shareholders' best
interests. Although the Poison Pill was generally described by
Vestcom Management in a letter to shareholders dated December 28,
1999, Vestcom management failed to describe either the effect of the
by-law amendments and the Poison Pill on the ability of shareholders
to call a special meeting, or that a significant group of
shareholders were being thwarted in their desire to call such a
meeting.
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In short, the Solicitors believe that the incumbent management team is
intent on entrenching itself despite what we see as its poor performance
to date. The Solicitors' proposed management team intends to provide
Vestcom's shareholders with substantially greater value than the existing
management team.
Q: WHO ARE THE NOMINEES?
A: The Nominees are Harish K. Chopra, Howard April, Parker S. Kennedy, Frank
E. Raab and Robert J. Verrilli, none of whom is currently affiliated with
Vestcom. They are highly qualified individuals who believe that you are
entitled and it is in the best interest of the Vestcom shareholders to
give a new management team a chance. Howard April was one of the founding
directors of Vestcom when it went public in August 1997, and was employed
by Vestcom under a three-year employment agreement which would have run
through August 2000, if Mr. April hadn't been terminated in March 1999.
(For additional information about the proposed Solicitor nominees, please
see ADDITIONAL INFORMATION REGARDING THE PROPOSAL -- PROPOSAL 2: ELECTION
OF NOMINEES. )
Q: IF YOU CONSENT TO THE CHANGE OF VESTCOM DIRECTORS, ARE YOU CONSENTING TO
ANY SUBSEQUENT BUSINESS COMBINATION?
A: No. The Solicitors are not aware of any pending or proposed business
combination, and there is no business combination or transaction being
proposed by the Solicitors. You will have the opportunity to consider any
such proposal if and when any such proposal is submitted for your
approval. If the Nominees are elected, that approval would be sought only
if a majority of the new Board believes that the transaction would be in
your best interest.
Q: WHO CAN CONSENT TO THIS MATTER?
A: If you owned Vestcom shares on February 8, 2000 (the "Consent Record
Date") you have the right to consent to the Proposals.
Q: WHAT IS THE DEADLINE FOR SUBMITTING CONSENTS?
A. Section 14A:5-6 of the New Jersey Business Corporation Act requires that,
in order for the Proposals to be adopted, Vestcom must receive written
consents signed by a sufficient number of shareholders to adopt the
Proposals not more than 60 days after the date on which this Consent
Solicitation is first mailed to the Vestcom shareholders. Consequently,
you should act promptly so we can ensure that all consents are properly
executed and returned. This Consent Solicitation is being mailed to the
shareholders on ________, 2000; accordingly, the termination date of this
Consent Solicitation is April 7, 2000. The Solicitors urge the Vestcom
shareholders to expedite the return of these consents so as to promptly
resolve the direction of the Company.
Q: HOW MANY SHARES MUST BE VOTED IN FAVOR OF THE PROPOSALS TO EFFECT THEM?
A: We must receive consents from a majority of Vestcom's outstanding shares
for the Proposals to be adopted. As of November 1, 1999, Vestcom reported
having 9,056,806 shares of common stock outstanding (which the Solicitors
understand to include voting rights appurtenant to one share of Series B
Preferred Stock convertible into 239,988 shares of dividend access
shares). Therefore, based on available information, we estimate that the
affirmative vote of at least
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4,528,404 shares is necessary to effect the Proposals. Abstentions,
failures to vote and broker non-votes will have the same effect as a "no"
vote.
Q: WHAT SHOULD YOU DO TO CONSENT?
A: Sign, DATE and return the enclosed GOLD consent card TODAY to Beacon Hill
Partners in the envelope provided. In order for your consent to be valid,
it must be dated.
Q: WHO DO YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?
A: Please call toll free Beacon Hill Partners at (800) 755-5001.
REASONS FOR THE SOLICITATION OF CONSENTS
In addition to what we believe to be mismanagement of the Company as
discussed elsewhere in this Consent Statement, the Solicitors are soliciting
your consent to the Proposals because we believe that the current members of the
Vestcom management have breached their fiduciary duties to you and are not
acting, and will not act, in your best interest. The Solicitors believe this is
the case based on the following:
o The current Vestcom management sought to entrench themselves with
so-called "golden parachute" change of control agreements which would require
payments from the Company of an estimated $500,000 each if, after the
shareholders elect a new Board, Messrs. Cartun (the present Chief Executive
Officer), Keating (the present President) and Helfand (the present Chief
Financial Officer) are terminated without "cause". "Cause" was defined in such a
limited manner that these payments would be due even if these executives are
terminated for poor performance.
o The current Vestcom management has inappropriately sought to impose a
standstill agreement upon the Solicitors to prevent the Solicitors from even
making or in any way participating in any solicitation to advise you of Vestcom
management's shortcomings.
o With full knowledge that the Solicitors were ready, willing and able to
undertake a solicitation on December 16, 1999, Vestcom's Board adopted
restrictive by-law amendments that severely limits the right of shareholders to
call a special meeting, and also adopted a Poison Pill which contains so-called
"dead hand" provisions that (i) in the context of a proxy or consent contest
permit only the current directors or new directors who are nominated or approved
by the current directors ("Continuing Directors") to redeem the Poison Pill, and
(ii) in the context of an unsolicited tender offer or other proposed business
combination permit only Continuing Directors or so-called "independent
directors" to redeem the Poison Pill. We believe that in most business
combinations and in proxy or consent contests these "dead hand" provisions
prevent the Vestcom shareholders from electing new directors who either intend
to redeem the Poison Pill or who could redeem the poison pill if they determine
it is in the best interest of the Vestcom shareholders to do so.
o Although in January 1999, the Board provided Mr. Cartun and Mr. Keating
with change of control agreements that preserve their employment and salaries,
Vestcom's operating results and financial condition continued to weaken. On a
quarter-to-quarter basis for the four quarters ending September 30, 1999,
revenues became essentially stagnant, operating profits fell (ultimately
resulting in deep operating losses), administrative costs increased, and nearly
$6 million in "restructuring" charges were incurred.
We believe that by approving the Poison Pill and the change of control
agreements for senior management (which include a total of up to an estimated
$1.5 million or more in severance payments),
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the current Vestcom management has gone to unreasonable and disproportionate
lengths to entrench itself. We also believe that the "dead hand" provisions of
the Poison Pill adopted by the present Board will prevent third parties from
buying shares of your stock in most unsolicited tender offers and other proposed
business combinations, and, together with the restrictive by-laws will inhibit
shareholders from making what they believe to be beneficial changes in
management.
In our opinion, by entrenching itself and senior management while
Vestcom's business, finances and stock price are all failing, the current
Vestcom Board is not acting, and will not act, in your best interest. Therefore,
we believe that five of the current directors should be removed and replaced
with our Nominees who have stated they intend to act in your best interest. The
Solicitors believe that the adoption of the Proposals will accomplish this goal.
A HISTORY OF MISMANAGEMENT
In addition to what we believe constitutes not acting in your best
interests as discussed elsewhere in this Consent Statement, the Solicitors are
requesting your consent to the Proposals because we believe that the incumbent
executive management has mismanaged the Company, all to the detriment of the
Vestcom stockholders. The Solicitors believe this is the case based on the
following:
Vestcom was created through a "roll-up" acquisition of seven operating
companies, based on a business strategy that recognized that each of those
companies was a locally-based business whose success resulted from the strong
personal relationships their owners and managers had, over the years, developed
with businesses and customers. Within a few months of its founding, however, we
believe that Vestcom began to abandon its business strategy and commenced what
we believe to be a series of poor strategic decisions which, we further believe,
resulted in Vestcom's rapidly deteriorating condition.
Within three months of Vestcom's IPO, and before completing the
integration of its seven initial acquisitions, the Board and senior management
set out upon an aggressive program of further acquisitions. From November 1997
through February 1999, Vestcom acquired eight additional operating companies,
one of which, Business Mail Express, was operating at a loss. In late January
1998 Vestcom management announced two further acquisitions which were described
as "not accretive", announced that management's "consolidation" plan was
over-budget and experiencing delays, and also stated that it expected decreased
future earnings. Nonetheless, Vestcom decided to continue its acquisition
program in the face of both difficulties in integrating its existing
acquisitions and expectations of depressed future earnings. On January 26, 1998,
the day of that announcement, Vestcom's stock price dropped from $18.875 per
share to $7.25 per share, thereby losing over $102 million of market
capitalization. It has never recovered, trading at $______ per share on the
trading day immediately preceding the date of this Consent Solicitation.
Even after the January 26, 1998 fall in Vestcom's stock price, the Board
and senior management continued on what we believe to be a misguided strategic
path--acquisitions in the face of integration difficulties and poor operating
and financial results--that we believe initially caused the decline in the
Company's stock price. Between August 1998 and February 1999 Vestcom acquired
four more operating companies.* For all eight post-IPO acquisitions Vestcom
expended in excess of $30 million in cash, notes and shares of Vestcom capital
stock.*
Instead of following its initial business strategy of decentralized
operations, senior management and the Board have increasingly centralized
operations and operating facilities. Between the fourth
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*Derived from Vestcom's Report on Form 10-K for the year ended December
31, 1998 and Vestcom's Report on Form 10-Q for the first quarter of 1999.
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quarter of 1998 and the third quarter of 1999, the Company undertook a series of
expensive, centralizing changes including consolidating three New England
operations sites into one New England site; relocating two New Jersey operations
sites to two new sites, both still in New Jersey; relocating its New York City
operations site and subsequently closing its New York City operation. As a
consequence, Vestcom incurred almost $6 million in restructuring charges last
year (i.e., $3,987,880 in the second quarter of 1999 and $1,930,144 in the third
quarter of 1999). We also believe that these "consolidations" directly
contributed to an increase in Vestcom's cost of revenue from 62.7% in the fourth
quarter of 1998 to 70.5% in the third quarter of 1999, and the increase in
Vestcom's SGA expenses from 29.3% of revenues in the fourth quarter of 1998 to
32.7% of revenues in the third quarter of 1999.** In the prior supporting
materials separately provided to Vestcom shareholders alerting them that this
Consent Solicitation would be forthcoming, the Solicitors indicated they
believed that Vestcom's incumbent management had spent an excessive amount of
money on infrastructure and that some of its larger facilities are under
utilized. We based those statements on information imparted to us in discussions
with some of the members of Vestcom's operating management. This
characterization represents the personal assessment of those operating managers
and these assessments are the basis for our belief that Vestcom's incumbent
management has spent more money than it needed to on infrastructure without
adequately using such infrastructure.
During the same period, and despite the acquisition of eight new operating
companies, Vestcom's quarter-to-quarter revenues remained essentially stagnant,
at a per quarter average of approximately $31.3 million. IN CONTRAST, PRIOR TO
THEIR ACQUISITION BY VESTCOM, THE INITIAL SEVEN OPERATING COMPANIES HAD A
COMBINED, COMPOUNDED ANNUAL REVENUE GROWTH RATE OF APPROXIMATELY 12%.*** We
believe that this stagnation of Vestcom's revenues is also largely attributable
to the Board's and senior management's failure to complete the integration of
the Company's seven initial acquisitions before embarking on acquiring
additional operating companies.
It is our view that the business strategy adopted by the Board and senior
management has resulted in a lack of operating cohesion in the Company, an
inability to take advantage of existing opportunities for revenue growth,
increased operating costs and the incurring of further expenses in an
ineffective effort to trim excess costs and "consolidate" operations among not
merely seven, but fifteen, operating companies that each have their own unique
market characteristics, management styles and operating philosophies.
WE BELIEVE THAT THE RESULT OF THIS SHORT-SIGHTED STRATEGY IS THE
DETERIORATION OF VESTCOM'S OPERATING INCOME IN 1999, BEFORE RESTRUCTURING
CHARGES, FROM APPROXIMATELY $2,269,100 FOR THE FIRST QUARTER TO $643,100 FOR THE
SECOND QUARTER TO A LOSS OF $988,900 FOR THE THIRD QUARTER--A STUNNING 254%
SECOND TO THIRD QUARTER LOSS OF $1,632,000.**
The basis for our views as to the Company's current business strategy is
not only Vestcom's historical results but also extensive discussions Messrs.
Chopra and Verrilli have had with various
- ----------
**Derived from Vestcom's Reports on Form 10-K for the year ended December
31, 1998, and Vestcom's Reports on Form 10-Q for the first, second and third
quarters of 1999.
***Derived from a comparison of Vestcom's financial statements as set
forth on its Reports on Form 10-Q for the first, second and third quarters of
1999, to the Summary of Individual Founding Companies Financial Data from 1994
to 1996 set forth in Vestcom's IPO Registration Statement.
10
<PAGE>
current and former Vestcom executive and operating officers as to the nature of
the Vestcom business and the opportunities and problems encountered therein.
In the prior supporting materials separately provided to Vestcom
shareholders, the Solicitors made pro-forma comparisons as to what the market
value of the Company would be if it would have been able to increase earnings
through reducing the cost of revenue, SGA expenses or interest expenses. The
periods for comparison in the prior supporting materials was the 12- month
period from October 1, 1998 to September 31, 1999. This was the most recent
financial information then available from Vestcom at the time of the report. The
Solicitors believe that comparisons of operating data to earlier periods are not
meaningful, because Vestcom acquired 6 additional operating companies between
the fourth quarter 1997 and October 1998. Accordingly, the 12-month period from
October 1, 1998 to September 31, 1999 were used, as they are least affected by
such interim acquisitions. In each case based on our analysis of Vestcom's
quarterly financial statements for the fourth quarter of 1998 through the third
quarter of 1999 and from our discussions with current and former Vestcom
executives and operations managers, we derived what we believe to be savings in
these cost and expense items that could reasonably have been achieved during
those four quarters. Next, in each case, we added those savings to Vestcom's
pre-tax earnings and divided the new, quarterly pre-tax earnings by the number
of outstanding shares of Vestcom common stock. This yielded a new pre-tax
earnings per share for the quarter. We then reduced these pre-tax earnings to
give pro forma effect to federal and state taxes assuming a blended tax rate of
40%. We then subtracted the former earnings per share from the new earnings per
share to yield incremental earnings per share attributable to the cost/expense
savings being measured. Last, we multiplied the result of calculation by an
"earnings multiple" of 20 to give effect to the estimated increased market value
of each share. This "earnings multiple" is set below the average 25.6 "earnings
multiple" of what the Solicitors believe to be four comparable publicly traded
companies, the multiples for which range from a high of 39.8 to a low of 11.7.
Further, the prior supporting materials project that the Company will be paying
interest charges of approximately, $3,100,000 per year. This is based on the
assumption that the $33.4 million of long-term debt and capital lease
obligations as shown on September 30, 1999 bear the same interest rate as
available to the Company at that time. The Solicitors believe the Company's
interest charges could increase further unless this debt can be reduced,
particularly in an environment of rising interest rates.
The discussions with current and former Vestcom executives and the
Solicitor's pro-forma adjustments and predictions can only be viewed as
estimates and/or predictions and are subject to operating risks and
uncertainties that could cause actual results or events to differ and perhaps
differ materially. Although the Solicitors believe them to be reasonable, due to
the various underlying bases of the estimates and assumptions set forth in this
Section and the prior supporting materials separately provided to Vestcom
shareholders, the Vestcom shareholders are cautioned against attributing undue
certainty to these foregoing assessments.
The Solicitors' prior supporting material mailed to Vestcom shareholders
included copies of two internet "chat room" messages, one of which predicted a
lower Vestcom share price over the next 3-6 months. To date, this prediction ha
not come to pass. Given the nature of internet "chat rooms", the identity of the
author or authors of these messages is unknown. Accordingly, the Solicitors have
not sought nor obtained the consent of such authors for the use of this
uncopyrighted material and none of the Solicitors, Nominees or their affiliates
has or will pay directly or indirectly any fee or other consideration for such
materials preparation or such use.
NEW LEADERSHIP CAN MAKE VESTCOM SUCCEED
We believe in Vestcom's potential for success. However, we believe the
Company's operating history demonstrates that the present Board and senior
management followed a strategic path that over- emphasized an aggressive
acquisition program while overlooking the fundamental necessity of first
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<PAGE>
completing the operations integration of the seven initial acquisitions it "went
public" with. In doing so, we believe the Board and senior management lost
control of operations, failed to achieve revenue and earnings projections, and
financially over-extended the Company in a counter-productive attempt to restore
Vestcom's health through what we believe to be a poorly executed centralization
strategy.
These problems are not beyond repair. In our view, the present Board's and
senior management's current strategies can be re-directed in a manner that, in
our view, result in improved shareholder value. We believe the key is to
re-empower local management, create a national accounts group, centralize only
those operations functions that can be substantially enhanced by centralized
control, and seize and grow technology-based market opportunities. These are
goals that, in our view, only a new Board and new senior management, led by Mr.
Chopra, realistically can be expected to achieve.
It is time for that change.
HOW OUR BOARD NOMINEES AND NEW SENIOR MANAGEMENT
WOULD IMPROVE VESTCOM'S PERFORMANCE
This Solicitation is being made by Harish K. Chopra, an experienced
business critical document imaging executive, and his affiliated companies,
TimeTrust, Inc., and R-Squared Limited. Through TimeTrust and R-Squared, Mr.
Chopra has acquired over 8% of Vestcom's common stock.
He believes that a new Board and new senior management led by himself
would combine the strategic vision, experience and management skills Vestcom
needs if it is to become profitable and successfully grow its business.
In this regard, Mr. Chopra intends to bring to Vestcom a record of success
at building and effectively managing businesses that we believe is highly
applicable to Vestcom. Mr. Chopra received a Bachelor of Science degree in
computer science from University of California Los Angeles. His 23-year business
career began in 1977 in satellite imaging research and development at NASA's Jet
Propulsion Laboratory. From 1980 to 1987 he held senior management and technical
management positions with Digital Equipment Corporation, Volt-Delta Resources,
Inc., Omex Systems, Inc., and 3M Corporation.
In 1988 Mr. Chopra founded DataTree Corporation, which over the next 10
years he managed and built into a successful company. In 1998, Mr. Chopra sold
DataTree Corporation for $58.8 million to First American Financial Corp.
DataTree is in the business of electronically imaging and producing business
documents such as real estate title reports and abstracts. Although not a
competitor of Vestcom, we believe that DataTree's business is very similar to
Vestcom's in a number of important ways. Like Vestcom, DataTree is based on
regional operations throughout the United States that rely on the strength of
locally developed business relationships. Like Vestcom, DataTree produces its
documents from a decentralized network of data bases. Like Vestcom, DataTree's
critical task was to successfully integrate and manage a decentralized,
nationwide operations network. Unlike Vestcom, under Mr. Chopra's leadership,
DataTree had a 10 year financial history of overall progressive growth in both
"top line" revenues and "bottom line" earnings. DataTree is a success story that
we believe can be repeated with Vestcom under Mr. Chopra's experienced
leadership.
In particular, we believe that the new Board and the new senior management
to be put into place by the new Board intend to adopt and implement a business
strategy having all or most of the following principal features:
12
<PAGE>
o Decentralized Operations Management, whereunder the local management of
Vestcom's operating subsidiaries will be directly responsible for marketing,
customer service and operations execution in each subsidiary's various
localities and/or regions.
o Independent National Accounts Sales Group, empowered to coordinate the
business critical documents services of Vestcom's subsidiaries with Vestcom's
nationally - based customers. Such a national accounts group would be
responsible for responsive, high quality customer service on a national scale.
o Selective Corporate Centralization of only those limited functions that
are most clearly amenable to economies of scale and that most readily lend
themselves to efficiencies of centralized decision-making. Such functions could
include purchasing, finance, research and development and national marketing and
sales.
o Technology-based, New Business Opportunities. Mr. Chopra's successful
experience building and using an offshore software company is intended to be
used to provide Vestcom an opportunity to use similar "out of the box" means to
(i) improve business opportunities by implementing software technology at
reduced cost, and (ii) use technology to perform business functions 24 hours a
day, seven days a week. Vestcom can increase its productivity, reduce labor
costs and improve quality of service by implementing software solutions that the
new team can provide.
At DataTree, Mr. Chopra led the development of electronic imaging
technology for public records along with a high-speed retrieval system. Under
Chopra's guidance, DataTree continues to be in the forefront of developing
innovative systems to streamline customer operations and help client's increase
profits. DataTree maintains what is believed to be the world's largest
public-imaged database of recorded documents and maps which includes over 600
million images.
DataTree is believed to be an example of effective use of technology to
process, manage and deliver very large document database. Effective use of
software technology is key in many other areas such as, automated billing,
quality customer service and management reporting.
Our goal is for Vestcom's operations to benefit from Mr. Chopra's
expertise in imaging technology and his internet strategy for electronic
billing, with the objective of increasing shareholder value for the benefit of
all Vestcom shareholders.
In addition, the Solicitors believe that the initial reconstitution of the
Board caused by the removal of five directors and the election of the Nominees
may possibly have a one time disruptive effect on the Company but the overall
effect would be in the best interests of the Vestom shareholders. To seek to
minimize possible short-term reductions in Vestcom working capital, if elected,
Mr. Chopra has agreed to work for the Company without a salary for his first
year of employment in consideration of a grant of options as the independent
directors of the Board may determine and one or more of the Solicitors would
make available from their own personal funds up to $3 million of additional
working capital to Vestcom on such terms as may be mutually agreed to with the
independent directors of the Board.
BACKGROUND OF THIS CONSENT SOLICITATION
We believe that the following actions of the current Vestcom directors are
indicative of a board that has acted to entrench itself and Vestcom's current
management.
On August 4, 1997, Vestcom "went public" by completing an initial public
offering (the "IPO") of an aggregate of 4,427,500 shares of its common stock
(which includes 557,500 over allotment shares)
13
<PAGE>
at a price of $13.00 per share. Although Vestcom's stock traded for as much as
$22.625 in the first few months following the IPO, just over 5 months later, on
January 26, 1998, the stock price precipitously fell to just $7.25 per share,
and has never recovered. In fact, since June 24, 1999, Vestcom's stock has
traded in the even lower range of from $4.4375 to $2.625 per share, and as of
the date of this Consent Solicitation, it traded at $____ per share. Vestcom's
stock also has only a limited following in the market, and its daily trading
volume is low, averaging only [23,200] shares per day since July 1, 1999.
Combined with a very low stock price, the absence of appreciable trading volume
makes Vestcom's stock not only potentially illiquid, but also, because only a
few small trades can have a large impact, highly vulnerable to potential price
volatility.
During the fourth quarter of 1998 through the third quarter of 1999
Vestcom's operations and financial condition also weakened. Revenues for that
period were essentially flat, averaging approximately $31.3 million per quarter;
selling, general and administrative ("SGA") expenses increased approximately
17%; and operating income (before restructuring charges of approximately $4
million in the second quarter of 1999 and approximately $1.9 million in the
third quarter of 1999) fell from approximately $2.4 million for the fourth
quarter of 1998 to $643,100 in the second quarter of 1999 and, finally, to a
loss of approximately $989,000 in the third quarter of 1999.*
We believe that the precipitous fall in Vestcom's stock price and the
weakening of Vestcom's operations and financial condition that took place during
an acquisition spree of acquiring eight companies--for an aggregate cost in
excess of $30 million**-- are attributable to what we believe are fundamentally
poor strategic decisions by the present Board of Directors and senior
management.
The Board and senior management have not followed Vestcom's initial
strategic business model--which we believe is still sound--and have, instead,
aggressively centralized management, operations and facilities.
o The Board and senior management carried out an aggressive series of
eight new acquisitions before Vestcom had completed the business and operations
integration of its original seven acquisitions.
o The Board and senior management have encumbered Vestcom with $33.4
million in debt and capitalized lease obligations that, at present rates, will
result in annual debt service payments of approximately $3.1 million.***
We believe these are poor strategic decisions that have distracted Vestcom from
integrating, solidifying and growing its core businesses. Instead, these
decisions have added substantial SGA expenses, drained cash
and--ultimately--resulted in the stagnant revenues and severe operating losses
from which Vestcom now suffers. However, we believe Vestcom's poor performance
can be substantially improved and shareholder value can be enhanced by a new
Board and new senior management.
In the face of this troubled picture and declining performance, Vestcom's
Board adopted a Poison Pill and amended the Company's by-laws so as to, in our
view:
- ----------
*Based on Vestcom's Report on Form 10-K for the year ended December 31,
1998 and Vestcom's Reports on Form 10-Q for the first, second and third quarters
of 1999.
**Derived from the aggregate of Vestcom's public reporting of the
acquisition of each of the eight companies.
***Derived from Vestcom's Report on Form 10-Q for the third quarter of
1999.
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<PAGE>
o Deter and penalize shareholder challenges (such as proxy and consent
contests) to the Board's and senior management's decisions and policies;
o Deter and penalize acquisition proposals that are not first solicited by
the Board; and
o Penalize virtually every present shareholder who chooses to acquire 10%
of the Company's outstanding shares in order to exercise his or her statutory
right to individually call a special shareholders' meeting; and
o Through the "dead hand" provisions of the Poison Pill that are
summarized below, improperly deprive Vestcom's shareholders of their right to
elect an entirely new Board that can remove such deterrents and penalties and
have the full authority to manage Vestcom's business and affairs.
It is our view that by continuing to follow a business model that the
Company's operating results for 1998 and the first three quarters of 1999
demonstrate to be ineffective, the Company's Board and senior management have
not acted prudently and as responsible stewards of the shareholders' interest
and investment. Indeed, for the reasons described below at page ___, we believe
the Board has violated its fiduciary obligations to the shareholders by using an
abusive "Poison Pill" and an unfair by-law amendment to impede shareholder
challenges to its failed operations policies, insulate itself from unsolicited
tender offers, insulate itself from criticism, and entrench itself and senior
management in their present positions.
On November 24, 1999, TimeTrust and Time Trust's majority owner, R-Squared
Limited ("R- Squared"), disclosed in a Schedule 13D under the Securities
Exchange Act of 1934 that they constituted a group that together beneficially
owned 6.68% (604,300 shares) of Vestcom's outstanding common stock and that they
intended, at a future date, to seek representation on Vestcom's Board or seek
changes in Vestcom's executive management. R-Squared and Mr. Chopra own
TimeTrust. TimeTrust is an investment company of which Mr. Chopra is the CEO.
Mr. Chopra and R-Squared are the sole owners of TimeTrust. The formation of a
"13D group" by TimeTrust and R-Squared and the announcement of their intentions
as to future Board representation or changes in Vestcom's management were
motivated first by Mr. Chopra's concerns over the poor market performance of
Vestcom's common stock and by what they believe to be ineffective management of
the Company's business, and second by their belief that a new Board and new
senior management--led by Mr. Chopra--could improve the Company's performance
for the benefit of all shareholders.
On October 29, 1999, in accordance with those concerns, Mr. Chopra
requested a meeting with Joel Cartun, Vestcom's CEO and owner of 1,474,198
shares, or 16.3%* of Vestcom , for the purpose of discussing possible ways of
enhancing Vestcom shareholder value. On November 18, 1999, Mr. Cartun returned
Mr. Chopra's call and arranged for a December 1, 1999 meeting. On November 24,
1999, Mr. Cartun called Mr. Chopra and cancelled the scheduled meeting and did
not reschedule the meeting for another date.
On November 30, 1999, Mr. Cartun sent a letter requiring that as a
precondition to any such meeting the Solicitors enter into a lengthy and
one-sided "standstill agreement" as a pre-condition to any such meeting. Among
other restrictions, the proposed standstill agreement would have required the
Solicitors to agree not to contact any Vestcom shareholders, purchase any
additional Vestcom shares or solicit proxies to seek to change the Board of
Directors. Believing that the terms of Vestcom's proposed standstill agreement
would potentially impede efforts to improve the Company's performance by
- ----------
*Derived from Vestcom's last Definitive Proxy Statement, filed with the
Securities and Exchange Commission on March 27, 1999.
15
<PAGE>
restricting their rights as shareholders, on December 1, 1999, Mr. Chopra
advised Mr. Cartun that Mr. Chopra would not sign the requested standstill
agreement.
By letter to Vestcom dated December 3, 1999, TimeTrust and R-Squared
requested that they be furnished with a list of Vestcom's shareholders. Instead
of providing the requested shareholders' list, Vestcom's management referred the
request to its outside corporate counsel. The shareholder list was finally
provided to Mr. Chopra on December 29, 1999.
On December 10, 1999, Mr. Cartun arranged for Mr. Chopra to meet at a
hotel facility near Vestcom's West Caldwell, New Jersey, facility on December
22, 1999. At that meeting, Mr. Chopra met with Joel Cartun, Brendan Keating,
Vestcom President and Bruce McCarthy of Oppenheimer. Mr. McCarthy advised Mr.
Chopra that Oppenheimer had been engaged to advise the Company. The meeting
proved uneventful. After listening to Mr. Chopra's ideas to improve Company
performance the remaining time was spent with Mr. McCarthy asking general
financial questions of Mr. Chopra without the Company management discussing any
plans or proposals for improving operations.
The response of Vestcom's Board to TimeTrust's and R-Squared's concerns
was on December 16, 1999 to adopt the Poison Pill and an amendment to Vestcom's
by-laws that, we believe, together disenfranchise the shareholders from their
full voting rights to elect effective directors, penalize the exercise of
shareholders' rights to call meetings that the New Jersey Business Corporation
Act expressly gives individually to each shareholder, and entrench the present
Board and senior management in their positions.
Pursuant to the Poison Pill, Vestcom has issued to each shareholder rights
(each a "Right" and collectively the "Rights") to purchase additional shares of
Vestcom common stock at a deep discount to the then-current market price, upon
the happening of certain "triggering" events. Each shareholder (including the
Solicitors) was issued one Right for each share of common stock held by the
shareholder. The Rights remain outstanding until either the Poison Pill is
redeemed or December 28, 2009, whichever occurs first.
Under the Poison Pill, the "triggering" events that bring about the deep
discount purchases are:
o the public announcement by either Vestcom or an individual, corporation
or other entity (a "Person") that such Person has become the beneficial owner of
10% or more of Vestcom's outstanding common stock (an "Acquiring Person")
(except in certain specified cases that are not presently applicable) and
o the commencement by a Person of a tender offer or exchange offer for
Vestcom's common stock (i) that is not withdrawn or canceled prior to certain
specified dates and (ii) that, if completed, would result in that Person
becoming an Acquiring Person.
When a "triggering" event occurs, each Right--other than Rights owned by
an Acquiring Person--entitles the holder to purchase from Vestcom, on a
per-Right basis, that number of shares of common stock that have an aggregate
"market price" (as defined by the Poison Pill) of $54 for a purchase price of
$27 (subject to adjustment in certain circumstances). For example, assuming a
"market price" of $3.50 per share, a Vestcom shareholder who owns 100 shares of
common stock--and who therefore has received 100 Rights--would upon exercise of
those Rights receive 1,540 additional shares for $1.75 per share. Since only the
Acquiring Person would not be permitted to exercise his or its Rights, the
Acquiring Person's 10% stock position would be suddenly and drastically reduced,
thereby making it exceedingly costly--if not impossible--for the Acquiring
Person to use his stock position as a basis for a tender offer or for acquiring
or even influencing control of the Company. As an example, since based on
Vestcom's report on Form 10-Q for the quarter ended September 30, 1999, Vestcom
has 9,056,806
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<PAGE>
shares of outstanding common stock,* and assuming a "market price" of $3.50 per
share, a person who amasses 10% (905,680 shares) would be diluted to owning a
mere 0.67% of Vestcom.
Importantly, the Rights can be redeemed (for $.01 per Right) and thereby
"turned off" only before a "triggering" event has occurred, and then only by the
vote of :
o a majority of the "Continuing Directors" then in office, if the Rights
redemption is not in connection with a merger, consolidation, share exchange or
other transaction resulting in a change of control of the Company, or a sale of
50% or more of the Company's assets (a "Business Combination") or
o a majority of the "Independent Directors" then in office (or if there
are no "Independent Directors", a majority of the "Continuing Directors" then in
office), if the Rights redemption is in connection with a Business Combination.
The Poison Pill defines a "Continuing Director" as
"(i) any member of the Board while such Person is a member of the
Board, who is not an Acquiring Person, or an Affiliate or Associate
of an Acquiring Person, or an employee, director, representative,
nominee or designee of an Acquiring Person or of any such Affiliate
or Associate, and was a member of the Board prior to the date of
this Agreement, or (ii) any Person who subsequently becomes a member
of the Board, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or an employee, director, representative, nominee or
designee of an Acquiring Person, or of any such Affiliate or
Associate, if such person's nominating for election or election to
the Board is recommended or approved by a majority of the Continuing
Directors." (Emphasis added)
The Poison Pill defines an "Independent Director" as
"with respect to any event or transaction or series of events or
transactions, a member of the Board other than a director who (i) is
an executive officer of the Company on, or was an executive officer
of the Company within five years immediately preceding, the date on
which the Board votes on a matter pertaining to such transaction or
series of transactions which matter, pursuant to the terms of this
Agreement, requires the concurrence of a majority of Independent
Directors, (ii) is a party to such event or transaction or series of
events or transactions, (iii) is an Affiliate or Associate of a
party (other than the Company) to such event or transaction or
series of events or transactions, or was nominated for election to
the Board by a party (other than the Company) to such event or
transaction or series of events or transactions or by an Affiliate
or Associate of such party, or (iv) has (A) a relationship that
would materially interfere with the exercise of such director's
independent judgment in carrying out the responsibilities of a
director with respect to such event or transaction or series of
events or transactions or (B) a financial interest (other than as a
Beneficial Owner of shares of
- ----------
*Assuming the full conversion of 239,988 dividend access shares.
17
<PAGE>
Common Stock) in or with respect to such event or transaction or
series of events or transactions." (Emphasis added)
Accordingly, a person proposing a tender offer for Vestcom could not,
after acquiring a sufficient number of common shares to replace the Board,
actually replace the Board and still be able to "turn off" the Poison Pill.
Similarly, only Vestcom's present directors--or subsequent directors who they
nominate--could "turn off" the Poison Pill if "dissident" shareholders (such as
the Solicitors) seek to replace the Board, or otherwise affect control of
Vestcom.
The Board also amended Article II, Section 2.3 of Vestcom's by-laws to
eliminate the right of shareholders holding 20% of Vestcom's outstanding shares
to call a special shareholders' meeting, and, instead, gave that right only to
the Board and senior management. As a result, a Vestcom shareholder who wants to
call a special shareholders' meeting must rely on and proceed under Section
14A:5-3 of the New Jersey Business Corporation Act, which permits only a
shareholder or shareholders who--alone or together--own 10% or more of a
corporation's outstanding stock to ask a New Jersey Court to order a special
meeting of shareholders for good cause. Because the share ownership threshold
for triggering the Poison Pill and for calling a special meeting of Vestcom's
shareholders are the same 10%, only a shareholder who owned at least 10% of
Vestcom's common stock on or before December 16, 1999, can in his own individual
right call a special meeting without triggering the Poison Pill and thereby be
penalized by having his or her ownership position substantially diluted. EACH
VESTCOM SHAREHOLDER SHOULD BE AWARE THAT, BASED SOLELY ON LAST YEAR'S VESTCOM
PROXY STATEMENT DATED APRIL 27, 1999, ONLY TWO VESTCOM SHAREHOLDERS--ONE OF WHOM
IS JOEL CARTUN, VESTCOM'S CHAIRMAN AND CEO AND A MEMBER OF ITS BOARD OF
DIRECTORS--OWN ENOUGH STOCK IN THEIR OWN INDIVIDUAL RIGHT TO CALL A SPECIAL
SHAREHOLDERS' MEETING WITHOUT TRIGGERING THE POISON PILL.
On December 17, 1999, the day after Vestcom's Board adopted the Poison
Pill and amended the by-laws, the Company filed a lawsuit against us (TimeTrust
and Chopra) and R-Squared in federal court alleging violations of the beneficial
ownership reporting requirements of Section 13(d) and the proxy solicitation
requirements of Section 14(a) of the Securities Exchange Act of 1934, and that
the Company would be irreparably harmed by our investment in the Company and
intention to--at some then future date--make changes in management.
Nevertheless, despite its claim of "irreparable" harm, the Company then waited
10 more days until December 27, 1999 before making us aware of that lawsuit.
On December 27, 1999, Vestcom's counsel provided the Solicitors with
copies of Vestcom's December 17, 1999 complaint and an application filed that
day for a temporary restraining order seeking to prevent the Solicitors from
contacting any shareholders of Vestcom or acquiring any further shares of
Vestcom Common Stock and for expedited discovery. The presiding judge declined
to issue such temporary restraints and scheduled a hearing on the matter for
February 2, 2000.
By letter dated December 28, 1999, the Vestcom Board of Directors advised
the Vestcom shareholders that 12 days before, the Board had adopted its Poison
Pill with a "dead hand" provision of unlimited duration.
The Board disclosed the following reasons for adopting the Poison Pill:
"'Dear Shareholder:
On December 16, 1999, the Board of Directors adopted a Shareholder
Protection Rights Agreement.. This letter briefly describes the Rights
Agreement and the Board's reasons for adopting it.
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The Rights Agreement was adopted to assure that the Company's
shareholders receive fair and equal treatment in the event of any proposal
takeover of the Company, and to guard against partial tender offers,
squeeze-outs open market accumulation and other actions intended to gain
control of the Company without paying all shareholders a fair price. More
than 2,500 U.S. corporations have considered it prudent to adopt
shareholder protection plans similar to the Rights Agreement.
The Rights Agreement does not in any way adversely affect Vestcom's
financial strength or interfere with its business plans. The issuance of
the Rights will not affect reported earnings per share, is not taxable to
Vestcom or its shareholders and will not change the way in which Vestcom
shares are traded.
Since the Rights may be redeemed by the Company at $0.01 per Right
prior to the day it is announced that a person or group has acquired 10%
or more of the Company's Common Stock, the Rights should not interfere
with any merger or other business combination that is in the best
interests of the Company and its shareholders.
A summary of the terms of the Rights Agreement is attached. The
summary is not complete and is qualified in its entirety by the Rights
Agreement, a copy of which can be obtained free of charge from the Company
upon written request addressed to Vestcom International, Inc., 5 Henderson
Drive, West Caldwell, New Jersey 07006, Attention: Secretary.'"
However, the letter (i) omits a discussion of the effect of the Poison
Pill on the shareholders' ability to call a special meeting under applicable
state law; (ii) omits any mention of the restrictive by- laws adopted the same
day that permit only the Board, the Chairman or the President to call a special
shareholders' meeting (although the new by-laws were filed via Edgar on December
20, 1999 without any comparison to the prior by-laws under which Vestcom went
public); (iii) omits disclosure of the Board's belief that the Solicitors then
planned to seek to replace the Board and senior management; (iv) omits the fact
that Company management on December 17, 1999 initiated a lawsuit in the United
States District Court for the District of New Jersey claiming the Solicitor's
plan to oust management was a present plan and not a future plan as described in
the Schedule 13D filed November 15, 1999 and seeking to disqualify any proxies
that the Solicitors had obtained to date; and (v) omits the fact that Company
management on December 27, 1999 sought entry of a temporary restraining order
and preliminary injunction against the Solicitors from (1) contacting any
Vestcom shareholders and (2) acquiring any further shares of Vestcom stock. We
believe that these omissions are material and their disclosure is important to
Vestcom shareholders in assessing the fitness of the current Board and senior
management in serving the best interests of Vestcom shareholders.
The Poison Pill adopted by Vestcom's Board is unlike conventional
shareholder rights plans, which are typically set at higher share ownership
trigger levels and without "dead hand" provisions so as to avoid creating
impermissible classes of directors and shareholders, some of which are entitled
to redeem poison pill rights or call special meetings and some of which are not.
Some commentators and corporate governance experts believe that
appropriately structured poison pills that have avoided the use of "dead hand"
provisions and low ownership trigger events may help a company achieve higher
premiums for their shareholders in unsolicited tender offers or business
combinations. Other commentators or corporate governance experts have maintained
that poison pills unduly interfere with the right of shareholders to change the
management of their companies and to themselves determine by vote or tender the
merits of such third party proposals. Few, if any commentators or corporate
governance experts have maintained that a poison pill is appropriate if it
unduly entrenches company management.
19
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We believe that in adopting the Poison Pill and amending Vestcom's by-laws
the Board violated the fiduciary obligations it owes to you--and to all other
Vestcom shareholders--by seeking to (i) penalize any shareholder who, for the
purpose of challenging the Board's and management's policies, accumulates a 10%
or greater stock ownership position, because the acquisition of that percentage
of stock will "trigger" the Poison Pill and thereby cause substantial dilution
of that ownership position; (ii) effectively block any offer to acquire the
Company that is not initially solicited by the present Board, regardless of the
offer's economic benefits to the shareholders; (iii) disenfranchise Vestcom's
shareholders by preventing a wholly new Board that is democratically elected by
the shareholders from redeeming the Poison Pill Rights; and (iv) thereby
improperly entrench itself, despite any contrary wishes of the shareholders.
In light of the tactics used by Vestcom's management, we came to the
conclusion--and we continue to believe--that Vestcom's Board and senior
management are unwilling to treat seriously our legitimate concerns about the
Company's poor performance and management, and have no real desire to discuss
ways to reverse these unfortunate developments. Accordingly, we began
considering other means of bringing these concerns to the fore, including
calling a special meeting of Vestcom's shareholders and this Consent
Solicitation.
On December 29, 1999, we amended our original Schedule 13D to add Chopra
to the group, disclose certain additional purchases of Vestcom common stock that
brought our ownership of Vestcom's stock to 7.83% of the outstanding shares, and
to state our present intention to replace the Company's Board of Directors and
senior management.
On January 6, 2000, the Solicitors filed their answer to Vestcom's
complaint confirming that Mr. Chopra now had a present plan to oust Vestcom
management, secure seats on its Board, and take control of Vestcom by electing
at least a majority of the Vestcom Board; and denied that the purchase of
Vestcom common shares by the Solicitors, and the creation of business models and
other actions violated applicable securities laws. Further, we filed a
counterclaim seeking a declaration that the Vestcom poison pill was invalid and
sought relief to be able to call a special meeting of Vestcom shareholders
regardless of the restrictions imposed by the Vestcom poison pill so as to let
the Vestcom shareholders determine whether a change in Vestcom management was
warranted.
On January 18, 2000, the Solicitors requested that Vestcom establish a
consent record date so that the Solicitors could undertake a consent
solicitation of the Vestcom shareholders to determine one or more of these
issues.
On January 24, 2000, we further amended our Schedule 13D to disclose
additional purchases of Vestcom common stock that brought our ownership of
Vestcom's common stock to 8.16% of the outstanding shares and to state our
intention to initiate this Consent Solicitation to replace the Company's Board
of Directors and senior management.
On January 26, 2000, Vestcom withdrew its application for an order to show
cause in light of the amendment of the proxy solicitation rules under the
Securities Exchange Act of 1934 which now expressly permit certain of the
alleged conduct by the Solicitors that Vestcom claimed was improper.
On Saturday, January 29, 2000, Vestcom advised us that the Consent Record
Date has been established as February 8, 2000 and that the last day for
submission of consents pursuant to this Consent Solicitation is April 7, 2000,
the Consent Tabulation Date.
On February 2, 2000, a preliminary conference was held before the
Honorable Alfred M. Wolin, United States District Judge. During the conference,
over the objection of Vestcom's counsel, Judge
20
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Wolin denied Vestcom's request for expedited discovery. Also, counsel for the
Solicitors informed Judge Wolin that they intended to file a motion for summary
judgment on their counterclaims on the grounds that the Vestcom poison pill is
invalid as a matter of law and a motion to dismiss Vestcom's complaint on the
grounds that it is moot. The Solicitors filed both motions on February 22, 2000.
WHY THE PENDING LITIGATION
IS IMPORTANT
We believe that the Poison Pill and the by-law amendments adopted by
Vestcom's Board on December 16, 1999 - and the lawsuit filed by Vestcom on
December 17, 1999 - constitute a coordinated attempt to prevent us from airing
our concerns about the management of Vestcom's business in an appropriate
corporate forum. In our view, it is not a coincidence that the Poison Pill is
triggered by the acquisition of the same percentage of Vestcom's outstanding
common stock as is needed under the New Jersey Business Corporation Act for a
shareholder to petition the Court to call a special shareholders' meeting; nor
is it a coincidence that Vestcom's lawsuit asked the Court to enjoin us from
soliciting your proxies (or consents).
We also believe the Poison Pill diminishes the prospects of enhancing
Vestcom shareholder value either through building an increasingly profitable
business or through a future, third-party exchange offer or tender offer. First,
because the share ownership threshold for calling a special shareholders'
meeting and triggering the Poison Pill are the same, it is our view that the
Poison Pill prevents you or any other Vestcom shareholder - other than Vestcom's
present chairman and CEO (who owns 16.3% of Vestcom's stock)* and one
institutional investor (which owns 13.09% of the stock)* - from calling a
special shareholders' meeting to replace five members of the current Board, whom
we believe the Company's prior performance has shown to be ineffective. Second,
because the completion of an exchange offer or a tender offer would trigger the
Poison Pill, we believe the Poison Pill also gives the present Board the power
to prevent a share exchange or acquisition from ever being consummated - even if
a majority of the shareholders want to exchange or sell their shares - simply by
refusing to redeem the Poison Pill Rights. Finally, the Poison Pill has a
"chilling effect" on ownership of Vestcom's shares by future private investors
or institutions as it limits their ability to invest in more than 10% of the
Company. We are concerned that the combined effect of these consequences of the
Poison Pill is to coercively entrench the present Board by pressuring you to
perpetuate it in office.
Because of the Company's prior performance and the foregoing reasons, and
because we do not believe the present Board will amend or redeem the Poison Pill
Rights so as to make them not coercive in entrenching management, we think it is
of the utmost importance to the profitable development of Vestcom's business,
and to the goal of enhancing the value of your investment in Vestcom, that new
management be put in place and the Poison Pill and the Rights be invalidated.
Despite their harsh economic effects on persons seeking to acquire a
target company, poison pills often have been upheld by the courts on the basis
that if the shareholders do not believe an incumbent board is acting in their
best interests in the application of a poison pill, they could elect a new Board
that would redeem the poison pill. Since there is no relevant case law in New
Jersey on this issue, the New Jersey courts will likely look to relevant
decisions of the Delaware courts. See, e.g., IBS Financial Corp. v. Seidman &
Assoc., LLP, 136 F.3d 940, 949-950 (3d Cir. 1998) and cases cited therein. The
leading Delaware case in this field is Moran v. Household Finance Corp., 500
A.2d 1346 (Del. 1985). The basis for our belief that the current Board violated
its fiduciary obligations to you - and all other Vestcom shareholders in
adopting the Poison Pill--is that Vestcom's current Board adopted its Poison
Pill with a
- ----------
*Derived from Vestcom's last definitive proxy statement filed with the
securities and exchange Commission on April 27, 1999.
21
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so-called "dead hand" provision, that permits only the "continuing directors" to
redeem the Poison Pill (in the context of a proxy or consent contest) and only
"continuing directors" or "independent directors" to redeem the Poison Pill (in
the context of a proposed business combination).
In the absence of an unsolicited tender offer or other proposed business
combination (none of which are applicable to this Consent Solicitation),
Vestcom's Poison Pill is expressly designed to withhold all power to redeem the
Rights or amend the Poison Pill from any new directors who are not nominated or
otherwise approved by the present Board or by a majority of "continuing
directors" (who are themselves selected by the present Board). Accordingly, the
present Board is said to have a "dead hand", because even after it is removed
and replaced by the shareholders (and is metaphorically "dead"), it still
controls the ability of successor directors to redeem the Poison Pill Rights.
A similar "dead hand" feature was examined by the Delaware Chancery Court
in Carmody v. Toll Brothers, 723 A.2d 1180 (Del. Ch. 1998) and was found in July
1998 to give rise to a cause of action for breach of the board's fiduciary duty
of loyalty for two reasons. First, the court held that the "dead hand" provision
purposefully interfered with the shareholder voting franchise without any
compelling justification and was therefore, unlawful. Second, the court held
that the "dead hand" provision was a "disproportionate" defensive measure,
because it either precluded or materially abridged the shareholder's rights to
receive unsolicited tender offers or to wage a proxy contest to replace the
board. In such circumstances, the board's approval of the "dead hand" provision
would not enjoy the presumption of validity conferred by the business judgment
review standard. See also Quickturn Design Sys., Inc. v. Shapiro, 721 A.2d 1281,
1290-1291 (Del. 1998) (agreeing with and applying the reasoning of Toll Brothers
in rejecting a poison pill which "would impermissibly deprive any newly elected
board of both its statutory authority to manage the corporation under 8 Del. C.
ss. 141(a) and its concomitant fiduciary duty pursuant to that statutory
mandate").
In our view, Vestcom's Poison Pill suffers from the same, fatal defects,
because its 10% share acquisition "trigger" is the same percentage of shares as
the New Jersey Business Corporation Act prescribes as the threshold for calling
a special shareholders' meeting at which a Vestcom shareholder dissatisfied with
Vestcom management could seek proxies or consents to remove the incumbent Board
at a special meeting. The Carmody v. Toll Brothers case had been published for
over a year when the Vestcom Board adopted its Poison Pill with a similar "dead
hand" provision of unlimited duration. Although to our knowledge a New Jersey
court has not ruled on the enforceability of a poison pill with a "dead hand"
provision of unlimited duration, we believe that as New Jersey courts have
followed Delaware law in this matter for poison pills in general, they will also
apply Carmody v. Toll Brothers to find Vestcom's Poison Pill with its "dead
hand' provision to be void and unenforceable, and the Board to have breached its
fiduciary duty in adopting it.
A motion for summary judgment has been filed by the Solicitors in the
United States District Court for the District of New Jersey (Civil Action
99-5935), a court of competent jurisdiction, seeking a determination that the
Vestcom Poison Pill is invalid. In the litigation we have taken the position
that among other matters the Poison Pill violates New Jersey's corporate
statutes by unlawfully creating two classes of directors and two classes of
shareholders, and thereby unlawfully deprives the shareholders of their full
voting rights. We expect that the Court will agree with us and invalidate the
Poison Pill. The Court's decision is expected in late March 2000.
In the meantime, we are seeking to remove only five of the present seven
Vestcom directors in order to provide that, if this Consent Solicitation is
successful, but the Court nevertheless decides against us in the pending
litigation, there will be two "continuing directors" who will be able to redeem
or amend the Poison Pill Rights and, thereby, return to the shareholders the
full voting rights which we believe the Poison Pill has deprived you. Messrs.
Bova and Fassler have not been asked nor have they advised the Solicitors as to
whether they would consider amending or redeeming the Vestcom Poison Pill
22
<PAGE>
but the Solicitors would expect that when properly apprised of the limiting
circumstances imposed upon the Company's shareholders by the Poison Pill and
restrictive by-law amendments, Messrs. Bova and Fassler would seek to act in the
best interests of the Vestcom shareholders.
It is, however, possible that Messrs. Bova and Fassler might resign rather
than continue to serve as Vestcom directors, or that they might refuse to seek
re-election to Vestcom's Board when their present terms expire at the next
Vestcom Annual Meeting, which we believe will be held in the Summer of 2000. If
they were to resign, the new Board would still have a sufficient number of
directors to constitute a quorum and thereby allow the new Board to fully
transact business. Any resulting vacancies would be filled by the remaining
directors and the individuals elected to fill those vacancies would serve until
the election of directors at the next Annual Meeting. If Messrs. Bova and
Fassler resign or refuse to stand for re-election, and if the court does not
invalidate the Poison Pill, there will not be any "continuing directors" who
will be able to redeem the Rights.
As to what we believe to be the breach by the current Vestcom Board of
fiduciary duties owed to you, the Vestcom shareholders, we intend to ask the
Vestcom independent directors to review the corporate records and circumstances
under which incumbent management presented to the independent directors the
merits of the Poison Pill and restrictive by-law amendments and to what extent
the independent directors were aware of the personal benefits derived by the
directors employed by the Company from these actions. Any final determinations
as to whether one or more members of the current Vestcom Board breached their
fiduciary duties would be made only to the extent that these claims are brought
before and determined by a court of competent jurisdiction.
OUTSTANDING VESTCOM SECURITIES
As of January 31, 2000, the Solicitors and their affiliates were the
beneficial owners of 742,100 shares of Vestcom common stock, representing 8.1%
of the outstanding shares. Two of the Nominees own an aggregate of 143,964
shares of Vestcom common stock as of that date, representing approximately 1.56%
of Vestcom's outstanding shares. According to Vestcom's Form 10-Q for the
quarter ended September 30,1999, as of October 31, 1999, there were 9,056,806
shares of Vestcom common stock, which the Solicitors understand include the
voting power of one share of Series B Preferred Stock convertible into 239,988
dividend access shares. It is the Solicitors understanding that these
outstanding shares are entitled to vote as a single class on all matters
including the Proposals. The record date for determining the shareholders of
Vestcom who are entitled to consent is February 8, 2000.
ADDITIONAL INFORMATION REGARDING THE PROPOSALS
PROPOSAL 1: REMOVAL OF DIRECTORS
Shareholders are being asked to adopt a proposal to remove five of the
current directors of Vestcom. Section 14A:6-6 of the New Jersey Business
Corporation Act allows shareholders to remove directors with or without cause.
Joel Cartun, Stephen R. Bova, Leonard J. Fassler, Brendan Keating, Fred S.
Lafer, Robert J. Levenson, and Richard D. White are the current members of
Vestcom's Board of Directors. As explained in this Consent Statement, the
Solicitors strongly believe that the current Vestcom management has breached
their fiduciary duties to you and are not acting, and will not act, in the best
interest of the Vestcom shareholders and that five of these directors (other
than Messrs. Bova and Fassler) should, therefore, be removed.
PROPOSAL 2: ELECTION OF NOMINEES
The Vestcom shareholders are being asked to adopt a proposal to elect as
directors of Vestcom each of the five Nominees named below, each of whom has
consented to serve as a director, if elected,
23
<PAGE>
until the next Annual Meeting of Vestcom's shareholders (which we believe will
be held in the Summer of 2000) or until his successor has been elected and
qualified. When elected, the Nominees would serve together with the two
remaining directors, Messrs. Bova and Fassler, as a single class provided that
the Company's recently enacted Poison Pill would purportedly give to Messrs.
Bova and Fassler the sole decision making power as to whether to amend or redeem
the Company's Poison Pill. (Please see "WHY THE PENDING LITIGATION IS IMPORTANT
TO YOU".) The Solicitors' primary purpose in seeking to elect the Nominees to
the Vestcom Board is to seek to put in place a better management team to seek to
enhance the value of Vestcom for the benefit of all of the Vestcom shareholders.
If elected, the Nominees would be responsible for managing the business and
affairs of Vestcom and would consider any and all feasible alternatives to
Vestcom's current business operations and practices. Each director of Vestcom
has an obligation under Vestcom law to discharge his duties as a director in
good faith, in a manner he reasonably believes to be in the best interest of
Vestcom and with such care, including reasonable inquiry, skill and diligence,
as a person of ordinary prudence would use under similar circumstances.
Although the Solicitors have no reason to believe that any of the Nominees
may be unable or unwilling to serve as directors, if any of the Nominees is
unable to serve as a director of Vestcom due to death, disability or otherwise,
the remaining Nominee or Nominees may designate another person or persons to
replace the Nominee or Nominees unable to serve.
The name, age, business address, present principal occupation and
employment history of each of the Nominees for at least the past five years are
as follows:
Name and Present Principal Occupation and
Business Address Age Five Year Employment History
---------------- --- ----------------------------
Harish K. Chopra 40 Mr. Chopra is the founder of
c/o TimeTrust TimeTrust, Inc. (one of the
1455 Frazee Road Solicitors) and has been its CEO since
Suite 420 its inception of July 1999. In 1988,
San Diego, California 92108 Mr. Chopra founded DataTree
Corporation, a document imaging and
database management systems company,
and served as its CEO since its
inception until 1998 when Mr. Chopra
sold DataTree to First American
Financial Corp., a public company on
the NYSE with revenues exceeding $3
billion a year. Mr. Chopra resigned as
President of DataTree in July 1999,
and Chopra is currently its Chairman
of the Board.
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Howard April 68 Mr. April has been an independent
1506-5150 MacDonald Ave. business consultant from May 1998 to
Montreal, Canada H3X 2V7 the present and was a director of
Vestcom from when it first went public
in August 1997 until May 1998. Mr.
April was also the founder and
President of COS Information Inc.,
based in Montreal, Canada from 1972 to
1996 and Chairman of that company from
1996 to 1998. COS Information Inc. was
one of the founding companies of
Vestcom International Inc. when it
went public in August 1997. In
connection with the integration of COS
Information into Vestcom, Mr. April's
employment with COS Information was
terminated and Mr. April will continue
to be paid under his employment
agreement until August 2000.
Parker S. Kennedy 51 Mr. Kennedy has been the President of
One First American Way First American Financial Corp., a NYSE
Santa Ana, California 92707 business information company since
1993 after serving as executive vice
present of First American since 1986.
Frank E. Raab 78 Mr. Raab, CPCU, has been a business
1280 Monte Cielo Drive consultant over the last five years.
Beverly Hills, California 90210 He is the former CEO and President of
Insurance Company of North America.
Mr. Raab is also a Rear Admiral, USNR
(Retired).
Robert J. Verrilli 55 Mr. Verrilli has been the Chief
c/o TimeTrust, Inc. Financial Officer of TimeTrust, Inc.
1455 Frazee Road since October 1999. Prior to joining
Suite 420 TimeTrust, Mr. Verrilli was the CFO of
San Diego, California 92108 DataTree Corporation from April 1999
to October 1999. From June 1994 to
April 1999, Mr. Verrilli was the CFO
of Astar, a multimedia instructional
systems provider.
This information has been furnished to the Solicitors by the respective
Nominees. Each of the Nominees has consented to serve as a director. None of the
Nominees nor any of their current employers is an affiliate of Vestcom. Annex
III contains additional information about the Nominees required to be disclosed
under the Securities Exchange Act of 1934.
It is expected that each Nominee, if elected and seated on the Vestcom
Board, will thereafter be reimbursed by Vestcom, based on its current fee
structure, for his reasonable out-of-pocket expenses incurred in the performance
of his service as director. Such directors will also be entitled to
indemnification by Vestcom in accordance with its Certificate of Incorporation
and by-laws.
In accordance with applicable regulations under the Securities Exchange
Act of 1934, the GOLD consent card delivered with this Consent Statement
provides each shareholder of Vestcom with the opportunity to designate the names
of any of the Nominees whom he or she does not desire to elect to the Vestcom
Board. THE SOLICITORS URGE SHAREHOLDERS TO VOTE FOR ALL OF THE NOMINEES ON THE
GOLD CONSENT CARD DELIVERED WITH THIS CONSENT STATEMENT.
PROPOSAL 3: BY-LAW AMENDMENT SETTING NUMBER OF DIRECTORS AT SEVEN
Shareholders are being asked to adopt a proposal to amend Section 3.2 of
Article III of the Vestcom by-laws to set the number of directors of Vestcom at
seven. The proposed amendment is
25
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contained in Annex IV to this Consent Statement. Vestcom's by-laws currently
provide that the Vestcom Board is to consist of not less than one nor more than
21 members, with the actual number of directors to be determined from time to
time by the Vestcom Board. The proposed by-law amendment would retain the
current size of the Vestcom Board at seven members, and if the Proposal to elect
the five Nominees is approved, the Nominees, together with Messrs. Bova and
Fassler, will constitute the entire Board of Directors of Vestcom.
PROPOSAL 4: BY-LAW AMENDMENT PERMITTING SHAREHOLDERS TO FILL VACANCIES
ON VESTCOM BOARD
Shareholders are being asked to adopt a proposal to amend Section 3.7 of
Article III of the Vestcom by-laws to provide that vacancies on the Vestcom
Board created by removal of directors from the Board by the shareholders of
Vestcom may be filled only with the approval of holders of a majority of the
outstanding voting shares of Vestcom. The proposed amendment to the Vestcom
by-laws is contained in Annex IV. The Vestcom by-laws now provide that vacancies
on the Vestcom Board, however caused, including removal of directors, may be
filled by the affirmative vote of a majority of the votes of the remaining
directors.
No provision is currently made for the filling of vacancies by
shareholders. The proposed by-law amendment would grant to shareholders the
exclusive right to elect the Nominees to fill the vacancies on the Vestcom Board
resulting from a removal of the five directors from the Vestcom Board by the
shareholders of Vestcom.
PROPOSAL 5: REPEAL OF BY-LAWS ADOPTED AFTER DECEMBER 16, 1999 AND BEFORE
THE EFFECTIVENESS OF THE PROPOSALS AND THE SEATING OF THE NOMINEES
Shareholders are being asked to adopt a proposal which would repeal any
amendment to the Vestcom by-laws adopted by the current Vestcom Board after
December 16, 1999 and before the effectiveness of the proposals and the seating
of the Nominees. This proposal is designed to prevent the current Vestcom
directors from taking actions to amend the Vestcom by-laws to attempt to nullify
or delay the actions taken by the shareholders under these Proposals or to
create new obstacles to the ability of Vestcom shareholders to freely elect a
board of directors that represent their best interests. Based on publicly
available information, the most recent version of the Vestcom by-laws were
adopted on December 16, 1999, and no amendments after that date have been
publicly disclosed.
VOTING SECURITIES
According to Vestcom's Certificate of Incorporation, the shares of Vestcom
common stock, Class B Preferred Stock and Class C Preferred Stock constitute the
only class of authorized voting securities of Vestcom. Accordingly, only holders
of Vestcom common stock, Class B Preferred Stock and Class C Preferred Stock are
entitled to execute consents. Vestcom stated in its Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1999, that, as of October 31,
1999, there were 9,056,806 shares of Vestcom common stock outstanding which the
Solicitors understand includes the one share of the Class B Preferred Stock that
is convertible into and vote as the equivalent of an aggregate of 239,988 common
shares and there are no shares of Class C Preferred Stock outstanding. Each
share of Vestcom common stock is entitled to one vote. Shareholders of Vestcom
do not have cumulative voting rights. The Consent Record Date for determining
shareholders entitled to vote is February 8, 2000.
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VESTCOM SHARES BENEFICIALLY OWNED
BY THE SOLICITORS AND THE NOMINEES
The following table sets forth the number and percent of outstanding
shares of Vestcom common stock beneficially owned by the Solicitors and each of
the Nominees, as of January 28, 2000, based solely on Vestcom's proxy statement
filed with the SEC on April 27, 1999 (the "Vestcom Proxy Statement"), and the
persons known to the Solicitors who beneficially own 5% or more of the
outstanding shares of Vestcom common stock as of December 13, 1999.
Name and Address of Amount and Nature of
Beneficial Owner(1) Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
Harish K. Chopra(2) 745,600 8.23%
Howard April(3) 141,464 1.56%
Parker S. Kennedy -0- -0-
Frank E. Raab 2,000 *
Robert J. Verrilli 3,500 *
Solicitors And _______ _____
Six Nominees 892,564 9.86%
As A Group
- ----------
* Less than 1/100th of 1%.
(1) Address not included if otherwise disclosed in this Consent Statement.
(2) Includes 184,500 shares held by TimeTrust, Inc., 527,100 shares of Vestcom
common stock held by R-Squared Limited, an affiliate of TimeTrust, and
33,900 shares held by Mr. Chopra personally.
(3) Includes 13,718 shares of Vestcom common stock and 127,746 dividend access
shares held by Mr. April which are convertible into 127,746 shares of
Vestcom common stock. Mr. April's son, Leonard April, holds 112,248 shares
of Vestcom common shares, as to which Howard April disclaims beneficial
ownership.
OTHER ANTI-TAKEOVER MEASURES
If Vestcom's Poison Pill is judicially invalidated, other measures will
remain available to Vestcom and its shareholders to guard against coercive
take-over attempts.
Undesignated Stock. Vestcom's Certificate of Incorporation authorizes not
only 20,000,000 shares of Common Stock, but also 10,000,000 shares of
undesignated stock. The undesignated stock may be issued from time to time by
the Company's Board of Directors as shares of one or more classes or series of
preferred stock or common stock. Subject to the provisions of the Company's
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the undesignated
shares, to fix the number of shares and to change the number of shares
constituting any series or class, and to provide for or change the voting
powers, designations, preferences and relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof, including
dividend rights (including whether dividends are cumulative), dividend
27
<PAGE>
rates, terms of redemption (including sinking fund provisions), redemption
prices, conversion rights and liquidation preferences of the shares constituting
any class or series of preferred stock or common stock, in each case without any
further action or vote by the shareholders.
One of the effects of undesignated stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to obtain control
of the Company by means of a tender offer, proxy contest, merger or otherwise.
The issuance of shares of preferred stock may, however, adversely affect the
rights of the holders of Common Stock. For example, preferred stock issued by
the Company may rank prior to the Common Stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of Common Stock. Accordingly, the issuance of shares
of such stock may discourage bids for the Common Stock at a premium or may
otherwise adversely affect the market price of the Common Stock.
Statutory Business Combination Provisions. The New Jersey Business
Corporation Act provides that in determining whether a proposal or offer to
acquire a corporation is in the best interest of the corporation, the board of
directors may, in addition to considering the effects of any action on
shareholders, consider any of the following: (a) the effects of the proposed
action on the corporation's employees, suppliers, creditors and customers, (b)
the effects on the community in which the corporation operates and (c) the
long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may best be served
by the continued independence of the corporation. The statute further provides
that if, based on these factors, the board determines that any such offer is not
in the best interest of the corporation, it may reject the offer. These
provisions may make it more difficult for a shareholder to challenge the Board's
rejection of, and may facilitate the Board's rejection of, an offer to acquire
the Company.
Vestcom is also subject to the New Jersey Shareholders Protection Act (the
"Protection Act"), which prohibits certain New Jersey corporations from engaging
in business combinations (including mergers, consolidations, significant asset
dispositions and certain stock issuances) with any interested shareholder
(defined to include, among others, any person that becomes a beneficial owner of
10% or more of the affected corporation's voting power) for five years after
such person becomes an interested shareholder, unless the business combination
is approved by the board of directors prior to the date the shareholder became
an interested shareholder. In addition, the Protection Act prohibits any
business combination at any time with an interested shareholder other than a
transaction that (i) is approved by the board of directors prior to the date the
interested shareholder became an interested shareholder, or (ii) is approved by
the affirmative vote of the holders of two-thirds of the voting stock not
beneficially owned by the interested shareholder, or (iii) satisfied certain
"fair price" and related criteria.'"
ADDITIONAL INFORMATION CONCERNING THE SOLICITORS
Certain information about the employees and representatives of the
Solicitors (other than Nominees) who may assist Solicitor in soliciting consents
is set forth in the attached Annex II. Annex III sets forth certain information
relating to the ownership of Vestcom common stock by certain of the Solicitors'
employees and representatives, and about any transactions between any of them
and Vestcom.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure in this Consent Statement and in our documents incorporated
by reference contain some forward-looking statements. Forward-looking statements
give our current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to:
28
<PAGE>
- future actions;
- prospective products or product approvals;
- future performance or results of current or anticipated products,
sales efforts and expenses;
- the outcome of contingencies such as legal proceedings; potential
growth and performance of Vestcom;
- projected revenues;
- annual research and development budgets; and
- financial results.
From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public.
Any and all of our forward-looking statements in this Consent Statement,
and in our documents incorporated by reference can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. We caution you not to place undue reliance on the
statements, which speak only as of the date of this Consent Statement or, in the
case of documents incorporated by reference, the date of the document.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral forward-looking
statements that the Solicitors or persons acting on their behalf may issue.
Solicitors undertake no obligation to review or confirm analysts' expectations
or estimates or to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date of this document or
to reflect the occurrence of unanticipated events.
SOLICITATION
The solicitation of consents pursuant to this Consent Solicitation is
being made by the Solicitors--Harish K. Chopra, TimeTrust, Inc. and R-Squared
Limited. Solicitation of consents also may be made by the directors, officers,
investor relations personnel and other employees of the Solicitors, its
subsidiaries and their affiliates and by the Nominees. Consents will be
solicited by mail, advertisement, telephone or telecopier and in person. No such
persons will receive additional compensation for such solicitation.
In addition, Solicitor has retained Beacon Hill Partners to assist in the
solicitation, for which services Beacon Hill Partners will be paid a fee of
$15,000, a $25,000 success fee and out-of-pocket expenses. Beacon Hill Partners
will be reimbursed for their reasonable out-of-pocket expenses. The
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<PAGE>
Solicitors have also agreed to indemnify Beacon Hill Partners against certain
liabilities and expenses, including certain liabilities and expenses under the
federal securities laws. It is anticipated that approximately 20 persons will be
employed by Beacon Hill Partners to solicit Vestcom shareholders.
Banks, brokers, custodians, nominees and fiduciaries will be requested to
forward solicitation material to the beneficial owners of shares of Vestcom
common stock. The Solicitors will reimburse banks, brokers, custodians, nominees
and fiduciaries for their reasonable expenses for sending solicitation material
to the beneficial owners.
Certain information about the directors and executive officers of the
Solicitors who are not Nominees and certain representatives of the Solicitors
who will assist Beacon Hill Partners in soliciting consents is contained in
Annex II. Annex III sets forth certain information relating to the ownership of
shares of Vestcom common stock by the Solicitors' directors, officers, employees
and representatives who may participate in the solicitation, and about any
transactions between any of them and Vestcom.
The cost of the solicitation of consents to the Proposals will initially
be borne by the Solicitors. The Solicitors may seek reimbursement of the costs
of this solicitation from Vestcom. If such reimbursement is sought, the question
of whether such reimbursement will be made will be submitted to the Board of
Directors for final decision. Costs related to the solicitation of consents to
the Proposals include expenditures for attorneys, accountants, investment
bankers, consent solicitors, public relations advisors, printing, advertising,
postage, litigation and related expenses and filing fees and are expected to
aggregate approximately $275,000, of which $185,000 has been spent to date. The
portion of such costs allocable solely to the solicitation of consents to the
Proposals is not readily determinable.
CONSENT PROCEDURE
Section 14A:5-6 of the New Jersey Business Corporation Act provides that,
absent a contrary provision in Vestcom's Certificate of Incorporation, any
action that may be taken at a meeting of the shareholders may be taken by the
written consent of at least the minimum number of votes that would be necessary
to take such action at a meeting in which all shares entitled to vote were
present and voting. Vestcom's Certificate of Incorporation contains no contrary
provision.
Article II, Section 2.15 of the Vestcom by-laws provides that any
shareholder of record seeking to have the shareholders authorize or take
corporate action by written consent will, by written notice to the Secretary of
Vestcom, request that the Vestcom Board fix a Consent Record Date. The Vestcom
Board is required to promptly, but in all events within 10 days of the date on
which such a request is received, adopt a resolution fixing the Consent Record
Date. Under the Vestcom by-laws, the Consent Record Date fixed by the Vestcom
Board cannot be later than 10 days following the date on which the resolution
fixing the Consent Record Date was adopted by the Vestcom Board. Under the NJBCA
and the Vestcom by-laws, if no Consent Record Date has been fixed by the Vestcom
Board within 10 days of the receipt of the request, the Consent Record Date will
be the first date on which a signed, written consent setting forth the action
taken or proposed to be taken is delivered to Vestcom. On January 18, 2000, the
Solicitors delivered to Vestcom a notice of its intention to seek to have
Vestcom's shareholders take action by written consent and requested that the
Vestcom Board fix the Consent Record Date for the consent solicitation made
hereby. On January 29, 2000, the Vestcom Board fixed February 8, 2000, as the
Consent Record Date for the solicitation.
The Consent Tabulation Date was set by Vestcom management to be April 7,
2000 (the "Consent Tabulation Date") which is permitted under New Jersey law to
be the effective date of these Proposals as no merger or business combination is
contemplated and all Vestcom shareholders are being notified by the Solicitors
and the Company of this Consent Solicitation. We understand that Vestcom's
incumbent management is seeking, after the Consent Tabulation Date, to send
written notice of the outcome of this
30
<PAGE>
Consent Solicitation to the Vestcom shareholders. This would extend the
effective date of our Proposals a further 10 days to April 17, 2000. We believe
this additional step is not required under the New Jersey Business Corporation
Act but is being utilized merely as a further delaying tactic by incumbent
management. During that additional 10 day period, we expect that Vestcom's
incumbent management will continue to seek to dissuade you and the other Vestcom
shareholders from adopting our Proposals. This 10 day delaying notification
period does not extend the time in which you may consent to our Proposals; it
only gives Vestcom's incumbent management further time to seek revocation of
your previously delivered consents. WE URGE YOU ONCE YOU HAVE DELIVERED YOUR
CONSENT NOT TO REVOKE IT.
Accordingly, pursuant to Section 14A:5-6(c) of the New Jersey Business
Corporation Act, the Proposals will become effective on April 17, 2000, if as of
that date properly completed, unrevoked consents consenting to the Proposals,
signed by the holders of record as of the close of business on the Consent
Record Date and constituting a majority of the shares of Vestcom common stock
then outstanding are delivered to Vestcom. NJBCA Section 14A:5-6(a) provides
that no written consent will be effective unless delivered to Vestcom within 60
days of the date of the earliest dated consent delivered to Vestcom in the
manner provided by New Jersey law. The effectiveness of the Proposals is subject
to, and conditioned upon, the adoption of Proposals 1 and 2 by the holders of
record, as of the close of business on the Consent Record Date, of a majority of
the shares of Vestcom common stock then outstanding.
Any failure to execute and return a consent, and all abstentions and
broker non-votes, will have the same effect as voting against the Proposals.
EFFECTIVENESS AND REVOCATION OF CONSENTS
Under Section 2.15 of Article II of the Vestcom by-laws, the Secretary of
Vestcom is required to engage a nationally recognized independent inspector of
election in connection with this consent solicitation. The inspector is
required, as soon as practicable after receipt of written consents for adoption
of the Proposals, to conduct such reasonable investigations as the inspector
deems necessary or appropriate for the purpose of ascertaining the validity of
the consents, including determining whether the holders of shares of Vestcom
common stock having the requisite voting power to authorize the Proposals have
given consent. If after this investigation, the inspector determines that
actions proposed by this consent solicitation have been validly taken, that fact
is to be certified on Vestcom's records. The Solicitor plans to present the
results of a successful solicitation with respect to the corporate actions
proposed herein to Vestcom as soon as possible.
An executed consent card may be revoked by signing, dating and delivering
a written revocation at any time prior to April 17, 2000, a date which is 10
days after the Consent Tabulation Date. The delivery of a subsequently dated
consent card that is properly completed and signed will constitute a revocation
of any earlier written revocation previously delivered by such holder. The
subsequently dated consent card may be delivered either to the Solicitor, in
care of Beacon Hill Partners, or to an address provided by Vestcom. Although a
subsequently dated consent card is effective if delivered to Vestcom, the
Solicitor requests that either the original or photostatic copies of all
subsequently dated consent cards be mailed or delivered to the Solicitor in care
of Beacon Hill Partners at the address set forth above, so that the Solicitor
will be aware of all subsequently dated consent cards and can more accurately
determine if and when unrevoked consents to the actions described in this
Consent Statement have been received from the holders of record on the Consent
Record Date of a majority of outstanding shares of Vestcom common stock.
SPECIAL INSTRUCTIONS
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If you were a record holder of shares of Vestcom common stock as of the
close of business on the Consent Record Date, you may elect to consent to,
withhold consent to or abstain with respect to each Proposal by marking the
"CONSENT," "DOES NOT CONSENT" or "ABSTAIN" box, as applicable, underneath each
such Proposal on the accompanying GOLD consent card and signing, dating and
returning it promptly in the enclosed postage-paid envelope or by mailing the
consent card to Beacon Hill Partners at the address stated below.
If the shareholder signing, dating and returning the GOLD consent card has
failed to check a box marked "CONSENT," "DOES NOT CONSENT" or "ABSTAIN" for any
of the Proposals, such shareholder will be deemed to have consented to each such
Proposal, except that such shareholder will not be deemed to have consented to
the removal of any current Vestcom director or to the election of any Nominee
whose name is written in on the consent card under the corresponding Proposal.
THE SOLICITORS RECOMMEND THAT YOU CONSENT TO
EACH OF THE PROPOSALS.
YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED GOLD
CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY OR
MAIL THE CARD TO MORROW AT THE ADDRESS STATED BELOW.
FAILURE TO RETURN YOUR CONSENT CARD WILL HAVE THE SAME EFFECT AS VOTING
AGAINST THE PROPOSALS.
If your shares of Vestcom common stock are held in "Street-Name," only
your bank or broker can execute a consent on your behalf, but only upon receipt
of your specific instructions. Please sign, date and return the enclosed GOLD
consent instruction form to your bank or broker today in the postage-paid
envelope provided. To ensure that your consent is effective, please contact the
persons responsible for your account and instruct them to execute a GOLD consent
card on your behalf. The Solicitors urge you to confirm in writing your
instructions to the person responsible for your account and provide a copy of
those instructions to the Solicitors in care of Beacon Hill Partners at the
address set forth below so that the Solicitors will be aware of all instructions
given and can attempt to ensure that such instructions are followed.
APPRAISAL RIGHTS
Holders of Vestcom common stock do not have dissenters' appraisal rights
under New Jersey law in connection with this consent.
COMPENSATION, REMUNERATION AND OTHER
INFORMATION ABOUT VESTCOM'S PRESENT
OFFICERS AND DIRECTORS
We refer you to Vestcom's last Proxy Statement, dated April 27, 1999, for
information concerning the compensation, enumeration and other information about
Vestcom's present officers and directors.
SHAREHOLDER PROPOSALS
According to Vestcom's Proxy Statement dated April 27, 1999, shareholder
proposals to be presented at Vestcom's next Annual Meeting must have been
received by Vestcom, in writing, no late than December 27, 1999, in order to be
eligible for inclusion in Vestcom's Proxy Statement and form of proxy for that
meeting, and must be received no later than March 12, 1999, to be considered at
the next
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Annual Meeting (but not included in Vestcom's Proxy Statement for that meeting).
We believe, however, that pursuant to the amended by-laws of Vestcom
adopted on December 16, 1999, shareholder proposals to be presented at the next
Annual Meeting must be received by Vestcom no earlier than January 27, 2000 and
no later than February 26, 2000 in order to be considered at the next Annual
Meeting (but not included in Vestcom's Proxy Statement).
If you have any questions or require any assistance in executing or
delivering your consent, please write to, or call:
Beacon Hill Partners
90 Broad Street, 20th Floor
New York, NY 10004
Banks and Brokerage Firms Call Collect: (212) 843-8500
Shareholders Please Call: (800) 755-5001
Dated: February , 2000
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ANNEX I
INFORMATION CONCERNING VESTCOM'S OFFICERS AND DIRECTORS
The following table sets forth the share ownership of all current
directors and executive officers of Vestcom and holders of more than five
percent of Vestcom's Common Stock as reported in Vestcom's Proxy Statement,
dated April 27, 1999:
Number of
Common Shares and Share
Name Equivalents(1)(2) of Class Percent
- ------------------------------- -------------------------- --------------
Brookside Capital Partners Fund 1,150,700(A) 13.09%
L.P.
Dresdner RCM Global Investors 867,200 9.87%
LLC [including Dresdner RCM
Global Investors US Holdings
LLC; RCM Limited L.P.; RCM
General Corporation; and
Dresdner Bank AG]
Gary J. Marcello 541,170 6.2%
AMVESCAP PLC 447,400 5.09%
Joel Cartun(1) 1,474,198 16.3%
Peter J. McLaughlin 172,287 1.9%
Harvey Goldman(2) 28,500 *
Brendan Keating(3) 16,250 *
Robert Rogus(4) 117,938 1.3%
- ----------
(1) Includes 200,000 shares held by trusts for the benefit of Mr.
Cartun's children. As trustee for such trustees, Mr. Cartun's wife
has the right to vote and dispose of such shares.
(2) Includes 12,500 shares issuable upon the exercise of stock options.
(3) Includes 8,750 shares issuable upon the exercise of stock options.
(4) Includes 1,000 shares issuable upon the exercise of stock options.
Mr. Rogus is no longer considered an executive officer of the
Company (effective January 1, 1999) and, accordingly, his holdings
are not included in the total for all current executive officers,
directors and nominees.
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<PAGE>
Number of
Common Shares and Share
Name Equivalents(1)(2) of Class Percent
- ------------------------------- -------------------------- --------------
Stephen R. Bova(5) 148,000 1.6%
Leonard J. Fassler(6) 13,500 *
Fred S. Lafer(7) 12,100 *
Robert J. Levenson(8) 10,100
Richard D. White(9) 110,000 1.2%
- ----------
(5) Includes 10,000 shares issuable upon the exercise of stock options.
(6) Includes 1,000 shares held by Mr. Fassler's wife, Mr. Fassler
disclaims beneficial ownership of such shares. Also includes 10,000
shares issuable upon the exercise of stock options.
(7) Includes 1,200 shares held by family trusts of which Mr. Lafer is
trustee. Also includes 10,000 shares issuable upon the exercise of
stock options.
(8) Includes 600 shares held by Mr. Levenson's wife as custodian for the
benefit of her children.
(9) Includes 61,704 shares held in the aggregate by CIBC Oppenheimer and
an affiliate of CIBC Oppenheimer. Mr. White is a Managing Director
of CIBC Capital Partners, an affiliate of CIBC Oppenheimer. Mr.
White disclaims beneficial ownership of these 61,704 shares. Also
includes 10,000 shares issuable upon the exercise of stock options.
Pursuant to Mr. White's employment arrangement with CIBC
Oppenheimer, any economic benefit derived from these options must be
contributed by him to CIBC Oppenheimer
35
<PAGE>
ANNEX II
INFORMATION CONCERNING DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER
REPRESENTATIVES OF THE SOLICITORS
The following table sets forth the name and the present principal
occupation or employment, and the name and principal business address of any
corporation or other organization in which such employment is carried on, of the
directors, officers, employees and representatives of the Solicitors who may
assist in soliciting consents from Vestcom's shareholders. Unless otherwise
indicated, each person listed below is an officer and/or director of TimeTrust,
Inc., and the principal business address of each person listed below is 1455
Frazee Road, Suite 420, San Diego, California 92108.
NAME AND PRINCIPAL PRESENT PRINCIPAL OCCUPATION OR
BUSINESS ADDRESS EMPLOYMENT
- ------------------ --------------------------------
Harish K. Chopra - President, Secretary and Director of TimeTrust, Inc.
Robert Verrilli - Chief Financial Officer of TimeTrust, Inc.
Jim Jensen - Director of TimeTrust, Inc.
Leatrice Latts - Director of TimeTrust, Inc.
Unless otherwise indicated, each person listed below is an officer and/or
director of R-Squared Limited and the principal business address of each person
listed below is P.O. Box 1586 GT, Cardinal Avenue, George Town, Grand Cayman,
British West Indies.
NAME AND PRINCIPAL PRESENT PRINCIPAL OCCUPATION OR
BUSINESS ADDRESS EMPLOYMENT
- ------------------ --------------------------------
Morgan Piers ap Peter Stradling Director of R-Squared Limited
Sheena Thompson Director of R-Squared Limited
Royal Bank of Canada Trust Secretary
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<PAGE>
ANNEX III
VESTCOM COMMON STOCK HELD BY CERTAIN
DIRECTORS, OFFICERS, EMPLOYEES AND OTHER REPRESENTATIVES
OF THE SOLICITORS AND THE NOMINEES AND CERTAIN TRANSACTIONS
BETWEEN ANY OF THEM AND VESTCOM
Except as disclosed in this Consent Statement, none of the Solicitors,
their directors or executive officers, the Nominees or the employees or other
representatives of the Solicitor named in Annex II owns any securities of
Vestcom or any parent or subsidiary of Vestcom, beneficially or of record; has
purchased or sold any such securities within the past two years; or is or was
within the past year a party to any contract, arrangement or understanding with
any person for such securities. Except as disclosed in this Consent Statement,
to the best knowledge of the Solicitors, its subsidiaries, their directors or
executive officers, the Nominees and the employees and other representatives of
the Solicitors named in Annex II, none of their Associates (as defined in Rule
14a-1 under the Exchange Act) beneficially owns, directly or indirectly, any
securities of Vestcom.
Except as disclosed in this Consent Statement, none of the Solicitors,
their subsidiaries, their directors or executive officers, the Nominees, the
employees or other representatives of the Solicitors named in Annex II, or, to
their best knowledge, their Associates has any arrangement or understanding with
any person as (1) to any future employment by Vestcom or its affiliates or (2)
to future transactions to which Vestcom or any of its affiliates will or may be
a party, nor any material interest, direct or indirect, in any transaction that
has occurred since January 1, 1998, or any currently proposed transaction, or
series of similar transactions, which Vestcom or any of its affiliates was or is
to be a party and in which the amount involved exceeds $60,000. Certain
Nominees, directors and executive officers of the Solicitors and/or its
respective associates may also be directors or officers of other companies and
organizations that have engaged in transactions with Vestcom or its subsidiaries
in the ordinary course of business since January 1, 1998, but the Solicitors
believe that the interest of such persons in such transactions is not material.
None of the Nominees have been involved in any legal proceedings in the
preceding five years which must be disclosed as material for purposes of an
evaluation of the integrity or ability of any person nominated to become a
director under the federal securities laws.
The following sets forth all purchases and sales during the past two years
of Vestcom common stock deemed to be beneficially owned by the Solicitors and
the Nominees. All transactions were effected in open market transactions.
Transaction
Name Date Number of Shares Purchase/Sold
- ---------------------- ----------- ---------------- -------------
Harish K. Chopra 12/27/99 10,000 Purchase
12/29/99 3,000 Purchase
12/30/99 5,500 Purchase
01/06/00 12,000 Purchase
02/02/00 3,500 Purchase
TimeTrust, Inc. 10/19/99 7,000 Purchase
10/26/99 1,100 Sold
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Transaction
Name Date Number of Shares Purchase/Sold
- ---------------------- ----------- ---------------- -------------
10/27/99 600 Purchase
10/28/99 9,900 Purchase
11/02/99 500 Purchase
11/05/99 200 Sold
11/16/99 35,000 Purchase
11/17/99 13,000 Purchase
11/18/99 3,800 Sold
11/18/99 101,200 Purchase
11/19/99 500 Sold
11/23/99 600 Sold
11/24/99 1,000 Purchase
12/01/99 15,500 Purchase
12/07/99 1,000 Purchase
12/14/99 3,000 Purchase
12/27/99 200 Purchase
12/28/99 2,800 Purchase
R-Squared Limited 10/13/99 4,000 Purchase
10/14/99 5,000 Purchase
10/15/99 50,000 Purchase
10/20/99 50,000 Purchase
10/21/99 51,000 Purchase
10/22/99 100,000 Purchase
10/27/99 115,500 Purchase
10/28/99 20,000 Purchase
11/01/99 5,000 Purchase
11/02/99 4,000 Purchase
11/03/99 7,000 Purchase
11/04/99 300 Purchase
11/08/99 15,000 Purchase
11/09/99 9,000 Purchase
11/18/99 2,500 Purchase
11/19/99 5,000 Purchase
11/23/99 1,000 Sold
11/29/99 25,000 Purchase
12/01/99 9,900 Purchase
12/02/99 6,500 Purchase
12/07/99 2,500 Purchase
12/08/99 8,700 Purchase
12/09/99 5,200 Purchase
12/15/99 4,300 Purchase
12/16/99 13,700 Purchase
12/22/99 1,000 Purchase
010/5/00 2,000 Purchase
01/18/00 6,000 Purchase
Frank E. Raab 02/02/00 2,000 Purchase
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<PAGE>
Transaction
Name Date Number of Shares Purchase/Sold
- ---------------------- ----------- ---------------- -------------
Robert J. Verrilli 11/30/99 2,500 Purchase
02/04/00 500 Purchase
02/07/00 500 Purchase
Katrina Hanson 12/17/99 900 Purchase
12/20/99 600 Purchase
39
<PAGE>
ANNEX IV
FORM OF PROPOSED AMENDMENTS
TO THE VESTCOM BY-LAWS
1. Proposed Amendment to Section 3.2 of Article III
Section 3.2 of Article III of the Vestcom by-laws is amended to read as
follows:
"The number of Directors constituting the whole Board shall be
seven."
2. Proposed Amendment of Section 3.7 of Article III
Section 3.7 of Article III of the Vestcom by-laws is amended to read as
follows:
"Subject to the last sentence of this Section, any vacancy or
vacancies which may occur among the Directors through death, resignation, or
disqualification or for any other cause, shall be filled by a majority of the
remaining Directors, though less than a quorum, or by the remaining Director,
and the Directors so chosen shall hold office until the next annual election and
until their respective successors shall be duly elected and shall have
qualified, unless sooner displaced as provided by the laws of the State of New
Jersey. Newly created directorships resulting from an increase in the number of
Directors shall be filled in the same manner. Notwithstanding anything in the
foregoing, any vacancies resulting from removal of a director or directors by
the shareholders through shareholder action without a meeting shall be filled
only by the affirmative vote of the majority of the issued and outstanding
shares of the stock of the Corporation entitled to vote."
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<PAGE>
APPENDIX 1
[GOLD CONSENT CARD] [FORM OF CONSENT CARD]
PRELIMINARY COPY -- SUBJECT OF COMPLETION
SOLICITATION ON BEHALF OF HARISH K. CHOPRA,
TIMETRUST, INC. AND R-SQUARED LIMITED
Unless otherwise indicated below, the undersigned, a shareholder of record of
Vestcom International, Inc. ("Vestcom") as of the close of business on February
8, 2000 (the "Consent Record Date"), hereby consents, pursuant to Section
14A.5-6 of the New Jersey Business Corporation Act and Section 2.15 of Article
II of the Vestcom by-laws for all shares of common stock of Vestcom held by the
undersigned, to the taking of the following actions without a meeting of the
shareholders of Vestcom:
[In the absence of prior Board action, the date of delivery to Vestcom of
the initial consent shall constitute the record date for this consent
solicitation.]
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
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Please mark
your votes as [X
indicated in
this example
DOES NOT
CONSENT CONSENT ABSTAIN
1. Remove Joel Cartun, Fred S. Lafer, Brendan
Keating, Robert J. Levenson, and Richard D.
White, and any other person (other than
Stephen R. Bova, Leonard J. Fassler or those
elected pursuant to this consent) elected or
appointed to the Vestcom Board prior to the
effective date of this shareholder action.
INSTRUCTION: TO CONSENT, NOT CONSENT OR ABSTAIN FROM CONSENTING TO THE
REMOVAL OF ALL THE PERSONS NAMED IN PROPOSAL #1, CHECK THE APPROPRIATE BOX
ABOVE. IF YOU WISH TO CONSENT TO THE REMOVAL OF CERTAIN OF THE PERSONS NAMED IN
PROPOSAL #1, BUT NOT ALL OF THEM, CHECK THE "CONSENT" BOX ABOVE AND WRITE THE
NAME OF EACH SUCH PERSON YOU DO NOT WISH REMOVED IN THE SPACE PROVIDED BELOW:
- -----------------------------------------------
DOES NOT
CONSENT CONSENT ABSTAIN
2. Elect Howard April, Harish K. Chopra, Parker
S. Kennedy, Frank E. Raab, and Robert J.
Verrilli (the "Nominees") to serve as
directors of Vestcom together with
continuing directors, Stephen R. Bova and
Leonard J. Fassler (or, if any such Nominee
is unable to serve as a director of Vestcom
due to death, disability or otherwise, any
other person designated as a Nominee by the
remaining Nominee or Nominees).
INSTRUCTION: TO CONSENT, NOT CONSENT OR
ABSTAIN FROM CONSENTING TO THE ELECTION OF
ALL THE PERSONS NAMED IN PROPOSAL #2, CHECK
THE APPROPRIATE BOX ABOVE. IF YOU WISH TO
CONSENT TO THE ELECTION OF CERTAIN OF THE
PERSONS NAMED IN PROPOSAL #2, BUT NOT ALL OF
THEM, CHECK THE "CONSENT" BOX ABOVE AND
WRITE THE NAME OF EACH SUCH PERSON YOU DO
NOT WISH ELECTED IN THE SPACE PROVIDED
BELOW.
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<PAGE>
3. Amend Section 3.2 of Article III of the |_| |_| |_|
Vestcom by-laws to set the number of
directors of Vestcom at seven as set forth
in Annex IV to the Consent Statement.
4. Amend Section 3.7 of Article III of the |_| |_| |_|
Vestcom by-laws to provide that vacancies on
the Vestcom Board created as a result of a
removal of directors by Vestcom shareholders
may be filled only by a majority vote of
shares of Vestcom common stock as set forth
in Annex IV to the Consent Statement.
- -----------------------------------------------
5. Repeal each provision of the Vestcom by-laws |_| |_| |_|
adopted after December 16, 1999 and before
the effectiveness of as of the foregoing
actions.
IF NO BOX IS MARKED FOR ANY
PROPOSAL, THE UNDERSIGNED
WILL BE DEEMED TO CONSENT TO
SUCH PROPOSAL, EXCEPT THAT
THE UNDERSIGNED WILL NOT BE
DEEMED TO CONSENT TO THE
REMOVAL OF ANY CURRENT
DIRECTOR OR TO THE ELECTION
OF ANY NOMINEE WHOSE NAME IS
WRITTEN IN THE SPACE
PROVIDED.
IN ORDER FOR YOUR CONSENT TO
BE VALID, IT MUST BE DATED.
PLEASE MARK, SIGN, DATE AND
MAIL YOUR CONSENT PROMPTLY IN
THE ENCLOSED POSTAGE-PAID
ENVELOPE.
The provisions of the Consent
Statement dated February ___,
2000 of Harish K. Chopra,
TimeTrust Inc., and R-Squared
Limited, which more fully set
forth the amendments to the
Vestcom by-laws described in
items 3 and 4 above,
including the precise wording
of such amendments (see Annex
IV) are incorporated by
reference.
IN THE ABSENCE OF DISSENT OR
ABSTENTION BEING INDICATED
ABOVE, THE UNDERSIGNED HEREBY
CONSENTS TO EACH ACTION
LISTED
43
<PAGE>
ABOVE.
The effectiveness of
proposals 1 through 5 is
subject to, and conditioned
upon, the adoption of
proposals 1 and 2 set forth
above by the holders of
record, as of the close of
business on the Consent
Record Date, of a majority of
the shares of Vestcom common
stock then outstanding
(including the receipt of
consents from such holders to
the election of each Nominee
to the Vestcom Board).
Signature(s) ________________________ Dated , 2000
Please sign exactly as the name appears on stock certificate or on the attached
label. If shares are held by joint tenants, both should sign. In case of joint
owners, each joint owner must sign. When signing as attorney, executor,
administrator, trustee guardian, corporate officer, etc., please give full
title.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
44
