Exhibit 1
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of June 12, 2002 by and among Vector Investment Holdings, Inc.,
a Delaware corporation ("Parent"), Vector Merger Corp., a New Jersey corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"); Cornerstone Equity
Investors IV, L.P., a Delaware limited partnership ("Cornerstone"); Xxxx Xxxxxx
("JC"); Xxxxxxx Xxxxxxx ("BK"); and Xxxxx Xxxxxxxx ("SB"). Cornerstone, JC, BK
and SB shall be referred to herein from time to time as the "Contributors".
WHEREAS, the parties hereto desire to enter into this
Agreement in order to provide for the issuance by Parent to the Contributors of
Parent Common Stock and Parent Preferred Stock pursuant to the terms provided
herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Definitions. The following terms are defined as follows:
"Closing" shall have the meaning given to such term in the
Merger Agreement.
"Company" means Vestcom International, Inc., a New Jersey
corporation.
"Company Common Stock" means the common stock, no par value,
of the Company.
"Contributed Shares" means collectively the JC Contributed
Shares, the BK Contributed Shares and the SB Contributed Shares.
"Merger" shall have the meaning given to such term in the
Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger,
dated as of the date hereof, among Parent, Merger Sub and Company.
"Merger Consideration" shall have the meaning given to such
term in the Merger Agreement.
"Parent Common Stock" means the Common Stock, par value $0.01
per share, of Parent.
"Parent Series A Preferred Stock" means the Series A Preferred
Stock, par value $0.01 per share, of Parent.
"Parent Series B Preferred Stock" means the Series B Preferred
Stock, par value $0.01 per share, of Parent.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Senior Commitment Letter" shall have the meaning given to
such term in the Merger Agreement.
"Shareholders" means collectively JC, BK and SB.
"Shareholder Contribution" means collectively the JC
Contribution, the BK Contribution and the SB Contribution.
"Sub Debt Commitment Letter" means the commitment letter,
dated as of the date hereof, by Cornerstone pursuant to which Cornerstone and/or
its affiliates have agreed to provide up to $10,500,000 in subordinated debt
financing to Parent in connection with the consummation of the Merger.
"Surviving Corporation" shall have the meaning given to such
term in the Merger Agreement.
"Transaction" shall have the meaning given to such term in the
Merger Agreement.
2. Contribution to Parent.
(a) As of immediately prior to the Closing, Cornerstone shall
contribute (the "CEI Contribution") to the capital of Parent, and
Parent hereby accepts as a contribution, cash in the amount of
$33,900,000. In exchange for the CEI Contribution, Parent shall
issue to Cornerstone shares of Parent Common Stock with a value of
$8,475,000 immediately following the consummation of the Merger and
shares of Parent Series A Preferred Stock with a value of
$25,425,000 immediately following the consummation of the Merger;
provided, that the CEI Contribution to Parent shall be reduced (and
no consent of any Shareholder shall be required under this
Agreement), with a proportionate reduction (75% of such reduction
shall be allocated to the Parent Series A Preferred Stock and 25% of
such reduction shall be allocated to the value of the Parent Common
Stock) in the shares of Parent Common Stock and Parent Series A
Preferred Stock to be received in exchange for such reduced CEI
Contribution, to the extent that any other holder of Company Common
Stock agrees (on term and condition satisfactory to Cornerstone and
Parent) prior to consummation of the Merger, to contribute its
shares of Company Common Stock to Parent in exchange for Parent
Common Stock, Parent Series A Preferred Stock and/or Parent Series B
Preferred Stock. Notwithstanding anything contained herein to the
contrary, in the event that the cash proceeds of the equity and
other debt financings (including the maximum amount of subordinated
debt financing required to be provided by Cornerstone or its
affiliates under the Sub Debt Commitment Letter) are not sufficient
to consummate the Merger, to pay all fees and expenses incurred in
connection with the Merger and to provide for the ongoing working
capital needs of the Surviving Corporation immediately following the
consummation of the Merger, and Parent and/or Merger Sub have
received cash proceeds pursuant to, and in accordance with, the
Senior Commitment Letter (as defined in the Merger Agreement), CEI
agrees (and no consent of any Shareholder shall be required under
this Agreement) to increase its CEI Contribution to Parent in an
amount up to
$2,000,000 (the "Additional CEI Contribution"), and in exchange,
shall receive a proportionate increase (75% of such increase shall
be allocated to the Parent Series A Preferred Stock and 25% of such
increase shall be allocated to the value of the Parent Common Stock)
in the shares of Parent Common Stock and Parent Series A Preferred
Stock for such increased CEI Contribution; provided, that the
Additional CEI Contribution shall be increased (with a proportionate
increase (75% of such increase shall be allocated to the Parent
Series A Preferred Stock and 25% of such increase shall be allocated
to the value of the Parent Common Stock) in the shares of Parent
Common Stock and Parent Series A Preferred Stock to be received by
Cornerstone) by the portion of any subordinated debt financing that
would have been required to be provided under the Sub Debt
Commitment Letter if there were no restrictions in the Senior
Commitment Letter on the aggregate amount of subordinated debt
financing permitted to be provided to Parent, Merger Sub and/or the
Surviving Corporation and to the extent such restrictions were not
waived by the provider of such senior debt financing under the
Senior Commitment Letter (such increased amount shall be referred to
as the "Maximum Additional CEI Contribution"); provided, however,
that the Maximum Additional CEI Contribution shall be reduced (with
a proportionate reduction (75% of such reduction shall be allocated
to the Parent Series A Preferred Stock and 25% of such reduction
shall be allocated to the value of the Parent Common Stock) in the
shares of Parent Common Stock and Parent Series A Preferred Stock to
be received by Cornerstone) by the portion of any (i) transaction
fees that Cornerstone or its affiliates are entitled to receive from
the Surviving Corporation contemporaneously with the consummation of
the Merger that have been deferred by Cornerstone or such affiliates
until after the consummation of the Merger and (ii) any payments
required to be made by the Company to its employees upon the
consummation of the Merger to the extent that such payments have
been waived or deferred by such employees until after the
consummation of the Merger.
(b) As of immediately prior to the Closing, JC shall
contribute (the "JC Contribution") to the capital of Parent, and
Parent hereby accepts, 773,250 shares of Company Common Stock (the
"JC Contributed Shares") having an aggregate value (based on the per
share Merger Consideration) of $4,832,813. In exchange for the JC
Contribution, Parent shall issue to JC shares of Parent Common Stock
with a value of $1,308,203 immediately following the consummation of
the Merger and shares of Parent Series B Preferred Stock with a
value of $3,524,610 immediately following the consummation of the
Merger.
(c) As of immediately prior to the Closing, BK shall
contribute (the "BK Contribution") to the capital of Parent, and
Parent hereby accepts, 77,800 shares of Company Common Stock (the
"BK Contributed Shares") having an aggregate value (based on the per
share Merger Consideration) of $486,250. In exchange for the BK
Contribution, Parent shall issue to BK shares of Parent Common Stock
with a value of $235,473 immediately following the consummation of
the Merger and shares of Parent Series B Preferred Stock with a
value of $250,777 immediately following the consummation of the
Merger.
(d) As of immediately prior to the Closing, SB shall
contribute (the "SB Contribution") to the capital of Parent, and
Parent hereby accepts, 32,000 shares of
Company Common Stock (the "SB Contributed Shares") having an
aggregate value (based on the per share Merger Consideration) of
$200,000. In exchange for the SB Contribution, Parent shall issue to
SB shares of Parent Common Stock with a value of $53,042 immediately
following the consummation of the Merger and shares of Parent Series
B Preferred Stock with a value of $146,958 immediately following the
consummation of the Merger.
3. Contribution to Merger Sub. Immediately upon receipt of the
CEI Contributed Cash and the Contributed Shares and as of immediately prior to
the Closing, Parent shall contribute (the "Parent Contribution") to the capital
of Merger Sub and Merger Sub shall accept the CEI Contributed Cash and the
Contributed Shares.
4. Tax Reporting. The parties hereto intend that the CEI
Contribution and the Shareholder Contribution collectively be treated as a
tax-free transfer under Section 351 of the Internal Revenue Code of 1986, as
amended. The parties hereto agree to file all applicable tax returns consistent
with such treatment.
5. Representations and Warranties by the Contributors. Each
Contributor hereby represents and warrants to Parent that:
(a) su ch Contributor is an "accredited investor," as defined
under Rule 501 promulgated under the Securities Act; and
(b) this Agreement constitutes the legal, valid and binding
obligation of such Contributor, enforceable in accordance with its
terms, and the execution, delivery and performance of this Agreement
by such Contributor does not conflict with, violate or cause a
breach of any agreement, contract or instrument to which such
Contributor is a party or any judgment, order or decree to which
such Contributor is subject.
6. Representation and Warranty by the Shareholders. Each
Shareholder hereby represents and warrants to Parent that such Shareholder holds
of record and owns beneficially the shares of Company Common Stock to be
contributed by such Shareholder to Parent pursuant to this Agreement, free and
clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), taxes, security interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands.
7. Further Assurances. From time to time following the date
hereof, the parties hereto shall execute and deliver such other instruments of
assignment, transfer and delivery (including the delivery by the Shareholders to
Parent and/or Merger Sub of certificates representing the Contributed Shares)
and shall take such other actions as any other party hereto reasonably may
request in order to consummate, complete and carry out the transactions
contemplated by this Agreement.
8. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other
jurisdiction, and this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
9. Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties hereto and supersedes
and preempts any prior understandings, agreements or representations
by or among the parties hereto, written or oral, which may have
related to the subject matter hereof in any way.
10. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be deemed to be an original and all
of which taken together will constitute one and the same agreement.
11. Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of and be enforceable by the parties hereto
and their respective successors, heirs and assigns.
12. No Third Party Beneficiaries. There are no third party
beneficiaries of this Agreement and nothing in this Agreement,
express or implied, is intended to confer on any person other than
the parties hereto other than their respective successors, heirs and
assigns, any rights, remedies, obligations or liabilities; provided,
that the Company is a third-party beneficiary of Sections 2 and 3
hereof.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Delaware,
without giving effect to any rules, principles or provisions of
choice of law or conflict of laws.
14. Remedies. The parties hereto acknowledge and agree that
money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party hereto will have the
right to injunctive relief or specific performance, in addition to
all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
15. Amendments and Waivers. Except as otherwise provided in
Section 2(a) hereof, any provision of this Agreement may be amended
or waived only with the prior written consent of each of the parties
hereto.
16. Termination of the Merger Agreement. If the Merger
Agreement is terminated, the parties hereto agree (i) to immediately
rescind all of the transactions which have then occurred pursuant to
the terms of this Agreement and (ii) to terminate this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this
Contribution Agreement as of the date first written above.
VECTOR INVESTMENT HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Secretary
VECTOR MERGER CORP.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Secretary
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone Equity Investors IV, LLC,
Its General Partner
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Managing Director
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
