kl06076.htm

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FUvBXtyVbMt3r4sBK8o7lk0Nn8zp2ccmrHuHWlxrKiVopyUH62Ae6yHXvWsV1PKK uZUpwSMMTaKeHMYIwl7N+A== 0000922423-07-000821.txt : 20070621 0000922423-07-000821.hdr.sgml : 20070621 20070621171848 ACCESSION NUMBER: 0000922423-07-000821 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20070621 DATE AS OF CHANGE: 20070621 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VERTRUE INC CENTRAL INDEX KEY: 0001020996 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 061276882 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-47315 FILM NUMBER: 07934602 BUSINESS ADDRESS: STREET 1: 20 GLOVER AVENUE CITY: NORWALK STATE: CT ZIP: 06850 BUSINESS PHONE: 2033247635 MAIL ADDRESS: STREET 1: 20 GLOVER AVENUE CITY: NORWALK STATE: CT ZIP: 06850 FORMER COMPANY: FORMER CONFORMED NAME: MEMBERWORKS INC DATE OF NAME CHANGE: 19960814 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BRENCOURT ADVISORS LLC CENTRAL INDEX KEY: 0001168705 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 600 LEXINGTON AVENUE STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123139743 MAIL ADDRESS: STREET 1: 600 LEXINGTON AVENUE STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 kl06076.htm SCHEDULE 13D AMENDMENT NO. 2 kl06076.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D/A

AMENDMENT NO. 2

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

Vertrue, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

92534N101

(CUSIP Number)

Mr. Michael Palmer

c/o Brencourt Advisors, LLC

600 Lexington Avenue, 8^th Floor

New York, NY 10022

(212) 313-9700

(Name, Address and Telephone Number of

Person Authorized to Receive Notices

and Communications)

June 20, 2007

(Date of Event which Requires Filing

of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following box: o.

SCHEDULE 13D

CUSIP No. 92534N101

1) NAME OF REPORTING PERSON

S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

Brencourt Advisors, LLC 13-4137530

_______________________________________________________________________________________________

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)

(b) x

_______________________________________________________________________________________________

3) SEC USE ONLY

_______________________________________________________________________________________________

4) SOURCE OF FUNDS AF, OO (managed accounts)

_______________________________________________________________________________________________

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO

ITEMS 2(d) OR 2(e) o

_______________________________________________________________________________________________

6) CITIZENSHIP OR PLACE OF ORGANIZATION

Delaware

_______________________________________________________________________________________________

7) SOLE VOTING POWER

NUMBER OF 1,617,164¹

SHARES __________________________________________________________________________

BENEFICIALLY 8) SHARED VOTING POWER

OWNED BY 1,128,446²

EACH __________________________________________________________________________

REPORTING 9) SOLE DISPOSITIVE POWER

PERSON 1,617,164¹

WITH __________________________________________________________________________

10) SHARED DISPOSITIVE POWER

1,128,446²

_______________________________________________________________________________________________

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

2,745,610³

_______________________________________________________________________________________________

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES o

__________________________________________________________________________

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

28.1%

__________________________________________________________________________

14) TYPE OF REPORTING PERSON

__________________________________________________________________________

;

^{-----------------------------------------------------------------------}

¹ Includes 1,044,625 shares that the reporting person has the right to acquire. See Item 6.

² Includes 762,396 shares that the reporting person has the right to acquire. See Item 6.

³ Includes 1,807,021 shares that the reporting person has the right to acquire. See Item 6.

SCHEDULE 13D

CUSIP No. 92534N101

1) NAME OF REPORTING PERSON

S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

Brencourt Credit Opportunities Master, Ltd 32-0006283

_____________________________________________________________________________________

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)

(b) x

_____________________________________________________________________________________

3) SEC USE ONLY

_____________________________________________________________________________________

4) SOURCE OF FUNDS WC

_____________________________________________________________________________________

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO

ITEMS 2(d) OR 2(e) o

_____________________________________________________________________________________

6) CITIZENSHIP OR PLACE OF ORGANIZATION

Bermuda

_____________________________________________________________________________________

7) SOLE VOTING POWER

NUMBER OF 1,449,133⁴

SHARES ______________________________________________________________

BENEFICIALLY 8) SHARED VOTING POWER

OWNED BY none

EACH ______________________________________________________________

REPORTING 9) SOLE DISPOSITIVE POWER

PERSON 1,449,133

WITH ______________________________________________________________

10) SHARED DISPOSITIVE POWER

none

_____________________________________________________________________________________

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

1,449,133

_____________________________________________________________________________________

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES o

__________________________________________________________________

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

14.8%

__________________________________________________________________

14) TYPE OF REPORTING PERSON

__________________________________________________________________

-----------------------------------------

⁴ Includes 876,594 shares that the reporting person has the right to acquire.

SCHEDULE 13D

CUSIP No. 92534N101

1) NAME OF REPORTING PERSON

S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

Brencourt Merger Arbitrage Master, Ltd. 32-0006280

___________________________________________________________________________________

2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)

(b) x

___________________________________________________________________________________

3) SEC USE ONLY

___________________________________________________________________________________

4) SOURCE OF FUNDS WC

___________________________________________________________________________________

5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO

ITEMS 2(d) OR 2(e) o

___________________________________________________________________________________

6) CITIZENSHIP OR PLACE OF ORGANIZATION

Bermuda

___________________________________________________________________________________

7) SOLE VOTING POWER

NUMBER OF 168,031⁵

SHARES ____________________________________________________________

BENEFICIALLY 8) SHARED VOTING POWER

OWNED BY none

EACH ____________________________________________________________

REPORTING 9) SOLE DISPOSITIVE POWER

PERSON 168,031

WITH ____________________________________________________________

10) SHARED DISPOSITIVE POWER

none

___________________________________________________________________________________

11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

168,031

___________________________________________________________________________________

12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES o

_________________________________________________________________

13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

1.7%

_________________________________________________________________

14) TYPE OF REPORTING PERSON

_________________________________________________________________

-------------------------------------

⁵ Includes 168,031 shares that the reporting person has the right to acquire.

This Amendment No. 2 amends and supplements the Schedule 13D Amendment No. 1 filed with the Securities and Exchange Commission (the “SEC”) on May 23, 2007 (the “Statement”) by and on behalf of Brencourt Advisors, LLC (“Brencourt Advisors”) and others with respect to the common stock, par value $0.01 per share (the "Common Stock"), of Vertrue, Inc., an Delaware corporation (the "Company").

Item 2. Identity and Background.

Item 2 of the Statement is hereby amended and restated as follows:

(a) - (c) This Statement on Schedule 13D is being filed on behalf of Brencourt Advisors, Brencourt Credit Opportunities Master, Ltd. (“BCOM”), and Brencourt Merger Arbitrage Master, Ltd. (“BMM,” and together with Brencourt Advisors and BCOM, the “Reporting Persons”).

Brencourt Advisors, a Delaware limited liability company and registered investment adviser engaged in the management of institutional client accounts, serves as investment manager to, and has voting and investment discretion over, certain investment vehicles and managed accounts. The chief executive officer and majority owner of Brencourt Advisors is Mr. William L. Collins. The principal business address of Brencourt Advisors and Mr. Collins is 600 Lexington Avenue, 8^th Floor, New York, NY 10022.

BCOM, a Bermuda mutual fund company, is engaged in the business of acquiring, holding and disposing of investments in various companies. BCOM is owned by Brencourt Multi-Strategy International, Ltd. (“Multi-Strategy”), a Bermuda mutual fund company, and certain other affiliated funds each of which is engaged in the business of investing directly and indirectly in master funds such as BCOM. Brencourt Advisors is the investment manager of BCOM, Multi-Strategy and the other funds with ownership interests in BCOM. The principal business address of BCOM and Multi-Strategy is Washington Mall West, 2^nd Floor, 7 Reid Street, Hamilton HM 11, Bermuda.

BMM, a Bermuda mutual fund company, is engaged in the business of acquiring, holding and disposing of investments in various companies. BMM is owned by Multi-Strategy and certain other affiliated funds, each of which is engaged in the business of investing directly and indirectly in master funds such as BMM. Brencourt Advisors is the investment manager of BMM, Multi-Strategy and the other funds with ownership interests in BMM. The principal business address of BMM is Washington Mall West, 2^nd Floor, 7 Reid Street, Hamilton HM 11, Bermuda.

(d) - (e) During the last five years, none of the Reporting Entities or any other person identified in response to this Item 2 was convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Mr. Collins is a citizen of the United States.

Item 3. Source and Amount of Funds or Other Consideration.

Item 3 of the Statement is hereby amended and supplemented as follows:

The amount of funds used to purchase the Common Stock by each of the Reporting Persons (including the purchase price for shares under the agreement referred to in Item 6) is as follows:

Brencourt Advisors through certain managed accounts	$	54,352,434
BCOM	$	69,620,116
BMM	$	8,216,732

The purchase of the Common Stock in each case was funded with the respective working capital of the Reporting Persons or their affiliates, which may include margin loans incurred from time to time in the ordinary course.

Item 4. Purpose of Transaction.

Item 4 of the Statement is hereby amended and supplemented as follows:

On June 21, 2007, William L. Collins, the Chairman and Chief Executive Officer of Brencourt Advisors, sent a letter to Gary Johnson, the Company’s Chief Executive Officer, a copy of which is attached as Exhibit 99.2 hereto and incorporated by reference herein. In the letter, Mr. Collins addresses what he believes to be fundamental errors in the valuation of the Company by Jefferies Broadview and the failure of the Company to adequately investigate alternatives to the proposed acquisition by One Equity Partners. Brencourt Advisors believes these alternatives are feasible and will provide greater value to shareholders.

On June 20, 2007, Brencourt Advisors entered into an agreement for the acquisition of shares of the Company’s Common Stock. See Item 6.

Item 5. Interest in Securities of the Issuer.

Items 5 (a) and (b) of the Statement are hereby amended and restated as follows:

(a) Brencourt Advisors may be deemed to be the beneficial owner of the aggregate amount of 2,745,610 Shares representing approximately 28.1%6, including shares Brencourt Advisors has the right to acquire pursuant to the agreement referred to in Item 6, as follows:

	Shares Currently Held	Right to Acquire	Percentage of Outstanding Shares
Held in managed accounts	366,050	762,396	11.6	%
Held by BCOM	572,539	876,594	14.8	%
Held by BMM	0	168,031	1.7	%

BCOM may be deemed to be the beneficial owner of 1,449,133 shares of Common Stock representing approximately 14.8%, including 876,594 shares that BCOM has the right to acquire pursuant to the agreement referred to in Item 6.

BMM may be deemed to be the beneficial owner of 168,031 shares of Common Stock representing approximately 1.7%, including 168,031 shares that BMM has the right to acquire pursuant to the agreement referred to in Item 6.

(b) Brencourt Advisors may be deemed to have shared voting and dispositive power over the Common Stock held in managed accounts, and sole voting and dispositive power over the Common Stock held by BCOM and BMM.

BCOM may be deemed to have sole voting and dispositive power over the Common Stock that it holds.

BMM may be deemed to have sole voting and dispositive power over the Common Stock that it holds.

Item 6.

Contracts, Arrangements, Understanding or Relationships With Respect to Securities of the Issuer.

On June 20, 2007, Brencourt Advisors entered into a Letter Agreement on behalf of its managed accounts, BCOM, and BMM, to acquire 1,807,021 shares of Common Stock (the “Letter Agreement”). The Purchase is subject to the expiration or early termination of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976 (the “HSR Act’). A copy of the Letter Agreement is attached as Exhibit 99.3. By letter dated as of June 20, 2007, Brencourt Advisors irrevocably waived any right to vote or direct the vote of the shares being acquired pursuant to the Letter Agreement until the expiration or early termination of the applicable waiting period under the HSR Act. A copy of the letter is attached as Exhibit 99.4.

Item 7.

Material to be Filed as Exhibits.

Exhibit No.

Exhibit Description

99.1	Agreement of Joint Filing among the Reporting Persons, dated June 21, 2007.

99.2	Letter to Gary Johnson, the Company’s Chief Executive Officer, dated June 21, 2007.

99.3	Letter Agreement by Brencourt Advisors on behalf of its managed accounts, BCOM, and BMM, dated June 20, 2007.

99.4	Letter of Brencourt Advisors, dated as of June 20, 2007.

SIGNATURES

After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certify that the information set forth in this Statement is true, complete and correct.

Dated: June 21, 2007

BRENCOURT ADVISORS, LLC

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

BRENCOURT CREDIT OPPORTUNITIES

MASTER, LTD.

By: Brencourt Advisors, LLC, its investment advisor

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

BRENCOURT MERGER ARBITRAGE

MASTER, LTD.

By: Brencourt Advisors, LLC, its investment advisor

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

EX-99.1 2 kl06076_ex99-1.htm EXHIBIT 99.1 AGREEMENT OF JOINT FILING kl06076_ex99-1.htm

EXHIBIT 99.1

Agreement of Joint Filing

Pursuant to Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned persons hereby agree to file with the Securities and Exchange Commission the Statement on Schedule 13D (the “Statement”) to which this Agreement is attached as an exhibit, and agree that such Statement, as so filed, is filed on behalf of each of them.

IN WITNESS WHEREOF, the undersigned have executed this Agreement.

Dated: June 21, 2007

BRENCOURT ADVISORS, LLC

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

BRENCOURT CREDIT OPPORTUNITIES

MASTER, LTD.

By: Brencourt Advisors, LLC, its investment advisor

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

BRENCOURT MERGER ARBITRAGE

MASTER, LTD.

By: Brencourt Advisors, LLC, its investment advisor

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

EX-99.2 3 kl06076_ex99-2.htm EXHIBIT 99.2 LETTER kl06076_ex99-2.htm

Exhibit 99.2

June 21, 2007

Gary A Johnson

President/CEO/Chairman of the Board

20 Glover Avenue

Norwalk, CT 06850

Dear Gary,

As you know by now, Brencourt Advisors, LLC (“Brencourt”) is your largest shareholder with beneficial ownership of over 28% of Vertrue’s common stock⁷. I am writing to you in response to the Board’s latest proxy filing dated June 12, 2007. To be sure, this letter is not my preferred venue for communicating our position. However, all calls to your office have gone unanswered. Given your brazen attempts to stonewall us and to push through the acquisition by a group led by One Equity Partners (“One Equity”), I feel compelled to address the Company’s response to our letter in this open forum.

In its proxy statement, the Company asserted that “The Brencourt statement focused on certain specific assumptions underlying the analysis of Jefferies Broadview (“Broadview”), but did not point to any incorrect calculations or fundamental errors.”⁸ Clearly, the Board either did not read our letter or did not understand it. The point we made in our first letter is that Broadview made major fundamental errors in their analysis in order to skew valuation to justify the One Equity bid of $48.50. These errors include:

·	Use of a “size premium” in the WACC calculation

Broadview applied a “size premium” in order to boost the Company’s cost of equity and thereby lower the valuation. As we highlighted in our original letter, we are baffled by this “size premium”. It is not accepted financial theory to include such a premium. Furthermore, we examined Ibbotson’s annual 2006 risk premium chart and noticed that he ascribes a 1% size premium to a $4 billion company, and a $0.68% size premium to a $16 billion company. Why does a $16 billion company need a size premium, or a $650 million company for that matter? The only reason we can come up with is that it artificially raises the cost of equity, which raises the WACC and allows Broadview to justify a lower valuation based on a Discounted Cash Flow (“DCF”) analysis.

·	Incorrect cost of debt

Broadview used a 9.25% cost of debt which is the coupon to the Company’s senior notes due 2014. Again, to reiterate our prior letter, we would highlight that a company’s cost of debt is the yield on its fixed income securities, not its coupon. The yield on the Company’s 9.25% senior notes was 7.0% before the transaction was even rumored, let alone announced. That is the cost of debt, not the 9.25% coupon. This is not a difference in assumptions as you claim; it is an outright error in their analysis. Broadview’s error does, however, justify a higher WACC and a lower valuation, which seems to be the point of their fairness opinion.

----------------------------------------------------

⁷ Brencourt contracted to purchase an additional 1,807,021 shares on June 20, 2007 subject to termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

⁸ Amendment #1 to Form PREM14A filed June 12, 2007.

·	Incorrect Market Premium

Broadview, in their base case, used a market premium of 7.8% to calculate the cost of equity. We reiterate that such market premiums are vastly higher than the 5% premium currently being used in the market today. Were we to use the Broadview market premium, no leveraged buyout today could be justified on a DCF basis. Broadview’s market premium is out of touch with reality in today’s financial marketplace.

Likewise, we find it interesting that Broadview placed such faith in Ibbotson’s analysis of size premium, yet ignored its market premium data. The Ibbotson analysis has a market premium of 6.3%, far lower than Broadview’s 7.8%. Broadview seems to pick and choose the numbers from various analyses that increase the WACC and depress valuation. That does not make sense unless they wanted to justify a proposed acquisition price, rather than judge its fairness.

·	Absurdly Low Terminal Value

Broadview uses a terminal multiple range of 6-7x EBITDA. This multiple range is absurdly low. It is based on their erroneous calculations of the WACC and terminal growth rate. We have already demonstrated that Broadview’s WACC is too high. Likewise, the terminal growth rate used is too low. Broadview uses a terminal growth rate of only 2.5% to justify the $48.50 in the DCF analysis. A 2.5% growth rate is on the low end of Broadview’s growth rate range. Based on management’s projections and Lehman Brothers marketing book for the proposed acquisition and given the superior online platform that Vertrue has, the terminal growth rate should be at least 4%. Based on FTN’s model, a more reasonable 4% growth rate would result in a present value of $61.41, 26.6% higher than the current offer. Again, Broadview’s high WACC and low terminal growth rate only make financial sense if one is attempting to justify a low terminal value and a corresponding low acquisition price for the shares.⁹

Broadview was not the right company to advise Vertrue on this transaction. In addition to the basic financial valuation mistakes they made, Broadview does not have the balance sheet or debt experience necessary to properly help the company secure the best price possible. For example, tier 1 banks often provide staple financing as an M&A advisor to equity sponsors. This gives equity sponsors the ability to run buyout scenarios because they have a stable source of financing. It also creates a more competitive field of financing alternatives as other lenders try to improve financing terms to win the business. This is something Broadview does not have the ability to do and it limited the field of potential buyers for the Company.

We also take issue with the Special Committee’s assertion that they had previously examined a leverage recapitalization with the assistance of FTN and decided that this transaction was the best alternative to maximizing shareholder value. We were stunned to read that the Special Committee had placed so much reliance on FTN despite its lack of fixed income experience. Of the 31 deals that FTN has advised on over the past two years, only one was a corporate bond offering. And that was a mere $50 million issue for Pan-American Life Insurance Company on 10/18/05 - over 18 months ago!¹⁰ We fail to see how FTN was the best advisor to the Board in considering a leveraged recap when FTN’s forte seems to be in micro-cap PIPE transactions and equity issuances. How could FTN properly assess what could be financed in the capital markets when they are not intimately involved in those markets on a day-to-day basis?

----------------------------------------------

⁹ The terminal multiple can be expressed as (1+g) / (WACC – g) where g is the terminal growth rate. A low g lowers the numerator and increases the denominator (especially if the WACC is artificially high), thereby decreasing the terminal multiple.

¹⁰ Source: Capital IQ

Brencourt, on the other hand, is involved in the debt markets on a day-to-day basis. We know that the debt markets have learned a great deal about the Company’s business model from the Affinion transactions. We also know that the market can appreciate the difference between Vertrue’s and Affinion’s business models. To re-hash our first letter, Vertrue has a strong online platform while Affinion is in the early stages of developing one. Vertrue has more diverse, high-growth platforms such as My Choice Medical and Neverblue, which Affinion does not. Vertrue should have higher profit margins with double digit growth rates going forward due to its strong online position, in addition to the massive progress that can be made from integrating past acquisitions and trimming the SG&A line.

As such, we believe Vertrue is more attractive than Affinion and will have the cash flows to support more debt from a dividend recapitalization. Using numbers from Lehman Brothers own presentation¹¹, Vertrue can comfortably support up to $760 million of total debt.¹² At that debt level, the Company could dividend up to $43 per share to existing shareholders while maintaining strong liquidity and significant free cash flow in excess of $25 million. Based on this free cash flow profile, we think the back end equity would be worth in excess of $18 per share, for a pro forma share price of over $61. Even your very own advisor, FTN, concurred that the pro forma share price from a much smaller leveraged dividend payment would be $60.¹³ How then are we, as owners of the company, expected to believe the Board’s assertion that the proposed acquisition price of $48.50 is the best way to maximize value when even your own advisors believe that the value is higher? And why do we need One Equity to effectuate something we can do ourselves?

We realize the Board is reluctant to pursue such a strategy given the problems the Company has had in the past in tapping the debt markets. Those problems, however, were 3 years ago. Since then, the debt markets have become more receptive to companies like Vertrue. Witness how Affinion, a company with lower growth prospects, has been able to lever up to similar levels. We know that Vertrue could do the same.

We acknowledge that the Board has been concerned about regulatory risks that all membership program firms face. However, it is something that the investment community is aware of and has discounted into the valuation of the company. It is something that One Equity has certainly factored into their analysis. Lehman Brothers is willing to underwrite 6.4x 2007E EBITDA to One Equity in the face of this regulatory risk. Finally, capital markets were receptive to 6.4x leverage for Affinion despite this regulatory risk. Why should the markets not be open to Vertrue when the company excels with best practice programs and has historically worked with state attorney generals to comply with state regulations?

At this point I would like to remind you that the Board still works for the shareholders of this company and that we, as major shareholders, are aware of our legal rights. Should you persist in these tactics designed to transfer long-term value from shareholders to management and private equity interests, we will be forced to nominate a new Board ahead of the next shareholder meeting that can properly represent shareholders’ long-term interests.

Sincerely,

/s/ William L. Collins

William L. Collins

Chairman and Chief Executive Officer

Brencourt Advisors, LL

-----------------------------------------

¹¹ Vertrue Presentation to Lenders, Lehman Brothers, June 2007

¹² Consists of $630 million of funded debt plus $100 million incremental facility for general corporate purposes and $30 million for the revolving credit facility

¹³“Strategic Alternatives Discussion Materials” FTN Investment Banking, February 12, 2007

EX-99.3 4 kl06076_ex99-3.htm EXHIBIT 99.3 LETTER AGREEMENT kl06076_ex99-3.htm

Exhibit 99.3

Brencourt Advisors, LLC

600 Lexington Avenue, 8th Floor

New York, NY 10022

June 20, 2007

Thomas W. Smith

Scott J. Vassalluzzo

323 Railroad Avenue

Greenwich, CT 06830

Gentlemen:

This Letter Agreement confirms the (i) agreement by Brencourt Advisors, LLC (“Brencourt”) to purchase for the account and on behalf of one or more funds managed by Brencourt (collectively, the “Purchasers”) an aggregate of 1,807,021 shares (the “Shares”) of common stock, par value $.01 per share (the “Common Stock”) of Vertrue Incorporated, a Delaware corporation (the “Company”) (CUSIP # 92534N101) from you and certain accounts managed by you (collectively, the “Sellers”) for a fixed price of $48.90 per Share (subject to adjustment as provided below), resulting in an aggregate purchase price of $88,363,326.90, and (ii) the agreement by you to sell for the account and on behalf of Sellers the Shares to the Purchasers for such price, in each case subject to the terms and conditions hereof. Such purchase price per Share shall be adjusted so that, for each day that the Closing occurs prior to July 10, 2007, the price per Share shall be reduced by $0.007, and for each day that the Closing occurs after July 10, 2007, the price per Share shall be increased by $0.007 (for example, a closing on July 6, 2007 would result in a purchase price per Share of $48.872; and a closing on July 11, 2007 would result in a purchase price per Share of $48.907.

1. Closing. The closing of such purchase and sale (the “Closing”) shall occur on the second business day after receipt by Brencourt and/or the Purchasers of notice of the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), or the expiration of the waiting period thereunder. The aggregate purchase price for the Shares shall be paid by wire transfer by the Purchasers on the date of the closing to such accounts as you shall have specified in writing.

2. Representations and Warranties.

(a) Brencourt represents and warrants to you, and you represent and warrant to Brencourt, that such party is duly authorized to execute, deliver and perform its obligations hereunder and that such execution, delivery and performance do not and will not conflict with or constitute a breach of any law, regulation or contract binding on such party. Brencourt represents and warrants that it has all necessary power and authority to act on behalf of and to bind the Purchasers to purchase the Shares and fulfill all the obligations of Purchasers contemplated by this Agreement, and that the Purchasers presently have and will have at the time of Closing sufficient funds to pay the full cash aggregate purchase price. You represent and warrant that you have all necessary power and authority to act on behalf of and to bind the Sellers to sell the Shares and fulfill all the obligations of Sellers contemplated by this Agreement.

(b) You represent that the Sellers own all of the Shares free and clear of any lien, claim or other encumbrance, except for any that will be released or satisfied upon the sale to the Purchasers hereunder.

3. Voting Agreement.

(a) Agreement to Vote. Subject to Section 7 of this Agreement, effective on the date hereof, you agree that at any meeting of the stockholders of the Company (a “Company Stockholders’ Meeting”), for which a Seller is a record holder of any of the Shares and at every adjournment or postponement thereof, or in any other circumstances upon which a vote, consent, or other approval (including by written consent) is sought, the Sellers shall—

(i) when a meeting is held, appear at such meeting or otherwise cause the Shares to be counted as present thereat for purposes of establishing a quorum,

(ii) vote, or execute consents in respect of the Shares, or cause the Shares to be voted, or consents to be executed in respect thereof, in respect of the Agreement and Plan of Merger (the “Merger Agreement”) between the Company and Velo Holdings Inc. and Velo Acquisition Inc. (including any revised or amended Merger Agreement approved by the board of directors of the Company), as Brencourt may direct in writing, and

(iii) vote, or execute consents in respect of the Shares to be voted, or consents to be executed in respect thereof, as Brencourt may direct in writing, in respect of (A) any agreement or transaction relating to an Acquisition Proposal (as defined in the Merger Agreement) or transaction or occurrence that if proposed and offered to the Company or its stockholders (or any of them) would constitute an Acquisition Proposal or (B) any extraordinary corporate transaction (other than the Merger), or any amendment of the Company’s Certificate of Incorporation or Bylaws or other proposal, action or transaction involving the Company or any of the Company Subsidiaries or any of its stockholders, and

(iv) vote, or execute consents in respect of the Shares to be voted, or consents to be executed in respect thereof, as Brencourt may direct in writing, in respect of any other matter that may be presented to the stockholders of the Company for which the Sellers are the record holders of the Shares.

(b) Appointment of Proxy. Subject to Section 7 of this Agreement, you hereby irrevocably (to the fullest extent permitted by law) constitute and appoint Marc Nuccittelli and William Collins, each of them individually, as the Sellers’ proxy and attorney-in-fact, with full power of substitution and resubstitution, to cause the Shares to be counted as present at any such Company Stockholders’ Meetings and to vote the Shares at any Company Stockholders’ Meeting, however called, and to execute consents in respect of the Shares as and to the extent provided in Section (a) hereof.

(c) Revocation of Other Proxies. You represent that any proxies heretofore given in respect of the Shares, if any, are revocable, and hereby revoke all other proxies and powers of attorney with respect to the Shares that the Sellers may have heretofore appointed or granted, and no subsequent proxy or power of attorney shall be granted.

(d) Proxy Irrevocable. You acknowledge that Purchasers are relying on this Agreement in purchasing the Shares. ACCORDINGLY, SUBJECT TO SECTION 7 OF THIS AGREEMENT, THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE(TO THE FULLEST EXTENT PERMITTED BY LAW) AND COUPLED WITH AN INTEREST. Except as otherwise required by law in the case of Shares beneficially owned by Sellers who are natural persons (other than yourselves), this irrevocable proxy shall not be terminated by any act of the Sellers (subject to Section 7 of this Agreement) or by operation of law, whether by the death or incapacity of the Sellers or by the occurrence of any other event or events (including, without limiting the foregoing, the termination of any trust or estate for which either of you is acting as a fiduciary or fiduciaries or the dissolution or liquidation of any corporation or partnership). If after the execution hereof any Seller should be dissolved or liquidated, actions taken by the Purchasers hereunder shall be as valid as if such dissolution, liquidation or other event or events had not occurred, regardless of whether or not the Purchasers have received any notice of such dissolution, liquidation or other event.

(e) No Transfer of Rights. Except as otherwise provided in Section 5 of this Agreement with respect to the Merger, the Sellers shall not: (i) enter into any tender, voting, or other such agreement, or grant any proxy, power-of-attorney or other authorization or consent with respect to any of the Shares; or (ii) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby or make any representation or warranty of the Sellers untrue or incorrect. Except as contemplated by this Agreement, the Sellers will not enter into any voting or other agreement or grant any power of attorney with respect to the Shares, or take any action that is inconsistent with this Agreement.

4. HSR Filing. Brencourt and Purchasers shall use their best efforts to prepare and file a Notification and Report Form with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice no later than two business days after the date of this Agreement, and to take all further actions as may be required to obtain the early termination of the waiting period under the HSR Act or the earliest possible expiration of the waiting period thereunder. Brencourt and Purchasers shall be solely responsible for all applicable costs and expenses, including the filing fee.

5. Additional Purchasers’ Obligations. If, for any reason other than as a result of a material breach by you under this Agreement, the Closing of the purchase and sale of the Shares under this Agreement does not occur prior to the closing of the Merger (as defined in the Merger Agreement and any amendments to the Merger Agreement), the Purchasers shall be obligated to pay you the amount of $0.25 per Share, or an aggregate payment of $451,755.25, which payment shall be made by wire transfer by the Purchasers to such accounts as you shall have specified in writing and shall be paid no later than two business days after the closing of the Merger. In such case where the Closing of the purchase and sale of the Shares under this Agreement does not occur prior to the closing of the Merger, Sellers shall retain all rights that they have with respect to their Shares under the Merger Agreement, and the parties shall have no further obligations under this Agreement other than Purchasers’ obligation to make the payment of $451,755.25.

6. Miscellaneous. Brencourt’s and Purchasers’ obligations under this Agreement shall not be excused if, for any reason, you are unable to perform your obligations with respect to all of the Shares, provided that you perform your obligations with respect to a minimum of 1,500,000 Shares. In any such case, neither you nor any Seller shall have any liability under this Agreement, and the parties shall enter into an appropriate amendment to this Agreement so that

the provisions of this Agreement only shall apply to the Shares for which and the Sellers for whom you are able to perform the obligations under this Agreement.

7. Termination. You may terminate this Agreement if the Closing shall not have occurred on or prior to July 31, 2007, other than as a result of a breach by you of your obligations under this Agreement. In the event of a termination of this Agreement, the voting agreement and proxy provided in Section 3 of this Agreement shall likewise terminate.

[Signature Page Follows]

If the foregoing accurately states our agreement, please sign and return a copy hereof, at which time this will become a mutually binding agreement.

Very truly yours,

BRENCOURT ADVISORS, LLC

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

/s/Thomas W. Smith

Thomas W. Smith

/s/Scott J. Vassalluzzo

Scott J. Vassalluzzo

EX-99.4 5 kl06076_ex99-4.htm EXHIBIT 99.4 LETTER OF BRENCOURT ADVISORS kl06076_ex99-4.htm

Exhibit 99.4

Brencourt Advisors, LLC

600 Lexington Avenue, 8th Floor

New York, NY 10022

As of June 20, 2007

Thomas W. Smith

Scott J. Vassalluzzo

323 Railroad Avenue

Greenwich, CT 06830

Gentlemen:

Reference is made to our letter agreement with you, dated June 20, 2007 (the "Letter Agreement"), pursuant to which we or funds under our management have agreed to purchase 1,807, 021 shares of common stock of Vertrue Incorporated. All capitalized terms not defined herein shall have the meanings given in the Letter Agreement.

Notwithstanding anything to the contrary contained in the Letter Agreement, the Purchasers hereby irrevocably agree not to exercise any rights under section 3 of the Letter Agreement, including without limitation any right to direct the voting of the Shares, until the termination or expiration of the applicable waiting period under the HSR Act. Please acknowledge your receipt of this letter by countersigning below a counterpart hereof.

Very truly yours,

BRENCOURT ADVISORS, LLC

By: /s/ Michael Palmer

Name: Michael Palmer

Title: Chief Financial Officer

Acknowledged:

Thomas W. Smith

Scott J. Vassalluzzo

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