APPLIED GRAPHICS TECHNOLOGIES INC, PRE 14A, 2000-09-28

APPLIED GRAPHICS TECHNOLOGIES INC
PRE 14A, 2000-09-28
MAILING, REPRODUCTION, COMMERCIAL ART & PHOTOGRAPHY

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as Permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

Applied Graphics Technologies, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statements, 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)(1) 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):

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

(4) Proposed maximum aggregate value of transaction:

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

(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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<PAGE> 2

[Applied Graphics Technologies Logo]

450 WEST 33RD STREET
NEW YORK, NEW YORK 10001

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 21, 2000

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

To our stockholders:

Notice is hereby given that the 2000 annual meeting of stockholders of
Applied Graphics Technologies, Inc. (the "Company") will be held at the Harmonie
Club, 4 East 60th Street, New York, New York 10022 on November 21, 2000, at
10:00 a.m., local time, for the following purposes:

1. To elect twelve directors of the Company for terms expiring at the
2001 annual meeting of stockholders;

2. To consider and vote upon a proposal to approve the Second
Certificate of Amendment of First Restated Certificate of Incorporation of
the Company to effect a two shares for five shares reverse stock split of
the Company's issued and outstanding shares of common stock, par value $.01
per share; and

3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on September 26, 2000
will be entitled to notice of, and to vote at, the annual meeting or any
adjournment or postponement thereof. A list of such stockholders will be open
for examination by any stockholder for any purpose germane to the annual meeting
at the annual meeting and during normal business hours, for ten days prior to
the annual meeting, at the offices of the Company, 450 West 33rd Street, New
York, New York 10001.

By Order of the Board of Directors,

/s/ Martin D. Krall
MARTIN D. KRALL
Secretary

Dated: October 10, 2000

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
<PAGE> 3

[Applied Graphics Technologies Logo]

450 WEST 33RD STREET
NEW YORK, NEW YORK 10001
------------------------

ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 21, 2000
------------------------

PROXY STATEMENT
------------------------

GENERAL INFORMATION

PROXY SOLICITATION

This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Applied Graphics
Technologies, Inc. (the "Company") for use at the 2000 annual meeting of
stockholders to be held at the Harmonie Club, 4 East 60th Street, New York, New
York 10022, on November 21, 2000, at 10:00 a.m., local time. The purpose of the
annual meeting and the matters to be acted upon are set forth in the
accompanying notice of annual meeting.

The Company is mailing its annual report for the fiscal year ended December
31, 1999, together with this proxy statement and the enclosed proxy, to
stockholders entitled to vote at the annual meeting. The annual report does not
form any part of the material for the solicitation of proxies.

The Company will pay the cost of all proxy solicitation. In addition to the
solicitation of proxies by use of the mails, officers and other employees of the
Company and its subsidiaries may solicit proxies by personal interview,
telephone, facsimile and telegram. None of these individuals will receive
compensation for such services, which will be performed in addition to their
regular duties. The Company also has made arrangements with brokerage firms,
banks, nominees and other fiduciaries to forward proxy solicitation material for
shares held of record by them to the beneficial owners of such shares. The
Company will reimburse such persons for their reasonable out-of-pocket expenses
in forwarding such material.

This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about October 10, 2000.

VOTING AND REVOCABILITY OF PROXIES

A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), represented by a properly executed proxy, if such proxy is received in
time and not revoked, will be voted at the annual meeting in accordance with the
instructions indicated in such proxy. If no instructions are indicated, such
shares will be voted "FOR" the election of the twelve director nominees named in
the proxy and "FOR" the approval of the Second Certificate of Amendment to the
Company's First Restated Certificate of Incorporation. Discretionary authority
is provided in the proxy as to any matters not specifically referred to therein.
Management is not aware of any other matters that are likely to be brought
before the annual meeting. If any such matters properly come before the annual
meeting, however, the persons named in the proxy are fully authorized to vote
thereon in accordance with their judgment and discretion.

A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the annual meeting by (1) giving written notice of revocation to the
Secretary of the Company, (2) properly submitting to the Company a duly executed
proxy bearing a later date or (3) voting in person at the annual meeting. All
written
<PAGE> 4

notices of revocation or other communications with respect to revocation of
proxies should be addressed to the Company's Corporate Secretary at its
principal executive offices as follows: Applied Graphics Technologies, Inc., 450
West 33rd Street, New York, New York 10001, Attention: Corporate Secretary.

VOTING PROCEDURE

All holders of record of the Common Stock of the Company at the close of
business on September 26, 2000 will be eligible to vote at the annual meeting.
Each holder of Common Stock is entitled to one vote at the annual meeting for
each share held by such stockholder. As of September 26, 2000, there were
22,584,282 shares of Common Stock outstanding.

The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote will constitute a quorum for the
transaction of business. Votes cast in person or by proxy, abstentions and
broker non-votes (as hereinafter defined) will be tabulated by the inspectors of
election and will be considered in the determination of whether a quorum is
present at the annual meeting. The inspectors of election will treat shares
represented by executed proxies that abstain as shares that are present and
entitled to vote for purposes of determining the approval of such matter. If,
with respect to any shares, a broker or other nominee submits a proxy indicating
that instructions have not been received from the beneficial owners or the
persons entitled to vote and that such broker or other nominee does not have
discretionary authority to vote such shares (a "broker non-vote") on one or more
proposals, those shares will not be treated as present and entitled to vote for
purposes of determining the approval of any such proposal.

SECURITY OWNERSHIP

The information set forth below regarding beneficial ownership of the
Common Stock has been presented in accordance with rules of the Securities and
Exchange Commission (the "Commission") and is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership of Common Stock includes any shares as to which a person has the sole
or shared voting power or investment power and also any shares that a person has
the right to acquire within 60 days from the date set forth below through the
exercise of any stock option or other right ("currently exercisable options").

2
<PAGE> 5

SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 26, 2000, information
regarding the beneficial ownership of the Common Stock by (i) each person known
to the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each director and each nominee to the Board, (iii) each of the executive
officers of the Company named in the Summary Compensation Table under "Executive
Compensation," and (iv) all directors, director nominees and executive officers
of the Company as a group. Except as indicated, each person identified in the
following table has sole voting and investment power with respect to the shares
shown. Percentage ownership of Common Stock is based on 22,584,282 shares
outstanding as of September 26, 2000.

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES OF COMMON SHARES
STOCK BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
------------------------ ------------------ -------------
<S> <C> <C>
Applied Printing Technologies, L.P.(1)(2).............. 4,985,000 22.1%
State of Wisconsin Investment Board(3)................. 3,517,000 15.6
Capital Group International, Inc.(4)................... 2,742,700 12.1
Dimensional Fund Advisors, Inc.(5)..................... 1,198,500 5.3
Mortimer B. Zuckerman(1)............................... -- --
Fred Drasner(1)........................................ -- --
Marne Obernauer, Jr.(6)................................ 524,799 2.3
Diane Romano(7)........................................ 135,000 *
Louis Salamone, Jr.(7)................................. 101,000 *
Jonathan Swindle(8).................................... -- --
Derek Ashley(7)........................................ 60,000 *
Martin D. Krall(7)..................................... 105,000 *
John R. Harris(7)...................................... 16,250 *
David R. Parker(9)..................................... 39,000 *
Howard Stringer(10).................................... 55,000 *
Linda J. Wachner(10)................................... 65,000 *
John Zuccotti(7)....................................... 35,000 *
John W. Dreyer......................................... -- --
Joseph D. Vecchiolla................................... -- --
John R. Walter......................................... -- --
All directors, director nominees and executive officers
as a group (16 persons)(11).......................... 6,256,049 26.9%
</TABLE>

---------------
* Represents holdings of less than 1%.

(1) Applied Printing Technologies, L.P. ("Applied Printing") is a limited
partnership in which Mr. Drasner, the Company's Chairman and a director, is
a minority limited partner and Mr. Zuckerman, Chairman of the Company's
Board, beneficially owns the remaining limited partnership interests, and
Mr. Zuckerman is the sole stockholder of the corporate general partner and
a corporate limited partner. Messrs. Zuckerman and Drasner comprise the
board of directors of the corporate general partner of Applied Printing.
Mr. Zuckerman is the sole stockholder of the corporate general partner and
therefore can change at any time the members of the board of directors of
that entity. Consequently, Mr. Zuckerman indirectly will be able to
exercise substantial influence over the outcome of all matters submitted to
a vote of the Company's stockholders, including election of the members of
the Company's Board, amendment of the Company's Restated Certificate of
Incorporation and the consummation of a merger, sale of substantially all
of the Company's assets or other significant corporate transactions. The
address of Applied Printing is 77 Moonachie Avenue, Moonachie, New Jersey
07074.

3
<PAGE> 6

(2) Shares shown are reported on a Schedule 13D dated April 26, 1996, as
amended on September 4, 1997, November 26, 1997, September 1, 1998, October
5, 1998, and November 25, 1998, filed with the Commission. Voting power
with respect to such shares is held by Mr. Zuckerman.

(3) Shares shown are reported on a Schedule 13G dated February 10, 2000, and
amended March 10, 2000, and on a Form 13F dated August 14, 2000, filed with
the Commission by State of Wisconsin Investment Board. The address of this
person is P.O. Box 7842, Madison, Wisconsin 53708.

(4) Shares shown are reported on a Schedule 13G dated February 8, 1999, and
amended August 9, 1999 and February 10, 2000, filed with the Commission by
Capital Group International, Inc. ("Capital") on behalf of itself and
Capital Guardian Trust Company ("Capital Trust"). Capital is the parent
holding company of Capital Trust, a bank, which may be deemed the
beneficial owner of the shares reported on the Schedule 13G through its
service as investment manager of certain institutional accounts. Capital
Trust has voting power over only 2,046,500 of the shares reported. Capital
and Capital Trust disclaim beneficial ownership of the shares of Common
Stock covered by the Schedule 13G. The address of the above persons is
11100 Santa Monica Boulevard, Los Angeles, California 90025.

(5) Shares shown are reported on a Form 13F dated August 29, 2000, filed with
the Commission by Dimensional Fund Advisors, Inc. The address of this
person is 1299 Ocean Avenue, Santa Monica, California 90401.

(6) Includes an aggregate of 7,200 shares held by Mr. Obernauer, Jr., as
trustee, for trusts created for the benefit of his two sons, a niece, and a
nephew over which Mr. Obernauer, Jr. has sole voting and investment power.

(7) Represents shares of Common Stock issuable upon exercise of currently
exercisable options.

(8) Left the employment of the Company in November 1999.

(9) Includes 35,000 shares of Common Stock issuable upon exercise of currently
exercisable options.

(10) Includes 45,000 shares of Common Stock issuable upon exercise of currently
exercisable options.

(11) Does not include Mr. Swindle. Includes 712,250 shares of Common Stock
issuable upon exercise of currently exercisable options.

4
<PAGE> 7

ELECTION OF DIRECTORS

(PROPOSAL NO. 1)

NOMINEES FOR ELECTION AS DIRECTORS

The Restated Certificate of Incorporation and Amended and Restated Bylaws
of the Company provide that the members of the Board are to be elected at the
annual meeting of the stockholders. The number of directors that will constitute
the entire Board as of the conclusion of the annual meeting is twelve.

If elected, the director nominees will serve a one-year term to expire at
the 2001 annual meeting of stockholders or until their successors are elected
and qualified or their earlier resignation or removal. The Board has nominated
the following twelve persons for election to the Board: Mortimer B. Zuckerman,
Fred Drasner, Derek Ashley, John W. Dreyer, John R. Harris, Martin D. Krall,
Marne Obernauer, Jr., David R. Parker, Howard Stringer, Joseph D. Vecchiolla,
John R. Walter and John Zuccotti.

Approval of the nominees requires the affirmative vote of a majority of the
shares present, in person or by proxy, at the annual meeting. In the event that
any nominee should become unable or unwilling to serve as a director, it is the
intention of the persons named in the proxy to vote for the election of such
substitute nominee for the office of director as the Board may recommend. It is
not anticipated that any nominee will be unable or unwilling to serve as a
director.

THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
"FOR" THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.

Biographical information concerning each of the director nominees is
presented on the following pages.

NOMINEES FOR ELECTION FOR 2000 TERM

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Mortimer B. Zuckerman....................................... 63 1996
Fred Drasner................................................ 57 1995
Derek Ashley................................................ 40 1999
John W. Dreyer.............................................. 62 --
John R. Harris.............................................. 51 1996
Martin D. Krall............................................. 59 1996
Marne Obernauer, Jr......................................... 57 1998
David R. Parker............................................. 57 1998
Howard Stringer............................................. 58 1996
Joseph D. Vecchiolla........................................ 44 --
John R. Walter.............................................. 53 --
John Zuccotti............................................... 63 1998
</TABLE>

Mortimer B. Zuckerman, Chairman of the Board of the Company, has been
Chairman of the Board of Directors and a principal stockholder of Boston
Properties, Inc., a national real estate development and management company,
since 1970. He has been Chairman of U.S. News & World Report, L.P. ("U.S. News")
and Editor-in-Chief of U.S. News & World Report since 1985, Chairman of Daily
News, L.P. ("Daily News") and Co-Publisher of the New York Daily Newssince 1993,
and served as Chairman of The Atlantic Monthly Company from 1980 to 1999. Mr.
Zuckerman has served as Chairman of Fast Company Media Group, L.L.C. ("Fast
Company") and President of FC Holdings, L.L.C., its majority owner, since
January 1999. Mr. Zuckerman also serves as a director of Snyder Communications,
Inc. ("Snyder"), Loews Cineplex Entertainment Corporation and Chase Manhattan
Bank National Advisory Board.

Fred Drasner, Chairman and a director of the Company, served as Chief
Executive Officer of the Company from 1996 until April 2000. Mr. Drasner has
been co-owner of Pro-Football, Inc., d/b/a The

5
<PAGE> 8

Washington Redskins, since July 1999. He has been the Chief Executive Officer of
Daily News and Co-Publisher of the New York Daily News since 1993, Co-Chairman
of U.S. News since 1998, Chief Executive Officer of U.S. News from 1985 to 1998,
and President of U.S. News from 1985 to 1997, Chairman and Chief Executive
Officer of Applied Printing since 1988, and served as Co-Chairman from 1998 to
1999 and Vice Chairman and Chief Executive Officer from 1986 to 1998 of The
Atlantic Monthly Company. Mr. Drasner has served as Co-Chairman of Fast Company
since January 1999. Mr. Drasner was also senior counsel to Shaw Pittman,
formerly known as Shaw Pittman Potts & Trowbridge, until his resignation in
April 1996. Mr. Drasner also serves as a director of Snyder and Ventiv Health,
Inc.

Derek Ashley, Vice Chairman, Chief Executive Officer, Chief Operating
Officer and a director of the Company, joined the Company in May 1999 following
the acquisition by the Company of Wace Group Limited (formerly Wace Group Plc
("Wace")), of which Mr. Ashley was Group Chief Executive. Wace operated an
international network of digital imaging businesses and provided digital
services in the areas of prepress, color management, interactive multimedia
services and print procurement. Mr. Ashley served as Group Chief Executive of
Wace from June 1998 until its acquisition by the Company. Prior to that, Mr.
Ashley served as President and Chief Executive Officer of Seven Worldwide, Inc.,
a wholly-owned subsidiary of Wace, from July 1997 and as European Managing
Director of Wace from 1995.

John W. Dreyer has been Chairman of the Board since 1978 and Chief
Executive Officer since 1977 of Pitman Company, a graphic arts and image
supplier. He also served as President of Pitman Company until 1998 and Chief
Operating Officer until 1994. Mr. Dreyer is also a director of Presstek, Inc.

John R. Harris has been President, Chief Executive Officer, and a director
of Ztango.com, a wireless Internet software and services company, since
September 1999 and Chairman of the Board of Directors since April 2000.
Previously, Mr. Harris was a Corporate Vice President at Electronic Data Systems
Corp. ("EDS") from 1997 through March 1999 where he was responsible for
marketing and corporate strategy. From 1989 to 1997, he served as President of
the Communications Industry Group at EDS where he was responsible for four
business units directed toward wirelines, wireless, media and interactive
services markets. Mr. Harris also serves as a director of CapRock Communications
Corp. and Ventiv Health, Inc.

Martin D. Krall, Executive Vice President, Chief Legal Officer, Secretary
and a director of the Company, has been Executive Vice President, Chief Legal
Officer, and Secretary of Daily News, Applied Printing and U.S. News since
January 1995. Mr. Krall served as Executive Vice President, Chief Legal Officer,
and Secretary of The Atlantic Monthly Company from 1995 to 1999. Mr. Krall has
served as Executive Vice President, Chief Legal Officer and Secretary of Fast
Company and FC Holdings, L.L.C., its majority owner, since January 1999. Prior
to 1995, Mr. Krall was a partner in the law firm of Shaw Pittman, formerly known
as Shaw Pittman Potts & Trowbridge, where he was a member of the Management
Committee from 1978 to 1994, and Vice Chairman of such Committee from 1991 to
1994. From 1995, Mr. Krall was also senior counsel to Shaw Pittman until his
resignation in April 1996.

Marne Obernauer, Jr., Vice Chairman and a director of the Company, served
as Chairman of the Board of Directors of Devon Group, Inc. ("Devon") from 1986
and Chief Executive Officer of Devon from 1980 until Devon's merger with and
into a wholly-owned subsidiary of the Company in May 1998. Mr. Obernauer also
serves as a director of The Advest Group, Inc.

David R. Parker is a founder and Managing General Partner of Interprise
Technology Partners, L.P., a venture capital fund focused on Internet and
information technology investments established in January 1999. From 1992
through May 1998, Mr. Parker was Chairman of ProSource Distribution Services,
Inc., a food service distributor, which was acquired by AmeriServe, Inc. in May
1998. In May 1998, Mr. Parker became Vice Chairman of AmeriServe, Inc.,
overseeing the integration of ProSource into AmeriServe. He served in this
capacity until he resigned his officer position in August 1998 and his position
on AmeriServe's Board of Directors in November 1999. Mr. Parker also serves on
the Board of Directors of Tupperware Corporation and World Commerce Online, Inc.

Howard Stringer has been the Chairman and Chief Executive Officer of Sony
Corporation of America since December 1998 and served as its President from 1997
to December 1998. From 1995 to 1997,

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<PAGE> 9

Mr. Stringer was Chairman and Chief Executive Officer of Tele-TV, a joint
venture among NYNEX, Pacific Telesis, and Bell Atlantic to provide home video
delivery through telephone lines. Before joining Tele-TV, Mr. Stringer was
President of CBS/Broadcast Group from 1988 to 1995 where he oversaw all
broadcast operations, including news, sports, entertainment, and network-owned
stations. Mr. Stringer serves on the Board of Directors of Loews Cineplex
Entertainment Corporation and TiVo Inc.

Joseph D. Vecchiolla, Senior Vice President and Chief Financial Officer of
the Company, joined the Company in May 2000. From February 1999 through April
2000 he served as Vice President of Marketing and Vice President of Finance at
Favorite Brands International, which was acquired by Nabisco in November 1999.
Favorite Brands International filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in March 1999. From May 1997 until February 1999 he served as
President of Old Greenwich Capital Corporation. From June 1993 through December
1997 he served in various capacities at Bird Corporation, beginning as Senior
Vice President and Chief Financial Officer (June 1993 through September 1993),
then President, Chief Operating Officer, and Chief Financial Officer (September
1993 through January 1994), then President and Chief Executive Officer (January
1994 through April 1995), and finally Chairman of the Board of Directors (May
1995 through December 1997). Concurrent to his tenure at Bird Corporation, from
May 1995 through December 1997, Mr. Vecchiolla served as Senior Vice President
of Corporate Finance at S.N. Phelps & Co., Vice President and Chief Financial
Officer of Wyatt Energy Corp., President of American Modular Technologies, LLP,
and Vice President and Chief Financial Officer of Commonwealth Oil of Puerto
Rico, LLP.

John R. Walter has been Chairman of Ashlin Management Corporation, a
management consulting firm, since December 1997, and Chairman of the Board of
Manpower, Inc., an employment services company, since April 1999. From November
1996 through July 1997, he served as President and Chief Operating Officer of
AT&T Corp. Mr. Walter was Chairman and Chief Executive Officer from 1989 to
October 1996 and President from 1987 to 1991 of R.R. Donnelley & Sons Company, a
print and digital information management, reproduction and distribution company.
Mr. Walter also serves on the Board of Directors of Abbott Laboratories,
Celestica, Inc., Deere & Company, Jones Lang LaSalle, Inc. and Manpower, Inc.

John Zuccotti has been Chairman of Brookfield Financial Properties, Inc.
(formerly World Financial Properties) since 1996 and in 1998 was appointed Vice
Chairman of Brookfield Properties Corporation. Mr. Zuccotti has served as
President and Chief Executive Officer of Olympia & York Companies (USA) from
January 1990 until its reorganization in November 1996, at which time Brookfield
Financial Properties, Inc. was formed to carry on a portion of the principal
business of Olympia & York Companies (USA). Various entities affiliated with
Olympia & York Companies (USA) filed for protection under Chapter 11 of the U.
S. Bankruptcy Code, starting in 1992. Olympia & York Companies (USA) was
reorganized in 1996 and all bankruptcy proceedings were completed as of 1997.
Mr. Zuccotti has been a senior counsel at Weil, Gotshal & Manges LLP since 1997.
Mr. Zuccotti also serves as a director of eight funds of The Dreyfus
Corporation, a director of Empire Blue Cross and Blue Shield, and a trustee of
Columbia University.

BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

The Board held seven meetings during the Company's 1999 fiscal year and
also took action seven times by unanimous written consent. During fiscal year
1999, each director attended at least 75% of the aggregate of the total number
of meetings of the Board held during the period he or she served as a director
and the total number of meetings held by each committee of the Board on which he
or she served (during the period for which he or she served), except Messrs.
Harris and Stringer, who attended 67% and 63%, respectively, of the meetings of
the Board and the committees of which they were members.

The Board currently has a standing Audit Committee and a standing
Compensation Committee. It does not currently have a standing nominating
committee.

The Audit Committee currently consists of Messrs. Harris, Parker and
Zuccotti and Linda J. Wachner. The Audit Committee met once during fiscal year
1999. The Audit Committee is responsible for recommending to the full Board the
selection of the Company's independent public accountants, reviewing the scope
7
<PAGE> 10

of the plans and the results of the audit engagement, reviewing the independence
of the public accountants, considering the range of audit and non-audit fees,
reviewing the adequacy of the Company's internal accounting controls and
exercising oversight with respect to the Company's code of conduct and other
policies and procedures regarding adherence with legal requirements. As part of
its determination to play a larger role in the financial affairs of the Company,
and in accordance with rules recently promulgated by the Commission, the Audit
Committee has adopted a charter that will govern its operation. In accordance
with such charter, the Audit Committee will meet at least four times a year,
commencing in 2000.

The Compensation Committee, which met once during fiscal year 1999 and also
took action four times by unanimous written consent, currently consists of Ms.
Wachner and Messrs. Harris, Stringer, Parker and Zuccotti. The Compensation
Committee is responsible for establishing salaries, bonuses and other
compensation for the Company's officers and administering the Company's stock
option plans.

COMPENSATION OF DIRECTORS

Directors who are not also employees of the Company or its affiliates
("nonemployee directors") receive from the Company $1,000 for each Board or
committee meeting attended and reimbursement of expenses incurred in attending
such meetings. Directors are also eligible to receive options to purchase Common
Stock under the Company's 1998 Incentive Compensation Plan, as amended and
restated (the "Incentive Compensation Plan").

Under the Incentive Compensation Plan, employees, nonemployee directors,
certain affiliated persons and independent contractors of the Company may be
granted cash awards, options to purchase Common Stock, stock appreciation
rights, stock awards, stock units, performance shares, and performance units.
Options to purchase Common Stock granted under the Incentive Compensation Plan
have a term of ten years and, except for those granted to nonemployee directors,
vest over a five-year period pursuant to a vesting schedule determined by the
committee administering the plan or, in lieu thereof, a vesting schedule
specified in the plan. Under this plan, each nonemployee director is granted
options to purchase 25,000 shares of Common Stock upon commencement of his or
her service as a director that vest ratably over a two-year period. In addition,
each nonemployee director then in office is automatically granted, on the
anniversary date of his or her commencement of service as a director, a
fully-vested, non-qualified option to purchase 5,000 shares of Common Stock at a
per-share exercise price equal to its fair market value on such date. In April
1999, Messrs. Harris and Stringer and Ms. Wachner each received grants of
options to purchase 5,000 shares of Common Stock at an exercise price of $7.063
per share. In May 1999, Messrs. Parker and Zuccotti each received grants of
options to purchase 5,000 shares of Common Stock at an exercise price of $10.563
per share. In April 2000, Messrs. Harris and Stringer and Ms. Wachner each
received grants of options to purchase 5,000 shares of Common Stock at an
exercise price equal to $6.000 per share. In May 2000, Messrs. Parker and
Zuccotti each received grants of options to purchase 5,000 shares of Common
Stock at an exercise price equal to $3.063 per share.

8
<PAGE> 11

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid to the Chief Executive
Officer of the Company and to each of the six other most highly compensated
executive officers (the "Named Executive Officers") for fiscal years 1999, 1998
and 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------- NUMBER OF
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($)
--------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Fred Drasner 1999 778,846 -- (1) -- --
Chairman and Former 1998 300,000 -- (1) -- --
Chief Executive Officer 1997 300,000 -- (1) -- --

Martin D. Krall 1999 348,000(2) 100,000(2) (1) -- --
Executive Vice President, 1998 (2) (2) -- 100,000 --
Chief Legal Officer, and 1997 (2) (2) -- -- --
Secretary

Louis Salamone, Jr.(3) 1999 327,772 -- (1) -- --
Former Senior Vice 1998 259,401 -- (1) 65,000 --
President and Chief 1997 240,000 -- (1) -- --
Financial Officer

Marne Obernauer, Jr. 1999 311,538 -- (1) -- --
Vice Chairman 1998 162,355(4) -- 30,817(5) -- --
1997 -- -- -- -- --

Diane Romano(6) 1999 309,462 -- 33,092(7) -- --
President, e-business and 1998 275,339 -- 32,581(7) -- --
publications divisions 1997 250,000 -- 33,381(7) -- --

Derek Ashley Vice 1999 231,461(8) 400,000 52,010(9) 300,000 --
Chairman, Chief 1998 -- -- -- -- --
Executive Officer, 1997 -- -- -- -- --
and Chief Operating
Officer

Jonathan Swindle 1999 230,481 -- 43,847(10) -- 225,000(11)
Former Senior Vice 1998 90,000(12) -- 24,865(10) 100,000 --
President, 1997 -- -- -- -- --
Administration
</TABLE>

---------------
(1) The Named Executive Officer received perquisites or other personal benefits
in the years shown, although the value of these benefits did not exceed in
the aggregate the lesser of $50,000 or 10% of his salary and bonus in such
year.

(2) Mr. Krall does not receive compensation directly from the Company. The 1999
amounts shown reflect reimbursement of the affiliate that employs Mr. Krall
in accordance with the shared services agreement with such affiliate, plus
reimbursement of the affiliate for work performed by Mr. Krall in 1999 for
the Company in connection with the Wace acquisition and payment of a bonus.
In 1998 and 1997 the

9
<PAGE> 12

Company reimbursed its affiliates $115,000 and $90,000, respectively, for legal
services provided to the Company by such affiliate, of which Mr. Krall's
services were a part. The Company is not able to determine how much of the
reimbursement in those years was attributable to Mr. Krall's services.

(3) Mr. Salamone's employment ceased on August 3, 2000. In connection with such
termination, Mr. Salamone received a severance payment equal to one year's
salary.

(4) Mr. Obernauer, Jr. commenced employment with the Company in May 1998,
following the merger of Devon, of which Mr. Obernauer, Jr. was Chief
Executive Officer, with and into a wholly-owned subsidiary of the Company.

(5) The amount shown includes $25,325 as payment of professional fees for tax
and accounting services provided to Mr. Obernauer, Jr., as well as an
imputed amount for use of a Company-owned automobile.

(6) Ms. Romano served as President of the Company from 1996 through March 2000.

(7) The amount shown represents payment by the Company of apartment rent for a
residence in New York City maintained partially for the Company's benefit
and the reimbursement for a leased automobile and automobile insurance.

(8) Mr. Ashley commenced employment with the Company in May 1999, following the
Company's acquisition of Wace, of which Mr. Ashley was Group Chief
Executive.

(9) The amount shown includes payment by the Company of $40,810 of apartment
rent for a residence in Chicago maintained partially for the Company's
benefit, as well as reimbursement for a leased automobile and automobile
insurance and payment of health club dues.

(10) The amount shown represents payment by the Company of apartment rent and
related expenses for a residence in New York City maintained partially for
the Company's benefit.

(11) The amount shown represents amounts received by Mr. Swindle as severance
payments. Mr. Swindle's employment ceased on November 26, 1999.

(12) Mr. Swindle commenced employment with the Company in June 1998.

10
<PAGE> 13

STOCK OPTION GRANTS IN FISCAL YEAR 1999

No stock options were granted during fiscal year 1999 to Named Executive
Officers, other than Derek Ashley. The following table sets forth information
concerning the stock options granted during 1999.

OPTION GRANTS IN FISCAL YEAR 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATE OF
----------------------------------------------- STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM
UNDERLYING GRANTED TO EXERCISE ---------------------
OPTIONS EMPLOYEES PRICE EXPIRATION 5% 10%
NAME GRANTED IN 1999 ($/SH) DATE ($) ($)
---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Derek Ashley........................ 300,000 64.5(1) 12.00 5/24/09 1,256,386 4,132,984
</TABLE>

---------------
(1) Based on total grants of options to purchase 465,000 shares of Common Stock.

No Named Executive Officer exercised stock options in fiscal year 1999. The
following table sets forth information concerning the number and value of
unexercised stock options granted to Named Executive Officers at December 31,
1999.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND

1999 FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------------------- ---------------------------
<S> <C> <C>
Fred Drasner.................................. --/-- --/--
Martin D. Krall............................... 65,000/115,000 --/--
Louis Salamone, Jr............................ 63,000/102,000 --/--
Marne Obernauer, Jr........................... --/-- --/--
Diane Romano.................................. 90,000/90,000 --/--
Derek Ashley.................................. --/300,000 --/--
Jonathan Swindle.............................. 20,000/80,000 --/--
</TABLE>

EXECUTIVE EMPLOYMENT CONTRACTS

In May 1999, the Company entered into an employment agreement with Mr.
Ashley, pursuant to which Mr. Ashley was to receive an annual base salary of
$400,000, a discretionary bonus that was to be no less that $100,000 for the
first twelve months of his employment, and a grant of options to purchase shares
of Common Stock. In May 2000, in connection with Mr. Ashley's appointment as
Chief Executive Officer of the Company, the Compensation Committee resolved to
increase Mr. Ashley's salary to $600,000 and to pay Mr. Ashley a bonus of
$400,000 in the event certain performance criteria were satisfied. In addition,
the Committee resolved to change the expiration of the term of Mr. Ashley's
agreement from May 2001 to the earlier of May 2002 or a change of control of the
Company. Mr. Ashley's agreement contains a noncompete provision applicable
during the term (and any extensions thereof) and extends for a period of the
longer of two years from commencement of employment or six months after
termination of employment with the Company, except in the event Mr. Ashley's
employment is terminated by the Company without cause, in which case the

11
<PAGE> 14

noncompete provision terminates. The agreement also contains a nonsolicitation
provision applicable during the term (and any extensions thereof) and for one
year after termination of employment with the Company.

The Company has also entered into an agreement with Ms. Romano extending
the term of her employment agreement with the Company for the three-year period
from April 2000 through March 2003. During such extended term, Ms. Romano will
serve as President of the Company's e-business divisions and the publications
divisions of its content management business. Ms. Romano's agreement contains a
noncompete provision applicable during the term (and any extensions thereof) and
a nonsolicitation provision applicable during the term (and any extensions
thereof), and for one year after termination of her employment with the Company.
The agreement provides for an annual base salary of $325,000, a bonus upon
attainment of certain objectives and options to purchase shares of Common Stock.

CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT ARRANGEMENTS

In March 2000, the Company announced that it had retained an investment
banking firm to explore the Company's strategic alternatives to enhance value
for the Company's stockholders, including the possible sale of the Company. In
order to incentivize the Company's key personnel to remain with the Company and
otherwise make themselves available to the Company to assist in the process, in
March 2000 the Compensation Committee approved payments to four key personnel in
the event of the sale of the Company and the satisfaction of certain conditions.
In August 2000, the Board decided that it would no longer actively pursue a sale
of the Company, but would continue to pursue other strategic alternatives.
Consequently, the Compensation Committee resolved that such personnel would no
longer be eligible for such payments in the event of a sale of the Company,
although in certain limited circumstances, if a sale occurred prior to May 8,
2001, Mr. Salamone would be entitled to $500,000 pursuant to the terms of the
Agreement and General Release, effective June 4, 2000, between the Company and
Mr. Salamone.

Mr. Ashley's agreement contains a provision that requires the Company to
continue to pay Mr. Ashley's base salary and provide certain employee benefits
for the shorter of the remaining term of the agreement or six months, in the
event that Mr. Ashley's employment is terminated by the Company without cause.

Ms. Romano's employment agreement contains provisions that require the
Company to make a cash payment to Ms. Romano equivalent to the amount of base
salary provided for in the agreement for the longer of the remaining term of the
agreement or two years in the event that Ms. Romano's employment is terminated
by the Company without cause or if Ms. Romano resigns for good reason, which
includes termination of employment following a change in control of the Company.
In addition, under either of these circumstances Ms. Romano would also be
entitled to receive a cash payment equal to the aggregate amount by which the
market value of the Common Stock as of the date of the termination exceeds the
exercise price of any nonvested stock options held by Ms. Romano and to the
continuation of certain employee benefits. In the event that Ms. Romano is
employed by the Company on March 31, 2003 and a new agreement is not entered
into extending the term of the existing employment agreement, Ms. Romano would
be entitled to receive a cash payment equal to one year's base salary and the
continuation of employee benefits for one year.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS OF THE COMPANY
ON EXECUTIVE COMPENSATION

COMPENSATION PHILOSOPHY

The Compensation Committee reviews the performance and compensation levels
for executive officers and sets salary and bonus levels and option grants under
the Company's incentive plans. The objectives of the Compensation Committee are
to correlate executive compensation with the Company's business objectives and
performance, and to enable the Company to attract, retain and reward executive
officers who contribute to the long term success of the Company.

12
<PAGE> 15

BASE SALARY

Base salaries of the executive officers are established by evaluating the
requirements of the position and the contribution of the executive with respect
to Company performance and the executive's responsibilities. In determining
executive officer salaries, the Compensation Committee generally sets base
salaries at or below competitive levels, with total potential compensation
(including bonuses and stock options) targeted at or above competitive levels.
The Compensation Committee relies on, among other things, recommendations from
the Chief Executive Officer in making such determinations.

Mr. Drasner, the Company's Chief Executive Officer in 1999, received a base
salary of $750,0000 in 1999. Mr. Drasner did not receive a bonus with respect to
1999. In the view of the Compensation Committee, based on a report prepared by
an independent consulting firm, Mr. Drasner's base salary is comparable to the
median base salary awarded by comparable companies to their chief executive
officers. The Compensation Committee did not make any stock option or other
stock-based incentive awards to Mr. Drasner during 1999.

Since the Company's initial public offering, Mr. Krall, the Company's
Executive Vice President, Chief Legal Officer and Secretary, has not received
any compensation from the Company; all compensation was received from an
affiliate of the Company that employs Mr. Krall. In light of the substantial
amount of time Mr. Krall devotes to Company matters, in January 1999 the Company
and the affiliate entered into an agreement pursuant to which the Company is
required to reimburse this affiliate for a portion of Mr. Krall's compensation,
benefits and costs. See "Compensation Committee Interlocks and Insider
Participation and Certain Transactions -- Shared Services Agreement." In 1999,
the Company reimbursed this affiliate $175,000 for Mr. Krall's compensation in
accordance with the terms of the agreement. In addition, the Company reimbursed
the affiliate $173,000 in 1999 for compensation for work performed by Mr. Krall
in connection with the acquisition of Wace and $100,000 for a bonus payment to
Mr. Krall.

ANNUAL CASH BONUSES

The Company may pay annual cash bonuses to its executive officers based on
such factors as the Compensation Committee may consider relevant in any given
year. No cash bonuses were awarded in 1999, other than that paid to Mr. Ashley
in connection with his employment agreement and the reimbursement to the
Company's affiliate for Mr. Krall's bonus as noted above.

LONG-TERM INCENTIVES

The Compensation Committee believes that equity ownership provides
significant motivation to executive officers to maximize value for the Company's
stockholders and, therefore, periodically grants stock options under the
Company's incentive plans. The Compensation Committee determines the size and
frequency of option grants for executive officers after consideration of
recommendations of the Chief Executive Officer. Such recommendations are based
upon the relative position and responsibilities of each executive officer,
previous and expected contributions of each executive officer to the Company and
previous option grants to such executive officers. Stock options granted to
executive officers are generally nonqualified stock options with exercise prices
that equal or exceed the fair market value of the Company's Common Stock on the
date of grant and vest in increments over a period of three to five years.

In 1999, the Compensation Committee awarded Mr. Ashley options to purchase
300,000 shares of Common Stock at an exercise price of $12.00. Mr. Drasner is
eligible to receive stock options under the terms of the Company's incentive
plans; however, the Compensation Committee has not granted stock options to Mr.
Drasner given his substantial interest in the Company through his limited
partnership interest in Applied Printing.

SECTION 162(m)

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
sets a limit of $1 million on the amount of compensation paid to executive
employees (other than enumerated categories of compensation, including
performance-based compensation) that may be deducted by a publicly-held

13
<PAGE> 16

company. The Committee's policy is to seek to qualify executive compensation for
deductibility to the extent that such policy is consistent with the Company's
overall objectives and executive compensation policy. Compensation attributable
to stock options granted under the Company's stock incentive plans currently is
excluded from the $1 million limit as "qualified performance-based compensation"
under the rules contained in applicable Treasury regulations. None of the
Company's executive officers received compensation in 1999 in excess of the
limits imposed under Section 162(m). The Compensation Committee intends to
continue to qualify compensation attributable to stock options as "qualified
performance-based compensation" within the meaning of Section 162(m).

COMPENSATION COMMITTEE

John R. Harris, Chairman
David Parker
Howard Stringer
Linda Wachner
John Zuccotti

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION AND CERTAIN TRANSACTIONS

Mr. Zuckerman beneficially owns the shares of the Company's Common Stock
owned by Applied Printing and beneficially owns a majority of U.S. News and
Daily News. Additionally, Mr. Drasner is a minority limited partner of Applied
Printing, U.S. News and Daily News. The following is a description of certain
transactions between the Company and Applied Printing, U.S. News, and Daily
News, respectively.

CONTENT MANAGEMENT AND DIGITAL IMAGING SERVICES FOR AFFILIATES

The Company provides content management services to U.S. News under an
agreement that expires December 31, 2000, and is renewable annually thereafter
by mutual agreement of the parties. In addition, the Company provides content
management services to a New York Daily News periodical, digital archiving
services to the New York Daily News, and certain advertising make-up and related
graphic services for Daily News' publications, all under agreements which are
renewable annually by mutual agreement of the parties. The Company also provides
content management services to Applied Printing under an agreement that expires
December 31, 2004. In order to secure this agreement, the Company paid $500,000
to Applied Printing in 1999. The Company also performs additional services for
U.S. News, Daily News, and Applied Printing on a per-project basis.

The Company's 1999 revenues included approximately $5,513,000, $3,525,000,
and $3,970,000 for services performed for each of U.S. News, Daily News, and
Applied Printing, respectively. Included in this revenue figure for 1999 is
$299,000 recognized under an agreement by Agile Enterprise, Inc., a wholly-owned
subsidiary of the Company, to license certain software to U.S. News.

SHARED SERVICES AGREEMENT

The Company entered into a shared services agreement in 1999 with U.S. News
and Daily News, under which both U.S. News and Daily News provide legal,
computer, and administrative services to the Company. Under this agreement, the
Company pays a percentage of the costs associated with U.S. News and Daily News
employees who provide such services to the Company based on the percentage of
each such employee's total time that is devoted to Company-related matters,
including costs for services provided by Mr. Krall. See "Report of the
Compensation Committee of the Board of Directors of the Company on Executive
Compensation -- Base Salary." The term of the agreement is for one year and is
renewable annually. During 1999, the Company incurred charges of approximately
$1,514,000 for such services.

The Company also received certain merger and acquisition services from
Daily News personnel in 1999 for which the Company was charged $280,000.
14
<PAGE> 17

OTHER TRANSACTIONS

The Company subleases space at the headquarters of U.S. News in Washington,
D.C., from U.S. News. Such space is used primarily to perform content management
services for U.S. News. The amount incurred by the Company for the sublease in
fiscal year 1999 totaled approximately $205,000 and corresponds to the amounts
U.S. News is required to pay for space under the prime lease.

The Company leases additional space at its corporate headquarters from U.S.
News, for which the Company incurred charges of $184,000 in 1999.

The Company has used certain Daily News space at its New York location, for
which the Company incurred charges of $156,000 in 1999.

Applied Printing provides printing services to the Company on a per-project
basis. In 1999, the Company incurred charges of approximately $2,962,000 for
such services.

The Company engaged the law firm of Weil, Gotshal & Manges LLP, at which
John Zuccotti, a director of the Company, is senior counsel, to perform legal
services for the Company in 1999 and 2000.

Pitman Company, of which John W. Dreyer, a nominee for director, is
Chairman of the Board and Chief Executive Officer, is a distributor of film and
other graphic arts materials. In 1999, the Company purchased approximately
$25,000,000 of such materials from Pitman Company. The Company believes that the
terms for its purchases of such materials are no less favorable to the Company
than those that could be obtained from another vendor.

VENDOR AGREEMENT

The Company is a major purchaser of film and other graphic arts materials
used in its manufacturing process, much of which it purchases through Pitman
Company. See "Compensation Committee Interlocks and Insider Participation and
Certain Transactions -- Other Transactions." Because of the dollar amount of the
products it purchases, the Company has been in a position to enter into
arrangements with manufacturers of such products pursuant to which the
manufacturers pay rebates and, in some instances, prepay to the Company a rebate
based upon a specified dollar volume of products purchased by the Company over a
given time period. The Company is entitled to retain the prepaid amount in full
if it purchases the stated volume, and would be obligated to repay all or a
portion of the amount depending on the difference between the stated volume and
the volume actually purchased.

In 1995, pursuant to an agreement with one of its manufacturers, the
Company received prepaid rebates aggregating approximately $2.7 million, which
has been and will be earned based on purchases made and to be made from 1996
through 2000. The Company expects approximately $596,000 of rebates earned in
1999 to be applied to its obligation related to prepaid rebates. The agreement
was extended by the parties, effective July 1, 1998, through December 31, 2001.
Minimum purchase obligations have been satisfied to date, and the Company
expects, through its normal purchasing requirements, to purchase the amounts
necessary to earn rebates with respect to the period through 2001 in excess of
the amount to be deducted by the manufacturer.

In connection with this agreement, the manufacturer's affiliate loaned $15
million to Mr. Zuckerman. The loan, which matured on December 31, 1998, bore
interest at the lender's commercial paper rate and was repaid in full by Mr.
Zuckerman in January 1999. The Company believes that the terms for its purchases
of the products covered by this agreement are no less favorable to the Company
than those that could be obtained from another vendor or manufacturer.

15
<PAGE> 18

STOCKHOLDER RETURN PERFORMANCE GRAPH

The following graph and table show the cumulative total stockholder return
on the Common Stock compared to the Nasdaq Composite Stock Index and a
self-constructed peer group index for the periods between April 17, 1996 (the
date the Common Stock began trading on Nasdaq National Market) and December 31,
1999 (the last trading day in fiscal year 1999). The peer group index is
composed of American Greetings Corporation (Class A), Cunningham Graphics
International, Inc., Gibson Greetings, Inc., Master Graphics, Inc., Schawk, Inc.
and Unidigital Inc., all of which are public companies with significant
operations in the prepress or publishing industries. The total stockholder
return on each company included in the peer group index has been weighted
according to such company's capitalization at the beginning of each period. The
graph assumes $100 was invested on April 17, 1996 in (1) the Common Stock, (2)
the Nasdaq Composite Stock Index and (3) the peer group index, and assumes
reinvestment of dividends.
[PERFORMANCE GRAPH AND CHART]

<TABLE>
<CAPTION>
APPLIED GRAPHICS
TECHNOLOGIES PEER GROUP NASDAQ
---------------- ---------- ------
<S> <C> <C> <C>
4/17/96 100.00 100.00 100.00
6/28/96 118.69 98.69 105.72
9/30/96 111.21 102.00 109.46
12/31/96 217.76 106.36 115.18
3/31/97 264.49 116.86 109.00
6/30/97 297.20 133.71 128.66
9/30/97 420.56 138.66 150.39
12/31/97 398.13 141.57 140.10
3/31/98 359.81 168.17 163.77
6/30/98 342.06 181.29 169.04
9/30/98 93.46 143.59 151.12
12/31/98 123.36 141.09 195.62
3/31/99 56.07 90.62 219.60
6/30/99 94.39 102.73 239.65
9/30/99 64.49 89.31 245.00
12/31/99 64.49 84.36 363.05
</TABLE>

The Nasdaq Composite Stock Index has been selected as a broad equity market
index. The peer group identified above was selected because the Company believes
that such group represents companies whose primary activities are in the content
management or publishing industries. The Company performs certain other
services, such as digital image archiving and broadcast media distribution
services, that the peer group may not perform. The Company believes, however,
that since approximately 78.7% of its 1999 revenues were from content management
services and approximately 14.5% were from publishing services, the peer group
selected provides a meaningful basis for comparison.

16
<PAGE> 19

APPROVAL OF SECOND CERTIFICATE OF AMENDMENT TO THE COMPANY'S FIRST RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT

(PROPOSAL NO. 2)

The Board has unanimously approved, and recommends to the holders of the
Common Stock that they approve, a two-for-five reverse stock split of the Common
Stock (the "Reverse Stock Split"). If approved by the stockholders, the Reverse
Stock Split may be effected in the manner described below.

Upon the approval of this proposal by the stockholders of the Company, the
proposed Second Certificate of Amendment of the Company's First Restated
Certificate of Incorporation (the "Certificate of Amendment"), as set forth in
Exhibit A to this Proxy Statement, will be filed with the Secretary of State of
the State of Delaware to effectuate the Reverse Stock Split. Except for any
changes as a result of the repurchase by the Company of fractional shares, each
stockholder of the Company will hold the same percentage of Common Stock
outstanding immediately following the Reverse Stock Split as each stockholder
did immediately prior to the Reverse Stock Split. Subject to the receipt of the
requisite stockholder approval, the Reverse Stock Split would be effective on
the date on which the Certificate of Amendment is filed with the Secretary of
State of the State of Delaware (the "Effective Date"), which is expected to
occur promptly following the Annual Meeting. A copy of the Certificate of
Amendment is attached to this Proxy Statement as Exhibit A and incorporated into
this Proxy Statement by this reference. At the Effective Date, each five shares
of Common Stock issued and outstanding will, automatically and without further
action by the Board or stockholders of the Company, be reclassified and
converted into two shares of Common Stock. Fractional shares will not be issued
as a result of the Reverse Stock Split, but will be repurchased by the Company
for cash at the current fair market value of the fractional share interest. The
cash payment for the fractional share interest will be calculated by multiplying
the fractional share by the fair market value per share of Common Stock, which
will be the closing sale price per share of Common Stock on the Nasdaq National
Market (or any other listing or quotation system on which the shares of Common
Stock are then listed or quoted) on the business day prior to the Effective
Date. If this proposal is approved by the requisite vote of the stockholders of
the Company, the Company intends to file the Certificate of Amendment promptly
with the Secretary of State of the State of Delaware. However, notwithstanding
the approval of the proposal by the stockholders of the Company, the Board may
elect not to file, or to delay the filing of, the Certificate of Amendment if
the Board determines that filing the Certificate of Amendment would not be in
the best interests of the Company and its stockholders.

REASONS FOR THE REVERSE STOCK SPLIT

The principal purpose of the Reverse Stock Split is to reduce the number of
shares of the Common Stock outstanding in order to enable the Company to
maintain compliance with the quantitative maintenance criteria of the Nasdaq
National Market. The Reverse Stock Split will reduce the number of issued and
outstanding shares of Common Stock, so it is anticipated that the principal
effect of the Reverse Stock Split will be to increase the market price per share
of the Common Stock after giving effect to the Reverse Stock Split, as compared
with the market price per share of the Common Stock outstanding before giving
effect to the Reverse Stock Split.

A higher price per share should enable the Company to maintain compliance
with the quantitative maintenance criteria of the Nasdaq National Market, which
require that the bid price per share of the Common Stock equal or exceed $5 in
order for the Common Stock to retain its designation as a Nasdaq National Market
security. The Common Stock has recently traded at prices lower than $5 per
share. If the Reverse Stock Split is not effected, it is likely that the Common
Stock will lose its Nasdaq National Market designation and will then be quoted
on another Nasdaq market, such as the Nasdaq SmallCap Market. Some institutional
investors have policies that limit their ability in invest in stocks quoted on
Nasdaq markets other than the Nasdaq National Market.

The Company could have satisfied an alternative set of quantitative
maintenance criteria of the Nasdaq National Market, which requires only a $1.00
per share minimum bid price, except that such alternative set of criteria
requires the Company to have net tangible assets of at least $4 million. The
Company's total net assets significantly exceed such level, but a large portion
of such assets consists of goodwill, which is not a tangible
17
<PAGE> 20

asset. The Company recorded over $480 million of goodwill at the time of its
acquisition of Wace and its merger with Devon. Because these business
combinations were financed in large part with borrowings under the Company's
credit facilities, the effect of the business combinations was to increase the
Company's liabilities without a corresponding increase in its tangible assets.
The difference between the acquisition price and the net tangible assets of the
two acquired companies was recorded as goodwill.

In addition, the Company believes that the current low price per share at
which the Company's Common Stock is trading reduces the marketability of the
Common Stock because certain brokerage firms and institutional investors are
reluctant to recommend low-priced stock to their clients or hold them in their
own portfolios. Investors may view low-priced stock as unattractive, more risky
or more volatile than alternative investments. In addition, certain brokerage
houses have policies and practices that discourage individual brokers within
those firms from dealing in lower priced stocks. These policies and practices
pertain, among other things, to payment of brokerage commissions and to
time-consuming procedures that function to cause lower priced stocks to be less
attractive to brokers from an economic point of view. In addition, since fixed-
price brokerage commissions on lower priced stocks represent a higher percentage
of the stock price than fixed-price commissions on higher priced stocks, the
current price per share of the Common Stock may result in individual
stockholders paying higher per-share transaction costs.

For the reasons set forth above, the Board believes that the Reverse Stock
Split is in the best interests of the Company and its stockholders, although the
Company cannot assure you that the Reverse Stock Split will have any of the
foregoing effects. The Company anticipates that, following consummation of the
Reverse Stock Split, the Common Stock will trade at a price per share that is
higher than the current market price per share of the Common Stock. HOWEVER,
THERE CAN BE NO ASSURANCE THAT THE TOTAL MARKET CAPITALIZATION AND AGGREGATE
VALUE OF THE PUBLIC FLOAT OF THE COMMON STOCK AFTER THE PROPOSED REVERSE STOCK
SPLIT WILL BE EQUAL TO THE TOTAL MARKET CAPITALIZATION AND THE AGGREGATE VALUE
OF THE PUBLIC FLOAT BEFORE THE PROPOSED REVERSE STOCK SPLIT OR THAT THE MARKET
PRICE FOLLOWING THE REVERSE STOCK SPLIT WILL EITHER EXCEED OR REMAIN IN EXCESS
OF THE CURRENT MARKET PRICE. IN SOME CASES, THE TOTAL MARKET CAPITALIZATION OF A
COMPANY FOLLOWING A REVERSE STOCK SPLIT IS LOWER, AND MAY BE SUBSTANTIALLY
LOWER, THAN THE TOTAL MARKET CAPITALIZATION BEFORE THE REVERSE STOCK SPLIT. IN
ADDITION, THE FEWER NUMBER OF SHARES THAT WILL BE AVAILABLE TO TRADE WILL CAUSE
THE TRADING MARKET OF THE COMMON STOCK TO BECOME LESS LIQUID, WHICH COULD HAVE
AN ADVERSE EFFECT ON THE PRICE OF THE COMMON STOCK.

After the effectiveness of the Reverse Stock Split, each stockholder will
own 40% of the number of shares of Common Stock as such stockholder owned prior
to the Reverse Stock Split, but will own the same percentage of the outstanding
shares of Common Stock of the Company, except for the effects of the Company's
repurchase of fractional share interests at the then current fair market value.
The number of shares of Common Stock that may be purchased upon the exercise or
conversion of outstanding options, warrants, and other securities convertible
into or exchangeable for shares of Common Stock of the Company (collectively,
the "Convertible Securities") and the per share exercise or conversion price per
share will be adjusted appropriately so that, as of the Effective Date, the
aggregate number of shares of Common Stock issuable in respect of Convertible
Securities immediately following the Effective Date will be approximately 40% of
the number issuable in respect thereof immediately prior to the Effective Date
and the aggregate exercise and conversion prices thereunder will remain
unchanged. As a result of the Reverse Stock Split, certain stockholders may own
"odd lots" of fewer than one hundred (100) shares of Common Stock. Brokerage
commissions and other costs of transactions for odd lots may be higher than for
"round lot" transactions, particularly on a per-share basis. The par value of
the Common Stock of $.01 per share will remain unchanged as a result of the
Reverse Stock Split. The number of outstanding shares of Common Stock will be
reduced by 60% and by such additional number to account for the repurchase by
the Company of fractional share interests that otherwise would result from the
Reverse Stock Split. Accordingly, the aggregate par value of the issued and
outstanding shares of Common Stock, and therefore the stated capital associated
with the Common Stock, will be reduced, and the additional paid-in capital
(capital paid in excess of the par value) will be increased in a corresponding
amount for statutory and accounting purposes. If the Reverse Stock Split is
effected, all share and per-share information in the Company's financial
statements will be

18
<PAGE> 21

restated to reflect the Reverse Stock Split for all periods presented in future
filings after the Effective Date with the Commission and the Nasdaq Stock
Market.

EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL SHARES

If the Reverse Stock Split is approved by the stockholders of the Company,
the combination and reclassification of shares of Common Stock pursuant to the
Reverse Stock Split will automatically occur on the Effective Date without any
further action on the part of the stockholders and regardless of the date on
which the certificates representing the share of Common Stock are physically
surrendered to the Company for exchange. Every five issued and outstanding
shares of Common Stock would be converted and reclassified into two shares of
Common Stock in the Reverse Stock Split, and any fractional share interests
resulting from such reclassification and combination would be repurchased by the
Company for cash at a price equal to the fair market value of the Common Stock
multiplied by such fractional share interest. The "fair market value" of the
Common Stock means the closing price per share as reported on the Nasdaq
National Market (or on such other quotation system or exchange on which the
Common Stock is then quoted or listed for trading) on the business day
immediately preceding the Effective Date. The ownership of a fractional share
interest in a share of Common Stock will not give the holder thereof any voting,
dividend or other rights except the right to receive payment therefor as
described herein.

As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of Common Stock for use in forwarding to the
Company stock certificates for surrender and exchange for certificates
representing the number of shares of Common Stock to which such holder is
entitled and the cash payment (to be paid by check) for any fractional share
interest. The transmittal forms will be accompanied by instructions specifying
the details of the exchange. Upon receipt of the transmittal form, each
stockholder should surrender the certificates representing shares of Common
Stock prior to the effectiveness of the Reverse Stock Split, in accordance with
the applicable instructions. Each holder who surrenders certificates will
receive new certificates representing the whole number of shares of Common Stock
to which such holder is entitled as a result of the Reverse Stock Split, and a
check for the cash payment to which such holder is entitled as a result of the
repurchase by the Company of fractional share interests, if any. STOCKHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM
FROM THE COMPANY.

As of the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date (an "existing certificate") will
be deemed canceled and, for all corporate purposes, will be deemed only to
evidence ownership of the number of shares of Common Stock into which the shares
of Common Stock evidenced by such existing certificates have been converted by
the Reverse Stock Split.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax consequences
to stockholders of the Company of the Reverse Stock Split. The following summary
discussion is based upon the Internal Revenue Code of 1986 (the "Code"),
Treasury regulations thereunder, judicial decisions, and current administrative
rulings and practices, all as in effect on the date hereof and all of which
could be repealed, overruled, or modified at any time, possibly with retroactive
effect. There can be no assurance that such changes will not adversely affect
the matters discussed in this summary. No ruling from the Internal Revenue
Service ("IRS") with respect to the matters discussed herein has been requested,
and there is no assurance that the IRS would agree with the conclusions set
forth in this discussion. This discussion may not address certain federal income
tax consequences that may be relevant to particular stockholders in light of
their personal circumstances or to certain types of stockholders (such as
dealers in securities, insurance companies, foreign individuals and entities,
financial institutions, and tax-exempt entities) who may be subject to special
treatment under the federal income tax laws. This discussion also does not
address any tax consequences under state, local or foreign laws.

STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.

19
<PAGE> 22

The Company believes that the Reverse Stock Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code and as a
stock-for-stock exchange under Section 1036(a) of the Code. As a result, the
Company believes that no gain or loss should be recognized by a stockholder in
the Reverse Stock Split, except with respect to any cash received in lieu of
fractional share interests. The aggregate tax basis of the shares of Common
Stock held by a stockholder following the Reverse Stock Split will equal the
stockholder's aggregate basis in the Common Stock held immediately prior to the
Reverse Stock Split. Generally, the aggregate tax basis will be allocated among
the shares of Common Stock held following the Reverse Stock Split on a pro rata
basis. Stockholders who have used the specific identification method to identify
their basis in shares of Common Stock combined in the Reverse Stock Split should
consult their own tax advisors to determine their basis in the shares of Common
Stock received in exchange in the Reverse Stock Split. Shares of Common Stock
received should have the same holding period as the Common Stock surrendered.
Each stockholder who receives cash, if any, in lieu of fractional share
interests will recognize capital gain or loss equal to the difference between
the amount of cash received and the stockholder's tax basis allocable to such
fractional shares.

This summary is provided for general information only and does not purport
to address all aspects of the possible federal income tax consequences of the
Reverse Stock Split and is not intended as tax advice to any person. Each
stockholder should consult his or her tax advisor regarding the specific tax
consequences of the proposed transaction to such stockholder, including the
application and effect of state, local and foreign income and other tax laws. It
is the responsibility of each stockholder to obtain and rely on advice from his
or her personal tax advisor with respect to the effect of the Reverse Stock
Split on his or her personal tax situation, the effect of possible future
legislation and regulations, and the reporting of information required in
connection with the Reverse Stock Split on his or her own tax returns. It also
will be the responsibility of each stockholder to prepare and file appropriate
tax returns.

VOTE REQUIRED

Approval of this proposal requires the affirmative vote of not less than a
majority of the votes entitled to be cast by all shares of Common Stock issued
and outstanding on September 26, 2000. If this proposal is approved by the
stockholders, it will become effective upon filing and recordation of the
Certificate of Amendment with the Secretary of State of the State of Delaware.
IF THIS PROPOSAL IS NOT APPROVED, THE REVERSE STOCK SPLIT WILL NOT BE
IMPLEMENTED. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF
THE PROPOSED CERTIFICATE OF AMENDMENT TO EFFECT THE REVERSE STOCK SPLIT.

20
<PAGE> 23

INDEPENDENT ACCOUNTANTS

Deloitte & Touche LLP will serve as independent accountants of the Company
for the fiscal year ending December 31, 2000. Audit services performed for the
Company during fiscal year ended December 31, 1999 included examination of the
Company's financial statements. Deloitte & Touche LLP has informed the Company
that it has no material direct or indirect interest in the Company.

Deloitte & Touche LLP has acted as the Company's independent accountants
since 1996. Representatives of Deloitte & Touche LLP are expected to be present
at the annual meeting and will be afforded the opportunity to make a statement
if they so desire and to respond to appropriate questions.

SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers and persons who own more
than 10% of a registered class of the Company's equity securities to file with
the Commission and the Nasdaq Stock Market initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. In addition, under Section 16(a), trusts for which a reporting
person is a trustee and a beneficiary (or for which a member of his immediate
family is a beneficiary) may have a separate reporting obligation with regard to
ownership of the Common Stock and other equity securities of the Company. Such
reporting persons are required by rules of the Commission to furnish the Company
with copies of all Section 16(a) reports (specifically, Forms 3, 4 and 5) they
file. Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for the last fiscal year, the Company believes
that all of its officers, directors, and greater than ten percent beneficial
owners complied with all filing requirements applicable to them with respect to
transactions during fiscal 1999.

STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING

Pursuant to rules of the Commission, in order for stockholder proposals to
be included in the Company's proxy statement and proxy for the 2001 annual
meeting of stockholders, such proposals must be received by the Secretary of the
Company at the Company's principal office in New York City no later than June
12, 2001.

Any stockholder proposal not included in the proxy materials disseminated
by the management of the Company for the Company's 2001 annual meeting in
accordance with Rule 14a-8 under the Exchange Act will be considered untimely
for the purposes of Rules 14a-4 and 14a-5 under the Exchange Act if notice of
the proposal is received after August 25, 2001. Management proxies will be
authorized to exercise discretionary voting authority with respect to any
stockholder proposal not included in such proxy materials for the Company's
annual meeting unless (a) the Company receives notice of such proposal by the
date set forth above and (b) the conditions set forth in Rule
14a-4(c)(2)(i)-(iii) under the Exchange Act are met.

By Order of the Board of Directors,

/s/ Martin D. Krall
MARTIN D. KRALL
Secretary

Dated: October 10, 2000
STOCKHOLDERS ARE REMINDED TO SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
21
<PAGE> 24

EXHIBIT A

SECOND CERTIFICATE OF AMENDMENT
OF
FIRST RESTATED CERTIFICATE OF INCORPORATION
AFTER THE PAYMENT OF ANY PART OF THE CAPITAL
OF
APPLIED GRAPHICS TECHNOLOGIES, INC.

It is hereby certificated that:

1. The name of the corporation (hereinafter called the "Corporation")
is Applied Graphics Technologies, Inc.

2. The Corporation's original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on December 12, 1995.

3. The Corporation's Certificate of Incorporation was restated by the
First Restated Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on December 18, 1995.

4. The Corporation's First Restated Certificate of Incorporation was
amended by the Certificate of Amendment filed with the Secretary of State
of the State of Delaware on May 27, 1998.

5. A resolution declaring this Second Certificate of Amendment of the
First Restated Certificate of Incorporation advisable and submitting such
Second Certificate of Amendment to the vote of the stockholders of the
Corporation was duly adopted by the Board of Directors of the Corporation
at a meeting thereof on September 19, 2000, and such Second Certificate of
Amendment has been duly adopted by the vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote thereon at the
annual meeting of the stockholders of the Corporation on November 21, 2000
in accordance with Section 242 of the General Corporation Law of the State
of Delaware.

6. The First Restated Certificate of Incorporation of the Corporation
is hereby amended by striking out Article V thereof and substituting in
lieu of said Article the following new Article V as follows:

ARTICLE V

COMMON STOCK

Each five shares of Common Stock of the Corporation, par value
$0.01, that are issued and outstanding on the date and at the time at
which the Second Certificate of Amendment of First Restated Certificate
of Incorporation (the "Second Certificate of Amendment") becomes
effective shall be and are, by means of the Second Certificate of
Amendment, automatically and without any further action on the part of
the stockholders of the Corporation converted into and reconstituted as
two fully-paid and non-assessable shares of Common Stock of the
Corporation, par value $0.01, subject to the treatment of fractional
interests as described below, with a resultant simultaneous change in
the amount of stated capital and additional paid-in capital of the
Corporation. Each holder of a certificate or certificates which,
immediately prior to the effective date of the Second Certificate of
Amendment pursuant to and in accordance with the General Corporation Law
of the State of Delaware (the "Effective Date"), representing
outstanding shares of Common Stock prior to the Effective Date shall be
entitled to receive a certificate representing the number of new shares
of Common Stock to which such holder shall be entitled as a result of
the Second Certificate of Amendment upon presentation of the certificate
representing the outstanding shares prior to the Effective Date to the
Corporation's transfer agent for cancellation and exchange.

No scrip or fractional certificates will be issued upon such
conversion and reconstitution. The number of shares of Common Stock
issuable upon the effectiveness of the Second Certificate of Amendment
shall be rounded down to the nearest whole share if a fractional share
interest in a share
22
<PAGE> 25

of Common Stock would, except for the provisions of the preceding
sentence, be deliverable upon such conversion and reconstitution. The
Corporation shall pay an amount in cash equal to the fair market value
of such fractional interest to each holder of shares of Common Stock to
whom such fractional interest would have been deliverable. Such fair
market value will be determined by multiplying the fractional interest
by the closing sale price per share of the Common Stock on the Nasdaq
National Market (or such other quotation or listing system on which the
Common Stock may then be listed or quoted) on the business day
immediately preceding the Effective Date. Such cash payment would be
made upon the surrender to the Corporation's transfer agent of stock
certificates representing a fractional share interest. The ownership of
a fractional share interest in a share of Common Stock will not give the
holder thereof any voting, dividend or other rights except the right to
receive payment therefor as described herein.

Except as required by law, all shares of Common Stock shall be
identical in all respects and shall entitle the holders thereof to the
same rights and privileges, subject to the same qualifications,
limitations and restrictions. Except as required by law, the holders of
shares of Common Stock shall be entitled to one vote per share of Common
Stock on all matters on which stockholders of the Corporation have the
right to vote.

IN WITNESS WHEREOF, APPLIED GRAPHICS TECHNOLOGIES, INC. has caused
this Second Certificate of Amendment to be signed by its Executive Vice
President, Chief Legal Officer and Secretary on this day of
, 2000.

MARTIN D. KRALL
Executive Vice President,
Chief Legal Officer and Secretary

23
<PAGE> 26
APPLIED GRAPHICS TECHNOLOGIES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 21, 2000.

The undersigned hereby appoints Fred Drasner, Martin D. Krall and Joseph D.
Vecchiolla, and each of them, attorneys and proxies, with power of substitution
and revocation, to vote, as designated below, all shares of Common Stock that
the undersigned is entitled to vote, with all powers that the undersigned would
possess if personally present at the Annual Meeting (including all adjournments
thereof) of Stockholders of Applied Graphics Technologies, Inc. to be held on
November 21, 2000, at 10:00 a.m. local time, at the Harmonie Club, 4 East 60th
Street, New York, New York 10022.

EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH NOMINEE FOR DIRECTOR NAMED
ON THE REVERSE SIDE AND FOR THE OTHER MATTERS DESCRIBED ON THE REVERSE SIDE.

PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.

(Continued and to be dated and signed on the reverse side.)

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL

PROPOSAL 1: ELECTION OF DIRECTORS
<TABLE>
<CAPTION>

<S> <C> <C>
[] FOR all nominees [] WITHHOLD AUTHORITY to [] EXCEPTIONS*
listed below vote for all nominees listed below
</TABLE>

Nominees: Derek Ashley, Fred Drasner, John W. Dreyer, John R. Harris, Martin
D. Krall, Marne Obernauer, Jr., David R. Parker, , Howard Stringer, Joseph D.
Vecchiolla, John R. Walter, John Zuccotti and Mortimer B. Zuckerman

(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space provided
below.)

* EXCEPTIONS: ______________________________________________________________

PROPOSAL 2: APPROVAL OF SECOND CERTIFICATE OF AMENDMENT TO THE COMPANY'S
FIRST RESTATED CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT

[ ]FOR [ ]AGAINST [ ]ABSTAIN

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.

CHANGE OF ADDRESS AND OR COMMENTS MARK HERE [ ]

NOTED: Please sign as name appears hereon. Joint owners EACH must sign. When
signing as attorney, trustee, executor, administrator or guardian, please give
your FULL title. If a corporation, please provide the full name of
<PAGE> 27
the corporation and the signature of the authorized officer signing on its
behalf. If a partnership, please sign in partnership name by an authorized
person.

DATE: _____________________________

(Signature) X: __________________________________

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.
<PAGE> 28

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. This voting instruction is requested by Dreyfus Trust Company
in conjunction with a proxy solicitation by the Board of Directors of Applied
Graphics Technologies, Inc.

Please read the enclosed Proxy Statement and the Annual Report to
Shareholders for more information.

CONFIDENTIAL VOTING INSTRUCTION FORM
TO: DREYFUS TRUST COMPANY
TRUSTEE FOR THE APPLIED GRAPHICS TECHNOLOGIES 401(k) SAVINGS PLAN

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING

The undersigned hereby instructs Dreyfus Trust Company as Trustee of the above
plans, to vote in person or by proxy at the Annual Meeting of the Shareholders
of Applied Graphics Technologies, Inc. to be held on November 21, 2000, and at
any postponements thereof, all shares of Common Stock of Applied Graphics
Technologies, Inc. for which the undersigned shall be entitled to instruct, in
the manner specified on the other side hereof.

Dreyfus Trust Company will vote the shares represented by this Voting
Instruction Form if it is properly completed, signed, and received by Dreyfus
Trust Company before 5:00 p.m. EST on November 16, 2000. Please note that if
this Voting Instruction Form is not properly completed and signed, or it is not
received by Dreyfus Trust Company as indicated above, the shares allocated to
the participant's account will not be voted.

Dreyfus Trust Company makes no recommendations regarding any voting instruction.

Dated __________________________, 2000

_______________________________________
Signature

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING

PLEASE VOTE BY MARKING THE APPROPRIATE BOXES BELOW.

FOR ALL WITHHOLD FOR ALL

(EXCEPT AS MARKED TO THE
CONTRARY AT LEFT)

[ ] [ ] [ ]

<PAGE> 29

Nominees

1. DEREK ASHLEY
2. FRED DRASNER
3. JOHN W. DREYER
4. JOHN R. HARRIS
5. MARTIN D. KRALL
6. MARNE OBERNAUER, JR.
7. DAVID R. PARKER
8. HOWARD STRINGER
9. JOSEPH D. VECCHIOLLA
10. JOHN R. WALTER
11. JOHN ZUCCOTTI
12. MORTIMER B. ZUCKERMAN

_______________________________________________________
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK THE
"FOR ALL EXCEPT" BOX ABOVE AND WRITE THAT NOMINEE'S NAME BELOW.)

2. APPROVAL OF SECOND CERTIFICATE OF AMENDMENT TO THE COMPANY'S FIRST
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT REVERSE STOCK SPLIT

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

IN THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

(Continued and to be dated and signed on the other side)