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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DISC GRAPHICS, INC.
(Name of Registrant as Specified in its Charter)
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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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Disc Graphics, Inc.
10 Gilpin Avenue
Hauppauge, New York 11788
April 21, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Disc Graphics, Inc. (the "Annual Meeting"), to be held at the
Watermill, 711 Route 347, Smithtown, New York, on Friday, May 21, 1999 at 9:30
a.m. Your Board of Directors looks forward to greeting personally those
stockholders able to be present.
At the Annual Meeting, you will be asked to elect two Class I
Directors and to approve the appointment of KPMG LLP as the Company's
independent auditors for its 1999 fiscal year. These matters are described in
detail in the accompanying Notice of 1999 Annual Meeting of Stockholders and
Proxy Statement. A proxy, as well as a copy of the Company's 1998 Annual Report,
is included along with the Proxy Statement. These materials are being sent to
stockholders on or about April 21, 1999.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares you may own, and whether or not you plan to
attend. Accordingly, please take a moment now to complete, sign, date and mail
the enclosed proxy.
We appreciate your cooperation, and look forward to seeing you at the
meeting.
Sincerely,
/s/ Donald Sinkin
Donald Sinkin
Chairman, President and Chief Executive Officer
<PAGE>
DISC GRAPHICS, INC.
10 Gilpin Avenue
Hauppauge, New York 11788
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
Disc Graphics, Inc. ("Disc Graphics" or the "Company") will be held at the
Watermill, 711 Route 347, Smithtown, New York, on Friday, May 21, 1999 at 9:30
a.m. for the following purposes:
1. To elect two Class I directors to serve until the 2002 Annual Meeting
of Stockholders and until their successors have been elected and
qualified or until their earlier resignation, retirement,
disqualification, removal or death. The Board of Directors has
nominated Seymour W. Zises and Mark L. Friedman for election as the
Class I directors.
2. To vote on a proposal to ratify the selection of KPMG LLP as the
Company's independent auditors for the 1999 fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 16, 1999
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
By Order of the Board of Directors
/s/ Stephen Frey
Stephen Frey
Secretary
Hauppauge, New York
April 21, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
DISC GRAPHICS, INC.
PROXY STATEMENT
April 21, 1999
The accompanying proxy is solicited on behalf of the Board of
Directors of Disc Graphics, Inc., a Delaware corporation ("Disc Graphics" or the
"Company"), for use at its 1999 Annual Meeting of Stockholders to be held at the
Watermill, 711 Route 347, Smithtown, New York, on Friday, May 21, 1999 at 9:30
a.m. (the "1999 Annual Meeting" or the "Meeting"). Only holders of record of the
Company's Common Stock, $0.01 par value per share (the "Common Stock") at the
close of business on April 16, 1999 (the "Record Date") will be entitled to
vote. At the close of business on that date, the Company had 5,548,761 shares of
Common Stock outstanding, of which 28,264 shares were held in treasury.
Accordingly, 5,520,497 shares of Common Stock were outstanding and entitled to
vote on the Record Date. A majority of the outstanding Common Stock (2,760,249
shares) will constitute a quorum for the transaction of business. This Proxy
Statement and the accompanying proxy were first mailed to stockholders on or
about April 21, 1999. An Annual Report containing all information specified by
Rule 14a-3 of the rules of the Securities and Exchange Commission (the "SEC")
was mailed to each stockholder concurrently with a copy of this Proxy Statement.
TABLE OF CONTENTS
Page
Voting Rights................................................................ 1
Solicitation and Revocability of Proxies..................................... 2
Company Background........................................................... 2
Proposal No. 1............................................................... 2
Election of Class I Directors....................................... 2
Proposal No. 2................................................................ 6
Ratification of Selection of Independent Auditors.................... 6
Security Ownership of Certain Beneficial Owners and Management................ 6
Compensation of Executive Officers........................................... 10
Report of the Compensation Committee on Executive Compensation............... 15
Company Performance Graph.................................................... 17
Certain Relationships and Related Transactions............................... 18
Stockholder Proposals for 2000 Annual Meeting................................ 18
Other Business............................................................... 18
Annual Report on Form 10-K................................................... 19
ENCLOSURE: Disc Graphics, Inc. 1998 Annual Report
VOTING RIGHTS
Holders of Common Stock are entitled to one vote for each share held
as of the Record Date. Shares of Common Stock may not be voted cumulatively for
the election of directors. If the enclosed proxy is properly signed and
returned, the shares represented thereby will be voted. If voting by proxy with
respect to the election of directors, stockholders may vote in favor of all
nominees, withhold their votes as to all nominees or withhold their votes as to
specific nominees. With respect to Proposal No. 2 and any other proposals that
the stockholders may be asked to vote upon at the Annual Meeting, stockholders
may vote for the proposal, vote against the proposal or abstain from voting with
respect to the proposal. If the stockholder specifies in the proxy how the
shares are to be voted, they will be voted as specified. If the stockholder does
not specify how the shares are to be voted, they will be voted for the Company's
nominees for election to the Board of Directors, and in favor of Proposal No 2.
Representatives of the Company will tabulate all votes cast. Abstentions and
broker non-votes will be counted for determining whether a quorum exists, but
not for determining whether a proposal is approved. The effect of an abstention
or broker non-vote will be the same as a vote against adoption of a proposal.
See "Security Ownership of Certain Beneficial Owners and Management -- Voting
Agreement."
1
<PAGE>
SOLICITATION AND REVOCABILITY OF PROXIES
Proxies in the enclosed form are being solicited by the Company, and
the expenses of soliciting such proxies will be paid by the Company. Following
the original mailing of the proxies and other soliciting materials, the Company
and/or its agents may also solicit proxies by mail, telephone, telegraph,
facsimile or in person. The Company does not currently expect that it will
retain a proxy solicitation firm. Following the original mailing of the proxies
and other soliciting materials, the Company will request brokers, custodians,
nominees and other record holders of the Company's Common Stock to forward
copies of the proxy and other soliciting materials to persons for whom they hold
shares of Common Stock and to request authority for the exercise of proxies. In
such cases, the Company, upon the request of the record holders, will reimburse
such holders for their reasonable expenses.
Any person signing a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to the 1999 Annual Meeting, or at the
Meeting prior to the vote pursuant to the proxy. A proxy may be revoked by: (i)
a notice in writing delivered to the Secretary of the Company stating that the
proxy is revoked; (ii) a subsequent proxy executed by the person executing the
prior proxy and presented at the Meeting; or (iii) attendance at the Meeting and
voting in person.
COMPANY BACKGROUND
Disc Graphics, headquartered in Hauppauge, New York, is a diversified
manufacturer and printer of specialty paperboard packaging focused on the home
video, music, entertainment software, cosmetics, pharmaceutical and other
consumer markets. Products include: pre-recorded video sleeves, compact disc and
audio cassette packaging; folding cartons for entertainment software, food,
pharmaceuticals and cosmetics; posters, pressure sensitive labels and general
commercial printing. Customers include leading software, CD-ROM and video
distributors; vitamin, cosmetic and fragrance companies; major book publishers;
and many Fortune 500 companies. The Company operates in one business segment:
the manufacturing and printing of specialty paperboard packaging. Historically,
the Company has grown primarily through the development of new customers by
capitalizing on its superior service and response capabilities and increases in
orders from existing customers. In 1996, the Company acquired Pointille, Inc., a
packaging printer, and in 1997 the Company acquired Benham Press, Inc., an
Indiana based commercial printing company, and has since integrated each of
their manufacturing facilities and sales/marketing programs into Disc Graphics.
The Company intends to continue to grow by acquiring strategically located
folding carton and printing companies, expanding existing facilities to serve
regional U.S. markets, broadening the Company's product line and continuing
ongoing internal expansion.
The Company was formed as the result of a merger between RCL Capital
Corp., a Delaware corporation ("RCL"), and a packaging company formerly known as
Disc Graphics, Inc., a New York corporation ("Old Disc"). RCL was incorporated
in 1992 to serve as a vehicle to effect a business combination with an operating
business. On October 30, 1995, Old Disc merged with and into RCL, which was the
successor corporation (the "Merger"). In connection with the Merger, RCL changed
its name to Disc Graphics, Inc. References to "Disc Graphics" or the "Company"
include subsidiaries of Disc Graphics, and its predecessor, Old Disc, unless the
context indicates otherwise.
PROPOSAL NO. 1
ELECTION OF CLASS I DIRECTORS
Background
The number of directors comprising the Company's full Board of
Directors is six, divided into three classes, designated Class I, Class II and
Class III. The Class I directors (Seymour W. Zises and Mark L. Friedman) were
elected at the 1996 Annual Meeting of Stockholders for three-year terms that
will expire at the 1999 Annual Meeting of Stockholders. The Class II directors
(Donald Sinkin and Daniel A. Levinson) were elected at the 1997 Annual Meeting
of Stockholders for a three-year term that will expire at the 2000 Annual
Meeting. The Class III directors (Stephen Frey and John Rebecchi) were elected
at the 1998 Annual Meeting for three-year terms that will expire at the 2001
Annual Meeting. A director may be removed from office before the expiration of
his elected term, with or without cause, at any meeting called for such purpose,
upon the approval of a majority of the holders of shares entitled to vote in the
election of directors.
2
<PAGE>
The Company's current Class I directors, Seymour W. Zises and Mark L.
Friedman, have been nominated by the Board for reelection as the Class I
directors. Following the 1999 Annual Meeting, the Company will have two Class I
directors, two Class II directors and two Class III directors constituting the
full Board.
Election of Class I Directors
At the 1999 Annual Meeting, stockholders will elect two Class I
directors each of whom will hold office until the 2002 Annual Meeting of
Stockholders and until his successor has been elected and qualified or until his
earlier resignation, retirement, disqualification, removal or death. The Class I
directors will be elected by a majority vote of the holders of Common Stock
represented and voting at the Meeting. Shares represented by the accompanying
proxy will be voted for the election of the nominee recommended by the Company's
management, unless the proxy is marked in such a manner as to withhold authority
to so vote. If the nominee for any reason is unable to serve or for good cause
will not serve, the proxies may be voted for such substitute nominee as the
proxy holder may determine. The Company is not aware that either of its nominees
will be unable to, or for good cause will not, serve as a director.
Director/Nominee
Certain information concerning the Company's incumbent directors, as
well as the nominees for election as Class I directors, is set forth below.
<TABLE>
Name of Director Age Principal Occupation Director Since
---------------- --- -------------------- --------------
Class I Directors/Nominees:
<S> <C> <C> <C>
Seymour W. Zises (1)(4) 46 President and Chief 1992
Executive Officer,
Family Management
Corporation and Family
Management Securities, LLC
Mark L. Friedman (2)(3) 51 Senior Managing Director, 1996
Millenium apital Group, Ltd.;
Counsel, Baer Marks & Upham LLP
Class II Directors:
Donald Sinkin (1)(4) 51 Chairman, Chief Executive 1986
Officer and President
of the Company
Daniel A. Levinson (2)(3)(4) 38 Founder, Colt Capital Group 1991
Class III Directors:
Stephen Frey (1) 45 Senior Vice President of 1986
Operations and
Secretary of the Company
John Rebecchi (2) 44 Senior Vice President of 1995
Sales and Marketing
of the Company
</TABLE>
- ----------------------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Incentive Stock Option Committee
(4) Member of Compensation Committee
Class I Directors/Nominees
Seymour W. Zises has been a director of the Company since August 1992,
and was a Vice President and Treasurer from August 1992 until October 1995. He
is currently President and Chief Executive Officer of Family Management
Corporation, a registered investment advisory firm in New York City, which he
established in 1989.
3
Additionally, Mr. Zises is the President and Chief Executive Officer of Family
Management Securities, LLC, a registered broker-dealer.
Mark L. Friedman has been a director of the Company since April 1996
and was a Vice President, Secretary and director of RCL from August 1992 until
October 1995. He has been counsel to the law firm of Baer Marks & Upham LLP
since February 1995, and a Senior Managing Director of Millenium Capital Group,
Ltd., an investment firm, since April 1999. From January 1993 through January
1995 he was counsel to the law firm of Proskauer Rose LLP. From 1982 through
January 1993 he was (individually or through a professional corporation) a
partner of the law firm of Shea & Gould. From July 1996 to July 1997, Mr.
Friedman served as corporate secretary of a private company which in July 1997
filed a voluntary petition under Chapter 11 of the United States Bankruptcy
Code.
Class II Directors
Donald Sinkin has been Chairman of the Board, President and Chief
Executive Officer of the Company and Old Disc since 1986. He also serves as a
director and the President and Chief Executive Officer of Disc Graphics Label
Group, Inc. and Four Seasons Litho, Inc. and is a director and the President and
Chief Executive Officer of Cosmetic Sampling Technologies, Inc. These entities
are subsidiaries of the Company. Mr. Sinkin joined the Company as Pre-Press
Supervisor in 1977 and became Plant Manager in 1982. Prior to joining the
Company, he helped found and manage Rutgers Packaging, a division of Queens
Group, Inc. d/b/a Queens Litho. Mr. Sinkin also serves as a director and the
President of Horizon Equities, Inc., a New York corporation controlled by him
("Horizon Equities"), and is the managing member of Spring Hollow Holding, LLC,
a New York limited liability company.
Daniel A. Levinson has been a director of the Company and RCL since
October 1991. He is also a director of two of the Company's subsidiaries, Disc
Graphics Label Group, Inc. and Cosmetic Sampling Technologies, Inc. In 1998, Mr.
Levinson founded Colt Capital Group, a niche provider of investment capital,
resources and support to small and mid-size growing companies. Between 1988 and
1998, Mr. Levinson was a group executive of Holding Capital Group, a stockholder
of the Company engaging in activities similar to those of Colt Capital Group.
See "Security Ownership of Certain Beneficial Owners and Management," below.
Class III Directors
Stephen Frey has been the Senior Vice President of Operations of the
Company since August 1998, the Secretary of the Company and Old Disc since 1988,
and a director of the Company and Old Disc since 1986. Between 1986 and August
1998, Mr. Frey was the Vice President of Operations of the Company and Old Disc.
Mr. Frey also serves as a director, Vice President and Secretary of Disc
Graphics Label Group, Inc., a director and the Vice President and Secretary of
Four Seasons Litho, Inc., and a director and the Vice President of Operations of
Cosmetic Sampling Technologies, Inc., each of which is a wholly-owned subsidiary
of the Company. Mr. Frey joined the Company in its Pre-Press Department in 1978,
became the Supervisor of that department in 1983, and established the Production
and Planning Department in 1985. Mr. Frey served as Chief Operating Officer from
1991 to 1995. Prior to joining the Company, Mr. Frey held various management
positions with Kordet Color Corporation and Terrace Litho. Mr. Frey also serves
on the Board of Directors of the Association of Graphic Communication, a trade
organization, and is a director and the Secretary of Horizon Equities and the
managing member of Stephen Ashley, LLC, a New York limited liability company.
John Rebecchi has been the Senior Vice President of Sales and
Marketing of the Company since August 1998 and a director since October 1995.
Between October 1995 and August 1998, Mr. Rebecchi was the Company's Vice
President of Sales. Between October 1995 and January 1996, he also served as the
Company's Chief Financial Officer. Between 1988 and October 1995, Mr. Rebecchi
was Vice President of Marketing and Chief Financial Officer of Old Disc. He also
serves as Vice President and a director of Disc Graphics Label Group, Inc.; Vice
President and a director of Four Seasons Litho, Inc.; and Vice President of
Sales and a director of Cosmetic Sampling Technologies, Inc., each of which is a
wholly-owned subsidiary of the Company. Mr. Rebecchi joined Old Disc in its
accounting department and in 1983 became the Controller of Old Disc. He took a
brief leave of absence between 1985 and 1988, when he rejoined Old Disc. He also
serves as a director and the Vice President and Treasurer of Horizon Equities,
the managing member of Tin Box Holding, LLC, a New York limited liability
company, and a director and the President of 92-37 Metro Corp., a New York
corporation formed for the purpose of acquiring real estate.
4
<PAGE>
The election of directors and the appointment of certain of the
executive officers of the Company are subject to the Voting Agreement described
under "Security Ownership of Beneficial Owners and Management -- Voting
Agreement." As of April 16, 1998, the parties to the Voting Agreement owned in
excess of 51% of the outstanding Common Stock of the Company and could
therefore, without the vote of any other stockholder, elect all of the directors
of the Company. Messrs. Sinkin, Frey, Rebecchi, Levinson, Friedman and Zises are
parties to the Voting Agreement and were or are nominated as directors pursuant
thereto. Messrs. Sinkin, Frey and Rebecchi were elected executive officers
pursuant to the Voting Agreement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
SEYMOUR W. ZISES AND MARK L. FRIEDMAN AS CLASS I DIRECTORS.
Board and Committee Meetings
During the year ended December 31, 1998, the Board of Directors met
five times. Each director who served on the Board during fiscal 1998 attended at
least 75% of all Board meetings and meetings of Board committees on which he
served, during the periods in fiscal 1998 that he served, except for Daniel
Levinson.
Standing committees of the Board include an Executive Committee, an
Audit Committee, a Compensation Committee and an Incentive Stock Option
Committee. The Board does not have a nominating committee or a committee
performing a similar function. See "Security Ownership of Certain Beneficial
Owners and Management -- Voting Agreement."
Messrs. Sinkin, Frey and Zises are currently the members of the
Executive Committee. The Executive Committee is generally authorized to exercise
the powers and authority of the Board to the extent provided in the resolutions
of the Board designating the Committee, except for issuing stock; declaring
dividends; amending the Company's Certificate of Incorporation or By-Laws; and
taking actions relating to any merger, consolidation, sale, lease or exchange of
all or substantially all of the Company's assets, or any dissolution of the
Company. The Executive Committee did not meet during fiscal 1998.
Messrs. Rebecchi, Friedman and Levinson are currently the members of
the Audit Committee. The Audit Committee reviews and evaluates the results and
scope of the audit and other services provided by the Company's independent
accountants, as well as the Company's accounting principles and system of
internal accounting controls. The Audit Committee met twice during fiscal 1998.
Messrs. Sinkin, Levinson and Zises are currently the members of the
Compensation Committee. The Compensation Committee reviews management
recommendations regarding compensation of employees above a certain salary level
and compensation of the Company's Directors, except for compensation under the
1995 Incentive Stock Option Plan, which is administered by the Incentive Stock
Option Committee. The Compensation Committee met once during fiscal 1998.
Messrs. Friedman and Levinson are currently the members of the
Incentive Stock Option Committee. The Incentive Stock Option Committee reviews
and approves of recommendations concerning incentive stock options and awards
stock options under the 1995 Incentive Stock Option Plan. Messrs. Friedman and
Levinson serve on the Incentive Stock Option Committee as the nominees of Old
Disc and RCL, respectively, pursuant to the Voting Agreement described below.
See "Security Ownership of Certain Beneficial Owners and Management -- Voting
Agreement." The Incentive Stock Option Committee met three times during fiscal
1998.
5
<PAGE>
Directors' Compensation
Directors who are officers of the Company receive no additional
compensation for serving on the Board or any Board committee. For 1998, the
Company paid an annual fee to non-employee directors of $2,500 each for service
on the Board, plus $1,000 for each Board and committee meeting attended.
Accordingly, the Company paid $11,500 to Mr. Friedman and $6,500 to Mr. Zises in
1998. The Company was required to pay these amounts pursuant to the Voting
Agreement described below under the caption "Security Ownership of Certain
Beneficial Owners and Management -- Voting Agreement." Pursuant to the 1995
Incentive Stock Option Plan, the Company has also agreed to grant annually to
each member of the Incentive Stock Option Committee for service on that
Committee an option to purchase 1,000 shares of Common Stock on January 1 of
each year. This arrangement will terminate in 2005, in accordance with the 1995
Incentive Stock Option Plan. On January 1, 1998, the Company granted to each
such director an option to purchase 1,000 shares of Common Stock at an exercise
price of $4.50 per share, which was the fair market value of the Common Stock at
the time of grant. These options vested on December 31, 1999 and will expire on
December 31, 2007.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
Each of Messrs. Sinkin, Frey and Rebecchi served as an executive
officer and director of the Company, and also served as an executive officer and
director of Horizon Equities, Inc., a New York corporation. Mr. Sinkin serves on
the Company's Compensation Committee. Messrs. Sinkin, Frey and Rebecchi and Mr.
Levinson, a director of the Company, are also parties to the Voting Agreement
described under the caption "Security Ownership of Certain Beneficial Owners and
Management -- Voting Agreement."
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Company has selected KPMG LLP ("KPMG") as its independent
accountant to perform the audit of the Company's financial statements for fiscal
1999, and the stockholders are being asked to ratify this selection. KPMG and
its predecessors have audited the financial statements of the Company and its
predecessor, Old Disc, since 1991. The Company expects that representatives of
KPMG will be present at the Meeting, will be given an opportunity to make a
statement at the Meeting if they desire to do so, and will be available to
respond to appropriate questions. The affirmative vote of the holders of a
majority of the Company's outstanding shares of Common Stock represented and
voting at the Meeting is required for approval of this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
General
As of the date of this Proxy Statement, the Company's authorized
capital stock consists of Common Stock, and Preferred Stock, par value $.01 per
share (the "Preferred Stock"). On the Record Date, there were 5,548,761 shares
of Common Stock outstanding, of which 28,264 shares were held in treasury, and
no shares of Preferred Stock outstanding. The holders of Common Stock are
entitled to elect all members of the Board. As of the Record Date, there were 46
record holders of Common Stock (reflecting approximately 707 beneficial owners),
and no record holders of Preferred Stock.
The Company also had outstanding as of the Record Date 1,242,105 Class
A Redeemable Common Stock Purchase Warrants, each of which is exercisable to
purchase one share of Common Stock at $5.50 per share (the "Class A Warrants").
The outstanding Class A Warrants will expire on November 10, 1999.
6
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding the
beneficial ownership of the Company's voting securities by each person known by
the Company to be the beneficial owner of more than 5% of the Company's voting
securities as of the Record Date. Unless otherwise indicated, the persons named
in the table below have sole voting and investment power with respect to all
shares shown as beneficially owned by them. The inclusion of any shares for any
stockholder in the table below shall not be deemed an admission that such
stockholder is, for any purpose, the beneficial owner of such shares.
<TABLE>
Amount and
Nature of Percentage
Name and Address of Beneficial of Class
Title of Class Beneficial Owner Ownership ----------
- -------------- ---------------- ---------
<S> <C> <C>
Common Stock, Donald Sinkin 1,720,066(1) 29.0%
$0.01 par value
Stephen Frey 650,979(2) 11.4%
John Rebecchi 616,186(3) 10.8%
Allen & Company
Incorporated 502,162(4) 8.7%
Holding Capital
Management Corp. 395,643(5) 7.0%
</TABLE>
- ---------------------------
(1) Donald Sinkin is Chairman of the Board, President and Chief Executive
Officer of the Company. His address is 10 Gilpin Avenue, Hauppauge,
New York 11788. The number of shares of Common Stock shown in the
table as beneficially owned by Mr. Sinkin includes the following:
1,339,698 shares owned directly by Mr. Sinkin and indirectly by his
spouse and a limited liability company controlled by him; and Class A
Warrants to purchase 380,368 shares of Common Stock owned directly by
Mr. Sinkin and indirectly by the same limited liability company. Of
the total number of shares reported as beneficially owned, Mr. Sinkin
shares voting power pursuant to a voting agreement with respect to all
shares and shares investment power with respect to 203,172 shares. See
"-- Voting Agreement," below.
(2) Stephen Frey is a director and the Senior Vice President of Operations
and Secretary of the Company. His address is 10 Gilpin Avenue,
Hauppauge, New York 11788. The number of shares of Common Stock shown
in the table as beneficially owned by Mr. Frey includes the following:
506,387 shares owned directly by Mr. Frey and indirectly by a limited
liability company controlled by him; and Class A Warrants to purchase
an aggregate of 144,592 shares of Common Stock owned directly by Mr.
Frey and indirectly by the same limited liability company. Of the total
number of shares reported as beneficially owned, Mr. Frey shares voting
power pursuant to a voting agreement with respect to all shares, and
shares investment power with respect to 203,172 shares. See "-- Voting
Agreement," below.
(3) John Rebecchi is a director and the Senior Vice President of Sales and
Marketing of the Company. His address is 10 Gilpin Avenue, Hauppauge,
New York 11788. The number of shares of Common Stock shown in the table
as beneficially owned by Mr. Rebecchi includes the following: 479,322
shares owned directly by Mr. Rebecchi and indirectly by a limited
liability controlled by him; and Class A Warrants to purchase 136,864
shares of Common Stock held directly by Mr. Rebecchi and indirectly by
the same entity. Of the total number of shares reported as beneficially
owned, Mr. Rebecchi shares voting power pursuant to a voting agreement
with respect to all shares, and shares investment power with respect to
203,172 shares. See "-- Voting Agreement," below.
7
<PAGE>
(4) Allen & Company Incorporated is a New York corporation ("Allen & Co.").
Its address is 711 Fifth Avenue, New York, New York 10022. The number
of shares of Common Stock shown in the table as beneficially owned by
Allen & Co. includes the following: 264,915 shares of Common Stock;
Class A Warrants to purchase 151,335 shares of Common Stock, and
warrants to purchase an additional 85,912 shares of Common Stock. Allen
Holding Inc., a Delaware corporation ("Allen Holding"), is an affiliate
of Allen & Co. that is deemed to own beneficially all of the shares
reported on the table above as owned by Allen & Co. The information
regarding ownership of Common Stock by Allen & Co. and Allen Holding
was contained in a Schedule 13G dated February 11, 1999 and filed with
the SEC on February 12, 1999, which was furnished to the Company on
behalf of such beneficial owners. According to the Schedule 13G, Allen
& Co. has sole voting and investment power with respect to all shares
reported as beneficially owned. Allen & Co. is a party to the Voting
Agreement described below under "-- Voting Agreement".
(5) Holding Capital Management Corp. is a Connecticut corporation ("Holding
Capital"). Its address is 685 Fifth Avenue, New York, New York 10022.
The number of shares of Common Stock shown in the table as beneficially
owned by Holding Capital includes 292,560 shares of Common Stock and
warrants to purchase an aggregate of 103,083 shares of Common Stock.
The information regarding ownership of Common Stock by Holding Capital
was furnished to the Company by Holding Capital. Holding Capital is a
party to the Voting Agreement described below under "-- Voting
Agreement."
Security Ownership of Management
The following table sets forth certain information as to each class of
outstanding equity securities of the Company beneficially owned as of the Record
Date by: (i) each director and nominee; (ii) the Company's Chief Executive
Officer and the other four most highly compensated executive officers who were
officers as of December 31, 1998; and (iii) all current directors and executive
officers as a group. No executive officer or director of the Company owns
securities of any parent or subsidiary of the Company, except as indicated in
the footnotes to the table below. Unless otherwise indicated, the persons named
in the table below have sole voting and investment power with respect to all
shares shown as beneficially owned by them. The inclusion of any shares for any
stockholder in the table below shall not be deemed an admission that such
stockholder is, for any purpose, the beneficial owner of such shares. An
asterisk denotes beneficial ownership of less than 1% of the class of securities
indicated.
8
<PAGE>
<TABLE>
Amount and
Nature of
Name of Beneficial Percentage
Title of Class Beneficial Owner Ownership of Class
- -------------- ---------------- --------- --------
<S> <C> <C>
Common Stock, Donald Sinkin 1,720,066(1) 29.0%
$0.01 par value
Stephen Frey 650,979(2) 11.4%
John Rebecchi 616,186(3) 10.8%
Daniel A. Levinson 261,856(4) 4.7%
Seymour W. Zises 180,747(5) 3.2%
Mark L. Friedman 167,920(6) 3.0%
Margaret M. Krumholz 66,870(7) 1.2%
Frank A. Bress 6,000(8) *
All directors and
executive officers 3,671,624 58.0%
as a group
</TABLE>
- ---------------------------
(1) See Note (1) under "Security Ownership of Certain Beneficial Owners"
table above.
(2) See Note (2) under "Security Ownership of Certain Beneficial Owners"
table above.
(3) See Note (3) under "Security Ownership of Certain Beneficial Owners"
table above.
(4) Includes 200,584 shares owned directly by Mr. Levinson and indirectly
by a family trust of which he is the trustee; Class A Warrants to
purchase 57,272 shares of Common Stock owned directly by Mr. Levinson
and indirectly by such trust; and options granted under the Company's
1995 Incentive Stock Option Plan to purchase 4,000 shares of Common
Stock, of which 2,000 such options were exercisable as of the Record
Date. Of the total number shares reported as beneficially owned, Mr.
Levinson shares voting power with respect to all shares, and shares
investment power with respect to 128,928 shares. See "-- Voting
Agreement," below.
(5) Includes 155,747 shares owned directly by Mr. Zises and indirectly by
a limited liability company controlled by him; and options granted
under the 1995 Incentive Stock Option Plan to purchase 25,000 shares
of Common Stock, all of which options were exercisable as of the
Record Date. Of the total number shares reported as beneficially
owned, Mr. Zises shares voting power with respect to all shares and
shares investment power with respect to 28,827 shares. See "-- Voting
Agreement," below.
(6) Includes shares held in a joint account with Mr. Friedman's wife; and
options to purchase 28,000 shares, of which options to purchase 26,000
shares were exercisable as of the Record Date. Mr. Friedman shares
voting power pursuant to a voting agreement with respect to all shares
reported in the table above. See "-- Voting Agreement," below.
(7) Includes 16,870 shares owned directly by Ms. Krumholz and indirectly
by members of her immediate family; and options to purchase 50,000
shares pursuant to the 1995 Incentive Stock Option Plan, of which
options to purchase 25,000 shares were exercisable as of the Record
Date. Ms. Krumholz has sole voting and investment power with respect
to 51,270 shares reported above.
9
<PAGE>
(8) This number represents options granted under the Company's 1995
Incentive Stock Option Plan to purchase 6,000 shares, none of which
options were exercisable as of the Record Date.
Voting Agreement
In connection with the Merger described under "Company Background,"
above, the Company entered into a Voting and Registration Rights Agreement dated
as of October 30, 1995 (the "Voting Agreement"), with the following
stockholders: Sheldon Simon, Sal Maisano, Harold M. Wit, Daniel Levinson,
Timothy Healy, Allen & Co., Holding Capital, the Levinson Trust, the Jessand
Corp. Profit Sharing Plan & Trust, H. Sean Mathis, Mark L. Friedman, Seymour
Zises and Quad Z. Trust. Pursuant to the Voting Agreement, such stockholders
agreed, among other things, to use their best efforts for a four year period to
ensure that the number of directors constituting the whole Board of Directors of
the Company does not increase to more than six directors; that four nominees of
the Old Disc stockholders and two nominees of the RCL stockholders are elected
to serve on the Board; that each of the RCL nominees on the Board receives an
annual fee of at least $2,500 for service as a director and $1,000 for each
Board and committee on which such RCL nominee sits; that the Board establish the
Incentive Stock Option Committee; that Daniel Levinson and Richard Gormley
become members of that Committee, and that Messrs. Sinkin, Rebecchi and Frey be
elected as the President and Chief Executive Officer, Vice President and Chief
Financial Officer, and Vice President, respectively. In April 1996, Mark L.
Friedman succeeded Richard Gormley as the RCL nominee on the Incentive Stock
Option Committee. Pursuant to the Voting Agreement, in October 1995, the
Incentive Stock Option Committee granted to each non-employee director who was
not a member of the Incentive Stock Option Committee options to purchase a total
of 25,000 shares of Common Stock for $4.125 per share. At that time, Seymour
Zises and Robert Schneider were the only such directors. Messrs. Friedman and
Zises are the current RCL nominees for director, and Messrs. Sinkin, Frey,
Rebecchi and Levinson are the current Old Disc nominees for director. Each of
the foregoing arrangements will terminate on October 30, 1999, but the Company
expects that all of its directors will continue in office for the remainder of
their respective terms.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors, and certain stockholders
owning more than 10% of any class of the Company's equity securities ("10%
Stockholders") to file reports with the SEC indicating their ownership of
securities of the Company and any changes in such ownership. Executive officers,
directors and 10% Stockholders are required to provide copies of these reports
to the Company. Based on a review of copies of all such reports filed with
respect to fiscal 1998 and furnished to the Company, as well as certain written
representations provided to the Company by executive officers, directors and
certain 10% Stockholders, all such reports required to be filed with respect to
fiscal 1998 have been filed in a timely manner.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Compensation
The following table summarizes the compensation earned by or paid to
the Company's Chief Executive Officer and the other four most highly compensated
executive officers during 1998 who were officers as of December 31, 1998
(collectively, the "Named Executives") for their services to the Company and its
subsidiaries during fiscal 1996, 1997 and 1998.
10
<PAGE>
<TABLE>
Summary Compensation Table
Long-Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------------------------------------------------------
Other Long
Annual Securities Term All Other
Compen- Restricted Underlying Incentive Compen-
Name and Bonus sation Stock Options/ Plan sation
Principal Position Year Salary ($) ($)(1) ($) Awards SARs(#) Payouts($) ($)(2)
- ------------------ ---- ---------- --- --- ------ ------- ---------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald Sinkin, 1998 $275,625 $137,813 0 0 0 $ 0 $27,262
Chairman 1997 262,500 157,500 0 0 0 0 21,123
President and 1996 250,000 250,000 0 0 0 0 3,955
Chief
Executive
Officer
Stephen Frey,
Senior Vice 1998 176,400 88,200 0 0 0 0 9,820
President of 1997 168,000 143,425 0 0 0 0 6,291
Operations 1996 160,000 212,883 0 0 0 0 6,286
John Rebecchi, 1998 176,400 88,200 0 0 0 0 12,499
Senior Vice 1997 168,000 145,832 0 0 0 0 8,937
President of 1996 160,000 206,146 0 0 0 0 6,901
Sales and
Marketing
Margaret 1998 163,000 81,500 0 25,000 25,000 0 12,200
Krumholz, 1997 131,291 59,062 0 0 0 0 1,273
Senior Vice 1996 119,000 62,500 0 25,000 25,000 0 1,275
President of
Finance and
Chief Financial
Officer
Frank A. Bress, 1998 150,000 13,500 0 5,000 5,000 0 8,153
Vice President 1997 0 0 0 0 0 0 0
for Legal Affairs 1996 0 0 0 0 0 0 0
and Human
Resources Policy
and General
Counsel
</TABLE>
- --------------------------
(1) For Messrs. Sinkin, Frey and Rebecchi, the total bonus amounts shown in
this column were payable under the employment agreements described
below under "Employment and Change of Control Arrangements."
(2) For fiscal 1998, All Other Compensation includes: (a) $19,960, $5,000
and $7,049 of premiums paid by the Company for certain life insurance
policies for Messrs. Sinkin, Frey and Rebecchi, respectively; (b)
Company contributions under the Company's 401(k) Retirement Plan of
$5,022 to Mr. Sinkin, $3,200 to each of Messrs. Frey and Rebecchi and
Ms. Krumholz, and $2,153 to Mr. Bress; and (c) miscellaneous car
allowances for each named executive.
11
<PAGE>
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
The Company is party to employment agreements dated as of June 28,
1995 with each of Messrs. Sinkin, Frey and Rebecchi. Each agreement provides for
an annual base salary, annual salary increases calculated with reference to the
Consumer Price Index, bonus compensation based on the Company's performance (as
measured by its gross revenues and its earnings before interest, taxes,
depreciation and amortization), and a monthly car allowance. Bonuses under these
agreements cannot exceed 100% of an employee's base salary. If in any year the
Company does not meet the specific performance requirements set forth in these
agreements, the Company will be obligated to pay, in lieu of bonus compensation,
incentive compensation pursuant to a management incentive plan. The amounts paid
to each of Messrs. Sinkin, Frey and Rebecchi under his employment agreement are
set forth above in the "Summary Compensation Table." In addition, the Company
will pay a fee to each of these executives for any Company loans which they have
personally guaranteed. Each of these employment agreements also provides for
continued payments of salary, bonus and incentive compensation for two years in
the event of the death, disability or termination without cause of the officers
party to these agreements. These agreements require the executives to dedicate
substantially all of their business time to the Company's affairs, and will
terminate on December 31, 2001.
The Company has also entered into employment agreements dated December
15, 1998 with each of Margaret M. Krumholz and Frank A. Bress. The agreement
with Ms. Krumholz provides for an annual base salary, annual salary increases
calculated with reference to the Consumer Price Index, bonus compensation based
upon the Company's performance (as described above in relation to the employment
contracts with Messrs. Sinkin, Frey and Rebecchi), and monthly car, gas and
cellular telephone allowances. Her agreement also provides for the payment of
salary, incentive compensation and bonus for two years following her death,
disability or discharge without cause, which includes a change of control, among
other things. This agreement will terminate on December 31, 2001. The agreement
with Mr. Bress provides for an annual base salary, annual salary increases
calculated with reference to the Consumer Price Index, bonus compensation
pursuant to a management incentive plan, and monthly car, gas and cellular
telephone allowances. His agreement also provides for the payment of salary,
incentive compensation and bonus for one year following his death, disability or
discharge without cause, which includes a change of control, among other things.
This agreement will terminate on December 31, 2001.
1995 Incentive Stock Option Plan
In 1995, the Company adopted the Disc Graphics, Inc. 1995 Incentive
Stock Option Plan (the "1995 Stock Incentive Plan") in order to advance the
interests of the Company by encouraging and enabling the acquisition of a larger
personal proprietary interest in the Company by key employees and directors of,
and consultants to, the Company and its subsidiaries upon whose judgment and
keen interest the Company is largely dependent for the successful conduct of its
operations. The 1995 Stock Incentive Plan provides for the grant of incentive
stock options within the meaning of the Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), non-qualified stock options not meeting the
requirements of Section 422 of the Code, stock appreciation rights, restricted
stock, performance grants and other types of awards.
The 1995 Stock Incentive Plan, which is administered by the Incentive
Stock Option Committee of the Board of Directors (currently comprised of Mark L.
Friedman and Daniel Levinson) authorizes the issuance of a maximum of 500,000
shares of Common Stock, which may be either newly issued shares, treasury
shares, re-acquired shares, shares purchased in the open market or any
combination thereof. Incentive stock options generally may be granted at an
exercise price of not less than the fair market value of shares of Common Stock
on the date of grant, and non-qualified stock options maybe be granted at an
exercise price determined by the Incentive Stock Option Committee. If any award
under the 1995 Incentive Plan terminates, expires unexercised, or is canceled,
the shares of Common Stock that would otherwise have been issuable pursuant
thereto will be available for issuance pursuant to the grant of new awards. As
of the Record Date, the Company had outstanding options to purchase an aggregate
of 303,429 shares of Common Stock under the 1995 Incentive Stock Option Plan.
Option/SAR Grants
The following table describes the options to purchase shares of Common
Stock granted to the Named Executives during fiscal 1998 and the potential value
of such options at the end of their terms, assuming certain levels of stock
price appreciation.
12
<PAGE>
<TABLE>
Option/SAR Grants in Fiscal 1998
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)(2)
--------------------------------------- -----------------------------
% of Total
Options/
Number of SARs
Securities Granted to
Underlying Employees Exercise or
Options/ SARs in Fiscal Base Price Expiration
Name Granted (#) Year (3) ($/share) Date 5%($) 10%($)
- ---- ----------- ---------- --------- ---- ----- ------
<S> <C>
Donald Sinkin 0 n/a n/a n/a n/a n/a
Stephen Frey 0 n/a n/a n/a n/a n/a
John Rebecchi 0 n/a n/a n/a n/a n/a
Margaret M. Krumholz 25,000 23.1% $4.00 5/4/08 $163,000 $259,250
Frank A. Bress 5,000 4.6% $4.00 5/4/08 $ 32,600 $ 51,850
</TABLE>
- ------------------------
(1) All options are either incentive or non-qualified stock options granted
under the Company's 1995 Incentive Stock Option Plan. All options were
granted with an exercise price greater than or equal to the fair market
value on the date of grant.
(2) Potential realizable values reflect the difference between the option
exercise price on the date of grant and the fair market value of the
Company's Common Stock at the end of the option term, assuming 5% and
10% compounded annual appreciation of the stock price from the date of
grant until the expiration of the option. The 5% and 10% appreciation
rates are assumed pursuant to rules promulgated by the SEC and do not
reflect actual historical or projected rates of appreciation of the
Common Stock. Assuming such appreciation, on May 4, 2008 the per share
value would be $6.52 at 5% or $10.37 at 10% (based on a fair market
value of $4.00 on May 4, 1998, which was the grant date for the option
listed in the table above). The foregoing values do not reflect
appreciation actually realized by the Named Executives. See
"Option/SAR Exercises and Values," below.
(3) For purposes of calculating these percentages, the total number of
options granted to all employees in fiscal 1998 was 108,145.
Option/SAR Exercises and Values
The following table provides certain information concerning the
exercise of stock options during 1998 and the value of unexercised options to
purchase shares of Common Stock held by the Named Executives as of December 31,
1998.
13
<PAGE>
<TABLE>
Aggregated Option/SAR Exercises in Fiscal 1998 and
Fiscal Year End Option/SAR Values
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year End Fiscal Year End(1)
---------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Donald Sinkin 0 n/a 0 0 0 $0
Stephen Frey 0 n/a 0 0 0 $0
John Rebecchi 0 n/a 0 0 0 $0
Margaret M. Krumholz 0 n/a 25,000 25,000 $60,950 $ 10,950
Frank A. Bress 0 n/a 0 5,000 0 $ 2,190
</TABLE>
- ------------------------
(1) The fair market value per share of Common Stock on December 31, 1998
was $4.438, based on the closing price on the Nasdaq National Market
System on December 31, 1998, which was the last trading day of the
year.
14
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
NOTE: THE FOLLOWING SECTION OF THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, NOTWITHSTANDING ANY INCORPORATION
BY REFERENCE OF ANY OTHER PORTIONS OF THIS PROXY STATEMENT.
The compensation of the Company's executive officers is generally
determined by either the Board of Directors or the Compensation Committee of the
Board of Directors, subject to approval by the Board of Directors, and subject
to applicable employment agreements. See "Compensation of Executive Officers --
Employment and Change of Control Arrangements." Each member of the Compensation
Committee, except for Donald Sinkin, is a director who is not an employee of the
Company or any of its affiliates.
General Policies
The Company's compensation programs are intended to enable the Company
to attract, motivate, reward and retain the management talent required to
achieve its corporate objectives, and thereby increase shareholder value. It is
the Company's policy to provide incentives to its senior management to achieve
both short-term and long-term objectives and to reward exceptional performance
and contributions to the development of the Company's businesses. To attain
these objectives, the Company's executive compensation program includes a
competitive base salary, cash incentive bonuses and stock-based compensation.
Stock options are granted to employees, including the Company's
executive officers, by the Compensation Committee under the Company's 1995
Incentive Stock Option Plan. The Committee believes that stock options provide
an incentive that focuses the executive's attention on managing the Company from
the perspective of an owner with an equity stake in the business. Incentive
stock options are awarded with an exercise price equal to the market value of
Common Stock on the date of grant, and all options have a maximum term of ten
years and generally become exercisable not less than six months from the date of
grant. Among the Company's executive officers, the number of shares subject to
options granted to each individual generally depends upon the level of that
officer's responsibility. Subsequent to the Merger, the largest grants generally
have been awarded to the most senior officers who, in the view of the
Compensation Committee, have the greatest potential impact on the Company's
profitability and growth. Previous grants of stock options are reviewed but are
not considered the most important factor in determining the size of any
executive's stock option award in a particular year.
Relationship of Compensation to Performance
The Compensation Committee annually establishes, subject to the
approval of the Board of Directors and any applicable employment agreements, the
salaries that will be paid to the Company's executive officers during the coming
year. In setting salaries, the Compensation Committee takes into account several
factors, including competitive compensation data, the extent to which an
individual may participate in the stock plans maintained by the Company, and
qualitative factors bearing on an individual's experience, responsibilities,
management and leadership abilities, and job performance.
For fiscal 1998, pursuant to the terms of their employment agreements
with the Company, Donald Sinkin, Stephen Frey and John Rebecchi each received a
base salary and a cash incentive bonus based on the Company's pre-tax income.
See "Compensation of Executive Officers -- Employment Contracts and Termination
of Employment and Change of Control Arrangements." Each of Margaret M. Krumholz
and Frank A. Bress received a base salary and a cash bonus. In addition, Ms.
Krumholz was granted options under the 1995 Incentive Stock Option Plan to
purchase 25,000 shares, and Mr. Bress was granted options under the same Plan to
purchase 5,000 shares, in each case at the fair market value on the date of
grant. The Compensation Committee determined that these amounts were appropriate
given the Company's financial performance, the substantial contribution made by
each of Ms. Krumholz and Mr. Bress to such performance, and the compensation
levels of executives at companies competitive with the Company.
15
<PAGE>
Compensation of Chief Executive Officer
For fiscal 1998, pursuant to the terms of his employment agreement
with the Company, Donald Sinkin received a base salary and a cash incentive
bonus based on the Company's pre-tax income. See "Compensation of Executive
Officers -- Employment Contracts and Termination of Employment and Change of
Control Arrangements." In light of this employment agreement, the Compensation
Committee was not required to make any decision regarding the cash compensation
of Mr. Sinkin.
COMPENSATION COMMITTEE
Seymour W. Zises
Daniel Levinson
Donald Sinkin
16
<PAGE>
COMPANY PERFORMANCE GRAPH
NOTE: THE FOLLOWING SECTION OF THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, NOTWITHSTANDING ANY INCORPORATION
BY REFERENCE OF ANY OTHER PORTIONS OF THIS PROXY STATEMENT.
The following chart compares the stock price performance of the
Company from December 31, 1993 through December 31, 1998 to those of all United
States companies listed in the Nasdaq Stock Market (the "Market Index"), and all
United States companies in the printing, publishing and allied industries (SIC
numbers 2700-2799) that are listed in the Nasdaq Stock Market (the "Peer Group
Index").
The Company's Common Stock began trading on the OTC Bulletin Board on
November 19, 1993, and the average of the bid and asked prices on that date was
$4.375. The performance graph below was prepared by the Center for Research in
Security Prices of the University of Chicago Graduate School of Business.
COMPARISON OF CUMULATIVE TOTAL RETURNS AMONG DISC GRAPHICS, INC.,
MARKET INDEX AND PEER GROUP INDEX THROUGH DECEMBER 31, 1998
17
<PAGE>
<TABLE>
December 31,
----------------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Disc Graphics, Inc. $ 76.5 $ 48.5 $ 105.9 $ 104.4
Market Index $ 73.3 $ 71.7 $ 101.4 $ 124.7 $ 152.9 $ 215.4
Peer Group Index $ 80.0 $ 75.3 $ 114.8 $ 111.8 $ 124.7 $ 107.0
</TABLE>
- -------------------
* Assumes $100 invested on October 30, 1995 in the Company's Common
Stock, the Market Index and the Peer Group Index. Assumes reinvestment
of dividends. The Company has not paid any dividends.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1998 to the present, there have been no transactions
involving more than $60,000 to which the Company or any of its subsidiaries was
a party and in which any executive officer, director or nominee for director,
beneficial owner of more than 5% of any class of the Company's voting
securities, or member of the immediate family of any of the foregoing persons,
had a material interest, except as indicated in "Compensation of Executive
Officers," above, and as follows.
The Company leases a 55,000 square foot building in Hauppauge, New
York from Horizon Equities L.P., a Delaware limited partnership ("Horizon")
under a 15 year lease that will terminate on December 31, 2007. Horizon
Equities, Inc., the corporate general partner of Horizon, is owned by Messrs.
Sinkin, Frey and Rebecchi, executive officers and directors of the Company, and
one other employee of the Company. The limited partners of Horizon include,
among others, Holding Capital (which owns more than five percent of the Company)
and one of its affiliates, and Investment Services Corp., an affiliate of Mr.
Levinson. The aggregate payments made by the Company in 1998 for rental of the
building were $348,000. The Company believes that the terms of the building
lease are at least as favorable to the Company as the terms for an equivalent
lease which could have been obtained from unaffiliated third parties.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals for inclusion in the Company's Proxy Statement
and proxy relating to the Company's 2000 Annual Meeting of Stockholders must be
received by the Company on or before December 22, 1999.
OTHER BUSINESS
The Board does not presently intend to bring any other business before
the Meeting and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the accompanying Notice of Meeting. As
to any business that may properly come before the Meeting, however, it is
intended that proxies, in the form enclosed, will be voted in accordance with
the judgment of the persons voting such proxies.
18
<PAGE>
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to each person whose proxy is
solicited, upon the written request of any such person, a copy of the Company's
Annual Report on Form 10-K for its fiscal year ended December 31, 1998 filed
with the SEC, including the financial statements and the schedules thereto. The
Company does not undertake to furnish without charge copies of all exhibits to
its Form 10-K, but will furnish any exhibit upon the payment of a charge equal
to the Company's costs of copying and mailing any such exhibits. Such written
requests should be directed to Ms. Margaret M. Krumholz, Chief Financial
Officer, Disc Graphics, Inc., 10 Gilpin Avenue, Hauppauge, New York 11788. Each
such request must set forth a good faith representation that, as of April 16,
1999, the person making the request was a beneficial owner of securities
entitled to vote at the Meeting.
By Order of the Board of Directors
/s/ Donald Sinkin
Donald Sinkin
Chairman
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
19
<PAGE>
PROXY CARD
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE
ANNUAL MEETING OF STOCKHOLDERS
DISC GRAPHICS, INC.
MAY 21, 1999
|PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED|
PLEASE MARK YOUR VOTES
[ X ] AS IN THIS EXAMPLE
FOR both nominees WITHHOLD Authority to vote for
listed at right both nominees listed at right
1. ELECTION OF [ ] [ ] NOMINEES: Seymour W. Zises
CLASS I Mark L. Friedman
DIRECTORS
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
SELECTION OF KPMG LLP AS
INDEPENDENT AUDITORS FOR
THE 1999 FISCAL YEAR
I PLAN TO ATTEND MEETING [ ]
The undersigned acknowledges receipt of (a) the Notice of 1999 Annual Meeting of
Stockholders, (b) the accompanying Proxy Statement and (c) the Company's 1998
Annual Report.
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY PROMPTLY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES
SIGNATURE______________ DATE_______, 1999 SIGNATURE__________ DATE______, 1999
Signature if held jointly
PROXY INSTRUCTIONS:
1. Please sign exactly as the name or names appear on your stock certificate (as
indicated hereon).
2. If the shares are issued in the name of two or more persons, all of them must
sign the proxy.
3. A proxy executed by a corporation must be signed in its name by an authorized
officer.
4. Executors, administrators, trustees and partners should indicate their
capacity when signing.
<PAGE>
DISC GRAPHICS, INC.
COMMON STOCK PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 21, 1999
The undersigned hereby appoints Donald Sinkin and Margaret M. Krumholz, or
either of them, each with full power of substitution, as proxies to represent
the undersigned at the Annual Meeting of Stockholders of DISC GRAPHICS, INC. to
be held at the Watermill, 711 Route 347, Smithtown, New York, on May 21, 1999 at
9:00 a.m., and any adjournments thereof, and to vote the number of shares of the
COMMON STOCK of DISC GRAPHICS, INC. that the undersigned would be entitled to
vote if personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DISC
GRAPHICS, INC. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION NAMED ON THE
REVERSE AND FOR PROPOSAL 2.
IN THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF TO THE EXTENT AUTHORIZED BY RULE 14A-4(C) PROMULGATED BY THE SECURITIES
AND EXCHANGE COMMISSION AND BY APPLICABLE STATE LAWS (INCLUDING MATTERS THAT THE
PROXY HOLDERS DO NOT KNOW, A REASONABLE TIME BEFORE THIS SOLICITATION, ARE TO BE
PRESENTED).
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
