OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
APPLIED GRAPHICS TECHNOLOGIES, INC.
AT
$0.85 NET PER SHARE
BY
KAGT ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
KAGT HOLDINGS, INC.
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JULY 18, 2003, UNLESS THE OFFER IS EXTENDED.
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June 20, 2003
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 20, 2003
(the "Offer to Purchase") and the related Letter of Transmittal (which, together
with amendments or supplements thereto, collectively constitute the "Offer")
relating to the Offer by KAGT Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of KAGT Holdings, Inc., a Delaware
corporation ("Parent"), to purchase all outstanding shares of common stock, par
value $0.01 per share (the "Shares"), of Applied Graphics Technologies, Inc., a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Offer. Also enclosed is the Letter to Stockholders
of the Company from the Chairman of the Board and Chief Executive Officer and
the President and Chief Operating Officer of the Company accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9.
WE (OR OUR NOMINEES) ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS
LETTER IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO
TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The offer price is $0.85 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions of
the Offer.
2. The Offer is being made for all outstanding Shares.
3. The Offer is being made pursuant to the Agreement and Plan of
Merger dated as of June 12, 2003 (the "Merger Agreement"), among Parent,
the Purchaser and the Company pursuant to which, as soon as practicable
following the consummation of the Offer and the satisfaction or waiver of
certain conditions, the Purchaser will be merged with and into the Company,
with the surviving entity becoming a wholly owned subsidiary of Parent (the
"Merger"). At the effective time of the Merger, each outstanding Share
(other than Shares owned by Parent, the Purchaser or the Company or any
subsidiary of Parent or the Company or by stockholders, if any, who are
entitled to and properly exercise appraisal rights under Delaware law) will
be converted into the right to receive the price per Share paid pursuant to
the Offer in cash, without interest, as set forth in the Merger Agreement
and described in the Offer to
Purchase. The Merger Agreement provides that the Purchaser may assign any
or all of its rights and obligations (including the right to purchase
Shares in the Offer) to Parent or any wholly owned subsidiary of Parent,
but no such assignment shall relieve the Purchaser of its obligations under
the Merger Agreement.
4. The Board of Directors of the Company (a) has unanimously approved
the Merger Agreement and the transactions contemplated by the Merger
Agreement including the Offer, the Merger and certain related
recapitalization transactions, (b) has unanimously determined that the
terms of the Offer and the Merger are fair, from a financial point of view,
to the stockholders of the Company and that the Merger is advisable, and
(c) unanimously recommends that the stockholders of the Company accept the
Offer and tender their Shares pursuant to the Offer.
5. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, JULY 18, 2003 (THE "EXPIRATION DATE"), UNLESS THE
OFFER IS EXTENDED BY THE PURCHASER, IN WHICH EVENT THE TERM "EXPIRATION
DATE" SHALL MEAN THE LATEST TIME AT WHICH THE OFFER, AS SO EXTENDED BY THE
PURCHASER, WILL EXPIRE.
6. The Offer is conditioned upon, among other things, (a) there being
validly tendered and not withdrawn prior to the Expiration Date that number
of Shares that would represent more than fifty percent of the Fully Diluted
Shares (as defined in the Offer to Purchase) on the date of purchase, (b)
any waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, if any, applicable to the purchase of Shares pursuant
to the Offer or to the Merger having expired or been terminated (c) the
consummation of the other recapitalization transactions (as described in
Section 14 of the Offer to Purchase) and (d) the receipt of financing under
the debt commitment letter (as described in Section 14 of the Offer to
Purchase).
7. Any stock transfer taxes applicable to a sale of Shares to the
Purchaser will be borne by the Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
8. Tendering stockholders will not be obligated to pay brokerage fees
or commissions to the Depositary or the Information Agent or, except as set
forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Purchaser pursuant to the Offer. However, federal
income tax backup withholding at a rate of 28% may be required, unless an
exemption is provided or unless the required taxpayer identification
information is provided. See Instruction 9 of the Letter of Transmittal.
If you wish to have us tender any of or all the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form on the detachable part hereof. An envelope to return
your instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified on the detachable
part hereof. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT
US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by The Bank of New York (the
"Depositary") of (a) the certificates for such Shares, together with a Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, and any required signature guarantees and any other required
documents or (b) in the case of a transfer effected pursuant to the book-entry
transfer procedures described in Section 2 of the Offer to Purchase, a
Book-Entry Confirmation and either a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, and any required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), and any other required documents. Accordingly, tendering stockholders
may be paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations with respect to Shares are actually received by the
Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE
OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE
OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of the Purchaser by one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
APPLIED GRAPHICS TECHNOLOGIES, INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase of KAGT Acquisition Corp., dated June 20, 2003 (the "Offer to
Purchase") and the related Letter of Transmittal relating to shares of common
stock, par value $0.01 per share (the "Shares"), of Applied Graphics
Technologies, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions set forth in the Offer to Purchase and related Letter of Transmittal.
Number of Shares to be Tendered:* -------------------------------------- Shares
SIGN HERE
Signature(s) -------------------------------------------------------------------
Please Type or Print Name(s) ---------------------------------------------------
Type or Print Address(es) ------------------------------------------------------
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Area Code and Telephone Number -------------------------------------------------
Taxpayer Identification or Social Security No. ---------------------------------
Dated: ------------------------------, 2003
* Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
