JOSTENS INC, 10-K, 2000-03-10

JOSTENS INC
10-K, 2000-03-10
JEWELRY, PRECIOUS METAL

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the Fiscal Year Ended January 1, 2000

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

Commission file number 1-5064

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Jostens, Inc.
(Exact name of Registrant as specified in its charter)

Minnesota 41-0343440
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)

5501 Norman Center Drive, 55437
Minneapolis, Minnesota (Zip code)
(Address of principal executive
offices)

Registrant's telephone number, including area code: (952) 830-3300

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -----------------------
<S> <C>
Common Shares, $0.33 1/3 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in PART III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of voting stock held by nonaffiliates of the
Registrant on March 1, 2000, was $567,548,472, based upon a closing price of
$24.00 per share. The number of shares outstanding of Registrant's only class
of common stock on March 1, 2000, was 33,327,209.

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<PAGE>

JOSTENS, INC.

Annual Report on Form 10-K
For the Year Ended January 1, 2000

<TABLE>
<CAPTION>
Page
----

PART I

<C> <S> <C>
ITEM 1. Our Business.................................................. 1
ITEM 2. Properties.................................................... 6
ITEM 3. Legal Proceedings............................................. 6
ITEM 4. Submission of Matters to a Vote of Security Holders........... 7

PART II

Market for Registrant's Common Stock and Related Security
ITEM 5. Holder Matters................................................ 7
ITEM 6. Selected Financial Data....................................... 8
Management's Discussion and Analysis of Financial Condition
ITEM 7. and Results of Operations..................................... 9
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.... 17
ITEM 8. Financial Statements and Supplementary Data................... 18
Changes in and Disagreements with Accountants on Accounting
ITEM 9. and Financial Disclosure...................................... 42

PART III

ITEM 10. Directors and Executive Officers of the Registrant............ 42
ITEM 11. Executive Compensation........................................ 43
Security Ownership of Certain Beneficial Owners and
ITEM 12. Management.................................................... 52
ITEM 13. Certain Relationships and Related Transactions................ 53

PART IV

Exhibits, Financial Statement Schedules, and Reports on Form
ITEM 14. 8-K........................................................... 54
Signatures.................................................... 56
</TABLE>
<PAGE>

PART I

ITEM 1. OUR BUSINESS

Unless otherwise indicated, all references to "Jostens," "we," "our," and
"us" refer to Jostens, Inc., a Minnesota corporation (incorporated in 1906),
and its subsidiaries.

We are a leading manufacturer and marketer of school-related affinity
products and one of the leading manufacturers and suppliers of corporate-based
affinity products that help people celebrate important moments, recognize
achievements and build affiliations.

Our home page on the Internet is www.jostens.com. You may learn more about
us by visiting this site. The information on our web site is not incorporated
into this annual report.

RECENT DEVELOPMENTS

Merger and Recapitalization

On December 27, 1999, we entered into a merger agreement with Saturn
Acquisition Corporation, a newly formed corporation controlled by Investcorp
S.A., a global investment group, and its co-investors. Under this agreement,
Saturn Acquisition Corporation will merge with and into Jostens. The merger
will be accounted for as a recapitalization by Jostens. Upon completion of the
merger, Investcorp and its co-investors, including Jostens' senior management,
will own approximately 94 percent of Jostens' common stock. The remaining 6
percent of our post-merger common stock will be retained by some or all of our
pre-merger public shareholders.

As a result of the merger:

. approximately 98 percent of Jostens' outstanding common stock will be
purchased for cash of $25.25 per share;

. all outstanding options to purchase Jostens' common stock will
automatically vest and be cancelled in exchange for a cash payment equal
to $25.25 per underlying share, less the applicable exercise price; and

. we will incur a substantial amount of debt.

The merger agreement obligates us to pay a fee of $19.125 million, plus up
to $5.0 million in expenses if the agreement is terminated under certain
circumstances, including a decision by us to accept a more favorable
acquisition proposal.

Successful completion of the recapitalization depends principally upon
shareholder approval and satisfaction of conditions to closing in the merger
agreement with Saturn Acquisition Corporation.

It is anticipated that the merger and recapitalization will be completed in
the second quarter of 2000.

In connection with our execution of the merger agreement, our Board of
Directors approved the following amendments to the shareholder rights
agreement:

. neither Saturn Acquisition nor its affiliates will be deemed to be an
acquiring person;

. the execution and delivery of the merger agreement will not give rise to
a distribution date or a triggering event; and

. no holder of rights shall be entitled to exercise such rights as a result
of the execution and delivery of the merger agreement.

1
<PAGE>

If the merger is not approved, the rights will expire in August 2008 unless
extended or redeemed earlier by us.

Special Charge

In the fourth quarter of 1999, we completed a strategic review of product
lines, manufacturing operations, infrastructure projects, and support functions
based on performance trends. In addition, we decided to refocus our
organization on sales growth versus infrastructure improvement. As a result of
this review, we incurred a pre-tax special charge of $20.2 million ($13.3
million after tax or $0.39 per share), which was approved by our Board of
Directors.

Information relating to the special charge follows:

<TABLE>
<CAPTION>
Balance
Initial Used in end of
Accrual 1999 1999
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Employee termination benefits......................... $ 4,910 $ -- $4,910
Abandonment of internal use software under
development.......................................... 6,455 6,245 210
Write-off of impaired goodwill related to retail class
ring sales channel................................... 4,560 4,560 --
Write-off of goodwill related to exiting the direct
marketing sales channel to college alumni............ 3,086 3,086 --
Other costs related to exiting the direct marketing
sales channel to college alumni...................... 1,183 270 913
------- ------- ------
$20,194 $14,161 $6,033
======= ======= ======
</TABLE>

Of the $20.2 million special charge, $4.8 million relates to the School
Products segment and $15.4 million relates to the "Other" segment.

Included in other accrued liabilities on the consolidated balance sheets is
the unused portion of the special charge of $6.0 million, which will be used or
paid in 2000.

Of the total special charge, $4.9 million relates to employee termination
benefits for the elimination of about 100 full-time positions, primarily in
corporate staff and executive functions and in exiting the direct marketing
sales channel to college alumni. Headcount reductions will be completed and
termination benefits paid in 2000.

We reviewed and modified our strategies for the retail class ring product
line and, as a result, determined that the carrying value of the related
goodwill was impaired based upon anticipated inadequate projected cash flows.
Accordingly, an impairment charge of $4.6 million was recorded as part of the
special charge for the write-off of all of the goodwill.

We also reviewed the Jostens Direct business and decided in the fourth
quarter of 1999 to close down the business due to 1999 performance and
forecasted decline in sales volume. As a result of that decision, the remaining
balance of the related goodwill of $3.1 million was written off and other
exiting costs of $1.2 million were recorded.

We estimate the pre-tax future savings of the 1999 special charge to be
approximately $8.0 million in 2000 and $10.0 million in 2001 and beyond.

2
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BUSINESS SEGMENTS

We classify our operations into the following business segments:

. SCHOOL PRODUCTS, which manufactures and markets school-related affinity
products primarily for the high school and college markets. School
Products is comprised of four product lines: Printing & Publishing,
Jewelry, Graduation Products and Photography.

. RECOGNITION, which manufactures and supplies corporate-based affinity
products that help companies and other organizations promote and
recognize achievement in people's careers. We concentrate our efforts in
service recognition and incentive programs designed to help companies
achieve their business objectives through improved employee performance.
Products include jewelry and other brand name merchandise from industry
leading manufacturers.

. OTHER, which represents the operating units that do not meet the
quantitative threshold for determining reportable segments. The "Other"
segment is primarily comprised of corporate expenses, the results of the
direct marketing sales channel to college alumni, international sales and
expenses and expenses associated with new product development.

Business segment financial information is contained in ITEM 8, Note 12 of the
Notes to Consolidated Financial Statements, included in this Form 10-K and is
incorporated herein by reference.

SCHOOL PRODUCTS SEGMENT

Product Lines

Printing & Publishing

We manufacture and sell student-created yearbooks in elementary, middle and
high schools, and colleges. Our independent and employee sales representatives
and their associates work closely with each school's yearbook staff (both
students and a faculty adviser), assisting with the planning, editing, layout
and printing scheduling until the yearbook is completed. Our independent and
employee sales representatives work with the faculty advisers to renew yearbook
contracts. We also print commercial brochures, and promotional books and
materials.

Jewelry

We manufacture and sell class rings primarily to high school and college
students. Many schools have only one school-designated supplier to its students
each year. Class rings are sold through bookstores, other campus stores, retail
jewelry stores and within the school through temporary order-taking booths. Our
independent and employee sales representatives manage the in-school process of
interacting with the students through ring design, promotion and ordering.

Graduation Products

We manufacture and sell graduation announcements and accessories, diplomas
and caps and gowns to students and administrators in high schools and colleges.
Our independent and employee sales representatives make calls on schools and
take sales orders through temporary order-taking booths, telemarketing
programs, college bookstores and the Internet.

Photography

Photography provides class and individual school pictures to students in
elementary, middle and high schools. Additionally, photography provides high
school senior portrait photography, photography for proms and other special
events and other photo-based products such as student ID cards. Our independent
dealers and employee sales force arrange the sittings/shootings at individual
schools or in their own studios.

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Seasonality

Our School Products segment experiences strong seasonal business swings
concurrent with the North American school year, with about 40 percent of full-
year segment sales and about 50 to 60 percent of full-year segment operating
income occurring in the second quarter. This seasonality requires us to
carefully manage our cash flows over the course of the year.

Competition

Consumers differentiate school products principally on the basis of
quality, price, marketing and service.

We are one of four primary competitors in the sale of yearbooks along with
Herff Jones, Inc., Taylor Publishing Company and Walsworth Publishing Company.
Each competes on the basis of print quality, price, product offerings and
service. Technological offerings in the way of computer-based publishing are
becoming significant market differentiators.

Customer service is particularly important in the sale of class rings
because of the high degree of customization and the emphasis on timely
delivery. Class rings are marketed through different channels that have
different quality and price points. Competitors in the sale of class rings
primarily consists of two firms: Herff Jones, Inc. and Commemorative Brands,
Inc. (CBI), which markets the Balfour and ArtCarved brands. Herff Jones, Inc.
distributes its product in schools in a manner similar to ours, while CBI
distributes its product through multiple distribution channels, including
schools, independent and chain jewelers and mass merchandisers.

In Graduation Products, several national and numerous local and regional
competitors offer products similar to ours.

In Photography products, we compete with Lifetouch, Inc., Herff Jones, Inc.
and a variety of regional and locally owned and operated photographers.

RECOGNITION SEGMENT

Our Recognition segment helps companies and other organizations promote and
recognize achievement in people's careers. We concentrate our efforts in
service recognition and incentive programs designed to help companies achieve
their business objectives through improved employee performance.

We manufacture almost half the products sold including jewelry, rings,
watches and engraved certificates. In addition, we market items manufactured
by other companies, such as Lenox, Waterman, Howard Miller, Oneida and
Waterford.

We serve customers ranging from small and mid-size companies to global
corporations, professional sports teams and special interest associations. We
design, communicate and administer programs, tailoring the products to an
individual organization's needs. We sell our products primarily through
independent sales representatives.

Standardized programs such as Symphony(TM) provide small to mid-sized
clients a variety of recognition options based on how much administrative work
the client wants to outsource and the client's budget. Many larger companies
expect more customized programs and products. We team with them to:

. design jewelry collections that capture the client's corporate identity;

. create brochures that feature product offerings and promote the client's
mission, values and goals; and

. design company-specific web sites for employees to view and choose their
awards.

4
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Competition

Principal competitors in the service recognition and incentive program
market include O.C. Tanner Recognition Company, The Robbins Company and The
Tharpe Company, Inc.

INFORMATION REGARDING ALL BUSINESS SEGMENTS

Backlog

Because of the nature of our business, all orders are generally filled
within a few months from the time of placement. However, our School Products
segment obtains student yearbook contracts in one year for a significant
portion of the yearbooks to be delivered in the next year. Often the prices of
the yearbooks are not established at the time of the order because the content
of the books may not be finalized. Subject to the foregoing qualifications, we
estimate the backlog of orders related to continuing operations was
approximately $305.0 million as of the end of 1999, compared with $292.0
million as of the end of 1998, primarily related to student yearbooks, jewelry
and graduation products. We expect most of the 1999 backlog to be confirmed and
filled in 2000.

Environmental

Matters pertaining to the environment are discussed in ITEM 7 and in ITEM 8,
Note 13 of the Notes to Consolidated Financial Statements, included in this
Form 10-K and are incorporated herein by reference.

Raw Materials

The principal raw materials that we purchase are gold, paper products, and
precious, semiprecious and synthetic stones. Any material increase in the price
of gold could adversely impact our cost of sales.

We purchase substantially all synthetic and semiprecious stones from a
single supplier, located in Germany, who is also a supplier to almost all of
the class ring manufacturers in the United States. We believe that the loss of
this supplier could adversely affect our business during the time period in
which alternate sources adapted their production capabilities to meet increased
demand.

Matters pertaining to our market risks are discussed in ITEM 7A,
Quantitative and Qualitative Disclosures about Market Risk, included in this
Form 10-K and are incorporated herein by reference.

Intellectual Property

We have licenses, trademarks and copyrights that in aggregate, are an
important part of our business. However, we do not regard our business as being
materially dependent upon any single license, trademark or copyright. We have
trademark registration applications pending and will pursue other registrations
as appropriate to establish and preserve our intellectual property rights.

Employees

As of the end of January 2000 we had approximately 6,700 employees, of which
approximately 300 were members of two separate unions. Because of the
seasonality of our business, the number of employees tends to vary. We have
never suffered an interruption of business that had a material impact on our
operations as a result of a labor dispute and consider our relationship with
our employees to be good.

Foreign Operations

Our foreign sales are derived primarily from operations in Canada. The
accounts and operations of our foreign businesses, excluding Canada, are not
material. Local taxation, import duties, fluctuation in currency exchange rates
and restrictions on exportation of currencies are among risks attendant to
foreign operations, but these risks are not considered material with respect to
our business. The profit margin on foreign sales is approximately the same as
the profit margin on domestic sales.

5
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ITEM 2. PROPERTIES

Our physical properties are summarized below:

<TABLE>
<CAPTION>
Approximate
Owned square
Business segment Location Type of property or leased footage
---------------- ------------------ ------------------- --------- -----------
<S> <C> <C> <C> <C>
School Products.. Anaheim, CA Office Leased 12,000
Attleboro, MA Manufacturing Owned 52,000
Burnsville, MN Manufacturing Leased 47,000
Clarksville, TN Manufacturing Owned 105,000
Denton, TX Manufacturing Owned 56,000
Laurens, SC Manufacturing Owned 98,000
Laurens, SC Warehouse Leased 105,000
Owatonna, MN Office Owned 88,000
Owatonna, MN Manufacturing Owned 30,000
Owatonna, MN Warehouse Leased 29,000
Red Wing, MN Manufacturing Owned 132,000
Shelbyville, TN Manufacturing Owned 87,000
State College, PA Manufacturing Owned 66,000
Topeka, KS Manufacturing Owned 236,000
Visalia, CA Manufacturing Owned 96,000
Winnipeg, MAN Manufacturing Owned 69,000
Winnipeg, MAN Office Leased 28,000
Winston-Salem, NC Manufacturing Owned 132,000
Webster, NY (2) Manufacturing Owned 60,000
Recognition...... Memphis, TN Distribution center Owned 67,000
Princeton, IL Manufacturing Owned 65,000
Saddle Brook, NJ Office Leased 6,000
Sherbrooke, QUE Distribution center Leased 15,000
Other............ Bloomington, MN (1) Office Owned 116,000
Bloomington, MN Office Leased 37,000
</TABLE>
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(1) A portion of this facility has been financed through revenue bonds.
(2) Closed and currently held for sale.

We believe that our production facilities are suitable for their purpose and
are adequate to support our businesses. The extent of utilization of individual
facilities varies due to the seasonal nature of the business.

ITEM 3. LEGAL PROCEEDINGS

In January 1999, a federal judge in Texas overturned a jury's $25.3 million
verdict against Jostens in an antitrust lawsuit. The judge, acting on Jostens'
post-trial motions, set aside the jury's verdict and dismissed all claims
against Jostens in the case. Yearbook competitor Taylor Publishing Company, who
is also the plaintiff in the case, has appealed the decision and is seeking to
have the jury verdict reinstated. Briefs have been filed and oral arguments
were held on December 8, 1999. The date for the decision from the Fifth Circuit
Court of Appeals has not been determined. No costs were accrued related to the
lawsuit because we believe a loss is not "probable and estimable."

Following the public announcement of the merger, three purported class
actions were filed, two on December 30, 1999 and the third on January 14, 2000,
in the Fourth Judicial District of the District Court for the State of
Minnesota, County of Hennepin ("the Court"). By order of the Honorable Daniel
H. Mabley dated January 21, 2000, the Actions were consolidated, and the
Complaint in File No. MC 99-18533 was thereafter designated as the Consolidated
Complaint.

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The Consolidated Complaint is purportedly brought on behalf of a class of
"all holders of Jostens common stock who are being and will be harmed" by the
actions alleged in the Consolidated Complaint. In the Consolidated Complaint,
the plaintiffs allege that the individual defendants, by virtue of their
positions as officers and directors of Jostens, owe fiduciary duties to the
shareholders of Jostens, and that by allegedly failing to take all steps
reasonably required to maximize the value shareholders will receive in a sale
of Jostens, the defendants have breached such duties. More specifically, the
plaintiffs allege that the defendants have taken actions designed to halt any
other offers and deter higher offers from other potential acquirers including,
among other things:

. allegedly concealing Jostens' fourth quarter results until after the
defendants entered into and disclosed the existence of the merger
agreement, thus allegedly capping the price of Jostens' common stock;

. allegedly agreeing to include in the merger agreement a termination fee
provision which would under specified circumstances require Jostens to
pay Saturn Acquisition the sum of $24 million, together with Investcorp's
expenses, in the event that Jostens receives a superior offer and
terminates the merger agreement;

. allegedly structuring a "preferential deal" pursuant to which some of the
defendants would receive "change of control" payments following the
consummation of the proposed merger; and

. allegedly failing to announce any active auction, open bidding, or any
other procedures best calculated to maximize shareholder value.

The Consolidated Complaint seeks an order of the Court:

. enjoining the defendants from proceeding with the merger;

. enjoining the defendants from consummating the merger, or a business
combination with a third party, unless and until Jostens adopts and
implements a procedure or process, such as an auction, to obtain the
highest possible price for Jostens;

. directing the individual defendants to exercise their fiduciary duties to
obtain a transaction which is in the best interests of shareholders until
the process for the sale or auction of Jostens is completed and the
highest possible price is obtained;

. awarding compensatory damages against the defendants;

. awarding the plaintiffs the costs and disbursements of the Consolidated
Complaint, including reasonable attorneys' and experts' fees; and

. granting such further relief as the Court may deem just and proper.

Jostens is a party to other litigation arising in the normal course of
business. We regularly analyze current information and, as necessary, provide
accruals for probable liabilities on the eventual disposition of these matters.
We believe the effect on our consolidated results of operations and financial
position, if any, for the disposition of these matters will not be material.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

Our common stock trades on the New York Stock Exchange under the trading
symbol "JOS." As of December 31, 1999, there were 5,044 shareholders of record.

Quarterly market and dividend information can be found in ITEM 8, Note 15 of
the Notes to Consolidated Financial Statements, included in this Form 10-K and
is incorporated herein by reference.

7
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ITEM 6. SELECTED FINANCIAL DATA

The table below sets forth summary consolidated historical data relating to
Jostens. The summary historical financial information for the years ended
January 1, 2000, January 2, 1999, January 3, 1998; the six month period ended
December 28, 1996; and for each of the two years ended June 30, 1996 and 1995
was derived from the audited historical Consolidated Financial Statements of
Jostens.

Financial Summary of Selected Financial Data Jostens, Inc. and subsidiaries

<TABLE>
<CAPTION>
(2) (3) (4) (4) (5) (6)
---------- ---------- ---------- ---------------- ------------------
Years ended Six months ended Years ended
--------------------------------- ---------------- ------------------
January 1, January 2, January 3, December 28, June 30, June 30,
2000 1999 1998 1996 1996 1995
---------- ---------- ---------- ---------------- -------- --------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Net sales .............. $782.4 $770.9 $742.5 $ 277.1 $695.1 $665.1
Cost of products sold .. 349.7 351.8 351.3 141.5 332.2 313.7
Operating income ....... 81.7 102.2 99.7 4.2 94.8 94.6
Net interest expense ... 7.0 6.7 6.3 4.1 7.3 0.7
Income taxes ........... 31.5 41.7 36.2 0.8 35.9 38.0
Income (loss) --
continuing operations
....................... 43.2 41.8 57.2 (0.8) 51.6 55.9
Net income (loss) ...... 43.2 41.8 57.2 (0.8) 51.6 50.4
Return on sales --
continuing operations
....................... 5.5% 5.4% 7.7% (0.3%) 7.4% 8.4%
Return on average
shareholders'
investment . 90.8% 45.1% 47.7% (0.7%) 26.3% 19.1%
------ ------ ------ ------- ------ ------
Balance Sheet Data
Current assets ......... $286.3 $240.5 $252.5 $ 257.5 $251.3 $402.4
Working capital (1) .... (70.8) (47.2) 6.3 11.8 8.9 206.3
Property and equipment,
net ................... 84.6 88.6 74.1 67.6 67.0 67.8
Total assets ........... 407.7 366.2 390.7 383.8 384.0 548.0
Short-term borrowings .. 117.6 93.9 50.0 90.9 27.6 --
Long-term debt,
including current
maturities 3.6 3.6 3.6 3.9 53.9 54.3
Shareholders' investment
....................... 36.5 58.6 127.1 112.6 121.8 270.6
------ ------ ------ ------- ------ ------
Common Share Data
Basic EPS -- continuing
operations ............ $ 1.27 $ 1.14 $ 1.47 $ (0.02) $ 1.29 $ 1.23
Basic EPS -- net income
(loss) ................ 1.27 1.14 1.47 (0.02) 1.29 1.11
Diluted EPS --
continuing operations
....................... 1.27 1.14 1.47 (0.02) 1.28 1.22
Diluted EPS -- net
income (loss) ......... 1.27 1.14 1.47 (0.02) 1.28 1.10
Cash dividends declared
per share ............. 0.88 0.88 0.88 0.22 0.88 0.88
Common shares
outstanding at period
end.................... 33.3 35.1 38.4 38.7 38.7 45.5
Stock price -- high .... 27 1/8 26 1/4 28 13/16 22 1/4 25 1/8 21 5/8
Stock price -- low ..... 17 9/16 19 20 17 1/4 19 1/2 15 3/4
------ ------ ------ ------- ------ ------
Other Data
Depreciation and
amortization .......... $ 25.3 $ 23.2 $ 22.1 $ 9.9 $ 16.6 $ 28.3
Capital expenditures ... 27.8 36.9 24.4 9.9 15.4 28.7
------ ------ ------ ------- ------ ------
</TABLE>
- --------
(1) Represents current assets less current liabilities.
(2) Net income in 1999 reflects a pre-tax special charge of $20.2 million
($13.3 million after tax or 39 cents per share).
(3) Net income in 1998 reflects an after tax charge of $15.7 million (43 cents
per share) for the write-off of JLC notes receivable of $12.0 million and
related net deferred tax assets of $3.7 million.
(4) Net income in 1998 and 1997 reflects pre-tax gains of $3.7 million ($2.2
million after tax or 6 cents per share) and $6.8 million ($4.0 million
after tax or 10 cents per share), respectively, resulting from a reduction
in LIFO gold inventories.
(5) In 1996, the company changed its fiscal year end from June 30 to the
Saturday closest to December 31, resulting in a six-month transition period
from July 1 to December 28, 1996.
(6) Net income reflects a loss from discontinued operations of $4.9 million (11
cents per share) for our JLC and Wicat Systems businesses. Net income also
reflects the cumulative effect of adopting SFAS 112 of $1.1 million ($0.6
million after tax, or one cent per share).

8
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

We occasionally may make statements regarding our business and markets, such
as projections of future performance, statements of our plans and objectives,
forecasts of market trends and other matters. To the extent such statements are
not historical fact, they may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements generally can be identified by the use of forward-looking
terminology such as "may," "will," "expected," "intend," "estimate,"
"anticipate," "believe," "project," or "continue," or the negative thereof or
similar words. Forward-looking statements may appear in this document or other
documents, reports, press releases and written or oral presentations made by
our officers to shareholders, analysts, news organizations or others. All
forward-looking statements speak only as of the date on which the statements
are made. Actual results could be affected by one or more factors, which could
cause the results to differ materially. Therefore, all forward-looking
statements are qualified in their entirety by such factors, including the
factors listed below. Such factors may be more fully discussed periodically in
our subsequent filings with the Securities and Exchange Commission ("SEC").

Any change in the following factors may impact the achievement of results:
the proposed merger and recapitalization; our ability to achieve the intended
benefits of our corporate restructuring; the price of gold; our dependence on a
key supplier for our synthetic and semiprecious stones; the seasonality of our
School Products business; general economic conditions, especially during peak
buying seasons for our products; competitive pricing and program changes;
manufacturing performance; our relationship with our sales forces; our ability
to respond to customer change orders and delivery schedules; fashion and
demographic trends; our ability to control costs and our ability to maintain
our customer base.

The foregoing factors are not exhaustive, and new factors may emerge or
changes to the foregoing factors may occur that would impact our business.

RESULTS OF OPERATIONS

The following table sets forth selected information from our Consolidated
Statements of Operations, expressed as a percentage of net sales.

<TABLE>
<CAPTION>
Percentage of net sales Percentage change
------------------------- -------------------------
1999 1998 1997 1999 to 1998 1998 to 1997
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................ 100.0% 100.0% 100.0% 1.5% 3.8%
Cost of products sold.... 44.7% 45.6% 47.3% (0.6%) 0.1%
------- ------- ------- ------ -----
Gross profit........... 55.3% 54.4% 52.7% 3.3% 7.1%
Selling and
administrative
expenses................ 42.3% 41.1% 39.3% 4.4% 8.7%
Special charge........... 2.6% 0.0% 0.0% -- --
------- ------- ------- ------ -----
Operating income......... 10.4% 13.3% 13.4% (20.1%) 2.5%
Net interest expense..... 0.9% 0.9% 0.8% 5.1% 6.1%
Write-off of JLC notes
receivable, net......... 0.0% 1.6% 0.0% (100.0%) --
------- ------- ------- ------ -----
Income before income
taxes................. 9.5% 10.8% 12.6% (10.6%) (10.6%)
Income taxes............. 4.0% 5.4% 4.9% (24.5%) 15.2%
------- ------- ------- ------ -----
Net income............... 5.5% 5.4% 7.7% 3.2% (26.9%)
======= ======= ======= ====== =====
</TABLE>

Net sales

Net sales in 1999, 1998 and 1997 were $782.4 million, $770.9 million and
$742.5 million, respectively. The increase from 1998 to 1999 of $11.5 million,
or 1.5 percent, was driven by price increases in our School Products segment
and volume increases in class rings and yearbook pages. These increases were
offset by overall volume decreases in our other product lines. The increase
from 1997 to 1998 of $28.4 million, or 3.8

9
<PAGE>

percent, was driven by increases in sales volume and pricing in our three
largest product lines (Printing & Publishing, Jewelry and Graduation Products).
Price increases in 1999 and 1998 varied by product and ranged from zero to four
percent. The following is an explanation of changes in net sales by business
segment.

School Products segment net sales in 1999, 1998 and 1997 were $675.5
million, $653.9 million and $624.5 million, respectively. The increase from
1998 to 1999 of $21.6 million, or 3.3 percent, was primarily driven by price
increases in all school product lines and a unit volume increase of 2.2 percent
in Jewelry, primarily due to strong sales in the high school market. In
addition, we experienced yearbook page volume increases and higher sales of
add-on features in our Printing & Publishing product line. These increases were
offset by a decline in commercial printing volume (used to fill excess
capacity), higher than expected yearbook rebates and returns due to problems
encountered with Jostens Direct Solutions ("JDS") (a direct payment program for
parents of high school students), a decrease in photography sales volume due to
closing eleven unprofitable retail sites and not renewing our relationships
with a number of independent wholesale dealers. In addition, the first half of
1998 included approximately $9.9 million in Jewelry, Graduation Products, and
Printing & Publishing sales volume from an independent sales group that left in
mid-1998.

The increase of $29.4 million, or 4.5 percent, from 1997 to 1998 was due to
increased pricing in all school product lines and new marketing programs which
resulted in higher sales of yearbooks and add-on features in our Printing &
Publishing product line. In addition, we had a 5.2 percent increase in Jewelry
units sold in 1998 primarily due to sales of specially designed rings for
students graduating in 1999, 2000 and 2001 (the "Millennium classes"). These
increases were offset by a decline in commercial printing volume as more
production capacity was used to produce higher margin yearbooks, and a decrease
in photography sales volume as we did not renew our relationships with a number
of independent wholesale dealers whose volume generated unacceptable returns.
In addition, we lost about $2.9 million in Jewelry and Graduation Products
sales volume due to an independent sales group that left in mid-1998.

Recognition segment net sales in 1999, 1998 and 1997 were $97.0 million,
$103.9 million and $103.7 million, respectively. The decrease of 6.7 percent
from 1998 to 1999 was primarily due to lower sales volume caused by issues
related to the new system implemented in the first quarter of 1999 as part of
our year 2000 compliance efforts. In 1998 Recognition sales were flat with 1997
as we realigned sales management, drove internal efficiencies and streamlined
business processes in advance of the system implementation.

The Other segment is comprised primarily of corporate expenses, the results
of the direct marketing sales channel to college alumni, international sales
and expenses and expenses associated with new product development. Net sales in
1999, 1998 and 1997 were $9.9 million, $13.1 million and $14.3 million,
respectively. The decreases of $3.2 million in 1999 compared with 1998, and
$1.2 million in 1998 compared with 1997 were primarily due to lower sales
volume resulting from a decline in response rates and fewer mailings in our
direct marketing program to college alumni. As part of the 1999 special charge,
we decided to closedown the direct marketing program to college alumni due to
1999 performance and forecasted decline in sales volume. In addition, we
experienced International sales volume decreases from 1997 to 1998 due to sales
representatives in Puerto Rico not renewing their contracts. We replaced these
sales representatives in the second-half of 1999.

Gross Margin

Gross margin in 1999 was 55.3 percent, compared with 54.4 percent in 1998
and 52.7 percent in 1997. The 2.6 percentage point increase in gross margin
from 1997 to 1999 was primarily the result of increased pricing and
manufacturing efficiencies.

Improvements in 1999 included:

. exiting the ring production facility in Nuevo Laredo, Mexico, which
experienced higher than expected costs, and moving all ring manufacturing
back to the United States; and

. closing eleven unprofitable retail photo sites.

10
<PAGE>

Improvements in 1999 were offset by:

. approximately $2.5 million of expenses incurred in 1999 to exit the Nuevo
Laredo, Mexico facility;

. higher costs in 1999 due to problems encountered with JDS; and

. higher costs in Recognition due to issues related to the new system
implemented in the first quarter of 1999 as part of our year 2000
compliance efforts.

Improvements in 1998 included:

. consolidating all photography processing into one facility;

. a one-time pre-tax benefit of $3.7 million in 1998 due to a reduction in
the remaining LIFO gold inventories resulting from our expansion of
consigned gold; and

. a decrease in raw material costs for jewelry compared with 1997.

Improvements in 1998 were offset by:

. a one-time charge of $2.5 million in 1998 to consolidate all photography
processing into one facility; and

. a one-time pre-tax benefit of $6.8 million in 1997 due to a reduction in
a portion of the LIFO gold inventories resulting from our decision to
consign gold.

Selling and Administrative Expenses

Selling and administrative expenses in 1999, 1998 and 1997 were $330.9
million, $316.9 million and $291.5 million, respectively. The 4.4 percent
increase in 1999 from 1998 and 8.0 percent increase in 1998 from 1997 were
primarily the result of investments in information systems to ensure year 2000
readiness and higher costs associated with market development activities.

Special Charge

Information relating to the special charge follows:

<TABLE>
<CAPTION>
Balance
Initial Used in end of
accrual 1999 1999
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Employment termination benefits....................... $ 4,910 $ -- $4,910
Abandonment of internal use software under
development.......................................... 6,455 6,245 210
Write-off of impaired goodwill related to retail class
ring sales channel................................... 4,560 4,560 --
Write-off of goodwill related to exiting the direct
marketing sales channel to college alumni............ 3,086 3,086 --
Other costs related to exiting the direct marketing
sales channel to college alumni...................... 1,183 270 913
------- ------- ------
$20,194 $14,161 $6,033
======= ======= ======
</TABLE>

Of the $20.2 million special charge, $4.8 million relates to the School
Products segment and $15.4 million relates to the "Other" segment.

11
<PAGE>

Included in other accrued liabilities on the consolidated balance sheets is
the unused portion of the special charge of $6.0 million, which will be used or
paid in 2000.

We estimate the pre-tax future savings of the 1999 special charge to be
approximately $8.0 million in 2000 and $10.0 million in 2001 and beyond.

Operating Income (Loss)

Excluding the special charge of $20.2 million, operating income in 1999 was
$101.9 million compared with $102.2 million in 1998 and $99.7 million in 1997.
The following is an explanation of changes in operating income by business
segment.

School Products operating income in 1999 was $146.7 million, excluding the
special charge of $4.8 million, compared with $127.0 million in 1998 and $108.8
million in 1997.

The $19.7 million, or 15.5 percent, increase in 1999 compared with 1998
primarily resulted from:

. increased sales; and

. manufacturing efficiencies due to exiting the Nuevo Laredo, Mexico
facility and moving all ring manufacturing back to the United States.

These were partially offset by:

. approximately $2.5 million of expenses incurred in 1999 to exit the
Nuevo, Laredo, Mexico facility; and

. higher costs in 1999 due to problems encountered with JDS.

The $18.2 million, or 16.7 percent, increase in 1998 compared with 1997
primarily resulted from:

. consolidating all photography processing into one facility;

. decreased cycle times and lower costs in Printing & Publishing due to
operating plants with common management teams;

. a one-time pre-tax benefit of $2.3 million in 1998 due to a reduction in
the remaining LIFO gold inventories resulting from our expansion of
consigned gold;

. a decrease in raw material costs for jewelry compared with 1997; and

. a one-time charge of $2.6 million in 1997 to close an announcement plant.

12
<PAGE>

These were partially offset by:

. a one-time charge of $2.5 million in 1998 to consolidate all photography
processing into one facility;

. higher than expected costs associated with the Nuevo Laredo, Mexico
facility; and

. a one-time pre-tax benefit of $5.4 million in 1997 due to a reduction in
a portion of the LIFO gold inventories resulting from our decision to
consign gold.

Recognition had an operating loss in 1999 of $0.4 million compared with
operating income of $10.4 million in 1998 and $8.9 million in 1997.

The $10.8 million decrease in 1999 compared with 1998 was primarily due to:

. decreased sales;

. higher costs caused by issues related to the new system implemented in
the first quarter of 1999 as part of our year 2000 compliance efforts;
and

. a one-time pre-tax benefit of $1.4 million in 1998 due to a reduction in
the remaining LIFO gold inventories resulting from our expansion of
consigned gold.

The $1.5 million increase in 1998 compared with 1998 was primarily the
result of:

. $3.3 million in material cost reductions, overhead spending reductions
and production efficiency improvements; and

. a partial offset by $1.8 million of additional investments in sales and
marketing staff to realign sales management.

Operating loss for the "Other" segment in 1999 was $44.5 million, excluding
the special charge of $15.4 million, compared with $35.3 million in 1998 and
$18.1 million in 1997.

The $9.2 million operating loss increase in 1999 compared with 1998 and
$17.2 million increase in 1998 compared with 1997 resulted primarily from:

. higher costs related to investments in information systems as part of our
year 2000 compliance efforts and

. higher costs associated with market development activities.

Net Interest Expense

Net interest expense was $7.0 million in 1999 compared with $6.7 million in
1998 and $6.3 million in 1997. The year-over-year increases reflect higher
borrowings partially offset by a decline in average interest rates. As a result
of the proposed merger and recapitalization, we will have significantly more
debt that will result in much higher future interest expense.

Write-off of JLC Notes Receivable, Net

In June 1995 we sold our Jostens Learning Corp. ("JLC") curriculum software
subsidiary to a group led by Bain Capital, Inc. As partial consideration for
the sale, we received two notes which were subsequently discounted and recorded
at their estimated fair values. In addition, a transaction gain of $13.2
million was deferred in accordance with the SEC Staff Accounting Bulletin No.
81, "Gain Recognition on the Sale of a Business or Operating Assets to a Highly
Leveraged Entity." The notes were subsequently recorded at their estimated fair
value of $12.9 million, net of deferred gain.

13
<PAGE>

of miscellaneous JLC-related assets and liabilities, plus $3.7 million of net
deferred tax assets associated with the initial sale of JLC. We did not record
a tax benefit related to the write-off for financial reporting purposes because
the tax benefit may not be realized.

Income Taxes

Our 1999 effective income tax rate was 42.2 percent compared with 49.9
percent in 1998 and 38.8 percent in 1997. The 7.7 percentage point decrease in
1999 from 1998 and the 11.1 percentage point increase in 1998 from 1997 were
primarily due to the write-off in 1998 of $3.7 million of net deferred tax
assets related to our 1995 sale of JLC, and the fact that no tax benefit was
recorded for financial reporting purposes on the JLC-notes that were written
off.

Other items that impacted our tax rates for the three years included: the
write-off of $3.1 million of nondeductible goodwill in connection with the
special charge in 1999; a benefit of $0.8 million for the reduction of a
valuation reserve in 1998 to reflect the utilization of previously reserved
foreign tax credits as a result of executed tax planning strategies; and the
recognition of $2.0 million of accumulated net operation loss carryforwards
benefits in 1997 through the reversal of a deferred tax asset valuation reserve
as a result of combining our U.S. Photography legal entity with the main U.S.
businesses.

We expect our effective tax rate in 2000 to be 40.5 percent before the
effects of the proposed merger and recapitalization.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated from operating activities and availability under short-term
borrowing agreements have been our principal sources of liquidity in 1999, 1998
and 1997. These funds covered our share repurchases, dividend payments, and
investments in property and equipment and equity investments.

Operating Activities

Operating activities generated cash of $125.2 million in 1999 compared with
$101.6 million in 1998 and $116.7 million in 1997. The $23.6 million increase
in 1999 over 1998 was primarily due to increased customer deposits, partially
offset by other working capital decreases. The $15.1 million decrease in cash
generated in 1998 compared with 1997 primarily reflected a change in the timing
of customer deposit collections resulting from a vendor change in the JDS
program.

Investing Activities

Capital expenditures in 1999, 1998 and 1997 were $27.8 million, $36.9
million and $24.4 million, respectively. The $9.1 million decrease in 1999 over
1998 and the $12.5 million increase in 1998 over 1997 was primarily due to
higher spending in 1998 to replace information systems to ensure year 2000
compliance. We anticipate capital spending in 2000 to be about $27.0 million.

In 1999 we invested $10.6 million to take minority equity positions in three
privately-held Internet-based companies which we believe will leverage our
access into, and our sales representatives' relationships with, schools. In
1997, we invested $9.5 million to purchase Gold Lance, our retail class ring
sales channel. An impairment charge of $4.6 million was recorded as part of the
1999 special charge for the write-off of goodwill associated with this sales
channel.

Financing Activities

Dividends paid in 1999 were $30.0 million compared with $32.3 million in
1998 and $34.2 million in 1997. The year-over-year decreases are the result of
common stock repurchases in each of the years. Following

14
<PAGE>

the proposed merger and recapitalization, we do not anticipate paying any
dividends to common shareholders for the foreseeable future.

The following table summarizes total amounts available under various
borrowing agreements as of the end of 1999:

<TABLE>
<CAPTION>
Amount
Expiration Total available
date of amount of at the
agreement agreement end of 1999
---------- --------- -----------
(In millions)
<S> <C> <C> <C>
Five-year bank credit
agreement.............. 12/20/2000 $180.0 $ 62.4
Unsecured demand
facilities with three
banks.................. (1) 54.5 54.5
Precious metals
consignment arrangement
(2).................... 5/31/2000 25.0 2.9
------ ------
$259.5 $119.8
====== ======
</TABLE>
- --------
(1) Facilities are subject to periodic review from time to time and at least
annually.
(2) See Note 5 of Notes to Consolidated Financial Statements.

As a result of the proposed merger and recapitalization, we will have
significantly more debt which will result in much higher interest expense and a
decline in operating cash flows which could adversely affect our future
financial health.

YEAR 2000

In 1997 we began to develop programs to address the impact of the year 2000
on our computer systems. All programs were completed before the century change
and to date we have not experienced any adverse effects resulting from the date
change. Our spending on year 2000 projects since inception was $50.2 million of
which $36.3 million was capitalized.

COMMITMENTS AND CONTINGENCIES

Environmental

As part of our environmental management program, we are involved in various
environmental remediation activities. As sites are identified and assessed in
this program, we determine potential environmental liabilities. Factors
considered in assessing liability include, but are not limited to: whether we
have been designated as a potentially responsible party, the number of other
potentially responsible parties designated at the site, the stage of the
proceedings and available environmental technology. As of the end of 1999, we
had identified three sites requiring further investigation. However, we have
not been designated as a potentially responsible party at any site.

We have assessed the likelihood that a loss has been incurred at one of
these sites as probable, and based on findings included in remediation reports
and from discussions with legal counsel, estimated the potential loss as of the
end of 1999 to range from $2.8 million to $3.8 million. As of the end of 1999,
$3.5 million was accrued and is included in "other accrued liabilities" on the
consolidated balance sheets. While we may have a right of contribution or
reimbursement under insurance policies, amounts recoverable from other entities
with respect to a particular site are not considered until recoveries are
deemed probable. No assets for potential recoveries were established as of the
end of 1999.

Litigation

15
<PAGE>

the case, has appealed the decision and is seeking to have the jury verdict
reinstated. Briefs have been filed and oral arguments were held on December 8,
1999. The date for the decision from the Fifth Circuit Court of Appeals has not
been determined. No costs were accrued related to the lawsuit because we
believe a loss is not "probable and estimable."

. allegedly structuring a "preferential deal" pursuant to which some of the
defendants would receive "change of control" payments following the
consummation of the proposed merger; and

. allegedly failing to announce any active auction, open bidding, or any
other procedures best calculated to maximize shareholder value.

The Consolidated Complaint seeks an order of the Court:

. enjoining the defendants from proceeding with the merger;

. awarding compensatory damages against the defendants;

. awarding the plaintiffs the costs and disbursements of the Consolidated
Complaint, including reasonable attorneys' and experts' fees; and

. granting such further relief as the Court may deem just and proper.

16
<PAGE>

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," as
amended, which is required to be adopted in years beginning after June 15,
2000. The effect of adopting the Statement is not currently expected to have a
material effect on our future financial position or overall trends in results
of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are subject to market risk associated with changes in commodity prices,
interest rates and foreign currency exchange rates. To reduce any one of these
risks, we may at times use financial instruments. All hedging transactions are
authorized and executed under clearly defined policies and procedures, which
prohibit the use of financial instruments for trading purposes.

Commodity Price Risk

Our results of operations could be significantly affected by changes in the
price of gold. To manage the risk associated with gold price changes, on an
annual basis we simultaneously set our pricing to customers and enter into gold
forward or option contracts based upon the estimated ounces needed to satisfy
customer requirements. We prepared a sensitivity analysis as of the end of 1999
to estimate our exposure to market risk on our open gold forward purchase
contracts. The fair market value of our gold positions was calculated by
valuing each position at quoted futures prices as of the end of 1999 and 1998,
and was $18.0 million and $17.8 million, respectively. The market risk
associated with these contracts was $1.8 million as of the end of 1999 and
1998, and is estimated as the potential loss in fair value resulting from a
hypothetical 10 percent adverse change in such prices.

Interest Rate Risk

Our earnings are affected by changes in short-term interest rates as a
result of our issuing short-term commercial paper. As of the end of 1999 and
1998, the fair market value of our outstanding commercial paper approximated
the carrying value. If market interest rates for commercial paper borrowings
averaged 10 percent more or less in 1999 and 1998, our interest expense would
have changed by approximately $0.7 million in 1999 and 1998.

Foreign Currency Risk

We may enter into foreign currency forward contracts to hedge purchases of
inventory in foreign currency. The purpose of these hedging activities is to
protect us from the risk that inventory purchases denominated in foreign
currencies will be adversely affected by changes in foreign currency rates. Our
principal currency exposures relate to the Canadian dollar and German mark. We
consider our market risk in such activities to be immaterial. Our foreign
operations are primarily in Canada, and substantially all transactions are
denominated in the local currency. Therefore, the exposure to exchange risks is
not considered to be material.

17
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

We are responsible for the integrity and objectivity of the financial
information presented in this report. The financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States and include certain amounts based on our best estimates and
judgment.

We are also responsible for establishing and maintaining our accounting
systems and related internal controls, which are designed to provide reasonable
assurance that assets are safeguarded and transactions are properly recorded.
These systems and controls are reviewed by the internal auditors. In addition,
our code of conduct states that our affairs are to be conducted under the
highest ethical standards.

The independent auditors provide an independent review of the financial
statements and the fairness of the information presented therein. The Audit
Committee of the Board of Directors, composed solely of outside directors,
meets regularly with us, our internal auditors and our independent auditors to
review audit activities, internal controls and other accounting, reporting and
financial matters. Both the independent auditors and internal auditors have
unrestricted access to the Audit Committee.

William N. Priesmeyer
Senior Vice President and Chief Financial Officer

Robert C. Buhrmaster
Chairman of the Board, President and Chief Executive Officer

Minneapolis, Minnesota
February 2, 2000

18
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of Jostens, Inc.:

We have audited the accompanying consolidated balance sheets of Jostens,
Inc. and subsidiaries as of January 1, 2000 and January 2, 1999, and the
related consolidated statements of operations, changes in shareholders'
investment and cash flows for each of the three fiscal years in the period
ended January 1, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jostens, Inc.
and subsidiaries as of January 1, 2000 and January 2, 1999, and the
consolidated results of their operations and cash flows for each of the three
fiscal years in the period ended January 1, 2000, in conformity with accounting
principles generally accepted in the United States.

Ernst & Young LLP

Minneapolis, Minnesota
February 2, 2000

19
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands, except per-
share data)
<S> <C> <C> <C>
Net sales......................................... $782,438 $770,917 $742,479
Cost of products sold............................. 349,691 351,795 351,290
-------- -------- --------
Gross profit.................................... 432,747 419,122 391,189
Selling and administrative expenses............... 330,895 316,933 291,527
Special charge.................................... 20,194 -- --
-------- -------- --------
Operating income.................................. 81,658 102,189 99,662
Interest income................................... (487) (366) (587)
Interest expense.................................. 7,486 7,026 6,866
Write-off of JLC notes receivable, net............ -- 12,009 --
-------- -------- --------
Income before income taxes...................... 74,659 83,520 93,383
Income taxes...................................... 31,480 41,700 36,200
-------- -------- --------
Net income........................................ $ 43,179 $ 41,820 $ 57,183
======== ======== ========
Earnings per common share
Basic........................................... $ 1.27 $ 1.14 $ 1.47
Diluted......................................... $ 1.27 $ 1.14 $ 1.47
-------- -------- --------
Weighted average common shares outstanding
Basic........................................... 34,004 36,527 38,773
Diluted......................................... 34,093 36,705 38,969
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

20
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

January 1, 2000 and January 2, 1999

<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands,
except per-share
ASSETS data)
<S> <C> <C>
Current assets
Cash and cash equivalents.................................. $ 38,517 $ 2,595
Accounts receivable, net of allowance of $5,775 and $7,308,
respectively.............................................. 107,638 106,347
Inventories................................................ 87,839 90,494
Deferred income taxes...................................... 17,400 14,682
Salespersons overdrafts, net of allowance of $6,332 and
$7,061, respectively...................................... 26,194 20,689
Prepaid expenses and other current assets.................. 8,721 5,737
-------- --------
Total current assets..................................... 286,309 240,544
-------- --------
Other assets
Intangibles, net........................................... 18,895 28,165
Other...................................................... 17,872 8,811
-------- --------
Total other assets....................................... 36,767 36,976
-------- --------
Property and equipment, net................................ 84,640 88,647
-------- --------
$407,716 $366,167
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities
Short-term borrowings...................................... $117,608 $ 93,922
Accounts payable........................................... 23,641 23,682
Employee compensation...................................... 29,478 27,560
Commissions payable........................................ 26,134 22,131
Customer deposits.......................................... 112,958 92,092
Income taxes............................................... 17,223 4,713
Other accrued liabilities.................................. 30,100 23,679
-------- --------
Total current liabilities................................ 357,142 287,779
Other noncurrent liabilities............................... 14,064 19,836
-------- --------
Total liabilities.......................................... 371,206 307,615
Commitments and contingencies
Shareholders' investment
Preferred shares, $1.00 par value: authorized 4,000 shares,
none issued............................................... -- --
Common shares, $.33 1/3 par value: authorized 100,000
shares, issued January 1, 2000 --33,324; January 2, 1999
-- 35,071................................................. 11,108 11,690
Retained earnings.......................................... 31,072 54,627
Accumulated other comprehensive loss....................... (5,670) (7,765)
-------- --------
Total shareholders' investment........................... 36,510 58,552
-------- --------
$407,716 $366,167
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

21
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income...................................... $ 43,179 $ 41,820 $ 57,183
Depreciation.................................... 23,329 20,587 19,845
Amortization.................................... 2,009 2,584 2,297
Deferred income taxes........................... (2,671) 15,712 (3,403)
Special charge (non-cash portion)............... 14,101 -- --
Write-off of JLC notes receivable, net.......... -- 12,009 --
Changes in assets and liabilities, net of
effects of business acquisition:
Accounts receivable........................... (1,291) 2,167 (651)
Inventories................................... 2,655 1,568 6,431
Salespersons overdrafts....................... (5,505) 4,806 (602)
Prepaid expenses and other current assets..... (2,984) (1,058) 4,554
Accounts payable.............................. 8,364 (1,171) 1,506
Employee compensation......................... 1,918 8,114 4,457
Commissions payable........................... 4,003 2,909 1,628
Customer deposits............................. 20,866 (6,567) 22,625
Income taxes.................................. 12,593 (6,044) 5,658
Other......................................... 4,653 4,179 (4,811)
-------- -------- --------
Net cash provided by operating activities... 125,219 101,615 116,717
-------- -------- --------
Investing activities
Purchases of property and equipment............. (27,830) (36,936) (24,381)
Business acquisition............................ -- -- (9,883)
Equity investments.............................. (10,611) -- --
Other........................................... 1,262 1,675 --
-------- -------- --------
Net cash used for investing activities...... (37,179) (35,261) (34,264)
-------- -------- --------
Financing activities
Net short-term borrowings (repayments).......... 15,281 38,248 (36,238)
Principal payments on long-term debt............ -- -- (281)
Dividends paid.................................. (29,998) (32,332) (34,198)
Proceeds from exercise of stock options......... 2,452 4,258 11,693
Repurchases of common stock..................... (39,853) (80,001) (20,000)
-------- -------- --------
Net cash used for financing activities...... (52,118) (69,827) (79,024)
-------- -------- --------
Change in cash and cash equivalents............. 35,922 (3,473) 3,429
Cash and cash equivalents, beginning of period.. 2,595 6,068 2,639
-------- -------- --------
Cash and cash equivalents, end of period........ $ 38,517 $ 2,595 $ 6,068
======== ======== ========
Supplemental information
Income taxes paid............................... $ 20,623 $ 32,357 $ 26,300
Interest paid................................... $ 5,702 $ 6,426 $ 5,900
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

22
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
Accumulated
Common shares other
--------------- Capital Retained comprehensive Comprehensive
Number Amount surplus earnings loss Total income
------ ------- ------- -------- ------------- -------- -------------
(In thousands, except per-share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- December 28,
1996................... 38,665 $12,888 $ 1,480 $101,687 $ (3,442) $112,613
Stock options and
restricted stock, net.. 584 241 11,452 11,693
Cash dividends declared
of $0.88 per share..... (34,198) (34,198)
Share repurchases....... (827) (276) (14,430) (5,294) (20,000)
Tax benefit of stock
options................ 1,498 1,498
Net income.............. 57,183 57,183 $57,183
Change in cumulative
translation
adjustment............. (824) (824) (824)
Adjustment in minimum
pension liability, net
of $606 tax............ (872) (872) (872)
-------
Comprehensive income.... $55,487
------ ------- ------- -------- -------- -------- =======
Balance -- January 3,
1998................... 38,422 12,853 -- 119,378 (5,138) 127,093
Stock options and
restricted stock, net.. 234 78 4,180 4,258
Cash dividends declared
of $0.88 per share..... (32,332) (32,332)
Share repurchases....... (3,585) (1,241) (4,521) (74,239) (80,001)
Tax benefit of stock
options................ 341 341
Net income.............. 41,820 41,820 $41,820
Change in cumulative
translation
adjustment............. (1,576) (1,576) (1,576)
Adjustment in minimum
pension liability, net
of $649 tax............ (1,051) (1,051) (1,051)
-------
Comprehensive income.... $39,193
------ ------- ------- -------- -------- -------- =======
Balance -- January 2,
1999................... 35,071 11,690 -- 54,627 (7,765) 58,552
Stock options and
restricted stock, net.. 129 43 2,409 2,452
Cash dividends declared
of $0.88 per share..... (29,998) (29,998)
Share repurchases....... (1,876) (625) (2,492) (36,736) (39,853)
Tax benefit of stock
options................ 83 83
Net income.............. 43,179 43,179 $43,179
Change in cumulative
translation
adjustment............. 1,078 1,078 1,078
Adjustment in minimum
pension liability, net
of $667 tax............ 1,017 1,017 1,017
-------
Comprehensive income.... $45,274
------ ------- ------- -------- -------- -------- =======
Balance -- January 1,
2000................... 33,324 $11,108 $ -- $ 31,072 $ (5,670) $ 36,510
====== ======= ======= ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

23
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Our Business

Fiscal Year

Our fiscal year ends the Saturday closest to December 31. Fiscal years 1999,
1998 and 1997 ended on January 1, 2000, January 2, 1999 and January 3, 1998,
respectively. Normally each fiscal year consists of 52 weeks, but periodically,
there will be a 53-week year, as was the case in 1997.

Principles of Consolidation

Our consolidated financial statements include the accounts of our company
and our subsidiaries. Significant intercompany accounts and transactions have
been eliminated. Certain balances have been reclassified to conform to the 1999
presentation.

Use of Estimates

The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and assumptions that affect the amounts reported in our
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, time deposits and commercial
paper. Short-term investments have an original maturity of three months or less
and are considered cash equivalents. Investments in debt securities have an
original maturity of three months or less and are held to maturity. All short-
term securities are carried at amortized cost, which approximates fair value.
Negative cash as of the end of 1998 was $8.4 million and is included in
"accounts payable" on the consolidated balance sheets. There was no negative
cash as of the end of 1999.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method for all inventories except gold and
certain other precious metals which are determined using the last-in, first-out
(LIFO) method. LIFO inventories were $0.1 million and $0.2 million as of the
end of 1999 and 1998 and approximate replacement cost.

Net income in 1998 and 1997 reflects pre-tax gains of $3.7 million ($2.2
million after tax or 6 cents per share) and $6.8 million ($3.5 million after
tax or 10 cents per share), respectively, resulting from a reduction in LIFO
gold inventories.

Intangibles

Intangibles primarily represent the excess of the purchase price over the
fair value of the net tangible assets of acquired businesses and are amortized
over various periods of up to 40 years. Accumulated amortization as of the end
of 1999 and 1998 was $14.1 million and $16.6 million, respectively.

24
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization is
computed for financial reporting purposes principally using the straight-line
method over the following estimated useful lives:

<TABLE>
<CAPTION>
Years
--------
<S> <C>
Buildings........................................................ 15 to 40
Machinery and equipment.......................................... 3 to 10
Capitalized software............................................. 2 to 5
</TABLE>

Impairment of Long-Lived Assets

We review long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If impairment indicators are present and the estimated future
undiscounted cash flows are less than the carrying value of the assets and any
related goodwill, the carrying value is reduced to the estimated fair value as
measured by the discounted cash flows.

Income Taxes

Deferred taxes are recognized for the estimated taxes ultimately payable or
recoverable based on enacted tax law. Changes in enacted tax rates are
reflected in the tax provision as they occur.

Revenue Recognition, Sales Returns and Warranty Costs

Sales are recognized when product is shipped. Provisions for sales returns
and warranty costs are recorded at the time of sale based on historical
information and current trends.

Foreign Currency Translation

Assets and liabilities denominated in foreign currency are translated at the
current exchange rate as of the balance sheet date, and income statement
amounts are translated at the average monthly exchange rate. Translation
adjustments resulting from fluctuations in exchange rates are recorded in
comprehensive income.

Financial Instruments

From time to time, we may use derivative financial instruments to manage
market risks and reduce our exposure resulting from fluctuations in foreign
currency and interest rates. Financial instruments are not used for trading
purposes.

We may enter into foreign currency forward contracts to hedge purchases of
inventory in foreign currency. The purpose of these hedging activities is to
protect us from the risk that inventory purchases denominated in foreign
currency will be adversely affected by changes in foreign currency rates. Gains
or losses on forward contracts used to purchase inventory for which we have
firm purchase commitments qualify as accounting hedges and are therefore
deferred and recognized in income when the inventory is sold. Counterparties
expose us to credit loss in the event of nonperformance as measured by the
unrealized gains on the contracts. There were no foreign currency contracts
outstanding as of the end of 1999 or 1998.

We may enter into interest rate swap agreements to limit the effect of
increases in the interest rates on any floating rate debt. The differential is
accrued as interest rates change and is recorded in interest expense. There
were no open interest rate swap agreements as of the end of 1999 or 1998.

25
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Earnings Per Common Share

Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
computed by dividing net income by the weighted average number of common shares
outstanding, including the dilutive effects of options, restricted stock and
contingently issuable shares. Unless otherwise noted, references are to diluted
earnings per share.

Basic and diluted earnings per share were calculated using the following:

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands, except
per-share data)
<S> <C> <C> <C>
Weighted average common shares outstanding --
basic............................................. 34,004 36,527 38,773
Dilutive shares.................................... 89 178 196
------- ------- -------
Weighted average common shares outstanding --
diluted........................................... 34,093 36,705 38,969
======= ======= =======
Net income for basic and diluted earnings per
share............................................. $43,179 $41,820 $57,183
Earnings per share -- basic........................ $ 1.27 $ 1.14 $ 1.47
Earnings per share -- diluted...................... $ 1.27 $ 1.14 $ 1.47
</TABLE>

Stock-Based Compensation

We use the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for employee stock options. Under the intrinsic
value method, compensation expense is recognized only to the extent the market
price of the common stock exceeds the exercise price of the stock at the date
of grant.

New Accounting Standards

2. Merger and Recapitalization

As a result of the merger:

. approximately 98 percent of Jostens' outstanding common stock will be
purchased for cash of $25.25 per share;

. we will incur a substantial amount of debt.

26
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Successful completion of the recapitalization depends principally upon
shareholder approval and satisfaction of conditions to closing in the merger
agreement with Saturn Acquisition Corporation.

It is currently anticipated that the merger and recapitalization will be
completed in the second quarter of 2000.

In connection with our execution of the merger agreement, our Board of
Directors approved the following amendments to the shareholder rights
agreement:

. neither Saturn Acquisition nor its affiliates will be deemed to be an
acquiring person;

. the execution and delivery of the merger agreement will not give rise to
a distribution date or a triggering event; and

. no holder of rights shall be entitled to exercise such rights as a result
of the execution and delivery of the merger agreement.

If the merger is not approved, the rights will expire in August 2008 unless
extended or redeemed earlier by us.

3. Special Charge

Information relating to the special charge follows:

<TABLE>
<CAPTION>
Balance
Initial Used in end of
accrual 1999 1999
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Employee termination benefits......................... $ 4,910 $ -- $4,910
Abandonment of internal use software under
development.......................................... 6,455 6,245 210
Write-off of impaired goodwill related to retail class
ring sales channel................................... 4,560 4,560 --
Write-off of goodwill related to exiting the direct
marketing sales channel to college alumni............ 3,086 3,086 --
Other costs related to exiting the direct marketing
sales channel to college alumni...................... 1,183 270 913
------- ------- ------
$20,194 $14,161 $6,033
======= ======= ======
</TABLE>

Of the $20.2 million special charge, $4.8 million relates to the School
Products segment and $15.4 million relates to the "Other" segment.

Included in other accrued liabilities on the consolidated balance sheets is
the unused portion of the special charge of $6.0 million, which will be used or
paid in 2000.

27
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

4. Comprehensive Income

The following amounts were included in accumulated other comprehensive loss
as of the end of 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
------- -------
(In thousands)
<S> <C> <C>
Minimum pension liability adjustments, net of tax...... $(1,026) $(2,043)
Foreign currency translation adjustments............... (4,644) (5,722)
------- -------
Accumulated other comprehensive loss................. $(5,670) $(7,765)
======= =======
</TABLE>

5. Inventories

As of the end of 1999 and 1998, inventories were comprised of:

<TABLE>
<CAPTION>
1999 1998
------- -------
(In thousands)
<S> <C> <C>
Raw materials and supplies............................... $17,886 $22,618
Work-in-process.......................................... 29,772 29,735
Finished goods........................................... 40,181 38,141
------- -------
Total inventories...................................... $87,839 $90,494
======= =======
</TABLE>

Precious Metals Consignment Arrangement

We have a precious metals consignment arrangement with a major financial
institution whereby we have the ability to obtain up to $25.0 million in
consigned inventory. In 1999, 1998 and 1997, we expensed consignment fees
related to this facility of approximately $0.3 million, $0.1 million and $0.1
million, respectively. Under the terms of the consignment arrangement, we do
not own the consigned inventory until it is shipped in the form of a product to
a customer. Accordingly, we do not include the value of consigned inventory or
the corresponding liability in our financial statements. The value of our
consigned inventory as of the end of 1999 and 1998 was $22.1 million and $14.4
million.

28
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

6. Property and Equipment

As of the end of 1999 and 1998, property and equipment, net consisted of:

<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Land................................................... $ 3,618 $ 4,866
Buildings.............................................. 36,420 36,210
Machinery and equipment................................ 195,673 182,698
Capitalized software................................... 36,079 32,391
-------- --------
Total property and equipment........................... 271,790 256,165
Less accumulated depreciation and amortization......... 187,150 167,518
-------- --------
Property and equipment, net............................ $ 84,640 $ 88,647
======== ========
</TABLE>

Capitalized interest was $0.4 million in 1999 and $0.7 million in 1998.

7. Borrowings

Line of Credit and Commercial Paper

We have a $180.0 million, five-year bank credit agreement that expires on
December 31, 2000. Credit available under the agreement is reduced by
commercial paper borrowings outstanding. Commercial paper outstanding is due
within 90 days and is included in short-term borrowings in the consolidated
balance sheets.

Annual fees and interest on borrowings are based on our commercial paper
rating. Annual fees range from 0.075 to 0.15 percent of the commitment. The
weighted average interest rate on commercial paper outstanding as of the end of
1999 and 1998 was 5.9 percent and 5.8 percent. Under the restrictive covenants
of the agreement, we must maintain a defined minimum interest coverage ratio
and a maximum leverage ratio. As of the end of 1999, $62.4 million was
available under the bank credit agreement.

Demand Facilities

As of the end of 1999, we had available unsecured demand facilities with
three banks totaling $54.5 million. Such credit arrangements are renegotiated
periodically based on the anticipated seasonal needs for short-term financing.

8. Income Taxes

The following summarizes the differences between income taxes computed at
the federal statutory rate and income tax expense for financial reporting
purposes:

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Federal statutory income tax rate............ 35% 35% 35%
Federal tax at statutory rate................ $26,130 $29,232 $32,684
State income taxes, net of federal tax
benefit..................................... 3,086 4,509 4,223
Write-off of JLC notes and related deferred
tax assets.................................. -- 7,245 --
Write-off of goodwill........................ 1,080 -- --
Reduction in deferred tax valuation
allowance................................... -- (750) (2,030)
Other differences, net....................... 1,184 1,464 1,323
------- ------- -------
Income tax expense........................... $31,480 $41,700 $36,200
======= ======= =======
</TABLE>

29
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The U.S. and foreign components of income before income taxes and the
provision for income taxes were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Income before income taxes
Domestic........................................ $68,044 $77,756 $88,275
Foreign......................................... 6,615 5,764 5,108
------- ------- -------
Income before income taxes...................... $74,659 $83,520 $93,383
======= ======= =======
Provision for income taxes
Federal......................................... $25,828 $18,435 $30,227
State........................................... 5,276 4,439 6,864
Foreign......................................... 3,047 3,114 2,512
------- ------- -------
Total current taxes............................. 34,151 25,988 39,603
Deferred........................................ (2,671) 15,712 (3,403)
------- ------- -------
Income tax expense.............................. $31,480 $41,700 $36,200
======= ======= =======
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the deferred income tax liabilities and assets as of the end of 1999 and
1998 consisted of:

<TABLE>
<CAPTION>
1999 1998
-------- --------
(In thousands)
<S> <C> <C>
Deferred tax liabilities
Tax over book depreciation.......................... $ (3,558) $ (4,083)
Capitalized software development costs.............. (8,712) (8,076)
Other, net.......................................... (3,616) (2,792)
-------- --------
Deferred tax liabilities............................ (15,886) (14,951)
-------- --------
Deferred tax assets
Reserves for accounts receivable and salespersons
overdrafts......................................... 6,936 7,194
Reserves for employee benefits...................... 10,669 8,698
Other reserves not recognized for tax purposes...... 4,025 4,215
Foreign tax credit carryforwards.................... 838 1,900
Other, net.......................................... 4,483 3,066
-------- --------
Deferred tax assets................................. 26,951 25,073
Valuation allowance................................. (838) (1,900)
-------- --------
Deferred tax assets................................. 26,113 23,173
-------- --------
Net deferred tax asset.............................. $ 10,227 $ 8,222
======== ========
</TABLE>

The net deferred tax asset as of the end of 1999 consisted of $17.4 million
current net deferred tax assets and $7.2 million noncurrent net deferred tax
liabilities. The net deferred tax asset as of the end of 1998 consisted of
$14.7 million current net deferred tax assets and $6.5 million noncurrent net
deferred tax assets.

We also have foreign tax credit carryforwards of $0.8 million that expire in
2000 through 2002. The foreign tax credits of $0.8 million and $1.9 million as
of the end of 1999 and 1998 were fully reserved.

30
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

9. Benefit Plans

Pension and Postretirement Benefits

We have noncontributory defined-benefit pension plans that cover nearly all
employees. The benefits provided under the plans are based on years of service
and/or compensation levels. We also provide health care insurance benefits for
nearly all retirees. Generally, the health care plans require contributions
from retirees.

The assumptions used for these plans consisted of:

<TABLE>
<CAPTION>
Pension benefits Retiree health benefits
------------------- -------------------------
1999 1998 1997 1999 1998 1997
----- ----- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Discount rate.............. 7.75% 7.00% 7.75% 7.75% 7.00% 7.75%
Expected return on plan
assets.................... 10.00% 10.00% 10.00% -- -- --
Rate of compensation
increase.................. 5.00% 5.00% 5.00% -- -- --
Initial health care cost
trend rate(1)............. -- -- -- 7.00% 8.00% 9.00%
</TABLE>
- --------
(1) Assumed to decrease to 6% in 2001.

Net periodic benefit (income) or expense for 1999, 1998 and 1997 included
the following components:

<TABLE>
<CAPTION>
Pension benefits Retiree health benefits
---------------------------- -------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 4,419 $ 4,044 $ 3,988 $ 74 $ 65 $ 61
Interest cost........... 9,462 8,838 8,346 351 372 377
Expected return on plan
assets................. (14,942) (13,447) (11,653) -- -- --
Amortization of prior
year service cost...... 1,869 1,716 1,585 (8) (7) (7)
Amortization of
transition amount...... (885) (894) (894) -- -- --
Amortization of net
actuarial gains........ (341) (929) (698) (41) (95) (109)
-------- -------- -------- ------- ------- -------
Net periodic benefit
(income) expense....... $ (418) $ (672) $ 674 $ 376 $ 335 $ 322
======== ======== ======== ======= ======= =======
</TABLE>

31
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The following tables present a reconciliation of the benefit obligation of
the plans, plan assets, and funded status of the plans.

<TABLE>
<CAPTION>
Retiree health
Pension benefits benefits
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation beginning of year.. $138,825 $117,670 $ 5,238 $ 5,047
Service cost.......................... 4,419 4,044 74 65
Interest cost......................... 9,462 8,838 351 372
Plan amendments....................... -- 1,575 -- --
Actuarial loss (gain)................. (12,284) 14,004 (894) 643
Benefits paid......................... (7,919) (7,306) (762) (889)
-------- -------- -------- --------
Benefit obligation end of year........ $132,503 $138,825 $ 4,007 $ 5,238
======== ======== ======== ========
Change in plan assets
Fair value of plan assets beginning of
year................................. $164,103 $167,246 $ -- $ --
Actual return on plan assets.......... 43,651 2,397 -- --
Company contributions................. 1,938 1,766 762 889
Benefits paid......................... (7,919) (7,306) (762) (889)
-------- -------- -------- --------
Fair value of plan assets end of
year................................. $201,773 $164,103 $ -- $ --
======== ======== ======== ========
Funded status
Funded (unfunded) status end of year.. $ 69,270 $ 25,278 $ (4,007) $ (5,238)
Unrecognized cost:
Net actuarial gains................. (64,263) (23,611) (1,947) (1,095)
Transition amount................... (3,294) (4,179) -- --
Prior service cost.................. 8,416 10,285 (50) (58)
-------- -------- -------- --------
Prepaid (accrued) benefit cost........ $ 10,129 $ 7,773 $ (6,004) $ (6,391)
======== ======== ======== ========
</TABLE>

Plan assets consist primarily of corporate equity investments as well as
corporate and U.S. government debt and real estate.

The components in the consolidated balance sheets consist of:

<TABLE>
<CAPTION>
Pension benefits Retiree health benefits
------------------ ------------------------
1999 1998 1999 1998
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Prepaid benefit cost...... $ 25,612 $ 22,918 $ -- $ --
Accrued benefit
liability................ (18,185) (19,808) (6,004) (6,391)
Intangible asset.......... 1,005 1,283 -- --
Accumulated other
comprehensive income..... 1,697 3,380 -- --
-------- -------- ----------- -----------
Net amount recognized..... $ 10,129 $ 7,773 $ (6,004) $ (6,391)
======== ======== =========== ===========
</TABLE>

Pension plans with obligations in excess of plan assets were as follows:

<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Projected benefit obligation............................. $19,159 $21,048
Accumulated benefit obligation........................... 18,185 19,808
Fair value of plan assets................................ -- --
</TABLE>

32
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

A one-percent change in the assumed health care cost trend rate would have
the following effects:

<TABLE>
<CAPTION>
1-Percent 1-Percent
Increase Decrease
--------- ---------
(In thousands)
<S> <C> <C>
Effect on total of service and interest cost
components for 1999............................... $ 19 $ 19
Effect on postretirement benefit obligation at the
end of 1999....................................... $218 $212
</TABLE>

Savings Plan

We have a retirement savings plan (401k plan), which covers nearly all
nonunion employees. We provide a matching contribution on amounts, limited to 6
percent of compensation, contributed by employees. Our contribution, in the
form of our common stock purchased in the open market, was $2.9 million, $2.6
million and $2.3 million in 1999, 1998 and 1997, respectively and this
represents 50 percent of eligible employee contributions.

10. Shareholders' Investment

Share Repurchases

In December 1998, the Board of Directors authorized the repurchase of up to
$100.0 million shares of our common stock in open market or negotiated
transactions. During 1999, we repurchased 1.9 million shares for $39.9 million.
This share repurchase program was suspended in the fourth quarter of 1999. A
similar $100.0 million repurchase program was authorized in July 1997 and
completed in the fourth quarter of 1998. Under this program we repurchased 4.4
million shares, including 3.6 million shares for $80.0 million in 1998.

Shareholder Rights Plan

In July 1998, the Board of Directors declared a distribution to shareholders
of one preferred share purchase right for each outstanding share of common
stock. The dividend was payable August 19, 1998, to shareholders of record at
the close of business on that date. Each right entitles the holder to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $90. If a person or group acquires at least 20 percent
of our common stock, each right will entitle the holder (other than the
acquiring person or group) to purchase, at the right's then-current exercise
price, a number of our common shares having a market value of twice the
exercise price. In addition, if we are acquired in a merger or other business
combination transaction after a person has acquired at least 20 percent of our
common stock, each right will entitle the holder to purchase, at the right's
then-current exercise price, a number of the acquiring company's common shares
having a market value of twice the exercise price. If a person or group
acquires at least 20 percent and less than 50 percent of our common stock, the
Board of Directors may exchange the rights (other than the rights owned by the
acquiring person or group), in whole or in part, for the number of shares of
common stock per right as could be purchased at the then-current exercise
price. Before a person or group acquires at least 20 percent of our stock, the
rights are redeemable for one-tenth of a cent per right at the option of a
committee of the board composed exclusively of our independent, non-employee
directors. The rights will expire in August 2008 unless extended or redeemed
earlier by us.

33
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

11. Stock Plans

Stock Options

We may grant stock options to any employee, including officers, under our
stock option plans. Options are granted with an exercise price equal to 100
percent of the market price on the dates the options were granted. One plan
also provides for increases in the number of shares available for future grants
equal to 1 percent of the outstanding common shares on July 1 of each year
through 2002. As of the end of 1999, there were 710,320 shares available for
future grant under stock option plans. Options are exercisable after five years
or less, subject to continuous employment and certain other conditions and
expire 10 years after the grant date. We apply Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for employee stock options and long-term
management incentive plans. Accordingly, no compensation cost has been
recognized for these plans. The following table summarizes results as if we had
recorded compensation expense for our stock option and long-term management
incentive plans under SFAS No. 123, "Accounting for Stock-Based Compensation."

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(In thousands,
except per-share data)
<S> <C> <C> <C>
Net income
As reported....................................... $43,179 $41,820 $57,183
Pro forma......................................... $42,428 $41,404 $56,800
------- ------- -------
Basic earnings per share
As reported....................................... $ 1.27 $ 1.14 $ 1.47
Pro forma......................................... $ 1.25 $ 1.13 $ 1.46
------- ------- -------
Diluted earnings per share
As reported....................................... $ 1.27 $ 1.14 $ 1.47
Pro forma......................................... $ 1.24 $ 1.13 $ 1.46
------- ------- -------
</TABLE>

These figures reflect only the impact of grants since July 1, 1995, and
reflect only part of the possible compensation expense that we would amortize
over the vesting period of the grants. In future years, therefore, the effect
on net income and earnings per share may differ from those shown above.

The weighted average fair value of options granted in 1999, 1998 and 1997
was $6.72, $4.67 and $4.44 per option, respectively. We estimated the fair
values using the Black-Scholes option-pricing model, modified for dividends and
using the following assumptions:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free rate............................................ 6.7% 4.7% 5.4%
Dividend yield............................................ 3.9% 3.8% 3.6%
Volatility factor of the expected market price of Jostens'
common stock............................................. 37% 26% 22%
Expected life of the award................................ 5.0 5.2 4.7
</TABLE>

34
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
Weighted-average
Shares exercise price
------ ----------------
(Shares in thousands)
<S> <C> <C>
Outstanding at December 28, 1996.................... 2,882 $22.38
Granted............................................. 496 24.69
Exercised........................................... (581) 25.05
Canceled............................................ (582) 25.14
----- ------
Outstanding at January 3, 1998...................... 2,215 22.31
Granted............................................. 946 23.47
Exercised........................................... (199) 19.34
Canceled............................................ (62) 24.40
----- ------
Outstanding at January 2, 1999...................... 2,900 22.69
Granted............................................. 776 22.66
Exercised........................................... (53) 18.51
Canceled............................................ (453) 24.85
----- ------
Outstanding at January 1, 2000...................... 3,170 $22.44
===== ======
</TABLE>

The following table summarizes information concerning options outstanding as
of the end of 1999:

<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------------------ -------------------------------
Number Weighted-average Number
outstanding remaining life Weighted-average exercisable Weighted-average
Range of exercise prices (in thousands) (in years) exercise price (in thousands) exercise price
- ------------------------ -------------- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$16.56-$20.00........... 831 4.9 $18.19 804 $18.19
$20.01-$25.00........... 2,161 8.0 23.43 773 23.93
$25.01-$30.00........... 76 1.5 26.42 76 26.42
$30.01-$34.19........... 102 1.6 33.22 102 33.22
----- --- ------ ----- ------
3,170 6.8 $22.44 1,755 $21.94
===== === ====== ===== ======
</TABLE>

Restricted Stock Awards

We have a stock incentive plan under which eligible employees are awarded
restricted shares of our common stock. Awards generally vest from three to five
years, subject to continuous employment and certain other conditions. The
awards are recorded at market value on the date of the grant as unearned
compensation and amortized over the vesting period.

The following table summarizes information concerning our restricted stock
awards:

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Number of restricted shares awarded during the
year.............................................. 51,442 5,350 46,050
Average market price of shares awarded during the
year.............................................. $ 23.84 $ 23.72 $ 23.51
Restricted shares outstanding at year end.......... 67,492 47,100 53,350
Annual expense, net (in thousands)................. $ 629 $ 416 $ 36
</TABLE>

Performance Shares

In 1997, a management incentive plan was approved. Under the plan, certain
members of the senior management team would receive the market value of up to
56,400 shares of our common stock upon achieving

35
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

specific financial targets in 1998. Under the plan, 50 percent of the value of
the award was paid in cash and 50 percent in unrestricted common stock. We
recorded $1.1 million as compensation expense in 1998 as a result of achieving
the financial targets contained in the plan. The plan was not renewed in 1999.

12. Business Segments

We classify our operations into the following business segments:

. OTHER, which represents the operating units which do not meet the
quantitative threshold for determining reportable segments. The "Other"
segment primarily is comprised of corporate expenses, the results of the
direct marketing sales channel to college alumni, international sales and
expenses and expenses associated with new product development.

The accounting policies of our operating segments are the same as those
described in the summary of significant accounting policies. We evaluate
performance based on the operating income of the segment. Revenues are reported
in the geographic area where the final sales to customers are made, rather than
where the transaction originates.

36
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Financial information by reportable business segment is included in the
following summary:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Net Sales From External Customers
School Products............................. $675,511 $653,865 $624,528
Recognition................................. 96,998 103,929 103,651
Other....................................... 9,929 13,123 14,300
-------- -------- --------
Consolidated................................ $782,438 $770,917 $742,479
======== ======== ========
Operating Income
School Products............................. $141,947 $127,016 $108,803
Recognition................................. (361) 10,430 8,916
Other....................................... (59,928) (35,257) (18,057)
-------- -------- --------
Consolidated................................ 81,658 102,189 99,662
Net interest expense........................ 6,999 6,660 6,279
Write-off of JLC notes receivable, net...... -- 12,009 --
-------- -------- --------
Income Before Income Taxes.................. $ 74,659 $ 83,520 $ 93,383
======== ======== ========
Identifiable Assets
School Products............................. $247,059 $251,629 $265,638
Recognition................................. 54,109 43,089 43,080
Other....................................... 106,548 71,449 82,012
-------- -------- --------
Consolidated................................ $407,716 $366,167 $390,730
======== ======== ========
Depreciation and Amortization
School Products............................. $ 15,560 $ 16,032 $ 15,244
Recognition................................. 2,649 2,749 3,002
Other....................................... 7,129 4,390 3,896
-------- -------- --------
Consolidated................................ $ 25,338 $ 23,171 $ 22,142
======== ======== ========
Capital Expenditures
School Products............................. $ 12,509 $ 12,358 $ 14,754
Recognition................................. 1,074 1,966 2,036
Other....................................... 14,247 22,612 7,591
-------- -------- --------
Consolidated................................ $ 27,830 $ 36,936 $ 24,381
======== ======== ========
</TABLE>

Operating Income

School Products operating income included:

. $4.8 million of the $20.2 million special charge in 1999;

. charges of $2.5 million in both 1999 and 1998 and $2.6 million in 1997
for plant closing costs; and

. LIFO gains from converting owned gold to consigned gold of $2.3 million
in 1998 and $5.4 million in 1997.

Recognition operating income included LIFO gains from converting owned gold
to consigned gold of $1.4 million in both 1998 and 1997.

37
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Operating loss for the Other segment in 1999 included of $15.4 million of
the $20.2 million special charge.

The following tables present net sales by product and certain geographic
information.

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Net Sales by Classes of Similar Products or
Services
Printing & publishing, primarily yearbooks......... $264,801 $258,452 $243,806
Jewelry, primarily class rings..................... 206,624 194,283 186,816
Graduation products................................ 164,713 159,473 153,066
Photography........................................ 45,971 47,297 48,245
Recognition, primarily jewelry and brand name
merchandise....................................... 96,998 103,929 103,651
Other.............................................. 3,331 7,483 6,895
-------- -------- --------
Consolidated....................................... $782,438 $770,917 $742,479
======== ======== ========
Net Sales by Geographic Area
United States...................................... $743,450 $732,433 $703,781
Other, primarily Canada............................ 38,988 38,484 38,698
-------- -------- --------
Consolidated....................................... $782,438 $770,917 $742,479
======== ======== ========
Net Property and Equipment and Intangibles by
Geographic Area
United States...................................... $ 98,858 $111,911 $100,999
Other, primarily Canada............................ 4,677 4,901 3,888
-------- -------- --------
Consolidated....................................... $103,535 $116,812 $104,887
======== ======== ========
</TABLE>

13. Commitments and Contingencies

Forward Purchase Contracts

To manage the risk associated with gold price changes, on an annual basis we
simultaneously set our pricing to customers and enter into gold forward or
option contracts based upon the estimated ounces needed to satisfy customer
requirements. We had open forward contracts of $17.9 million to purchase gold
as of the end of 1999 that mature at various times in 2000.

Environmental

38
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

respect to a particular site are not considered until recoveries are deemed
probable. No assets for potential recoveries were established as of the end of
1999.

Executive Stock Purchase Program

In 1998, our Board of Directors approved an Executive Stock Purchase Program
("the Program"). The Program offered certain executives a one-time opportunity
to purchase our stock, at current market price, through unsecured, full-
recourse loans financed by The First Chicago National Bank and guaranteed by
us. The total amounts of such loans outstanding as of the end of 1999 were $7.2
million.

Litigation

. allegedly structuring a "preferential deal" pursuant to which some of the
defendants would receive "change of control" payments following the
consummation of the proposed merger; and

. allegedly failing to announce any active auction, open bidding, or any
other procedures best calculated to maximize shareholder value.

39
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The Consolidated Complaint seeks an order of the Court:

. enjoining the defendants from proceeding with the merger;

. awarding compensatory damages against the defendants;

. awarding the plaintiffs the costs and disbursements of the Consolidated
Complaint, including reasonable attorneys' and experts' fees; and

. granting such further relief as the Court may deem just and proper.

14. Write-off of JLC Notes Receivable, Net

In January 1999, we received information indicating to us that the carrying
value of the notes was permanently impaired. As a result, we wrote-off $12.0
million in 1998 for the carrying value of the notes, net of miscellaneous JLC-
related assets and liabilities, plus $3.7 million of net deferred tax assets
associated with the initial sale of JLC. We did not record a tax benefit
related to the write-off for financial reporting purposes because the tax
benefit may not be realized.

40
<PAGE>

JOSTENS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

15. Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------- ----------------------------------------------------
First Second Third Fourth(1) Year(1) First Second Third Fourth(2) Year(2)
--------- ---------- -------- --------- -------- -------- -------- -------- --------- --------
(In thousands, except per-share and stock data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....... $ 166,358 $ 303,161 $122,643 $190,276 $782,438 $168,277 $298,879 $127,009 $176,752 $770,917
Gross margin.... 97,859 162,417 52,984 119,487 432,747 99,604 156,320 56,539 106,659 419,122
Net income
(loss)......... 8,043 39,046 (6,914) 3,004 43,179 10,496 37,632 (7,178) 870 41,820
Earnings (loss)
per share: (3)
Basic........... 0.23 1.14 (0.21) 0.09 1.27 0.28 1.02 (0.20) 0.02 1.14
Diluted......... 0.23 1.14 (0.21) 0.09 1.27 0.28 1.01 (0.20) 0.02 1.14
Stock price:
High............ 27 1/8 22 5/8 21 24 5/16 27 1/8 24 15/16 26 1/4 25 5/8 26 1/4 26 1/4
Low............. 21 1/4 20 7/16 19 1/8 17 9/16 17 9/16 22 1/16 22 7/8 19 9/16 19 19
Dividends
declared per
share (4)...... 0.22 0.22 0.22 0.22 0.88 0.22 0.22 0.22 0.22 0.88
</TABLE>
- --------
(1) Net income in 1999 reflects a pre-tax special charge of $20.2 million
($13.3 million after tax or 39 cents per share) incurred in the fourth
quarter.
(2) Net income in 1998 reflects an after tax charge of $15.7 million (43 cents
per share) in the fourth quarter for the write-off of JLC notes receivable
and related net deferred tax assets. Net income in 1998 also reflects a
pre-tax gain of $3.7 million ($2.2 million after tax or 6 cents per share)
resulting from a reduction in LIFO gold inventories in the fourth quarter.
(3) Amounts may not total to the annual earnings per share because each quarter
and the year are calculated separately based on basic and diluted weighted
average common shares outstanding during that period.
(4) We have historical declared and paid a quarterly dividend to our common
stock shareholders. We do not anticipate paying dividends to any class of
our common shareholders following the proposed merger and recapitalization.

41
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

NONE

PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

Executive officers and directors of Jostens as of March 1, 2000 are as
follows:

<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<C> <C> <S>
Robert C. Buhrmaster........ 52 Chairman of the Board, President and Chief
Executive Officer
William N. Priesmeyer....... 55 Senior Vice President and Chief Financial
Officer
Carl H. Blowers............. 60 Senior Vice President--Manufacturing
Michael L. Bailey........... 44 Senior Vice President--School Solutions
Gregory S. Lea.............. 47 Vice President--Business Ventures
William J. George........... 51 Vice President, General Counsel and
Corporate Secretary
Lee U. McGrath.............. 43 Vice President and Treasurer
Patricia R. Schiavone....... 48 Vice President and General Manager--
Recognition
Lilyan H. Affinito.......... 68 Director
Jack W. Eugster............. 54 Director
Mannie L. Jackson........... 60 Director
Brenda J. Lauderback........ 49 Director
Kendrick B. Melrose......... 59 Director
Richard A. Zona............. 55 Director
</TABLE>

Robert C. Buhrmaster joined Jostens in December 1992 as Executive Vice
President and Chief Staff Officer. He was named President and Chief Operating
Officer in June 1993; was named Chief Executive Officer in March 1994; and was
named Chairman in February 1998. Prior to joining Jostens, Mr. Buhrmaster
worked for Corning, Inc. for 18 years, most recently as Senior Vice President.
He is also a director of The Toro Company.

William N. Priesmeyer joined Jostens in August 1997 in his current position.
From April to August 1997, Mr. Priesmeyer was Senior Vice President and CFO of
MVE Holdings. From 1994 to 1997, he was Senior Vice President and CFO for
Waldorf Corp.; and from 1993 to 1994 was Vice President and CFO for DataCard
Corp.

Carl H. Blowers joined Jostens in May 1996 as an independent consultant
serving as Division Vice President--Manufacturing & Engineering and was hired
as an employee in 1997. He was appointed to his current position in February
1998. Prior to joining Jostens, Mr. Blowers worked for Corning, Inc. for 27
years, most recently as Vice President and General Manager of Corning's
Advanced Materials and Process Technologies Division.

Michael L. Bailey joined Jostens in 1978. He has held a variety of
leadership positions including director of marketing, planning manager for
manpower and sales, national product sales director, division manager for
Printing & Publishing, printing operations manager and Vice President--Jostens
School Solutions. He was appointed to his current position in February 2000.

Gregory S. Lea joined Jostens in November 1993 as Vice President--Total
Quality Management. From June 1995 to January 2000 he was Vice President and
General Manager--College and Universities. He was named to his current position
in February 2000. Prior to joining Jostens, Mr. Lea spent 19 years with
International Business Machines Corp. in various financial, operations and
quality positions.

42
<PAGE>

William J. George joined Jostens in February 1999 in his current position.
From 1995 to 1999, Mr. George was Vice President, General Counsel and Secretary
of Simplex Time Recorder Co. From 1978 to 1995, he worked for Honeywell, Inc.,
most recently as Vice President and Associate General Counsel.

Lee U. McGrath joined Jostens in May 1995 in his current position. For the
six years prior to joining Jostens, he was the assistant treasurer for H.B.
Fuller Company.

Patricia R. Schiavone joined Jostens in January 1998 as Vice President--
Sales. She was named to her current position in January 1999. Prior to joining
Jostens, Ms. Schiavone held the position of Senior Consultant for Wm. M. Mercer
Inc, of Marsh and McLennan's consulting group, where she worked from 1994 to
1998. Prior to that, Ms. Schiavone was Vice President of Marketing and Business
Development for Ogden Corp. and worked for Pan American Airways as the General
Manager of the U.S. Division.

Lilyan H. Affinito has been a director of Jostens since 1987. Until 1991 she
served as Vice Chairperson of the Board of Maxxam Group, Inc., a forest
products and real estate management and development company. She previously
served as President and Chief Operations Officer of Maxxam Group. She is also a
director of Kmart Corporation; Caterpillar, Inc.; and KeySpan Energy
Corporation.

Jack W. Eugster has been a director of Jostens since 1995. Mr. Eugster is
Chairman, President and Chief Executive Officer of Musicland Stores Corp, a
specialty retailer of home entertainment products. He has been with Musicland
Stores Corp. since June 1980. He is also a director of Donaldson Company, Inc.;
MidAmerican Energy Holdings Company; and ShopKo Stores, Inc.

Mannie L. Jackson has been a director of Jostens since 1994. Mr. Jackson is
majority owner and Chairman of Harlem Globetrotters International, Inc., a
sports and entertainment company. Until December 1994, he was Senior Vice
President--Corporate Marketing and Administration of Honeywell Inc., a
manufacturer of control systems. He was with Honeywell since 1968, serving in a
variety of executive capacities. He is also a director of Ashland Inc.; The
Stanley Works; and Reebok International Ltd.

Brenda J. Lauderback has been a director of Jostens since 1999. Ms.
Lauderback was the Group President--Wholesale and Retail of Nine West Group,
Inc., a company that designs, develops and markets quality, fashionable
footwear and accessories, from 1995 until March 1998. From 1993 through 1995,
Ms. Lauderback was President--Wholesale Division of U.S. Shoe Corporation. She
is also a director of Irwin Financial Corporation; Consolidated Stores Corp.;
and Louisiana Pacific Corporation.

Kendrick B. Melrose has been a director of Jostens since 1996. Mr. Melrose
is Chairman and Chief Executive Officer of The Toro Company, a manufacturer of
outdoor beautification equipment. He has been with The Toro Company since 1970.
He is also a director of The Valspar Corporation; Donaldson Company, Inc.; and
SurModics, Inc.

Richard A. Zona has been a director of Jostens since 1996. Mr. Zona is Vice
Chairman of U.S. Bancorp, a regional bank holding company. He has been with
U.S. Bancorp since September 1989.

ITEM 11. EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION

To Jostens Shareholders:

The Compensation Committee of our Board of Directors has the responsibility
to establish and carry out the executive compensation philosophy and programs
of Jostens and to report to you the compensation decisions and actions taken
during the past fiscal year. Our committee consists of three outside
independent board members. We have independent access to and use of outside
executive compensation consultants on matters of plan design, administration
and competitiveness. This report discusses the committee's work in establishing
executive compensation for the Chief Executive Officer and the other executive
officers of Jostens.

43
<PAGE>

Philosophy

The Board of Directors has established a compensation philosophy and
programs that support and reinforce growth in shareholder value. We recognize
and reward our employees for individual, team and overall company performance.
We provide a competitive total compensation opportunity that delivers premium
rewards for superior performance and below-competitive rewards for performance
that fails to meet our standards. Beyond structuring base salary and benefits
to be competitive to attract and retain well-qualified executives, our
philosophy is to strongly tie compensation to company performance by placing a
significant part of the executive officers' compensation at risk.

The committee believes that:

. The interests of executives and shareholders should be linked through the
risks and rewards of Jostens stock ownership;

. Executives should purchase and hold Jostens stock;

. A substantial portion of executive compensation should be at risk of not
being paid if Jostens' performance does not meet objectives;

. All executives should have a portion of compensation tied to overall
corporate performance;

. Executives responsible for specific business units also should have a
substantial portion of compensation tied to that business unit's
performance;

. In addition to rewards for annual results, a significant portion of
executive compensation should be long-term, to focus management on
achieving sustained long-term results; and

. Special benefits and perquisites for executives should be minimized.

Elements of the Executive Compensation Program

We directly link key executive officer compensation to Jostens' stock
performance and achievement of other long- and short-term performance goals and
objectives. Approximately 60 percent of an executive officer's targeted total
compensation is "at risk." If Jostens' performance targets are not achieved,
bonus and incentive awards are significantly reduced or not paid at all. If
performance targets are met or surpassed, shareholder value should increase and
executive officer performance-based compensation increases commensurate with
Jostens' performance.

The key elements of Jostens' executive compensation are: base salary, an
annual bonus and long-term incentives in the form of stock options. While we
establish the elements and targets for compensation, individual and corporate
performance drive the actual compensation paid.

In determining each component of compensation, we consider an executive's
total compensation package. We target total compensation for executive officers
at levels that reflect total compensation offered by companies of similar size
in general industry (represented by organizations with revenues of $500 million
to $1 billion in the Towers Perrin Executive Compensation Database). The
comparison companies we use to determine appropriate executive compensation
levels are not the same companies included in the Performance Graph in this
Form 10-K, because the peer group index includes companies with revenues
greater than Jostens and companies in a different grouping of industries.

We establish base salaries of executive officers that are competitive with
the market median for similar positions in other companies of similar size in
general industry. Each executive's base salary is initially determined
according to competitive pay practices, consideration of internal equity, level
of responsibility, prior experience and breadth of knowledge. Generally,
salaries are reviewed annually. Increases to executive officer base salary
depend primarily on individual performance and the executive officer's
contribution and future growth potential, as well as company performance and
competitive market rates.

44
<PAGE>

We establish annual bonus targets as a percentage of base salary. Bonus
awards are designed to reward executives and other key managers for achieving
financial performance goals of Jostens and/or operating unit as well as
completing key business initiatives. If performance goals are exceeded, award
amounts increase, but if goals are not met, awards are reduced or not paid at
all. Annual bonus awards are paid to operating officers for achieving total
corporate and individual operating unit financial performance and key business
initiatives. Annual bonus awards for staff officers are tied to achieving total
corporate financial performance and key strategic initiatives. Executive
officers (excluding the chief executive officer) also participate in a company-
wide Performance Pays bonus program that was introduced in 1997 for all of
Jostens' non-union employees and is based on achieving net income performance
goals established by this committee.

Long-term incentive compensation for executive officers consists primarily
of annual stock option grants approved by the committee. In February 1999, the
committee approved an annual grant of stock options. These options were granted
at fair market value on date of grant with vesting over three years or earlier
under certain change of control provisions. The granting of stock options was
suspended in 2000 pending the merger of Jostens by Investcorp, a global
investment group, and certain other international co-investors.

Mr. Buhrmaster's 1999 performance was reviewed by the independent directors
as provided for in the CEO Evaluation Process adopted by the Board of Directors
in 1995. Jostens' overall financial performance was slightly below plan as we
completed several infrastructure improvements and positioned ourselves to focus
on schoolhouse business going forward.

Mr. Buhrmaster's compensation reflects the board's assessment of both
Jostens' 1999 results and his overall performance. The board granted Mr.
Buhrmaster a salary increase in 1999 of 8 percent to bring him to a base salary
of $540,000. Based on Mr. Buhrmaster's partial achievement of fiscal year 1999
performance goals, the board approved a 1999 bonus for him of $273,266. This
bonus is 51 percent of Mr. Buhrmaster's 1999 base salary of $540,000. Mr.
Buhrmaster's bonus target for 1999 was 60 percent of base salary.

In February 1999, Mr. Buhrmaster received an annual grant of 100,000 stock
options. The options were granted at fair market value on the date of grant and
vest over three years or earlier under certain change of control provisions.
Additionally, Mr. Buhrmaster was awarded restricted stock under Jostens'
Executive Stock Purchase Program in the amount of 10,135 shares, which vest
five years from the date of grant.

IRS Limitations

Under Section 162(m) of the Internal Revenue Code of 1986, as amended, no
tax deduction by a publicly-held corporation is allowed for compensation to a
named executive officer that exceeds $1 million in a taxable year. Annual
compensation for purposes of this deduction limitation does not include any
compensation that is considered performance based under Section 162(m). Our
policy is to ensure that compensation earned under our executive compensation
program will either qualify for the exclusion from deduction limitation under
Section 162(m) or be deferred until they become tax deductible by Jostens.

Summary

The committee believes Jostens' executive compensation policies and programs
effectively serve the interests of the shareholders. The quality and motivation
of the Jostens' executive leadership team are two of the most crucial factors
impacting our long-term success. We believe that recognizing and rewarding
individual, team and corporate achievement related to Jostens' performance is
very important in reinforcing our beliefs and in advancing the long-term
interests of you, the shareholder. We also believe that the executive
compensation actions we have taken are consistent with our philosophy for the
executive compensation program.

Respectfully submitted,

Members of the Compensation
Committee:

Jack W. Eugster, Chair
Mannie L. Jackson
Brenda J. Lauderback

45
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth the cash and non-cash compensation for 1999,
1998 and 1997 awarded to or earned by the Chief Executive Officer, the four
other most highly compensated executive officers, and one former executive
officer of Jostens.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-
Annual compensation term compensation
-----------------------------------------
Securities
Restricted underlying
Name and principal stock options All other
position Year Salary Bonus(1) awards(2) (#) compensation(3)
------------------ ---- --------- -------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Buhrmaster.... 1999 $ 536,154 $ 273,266 $243,873 100,000 $ --
Chairman of the Board,
President 1998 500,000 324,000 -- 75,000 286,344
and Chief Executive
Officer 1997 467,307 167,227 -- 60,000 --

David J. Larkin......... 1999 $ 348,650 $ 153,516 $143,028 55,000 $684,011
Executive Vice President
and 1998 304,927 138,933 10,639 100,000 225,785
Chief Operating
Officer(4) 1997 -- -- -- -- --

Carl H. Blowers......... 1999 $ 296,471 $ 124,524 $115,909 25,000 $ --
Senior Vice President 1998 290,097 118,288 -- 70,000 100,221
Manufacturing(5) 1997 249,231 66,746 -- 21,000 --

William N. Priesmeyer... 1999 $ 262,490 $ 153,536 $120,144 50,000 $ --
Senior Vice President
and 1998 229,154 70,513 15,491 85,000 162,186
Chief Financial
Officer(6) 1997 77,692 23,663 -- 21,000 --

Thomas W. Jans.......... 1999 $ 201,891 $ 63,717 $ 60,974 20,000 $289,886
Vice President --
Consumer 1998 195,261 25,000 -- 31,500 71,586
Marketing and Channel
Development(7) 1997 197,308 -- 35,719 30,000 --

John J. Mann............ 1999 $ 139,983 $ -- $ -- 25,000 $336,846
Vice President and
General 1998 209,231 72,463 -- 41,500 71,586
Manager -- Scholastic(8) 1997 207,692 66,485 35,719 30,000 --
</TABLE>
- --------

(1) Bonuses for 1999, 1998 and 1997 were paid in February of the following
year. Amounts in 1999 include payments under the Performance Pays bonus
program as follows: Mr. Buhrmaster: not eligible; Mr. Larkin, $12,900; Mr.
Blowers, $10,969; Mr. Priesmeyer, $9,712; Mr. Jans, $7,470; and Mr. Mann,
not eligible. Amounts in 1998 include payments under the Performance Pays
bonus program as follows: Mr. Buhrmaster: not eligible; Mr. Larkin,
$11,343; Mr. Blowers, $10,792; Mr. Priesmeyer, $8,525; Mr. Jans, $2,207;
and Mr. Mann, $7,783. Amounts in 1997 include payments under the
Performance Pays bonus program as follows: Mr. Buhrmaster, $5,227; Mr.
Blowers, $2,788; Mr. Priesmeyer, $1,163; Mr. Jans $570; and Mr. Mann,
$2,323. The Performance Pays bonus program was introduced in 1997 for all
of Jostens' non-union employees and is based on Jostens' net income
performance.
(2) Amounts in 1999 include awards of restricted stock under the Executive
Stock Purchase Program. The total number and value of restricted stock
holdings as of the end of 1999 was calculated by multiplying the average of
the high and low trading prices of our common stock on the last trading day
of 1999 ($24.2188) by the number of restricted shares held for the named
officers as follows: Mr. Burhmaster, 10,135 shares valued at $245,458; Mr.
Larkin, 6,411 shares valued at $155,267; Mr. Blowers, 4,817 shares valued
at $116,662; Mr. Priesmeyer, 5,673 shares valued at $137,393; and Mr. Jans,
4,034 shares valued at $97,699. Amounts in 1998 were for restricted stock
awarded to Mr. Larkin and Mr. Priesmeyer as part of their bonus and vest
three years from the date of grant. Amounts in 1997 were for restricted
stock awarded to Mr. Jans and Mr. Mann upon their appointment as officers
in May 1997 and upon Mr. Mann's date of hire in April 1996.

46
<PAGE>

(3) The 1999 amounts for Mr. Larkin and Mr. Jans are accruals related to the
termination of their employment as part of the restructuring plan announced
in the fourth quarter of 1999. The accrual amounts were estimated based on
terms set forth in the Executive Severance Pay Plan. The actual termination
benefits Mr. Larkin and Mr. Jans will receive are still under negotiation
and actual amounts paid could differ from the amounts accrued. The 1999
amount for Mr. Mann is for salary continuation and other benefits paid or
to be paid by Jostens under his separation agreement. Amounts in 1998
include conversion of performance shares granted in 1997 for 1998 company
performance. Performance shares were earned at 110 percent of targets. One-
half of the amounts were paid in cash and the other-half was paid in our
common stock based on the average of the high and low trading prices of our
common stock on the last trading day of 1998 ($26.0313). The 1998 amounts
listed for Mr. Larkin and Mr. Priesmeyer also include the portion of their
1998 bonus they elected to have paid in our common stock, $42,525 and
$61,965, respectively.
(4) Mr. Larkin joined Jostens in February 1998. His employment with Jostens
will be terminated as part of the restructuring plan announced in the
fourth quarter of 1999.
(5) Mr. Blowers joined Jostens in May 1996 as an independent consultant and
became an employee of Jostens in 1997. He was appointed to his current
position in February 1998.
(6) Mr. Priesmeyer joined Jostens in August 1997.
(7) Mr. Jans' employment with Jostens will be terminated as part of the
restructuring plan announced in the fourth quarter of 1999.
(8) Mr. Mann resigned from Jostens in August 1999 as his position was
eliminated. Mr. Mann and Jostens reached a mutually acceptable separation
agreement in which his compensation and certain benefits will continue
through August 2000. The separation agreement is filed as an exhibit of
this Form 10-K.

Stock Options

The following table sets forth information concerning stock options granted
in 1999, including the potential realizable value of each grant assuming that
the market value of our common stock appreciates from the date of grant to the
expiration of the option at annualized rates of (a) 5% and (b) 10%, in each
case compounded annually over the term of the option. These assumed rates of
appreciation have been specified by the Securities and Exchange Commission for
illustrative purposes only and are not intended to predict future prices of our
common stock, which will depend upon various factors, including market
conditions and our future performance and prospects.

Option Grants in 1999

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Number of Potential realizable value
securities % of total at assumed annual rates
underlying options of stock price appreciation
options granted to Exercise Expiration for option term
granted employees price date(1) ---------------------------
Name (#) in 1999 ($/share) (2) 5% 10%
---- ---------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Buhrmaster.... 100,000 13.23% $22.7813 2/4/09 $ 1,432,703 $ 3,630,753
David J. Larkin......... 55,000 7.28% $22.7813 2/4/09 787,987 1,996,914
Carl H. Blowers......... 25,000 3.31% $22.7813 2/4/09 358,176 907,688
William N. Priesmeyer... 50,000 6.61% $22.7813 2/4/09 716,352 1,815,376
Thomas W. Jans.......... 20,000 2.65% $22.7813 2/4/09 286,541 726,151
John J. Mann............ 25,500 3.31% $22.7813 2/4/09 358,176 907,688
</TABLE>
- --------

(1) Options not yet exercisable generally become exercisable upon a change in
control as defined in our Executive Change in Control Severance Pay Plan.
The exercise price may be paid in cash, in shares of Jostens' common stock
subject to certain conditions or pursuant to a cash-less exercise
procedure. The

47
<PAGE>

proposed merger and recapitalization will constitute a change in control as
a result of which all outstanding options will vest and will be cancelled in
exchange for a cash payment equal to the difference between $25.25 per
underlying share, less applicable exercise price.
(2) Options become exercisable in equal installments on February 4 of 2000,
2001 and 2002 so long as employment with Jostens or any of its subsidiaries
continues.

The following table sets forth information concerning the aggregate number
of options held and the value of unexercised "in-the-money" options held as of
the end of 1999 (the difference between the aggregate exercise price of all
such options held and the market value of the shares covered by such options as
of the end of 1999). No options by the named officers were exercised in 1999.

Year End 1999 Option Values

<TABLE>
<CAPTION>
Number of unexercised Value of unexercised In-
securities underlying the-money options at year
options at year end 1999 end 1999(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert C. Buhrmaster........ 466,000 170,000 $2,291,223 $181,250
David J. Larkin............. 33,333 121,667 25,000 129,063
Carl H. Blowers............. 55,333 78,667 96,813 70,938
William N. Priesmeyer....... 42,333 113,667 21,250 114,375
Thomas W. Jans.............. 61,420 46,000 48,800 44,500
John J. Mann(2)............. 46,333 -- 33,110 --
</TABLE>
- --------
(1) Based on the average of the high and low trading prices of our common stock
on the last trading day of 1999 ($24.2188).
(2) Mr. Mann's vested options expire in August 2000 as part of his separation
agreement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Eugster, Mr. Jackson and Ms. Lauderback served as members of the
Compensation Committee during fiscal year 1999. Neither Mr. Eugster, Mr.
Jackson nor Ms. Lauderback was an officer or employee of Jostens or any of its
subsidiaries during 1999.

TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

Termination of Employment

In August of 1999, we entered into a separation agreement with Mr. Mann. The
terms of the agreement provide Mr. Mann will receive salary and perquisites
through August 2000, a management bonus of $36,846 for the first half of 1999,
and an additional performance bonus of $50,000. In addition, Mr. Mann will
receive an amount covering the difference of any COBRA premiums paid and the
premiums paid for coverage by similarly situated active employees. Under the
agreement, Mr. Mann will have a period of twelve months following his
termination date to exercise any stock options which have vested and not
expired. In addition, under the agreement, all of Mr. Mann's restricted stock
awards immediately vest as of his termination date.

Executive Change in Control Severance Pay Plan

In 1999, we implemented the Jostens' Executive Change in Control Severance
Pay Plan (the "Plan"). The primary purpose of the Plan is to provide severance
benefits for our Chief Executive Officer and other members of management or
highly compensated employees that are selected by our Chief Executive Officer,
whose employment is terminated during the 24 month period following a change in
control (as defined in the Plan).

48
<PAGE>

Plan participants are eligible to receive severance benefits if their
employment is terminated either voluntarily with "good reason" (as defined in
the Plan) or involuntarily for any reason other than death or for "cause" (as
defined in the Plan). The amount of severance benefits received by a particular
employee is based upon the employee's position in Jostens and the employee's
base salary plus the higher of the target of the current year's annual
incentive or the three year average of actual payments of annual incentives.
The range of severance benefits is from 15 months to 36 months and would be
paid in a lump sum upon termination. Plan participants are also eligible to
receive an additional cash payment from us to the extent the total payments
received from this Plan or any other benefit plan is treated as an "excess
parachute payment" within the meaning of Section 280(G) of the Internal Revenue
Code of 1986, as amended.

EXECUTIVE STOCK PURCHASE PROGRAM

In 1998, our Board of Directors approved an Executive Stock Purchase Program
("the Program") sponsored by Jostens. The Program offered certain executives a
one-time opportunity to purchase Jostens' common stock, at current market
price, through unsecured, full-recourse loans financed by The First Chicago
National Bank and guaranteed by Jostens. The dollar value of shares that
participants were authorized to purchase under the Program was one to three
times their base salary, depending upon the executive's position within
Jostens. A minimum purchase of 50 percent of the authorized value was required
in order to participate. Our Board of Directors also authorized a grant of
restricted shares of common stock equal to 15 percent of the number of shares
that each participant purchased in the Program. The restricted stock awards
under this Program vest five years from the date of grant. Dividends from the
stock purchased under this Program and the restricted stock may be applied to
the quarterly interest payments due on the loans. The remainder of the interest
will be capitalized and due at the end of the five-year loan period. Five of
the named executive officers in the Summary Compensation Table elected to
participate in this Program. Shares purchased under this Program and the
restricted stock grants are included in the Shares Held by Directors and
Officers. The principal amounts of loans to the named executive officers and
guaranteed by Jostens are: Mr. Buhrmaster: $1,620,000; Mr. Larkin: $950,000;
Mr. Blowers: $770,000; Mr. Priesmeyer: $798,000; and Mr. Jans: $405,000. The
number of shares purchased and related restricted stock granted for each of the
named executive officers are: Mr. Buhrmaster: 67,569 and 10,135; Mr. Larkin:
39,624 and 5,944; Mr. Blowers: 32,116 and 4,817; Mr. Priesmeyer: 33,284 and
4,993 and Mr. Jans: 16,892 and 2,534.

JOSTENS RETIREMENT PLANS

We maintain a non-contributory pension plan, Pension Plan D (Plan D), that
provides benefits for substantially all salaried employees. Retirement income
benefits are based upon a participant's highest average annual cash
compensation (base salary plus annual bonus, if any) during any five
consecutive calendar years, years of credited service (to a maximum of 35
years) and the Social Security-covered compensation table in effect at
termination.

We also maintain an unfunded supplemental retirement plan that gives
additional credit under Plan D for years of service as a Jostens' sales
representative to those salespersons who were hired as employees of Jostens
prior to October 1, 1991. In addition, benefits specified in Plan D may exceed
the level of benefits that may be paid from a tax-qualified plan under the
Internal Revenue Code of 1986, as amended. The benefits up to IRS limits are
paid from Plan D and benefits in excess, to the extent they could have been
earned in Plan D, are paid from the unfunded supplemental plan.

The executive officers participate in pension plans maintained by us for
certain employees. The following table shows estimated annual retirement
benefits payable for life at age 65 for various levels of compensation

49
<PAGE>

and service under these plans. The table does not take into account transition
rule provisions of the plan for employees who were participants on June 30,
1988.

<TABLE>
<CAPTION>
Years of service at retirement(1)
--------------------------------------------------------------------
Average
final
compensation 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 27,300 $ 36,400 $ 45,500 $ 54,600 $ 63,700
200,000 38,600 51,400 64,300 77,100 90,000
300,000 61,100 81,400 101,800 122,100 142,500
400,000 83,600 111,400 139,300 167,100 195,000
500,000 106,100 141,400 176,800 212,100 247,500
600,000 128,600 171,400 214,300 257,100 300,000
700,000 151,100 201,400 251,800 302,100 352,500
800,000 173,600 231,400 289,300 347,100 405,000
900,000 196,100 261,400 326,800 392,100 457,500
1,000,000 218,600 291,400 364,300 437,100 510,000
1,050,000 229,800 306,400 383,000 459,600 536,200
</TABLE>
- --------
(1) The following individuals named in the Summary Compensation Table have the
respective number of years of service under Plan D: Mr. Buhrmaster, 7.1
years; Mr. Larkin, 1.9 years; Mr. Blowers, 3.6 years; Mr. Priesmeyer, 2.3
years; Mr. Jans, 4.4 years; and Mr. Mann, 3.4 years.

We also maintain a non-contributory supplemental pension plan for corporate
vice presidents. Under the plan, vice presidents who retire after age 55 with
at least seven full calendar years of service as a corporate vice president are
eligible for a benefit equal to 1 percent of final base salary for each full
calendar year of service, up to a maximum of 30 percent. Only service after age
30 is recognized in the plan. The calculation of benefits is frozen at the
levels reached at age 60. If they continue in their current positions at their
current levels of compensation and retire at age 60, the estimated total annual
pension amounts from this plan for Messrs. Buhrmaster and Priesmeyer would be
$75,600 and $21,280, respectively. Messrs. Larkin and Blowers waived their
eligibility in this plan. Messrs. Mann and Jans were not vested in this plan at
the time of their separation from Jostens in 1999.

DIRECTORS FEES

An annual retainer of $22,000 is paid to those members of the Board of
Directors who are not present or past employees of Jostens. In addition, non-
employee directors receive $1,000 for each board or committee meeting attended
and $500 for each telephone meeting. The chair of each board committee is
entitled to an additional $2,000 per year. Pursuant to Jostens' 1992 Stock
Incentive Plan, each non-employee director automatically is granted, as of the
date of each annual meeting of shareholders, a non-qualified option to purchase
4,000 shares of Jostens' common stock at the then-current market value and
restricted stock units equal to 50 percent of the value of the then-annual base
retainer. Such share units are paid to the director in Jostens' common stock.

Under the Jostens' Deferred Compensation Plan, a non-employee director may
elect to receive his or her fees in the form of either cash or Jostens' common
stock or to defer such fees in an interest-bearing account and/or a share
equivalent account. The interest-bearing account accrues interest at a rate
equivalent to the seven-year U.S. Treasury Note rate plus one percentage point.
Deferred compensation in the share equivalent account is treated as though it
were invested in Jostens' common stock, with each account credited for dividend
equivalents and adjusted to reflect share ownership changes resulting from
events such as a stock split or recapitalization. Participants have no voting
rights with respect to the share equivalent account until shares are
distributed. Upon termination of service as a director, a participant may elect
to receive the balance in his or her account (in the form of cash or shares, as
the case may be) either in a lump sum or in installments. Upon a change in
control of Jostens, participants will receive the balance in their accounts in
a lump sum.

50
<PAGE>

PERFORMANCE GRAPH

The following graph and table compare the cumulative total shareholder
return of our common stock from December 31, 1994 through December 31, 1999
with the S&P 500 Index and a peer group index comprised of 15 companies in
three S&P consumer product indexes. The comparisons reflected in the graph and
table are not intended to forecast the future value of our common stock and may
not be indicative of future performance. The graph and table assume an
investment of $100 in our common stock and each index on December 31, 1994 and
the reinvestment of all dividends.

[GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Jostens, Inc.......................... 100.00 134.81 122.31 138.68 163.43 158.22
Peer Group(1)......................... 100.00 105.59 117.11 143.20 146.12 112.70
S&P 500............................... 100.00 137.58 169.17 225.61 290.09 351.13
</TABLE>
- --------
(1) The peer group index comprises the following 15 companies that are included
in three S&P consumer product indexes: Jostens, Inc.; American Greetings
Corporation; A.T. Cross Co.; Action Performance Company, Inc.; Blyth
Industries, Inc.; Cyrk, Inc.; Department 56, Inc.; Enesco Group, Inc.;
Fossil, Inc.; Franklin Covey Co.; Gibson Greetings, Inc.; Jan Bell
Marketing, Inc.; Lancaster Colony Corporation; Russ Berrie and Company,
Inc.; and Swiss Army Brands, Inc. Total return calculations were weighted
according to the respective company's market capitalization.

51
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

We prepare Section 16(a) forms on behalf of our officers and directors based
on the information provided by them. Based solely on review of this
information, including written representations from our officers and directors
that no other reports were required, we believe that, during 1999, all Section
16(a) filing requirements applicable to our officers and directors were
complied with except for one late Form 4 report filing. In 1999, as a result of
an administrative oversight, Isaac Yates, a section 16(a) officer of Jostens,
had one late Form 4 report filing related to a single open market sale
transaction.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock
as of March 1, 2000 by each of our directors, by each executive officer listed
in the Summary Compensation Table in ITEM 11, by all directors and executive
officers as a group and by each of our shareholders beneficially owning in
excess of five percent of our outstanding shares.

<TABLE>
<CAPTION>
Options
Restricted Deferred exercisable Common stock Percentage of
Name of beneficial Common stock compensation within 60 beneficially shares
owner stock(1) awards(2) (3) days (4) owned outstanding(5)
------------------ --------- ---------- ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Lilyan H. Affinito..... 1,800 -- 13,663 10,449 25,912
Carl H. Blowers........ 37,041 4,817 -- 86,999 128,857
Robert C. Buhrmaster... 111,798 10,135 -- 524,333 646,266 1.91%
Jack W. Eugster........ 1,000 -- 8,396 5,449 14,845
Mannie L. Jackson...... -- -- 11,311 6,449 17,760
Thomas W. Jans......... 27,022 2,534 -- 78,586 108,142
David J. Larkin........ 49,216 6,411 -- 84,999 140,626
Brenda J. Lauderback... -- -- 524 1,333 1,857
John J. Mann(6)........ 4,934 -- -- 46,333 51,267
Kendrick B. Melrose.... 2,000 -- 6,575 4,449 13,024
William N. Priesmeyer.. 41,498 5,673 -- 87,332 134,503
Richard A. Zona........ 6,683 -- 1,582 4,449 12,714

All directors and
executives officers as
a group (20 members).. 379,970 43,579 44,415 1,234,845 1,702,809 4.93%

Barclays Global
Investors, N.A.(7).... 2,036,782 2,036,782 6.10%
45 Fremont Street
San Francisco, CA
94105

Capital Group
International,
Inc.(8)............... 4,004,910 4,004,910 12.00%
11100 Santa Monica
Blvd.
Los Angeles, CA 90025

ESL Partners, L.P.(9).. 3,169,700 3,169,700 9.50%
One Lafayette Place
Greenwich, CT 06830
</TABLE>
- --------
(1) Unless otherwise noted, each person and group identified possesses sole
voting and investment power with respect to the shares shown opposite such
person's or group's name. Shares not outstanding but deemed beneficially
owned by virtue of the right of an individual to acquire them within 60
days are treated as outstanding only when determining the amount and
percent owned by such individual or group. Unless otherwise noted, each
person and group has an address of Jostens, Inc., 5501 Norman Center Drive,
Minneapolis, Minnesota 55437.
(2) Restricted shares issued pursuant to incentive plans in which the
beneficial owner has sole voting power but no investment power.
(3) Represents shares issued pursuant to our Deferred Compensation Plan.

52
<PAGE>

(4) Represents options exercisable within 60 days from March 1, 2000.
(5) Less than 1 percent unless otherwise indicated.
(6) Mr. Mann's vested options expire in August 2000 as part of his separation
agreement.
(7) According to a Schedule 13G filed with the SEC on February 14, 2000, this
entity had the sole power to dispose or to direct the disposition of
2,036,782 of the shares set forth opposite its name as of December 31,
1999. Barclays Global Investors, LTD, a bank as defined in Section 3(a)(6)
of the Exchange Act, is deemed to be the beneficial owner of the securities
reported as a result of holding trust accounts for the economic benefit of
the beneficiaries of those accounts. The securities reported include
1,963,827 shares for Barclays Global Investors, N.A., 40,655 shares for
Barclays Global Fund Advisors , 3,000 shares for Barclays Fund Limited, and
29,300 shares for Barclays Global Investors, LTD, all of which are deemed
to be beneficial owners as a result of its serving as the investment
manager of various accounts. Barclays Global Investors LTD, Barclays Global
Investors, N.A., Barclays Global Fund Advisors and Barclays Funds Limited
are affiliated entities.
(8) According to a Schedule 13G filed with the SEC on February 11, 2000, this
entity had sole dispositive power over all of the shares set forth opposite
its name as of December 31, 1999. Capital Group International, Inc. does
not have investment power or voting power over any of the securities
reported herein; however, Capital Group International, Inc. may be deemed
to "beneficially own" such securities by virtue of Rule 13d-3 under the
Act. Capital Guardian Trust Company, a bank as defined in Section 3(a)(6)
of the Exchange Act, is deemed to be the beneficial owner of 2,484,770
shares as a result of its serving as the investment manager of various
institutional accounts. Capital Group International, Inc. and Capital
Guardian Trust Company are affiliated entities.
(9) According to a Schedule 13G filed with the SEC on November 30, 1999, this
entity had sole dispositive power over 2,531,120 of the shares set forth
opposite its name as of December 1, 1999; ESL Limited had sole dispositive
power over 591,135 of such shares; and ESL Institutional Partners, L.P. had
sole dispositive power over 47,445 of such shares. These three entities may
be deemed to be the beneficial owners of all of the shares set forth above
opposite the name of ESL Partners, L.P.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NONE

53
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)List of documents filed as part of this report:

(1) Financial Statements

Consolidated Statements of Operations for 1999, 1998 and 1997

Consolidated Balance Sheets as of January 1, 2000 and January 2, 1999

Consolidated Statements of Cash Flows for 1999, 1998 and 1997

Consolidated Statements of Changes in Shareholders' Investment for
1999, 1998 and 1997

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule II--Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have
been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

(3) Exhibits

<TABLE>
<C> <S>
2 Stock Purchase Agreement by and between JLC Holdings, Inc. Software
Systems Corp. and JLC Acquisition, Inc. and Jostens, Inc.
(Incorporated by reference to Exhibit 2.1 contained in the Current
Report on Form 8-K filed on July 14, 1995).

3.1 Restated Articles of Incorporation of Jostens, Inc. (Incorporated by
reference to Exhibit 3.1 contained in Jostens' Report on Form 10-Q for
the quarterly period ended July 3, 1999).

3.2 Bylaws of Jostens, Inc. (Incorporated by reference to Exhibit 3.2
contained in Jostens' Report on Form 10-Q for the quarterly period
ended July 3, 1999).

4.1 Rights Agreement, dated July 23, 1998, between Jostens, Inc. and
Norwest Bank Minnesota, N.A. (incorporated by reference to Jostens'
Form 8-A filed on August 5, 1998).

4.2 Form of Indenture, dated August 30, 1999, between Jostens, Inc. and
Norwest Bank Minnesota, N.A., as Trustee (incorporated by reference to
Exhibit 4.1 contained in Jostens' Form 8-K filed August 30, 1999).

4.3 Officers' Certificate and Company Order, dated August 30, 1999
pursuant to sections 201, 301 and 303 of the Indenture dated August
30, 1999 (incorporated by reference to Exhibit 4.2 contained in
Jostens' Form 8-K filed August 30, 1999).

4.4 Specimens of the Global Fixed Rate Note, Global Floating Rate Note,
Global Original Issue Discount Zero Coupon Note, and Global Original
Issue Discount Fixed Rate Note (incorporated by reference to Exhibit
4.3 contained in Jostens' Form 8-K filed August 30, 1999).

4.5 Form of Indenture, dated May 1, 1991, between Jostens, Inc. and
Norwest Bank Minnesota, N.A., as Trustee (incorporated by reference to
Exhibit 4.1 contained in Jostens' Registration Statement on form S-3,
File No. 33-40233).]

10 1984 Stock Option Plan (incorporated by reference to Jostens'
Registration Statement on
Form S-8, File No. 2-95076).

10.1 1987 Stock Option Plan (incorporated by reference to Jostens'
Registration Statement on
Form S-8, File No. 33-19308).
</TABLE>

54
<PAGE>

<TABLE>
<C> <S>
10.2 1992 Stock Incentive Plan (incorporated by reference to Exhibit 10(d)
contained in the Annual Report on Form 10-K for 1992).

10.3 Form of Contract entered into with respect to Executive Supplemental
Retirement Plan (incorporated by reference to Jostens' Registration
Statement on Form 8 dated May 2, 1991).

10.4 Jostens, Inc. Executive Change in Control Severance Pay Plan First
Declaration of Amendment, effective August 1, 1999 (incorporated by
reference to Jostens' Report on Form 10-K for the quarterly period
ended October 2, 1999).

10.5 1992 Stock Incentive Plan Performance Share Agreement (incorporated
by reference to Exhibit 10(f) contained in the Annual Report on Form
10-K for 1997).

10.6 Deferred Compensation Plan (incorporated by reference to Exhibit
10(j) contained in the Annual Report on Form 10-K for 1997).

10.7 Jostens, Inc. Deferred Compensation Plan 1998 Revision and Jostens,
Inc. Deferred Commission Plan 1998 Revision (incorporated by
reference to Jostens' Registration Statement on Form S-8 filed on
June 9, 1998, File No. 333-56455).

10.8 Jostens, Inc. Executive Change in Control Severance Pay Plan
effective January 1, 1999 (incorporated by reference to Exhibit 10.8
contained in the Annual Report on Form 10-K for 1998).

10.9 Executive Stock Purchase Program dated February 15, 1999 (filed by
Jostens' on Form S-8 filed on February 12, 1999, File No. 333-72347).

10.10 Credit Agreement, dated December 20, 1995, between Jostens, Inc. and
The First National Bank of Chicago (incorporated by reference to
Exhibit 10.1 contained in Jostens' Report on Form
10-Q for the Quarterly Period Ended July 3, 1999).

10.11 Amendment to Credit Agreement, dated July 14, 1997, between Jostens,
Inc. and The First National Bank of Chicago (incorporated by
reference to Exhibit 10.2 contained in Jostens' Report on Form 10-Q
for the Quarterly Period Ended July 3, 1999).

10.12 Agreement and Plan of Merger, dated December 27, 1999, by and between
Jostens, Inc. and Saturn Acquisition Corporation.

10.13 Jostens, Inc. Executive Change in Control Severance Pay Plan First
Declaration of Amendment, effective August 1, (incorporated by
reference to Exhibit 10.10 contained in Jostens' Report on Form 10-Q
for the Quarterly Period Ended October 2, 1999).

10.14 Separation Agreement dated August 13, 1999 between Jostens, Inc. and
John Mann.

12 Computation of Ratio of Earnings to Fixed Charges

21 List of Jostens' subsidiaries.

23 Consent of Independent Auditors -- Ernst & Young LLP

27 Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K

A Form 8-K dated December 27, 1999, was filed on January 5, 2000 announcing
a definitive Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which Jostens will be merged (the "Merger") with a newly formed corporation
controlled by Investcorp S.A., a global investment group, and its co-investors.
Additionally, we announced on December 28, 1999 an internal restructuring
unrelated to the Merger.

A Form 8-K dated and filed on March 9, 2000, announcing that our Board of
Directors postponed the annual shareholders meeting previously scheduled for
April 27, 2000. The action was taken to give shareholders the opportunity to
vote on the proposed merger of Jostens into a company controlled by Investcorp.
It is anticipated that the special shareholders' meeting will be held in late
April, but no specific meeting date has been set.

55
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 10, 2000.

JOSTENS, INC.

/s/ Robert C. Buhrmaster
By __________________________________
Robert C. Buhrmaster
Chairman of the Board, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on March 10, 2000 in the
capacities indicated.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<S> <C>
/s/ Robert C. Buhrmaster Chairman of the Board,
____________________________________ President and Chief
Robert C. Buhrmaster Executive Officer

/s/ William N. Priesmeyer Senior Vice President and
____________________________________ Chief Financial Officer
William N. Priesmeyer (Chief Accounting Officer)

/s/ Lilyan H. Affinito Director
____________________________________
Lilyan H. Affinito

/s/ Jack W. Eugster Director
____________________________________
Jack W. Eugster

/s/ Mannie L. Jackson Director
____________________________________
Mannie L. Jackson

/s/ Brenda J. Lauderback Director
____________________________________
Brenda J. Lauderback

/s/ Kendrick B. Melrose Director
____________________________________
Kendrick B. Melrose

/s/ Richard A. Zona Director
____________________________________
Richard A. Zona
</TABLE>

56
<PAGE>

SHAREHOLDER INFORMATION

EXECUTIVE OFFICES
Jostens, Inc.
5501 Norman Center Drive
Minneapolis, Minnesota 55437

ANNUAL MEETING

The annual meeting of shareholders has been postponed from its regular meeting
date of April 27, 2000. The annual meeting date was postponed to give
shareholders the opportunity to vote on the proposed merger of Jostens into a
company controlled by Investcorp at a special shareholders meeting. It is
anticipated that the special shareholders' meeting will be held in late April,
but no specific meeting date has been set.

COMMON STOCK TRANSFER AGENT AND REGISTRAR

Communications concerning stockholdings, transfer requirements, address
changes, dividend checks and requests for dividend reinvestment plan brochures
should be directed to our transfer agent and registrar:

Norwest Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
(800) 468-9716

FINANCIAL INFORMATION

Jostens news and financial results are available through our web site and mail.

Web Site

For information about Jostens, including news and financial results and
product information , access our home-page on the Internet at
www.jostens.com.

Mail

At your request, we will mail to you our quarterly financial data on
Form 10-Q, and additional annual reports on Form 10-K. Please contact us at:

Investor Relations
Jostens, Inc.
5501 Norman Center Drive
Minneapolis, Minnesota 55437
(952) 830-3300

INVESTOR CONTACTS

We maintain an Investor Relations office to assist shareholders and investors.
Inquiries may be directed to:

Heide Erickson
Director, Investor Relations
(952) 830-3332
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Jostens, Inc. and subsidiaries
<TABLE>
<CAPTION>
ADDITIONS
------------------------
CHARGED TO
BALANCE CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
IN THOUSANDS OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESERVES AND ALLOWANCES DEDUCTED FROM ASSET ACCOUNTS:
ALLOWANCES FOR UNCOLLECTIBLE ACCOUNTS:
Year ended January 1, 2000 .................. $ 7,308 $ 1,882 $ -- $ 3,415/(1)/ $ 5,775
Year ended January 2, 1999 .................. $ 7,446 $ 1,858 $ -- $ 1,996/(1)/ $ 7,308
Year ended January 3, 1998 .................. $ 6,884 $ 2,245 $ -- $ 1,683/(1)/ $ 7,446

ALLOWANCES FOR SALES RETURNS:
Year ended January 1, 2000 .................. $ 5,569 $22,458 $ -- $20,897/(2)/ $ 7,130
Year ended January 2, 1999 .................. $ 5,569 $17,753 $ -- $17,822/(2)/ $ 5,500
Year ended January 3, 1998 .................. $ 4,787 $18,352 $ -- $17,570/(2)/ $ 5,569

SALES PERSON OVERDRAFT RESERVES:
Year ended January 1, 2000 .................. $ 7,061 $ 2,500 $ 3,229/(1)/ $ 6,332
Year ended January 2, 1999 .................. $ 8,322 $ 1,947 $ -- $ 3,208/(1)/ $ 7,061
Year ended January 3, 1998 .................. $ 7,344 $ 2,946 $ -- $ 1,968/(1)/ $ 8,322

RESTRUCTURING RESERVE:
Year ended January 1, 2000 .................. $ -- $20,194 $ -- $ 14,161/(3)/ $ 6,033
- --------------
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Returns processed against reserve.
(3) Goodwill and property and equipment written off against reserve.

<PAGE>

EXHIBIT 10.12

Appendix A

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of December 27, 1999 (the
"Agreement"), by and between Jostens, Inc., a Minnesota corporation (the
"Company"), and Saturn Acquisition Corporation, a Minnesota corporation
("MergerCo").

WHEREAS, the Board of Directors of the Company (the "Board") and the Board
of Directors of MergerCo have determined that the merger of MergerCo with and
into the Company (the "Merger"), in accordance with the Minnesota Business
Corporation Act (the "MBCA") and upon the terms and subject to the conditions
set forth in this Agreement, would be fair to and in the best interests of
their respective shareholders, and such Boards of Directors have approved such
Merger, pursuant to which each share of Common Stock, par value $.33 1/3 per
share of the Company (the "Common Stock") issued and outstanding immediately
prior to the Effective Time (as defined in Section 1.2) will be converted into
either (i) the right to receive cash or (ii) subject to the terms hereof and
other than as set forth herein, the right to retain at the election of the
holder thereof one share of Common Stock (which will thereafter be denominated
as a share of Class A Common Stock);

WHEREAS, (i) the Board has, in light of and subject to the terms and
conditions set forth herein, determined that the consideration to be paid for
each share of Common Stock in the Merger is fair to the shareholders of the
Company, and the Merger is otherwise in the best interest of the Company and
its shareholders, (ii) the Board and the Board of Directors of MergerCo have
approved this Agreement and the transactions contemplated hereby, (iii) the
shareholders of MergerCo have approved and adopted this Agreement and the
transactions contemplated hereby, and (iv) the Board has resolved to submit
this Agreement to a vote of the shareholders of the Company and, subject to
the terms hereof, to recommend approval and adoption of this Agreement by the
shareholders of the Company;

WHEREAS, it is intended that the Merger be recorded as a recapitalization
for financial reporting purposes; and

WHEREAS, MergerCo and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:

ARTICLE 1

THE MERGER

Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2) and in accordance
with the provisions of the MBCA, MergerCo shall be merged with and into the
Company, whereupon the separate corporate existence of MergerCo shall cease,
and the Company shall continue as the surviving corporation (the "Surviving
Corporation"). From and after the Effective Time, the Surviving Corporation
shall possess all the rights, privileges, immunities, powers and franchises,
of a public as well as a private nature, of the Company and MergerCo and be
subject to all the liabilities, obligations and duties of the Company and
MergerCo, all as more fully described in the MBCA.

Section 1.2 Closing: Effective Time. Subject to the provisions of Article
6, the closing of the Merger (the "Closing") shall take place in New York City
at the offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New
York 10166, as soon as practicable but in no event later than 10:00 a.m. New
York City time on the first business day after the date on which each of the
conditions set forth in Article 6 has been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at such other place, at
such other time

A-1

<PAGE>

or on such other date as MergerCo and the Company may mutually agree. The date
on which the Closing actually occurs is hereinafter referred to as the
"Closing Date." At the Closing, MergerCo and the Company shall cause articles
of merger for the Merger (the "Articles of Merger") to be executed and filed
with the Secretary of State of the State of Minnesota in the form required by
and executed in accordance with the applicable provisions of the MBCA. The
Merger shall become effective as of the date and time of such filings or such
other time after such filings as MergerCo and the Company shall agree to in
the Articles of Merger (the "Effective Time").

Section 1.3 Articles of Incorporation. At the Effective Time, and without
any further action on the part of the Company or MergerCo, the articles of
incorporation of the Company (as amended and restated in substantially the
form of which is set forth in Exhibit A hereto) shall be the articles of
incorporation of the Surviving Corporation and thereafter may be amended or
repealed as provided by law.

Section 1.4 Bylaws. The bylaws of MergerCo, as in effect immediately prior
to the Effective Time, shall become, from and after the Effective Time, the
bylaws of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein or in the articles of incorporation of the
Surviving Corporation and in accordance with applicable law.

Section 1.5 Directors and Officers. The directors of MergerCo and officers
of the Company, respectively, immediately prior to the Effective Time shall
become, from and after the Effective Time, the directors and officers of the
Surviving Corporation, until their respective successors are duly elected or
appointed or their earlier resignation or removal.

ARTICLE 2

CONVERSION OF SHARES; SHAREHOLDER APPROVAL

Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Common Stock or any shares of capital stock of MergerCo:

(a) Capital Stock of MergerCo. Each share of Class A Common Stock, Class
B Common Stock, Class C Common Stock, Class D Common Stock and Class E
Common Stock of MergerCo issued and outstanding immediately prior to the
Effective Time shall be converted into and become one share of Class A
Common Stock, Class B Common Stock, Class C Common Stock, Class D Common
Stock and Class E Common Stock, as the case may be, of the Surviving
Corporation.

(b) Treasury Stock and MergerCo-Owned Stock. Each share of Common Stock
that is owned by the Company or any subsidiary of the Company and each
share of Common Stock that is owned by MergerCo or any affiliate of
MergerCo shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion (Or Retention) of Common Stock. Except as otherwise
provided in Section 2.1(b) or 2.1(d) and subject to Sections 2.2 and 2.3
hereof, each issued and outstanding share of Common Stock (each, a "Share")
shall be converted into the following (the consideration set forth in
clauses (i), (ii) and (iii) below being collectively referred to as the
"Merger Consideration"):

(i) each Share with respect to which an election to retain such
Share has been effectively made pursuant to Section 2.2 and not revoked
or lost ("Electing Shares"), shall remain as one fully paid and
nonassessable Share (a "Non-Cash Election Share"), which shall be
denominated as a share of Class A Common Stock of the Surviving
Corporation at the Effective Time;

(ii) each Share listed on Exhibit B held by the persons set forth on
such Exhibit B (such persons, the "Management Continuing Shareholders,"
and such Shares, the "Management Rollover Shares"), shall remain as one
fully paid and nonassessable Share, which shall be denominated as a
share of Class A Common Stock of the Surviving Corporation at the
Effective Time; and

(iii) each other Share, other than Dissenting Shares (as defined in
Section 2.1(d)), shall be converted into the right to receive in cash,
without interest, from the Company following the Merger an amount equal
to $25.25 (the "Cash Election Price").

A-2

<PAGE>

(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, each share of Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is held by a shareholder
who has properly demanded and perfected such shareholder's rights to
dissent from the Merger and to be paid the fair value of such shares in
accordance with Sections 302A.471 and 302A.473 of the MBCA (the "Dissenting
Shares"), shall not be converted into or exchangeable for the right to
receive the Merger Consideration, but the holder thereof shall be entitled
to such rights as are granted by the MBCA and the Surviving Corporation
shall make all payments to the holders of the shares of Common Stock with
respect to such demands in accordance with the MBCA; provided, however,
that if such holder shall have failed to perfect or shall have lost the
right to dissent and payment under the MBCA, each share of Common Stock
held such holder shall thereupon be deemed to have been converted into and
to have become exchangeable for, as of the Effective Time, solely the right
to receive Merger Consideration as follows: subject to compliance with
Section 2.6, the holder of such Dissenting Shares shall be entitled to
receive the same combination of cash (without interest) and Non-Cash
Election Shares as a holder of the same number of shares who did not make a
Non-Cash Election with respect to any of such shares would be entitled to
receive in the Merger. The Company shall give reasonably prompt notice to
MergerCo of any demands received by the Company for payment under Sections
302A.471 and 302A.473 of the MBCA, and MergerCo shall have the right to
participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
MergerCo, make any payment with respect to, or settle or offer to settle,
such demands.

(e) Cancellation and Retirement of Common Stock. Each Share converted
into the right to receive the Cash Election Price pursuant to Section
2.1(c) shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall, to the extent such certificate
represents such Shares, cease to have any rights with respect thereto,
except the right to receive the cash applicable thereto, upon surrender of
such certificate in accordance with Section 2.5.

Section 2.2 Common Stock Elections. (a) Each person who, on or prior to the
Election Date referred to in clause (b) below, is a record holder of Shares
will be entitled, with respect to all or any portion of such holder's Shares
(other than Shares described in Section 2.1(b), Dissenting Shares, Management
Rollover Shares and any other Shares held by any of the Management Continuing
Shareholders), to make an unconditional election (a "Non-Cash Election") on or
prior to such Election Date to retain such Shares, on the basis set forth
below, subject to Section 2.3.

(b) MergerCo shall prepare and mail a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election"), to
be mailed by the Company with the Proxy Statement (as defined in Section 2.5)
to the record holders of Shares as of the record date for the Shareholders
Meeting (as defined in Section 2.5), which Form of Election shall be used by
each record holder of Shares who wishes to elect to retain, subject to the
provisions of Section 2.3, any or all Shares held by such holder. The Company
will use its reasonable efforts to make the Form of Election and the Proxy
Statement available to all persons who become holders of Shares during the
period between such record date and the Election Date (as defined below). Any
such holder's election to retain Shares shall have been properly made only if
the Exchange Agent (as defined in Section 2.6) shall have received at its
designated office, by 5:00 p.m., New York City time on the third trading day
preceding the date of the Shareholders Meeting (the "Election Date"), a Form
of Election properly completed and signed and accompanied by certificates for
the Shares to which such Form of Election relates, duly endorsed in blank or
otherwise in form acceptable for transfer on the books of the Company (or by
an appropriate guarantee of delivery of such certificates as set forth in such
Form of Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the
Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such guarantee of delivery).

(c) Any Form of Election may be revoked by the holder submitting it to the
Exchange Agent only by written notice received by the Exchange Agent prior to
5:00 p.m., New York City time, on the Election Date (unless

A-3

<PAGE>

MergerCo and the Company determine not less than two business days prior to
the Election Date that the Effective Time is not likely to occur within five
business days following the date of the Shareholders Meeting, in which case
the Form of Election will remain revocable until a subsequent date which shall
be a date prior to the Effective Time determined by MergerCo and the Company).
In addition, all Forms of Election shall automatically be revoked if the
Exchange Agent is notified in writing by MergerCo and the Company that this
Agreement has been terminated in accordance with its terms and the Merger has
been abandoned. If a Form of Election is revoked, the certificate or
certificates (or guarantees of delivery, as appropriate) for the Shares to
which such Form of Election relates shall be promptly returned to the
shareholder submitting the same to the Exchange Agent.

(d) The determination of the Exchange Agent shall be binding as to whether
or not elections to retain Shares have been properly made or revoked pursuant
to this Section 2.2 with respect to Shares and when elections and revocations
were received by it. If the Exchange Agent determines that any election to
retain Shares was not properly made, such Shares shall be treated by the
Exchange Agent as Shares for which no election was received and such Shares
shall be converted in accordance with Section 2.1(c)(iii). The Exchange Agent
shall also make all computations as to the allocation and the proration
contemplated by Section 2.3, and any such computation shall be conclusive and
binding on the holders of Shares. The Exchange Agent may, with the mutual
agreement of MergerCo and the Company, make such rules as are consistent with
this Section 2.2 for the implementation of the elections provided for herein
as shall be necessary or desirable fully to effect such elections.

Section 2.3 Proration. (a) Notwithstanding anything in this Agreement to
the contrary, the aggregate number of Shares (excluding for purposes of this
Section 2.3 Management Rollover Shares) to be converted into the right to
retain Shares at the Effective Time (the "Non-Cash Election Number") shall be
equal to the sum of (i) the number of shares of Class A Common Stock, Class B
Common Stock, Class C Common Stock, Class D Common Stock and Class E Common
Stock of MergerCo which are outstanding as of immediately prior to the
Effective Time and (ii) the number of Management Rollover Shares, multiplied
by 0.06383, rounded up to the nearest whole number.

(b) If the number of Electing Shares exceeds the Non-Cash Election Number,
then each Electing Share shall be converted into the right to retain Non-Cash
Election Shares or receive the Cash Election Price in the following manner:

(i) a proration factor (the "Non-Cash Proration Factor") shall be
determined by dividing the Non-Cash Election Number by the total number of
Electing Shares;

(ii) the number of Electing Shares covered by each Non-Cash Election to
be converted into the right to retain Non-Cash Election Shares shall be
determined by multiplying the Non-Cash Proration Factor by the total number
of Electing Shares covered by such Non-Cash Election rounded up to the
nearest whole number; and

(iii) all Electing Shares, other than those shares converted into the
right to retain Non-Cash Election Shares in accordance with Section
2.3(b)(ii), shall be converted into the right to receive the Cash Election
Price in accordance with Section 2.1(c)(iii) (on a consistent basis among
shareholders who made a Non-Cash Election in Section 2.1(c)(i), pro rata to
the number of Shares as to which they made such Non-Cash Election) as if
such Shares were not Electing Shares.

(i) all Electing Shares shall be converted into the right to retain
Shares in accordance with the terms of Section 2.1(c)(i);

(ii) additional Shares (other than Electing Shares, Dissenting Shares,
Management Rollover Shares and any other Shares held by any of the
Management Continuing Shareholders) shall be converted into the right to
retain Non-Cash Election Shares in accordance with the terms of Section
2.1(c) in the following manner:

(1) a proration factor (the "Cash Proration Factor") shall be
determined by dividing (x) the difference between the Non-Cash Election
Number and the number of Electing Shares, by (y) the total number of
Shares (other than Shares described in Section 2.1(b), Electing Shares,
Dissenting Shares and Management Rollover Shares); and

A-4

<PAGE>

(2) the number of Shares in addition to Electing Shares to be
converted into the right to retain Non-Cash Election Shares shall be
determined by multiplying the Cash Proration Factor by the total number
of Shares (other than Shares described in Section 2.1(b), Electing
Shares, Dissenting Shares and Management Rollover Shares); and

(iii) subject to Section 2.1(d), Shares subject to clause (ii) of this
paragraph (c) shall be converted into the right to retain Non-Cash Election
Shares in accordance with Section 2.1(c)(i) (on a consistent basis among
shareholders who held Shares as to which they did not make a Non-Cash
Election (other than shares described in Section 2.1(b), Dissenting Shares
and Management Rollover Shares), pro rata to the number of Shares as to
which they did not make a Non-Cash Election).

Section 2.4 Treatment of Options. (a) Subject to Section 2.4(b), the
Company shall take all action necessary so that each option to purchase shares
of Common Stock (each, a "Company Stock Option") (and any rights thereunder)
outstanding immediately prior to the Effective Time shall be canceled
immediately prior to the Effective Time in exchange for the right to receive
an amount in cash equal to the product of (i) the number of shares of Common
Stock subject to such Company Stock Option immediately prior to the Effective
Time and (ii) the excess, if any, of the Cash Election Price over the per
share exercise price of such Company Stock Option, to be delivered by the
Surviving Corporation immediately following the Effective Time. All applicable
withholding taxes attributable to the payments made hereunder or to
distributions contemplated hereby shall be deducted from the amounts payable
under this Section 2.4 and all such taxes attributable to the exercise of
Company Stock Options shall be withheld from the proceeds received in respect
of the shares of Common Stock issuable upon such exercise. Notwithstanding the
foregoing, any Company Stock Option with an exercise price greater than the
Cash Election Price immediately prior to the Effective Time shall be cancelled
immediately prior to the Effective Time, without any payment being made
therefor. The Company shall use its reasonable best efforts to obtain the
consent of each holder of Options to the foregoing treatment of such Options
to the extent required under the option plan of the Company pursuant to which
such Options were granted.

(b) Notwithstanding the provisions of Section 2.4(a), and subject to
agreeing with MergerCo upon a mutually satisfactory tax-free "rollover"
mechanism, each person listed on Exhibit C who, on or prior to the Election
Date, is the holder of a Company Stock Option will be entitled, with respect
to all or any portion of such holder's Company Stock Option, to make an
unconditional election to the Company in writing (a "Retention Election") on
or prior to the Election Date, to retain such portion of their Company Stock
Options as may be specified in such Retention Election in lieu of receiving a
cash payment, if any, in consideration for the cancellation of such portion of
their Company Stock Options in the manner described in Section 2.4(a). Any
portion of a Company Stock Option with respect to which a timely Retention
Election has been delivered to the Company (the "Elected Portion") shall,
whether or not then vested or exercisable, effective as of the Effective Time,
become and represent an option (a "Continuing Option") for the number of
Shares subject to the Elected Portion of such Company Stock Option immediately
prior to the Effective Time at an exercise price per share and on such terms
and conditions as may be mutually agreed upon with MergerCo. After the
Effective Time, each Continuing Option shall as of the Effective Time be
immediately fully vested and exercisable.

(c) Prior to the Effective Time, the Company shall have taken all actions
necessary or appropriate in the judgment of MergerCo to ensure that all stock
option, stock appreciation right or other equity-based plans maintained with
respect to the Shares, including the Jostens, Inc. 1992 Stock Incentive Plan,
shall terminate as of the Effective Time and the provisions in any other
compensation or benefit plan providing for the issuance, transfer or grant of
any capital stock of the Company or any interest in respect of any capital
stock of the Company shall be terminated as of the Effective Time, and the
Company shall use its reasonable best efforts to ensure that following the
Effective Time neither the Company nor any of its subsidiaries is or will be
bound by any Options (other than Continuing Options) which would entitle any
person, other than MergerCo or its affiliates, to beneficially own, or receive
any payments (other than as otherwise contemplated by Section 2.1 and this
Section 2.4) in respect of, any capital stock of the Company or the Surviving
Corporation.

A-5

<PAGE>

Section 2.5 Shareholders' Meeting; Proxy Statement. (a) Shareholders
Meeting. The Company, acting through the Board, will, as promptly as
practicable following the date of this Agreement and in consultation with
MergerCo:

(i) duly call, give notice of, convene and hold a meeting of its
shareholders for the purpose of approving and adopting this Agreement and
the transactions contemplated hereby (the "Shareholders Meeting"); and

(ii) (A) include in the Proxy Statement (as defined in Section 2.6(b))
the recommendation of the Board that the shareholders of the Company vote
in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby, as well as the written opinion of Credit
Suisse First Boston Corporation ("CSFB"), the Board's financial advisor,
that, as of the date of such opinion, the consideration to be received by
the shareholders of the Company pursuant to the Merger (other than members
of the Company's management who will retain, and other shareholders who
make a valid election to retain, an equity interest in the Company after
the Merger) is fair to such shareholders from a financial point of view and
(B) use its reasonable best efforts to obtain the necessary approval and
adoption of this Agreement and the transactions contemplated hereby by its
shareholders, provided, however, that the Board may fail to make or may
withdraw or modify such recommendation or fail to seek such approval if one
or more persons or group shall have made a Superior Proposal (as defined in
Section 7.1), and the Board has determined in good faith after consultation
with outside counsel that failure to so act would reasonably likely be
inconsistent with its fiduciary duties to the Company's shareholders.

(b) Proxy Statement. Promptly following the date of this Agreement, the
Company shall prepare a proxy statement relating to the Shareholders Meeting
(as amended or supplemented, the "Proxy Statement") and the Company shall
prepare and file with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-4 (as amended or supplemented, the "Form S-
4"), in which the Proxy Statement will be included. The Company shall use its
reasonable best efforts to have the Form S-4 declared effective under the
Securities Act of 1933, as amended (the "Securities Act"), as promptly as
practicable after such filing. The Company will use its reasonable best
efforts to cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. The Company shall also take any action
required to be taken under any applicable state securities laws in connection
with the registration and qualification of the Non-Cash Election Shares in
connection with the Merger. MergerCo and the Company will cooperate with each
other in the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, the Company will as promptly as practicable
notify MergerCo of the receipt of any comments from the SEC and any request by
the SEC for any amendment to the Proxy Statement or for additional
information. All filings with the SEC, including the Proxy Statement and any
amendment thereto, and all mailings to the Company's shareholders in
connection with the Merger, including the Proxy Statement, shall be subject to
the prior review, comment and approval of MergerCo (which approval by MergerCo
shall not be unreasonably withheld or delayed). MergerCo will furnish to the
Company the information relating to it required by the Securities Act,
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, to be set forth in the Proxy
Statement. The Company agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof filed by it and cause such Proxy Statement to be
mailed to the Company's shareholders at the earliest practicable time.

Section 2.6 Payment for Common Stock. (a) Exchange Agent. At or before the
Effective Time, MergerCo shall designate a bank or trust company reasonably
acceptable to the Company to act as Exchange Agent in connection with the
Merger (the "Exchange Agent") for the purpose of exchanging certificates
representing Shares for the Merger Consideration. On the Closing Date,
MergerCo will make available to the Exchange Agent the cash portion of the
Merger Consideration to be paid in respect of the Shares. For purposes of
determining the cash portion of the Merger Consideration to be made available,
MergerCo shall assume that no holder of Shares will exercise dissenters
rights.

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(b) Exchange. Promptly after the Effective Time, the Surviving Corporation
shall cause the Exchange Agent to mail to each record holder, except the
holders of Dissenting Shares, as of the Effective Time, of any outstanding
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock (the "Certificates"), a form
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and instructions for use
in effecting the surrender of the Certificates for payment therefor. In
effecting the payment of the Cash Election Price in respect of Shares
represented by Certificates entitled to the payment of the Cash Election Price
pursuant to Section 2.1 (the "Cashed Shares"), upon the surrender of each such
Certificate, the Exchange Agent shall pay the holder of such Certificate the
Cash Election Price multiplied by the number of Cashed Shares, in
consideration therefor. Upon such payment (and the exchange, if any, of
Certificates formerly representing Shares for certificates representing Non-
Cash Election Shares) such Certificate shall forthwith be canceled. In
effecting the exchange of Non-Cash Election Shares in respect of Shares
represented by Certificates which, at the Effective Time, shall become Non-
Cash Election Shares, upon surrender of each such Certificate, the Exchange
Agent shall deliver to the holder of such Certificate a certificate
representing that number of whole Non-Cash Election Shares which such holder
has the right to receive pursuant to the provisions of Section 2.1, and cash
in lieu of fractional Non-Cash Election Shares as determined pursuant to
Section 2.6(e). Upon such exchange (and any payment of the Cash Election Price
for Cashed Shares), such Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash payable upon the
surrender of the Certificates. If any certificate for any Non-Cash Election
Share is to be issued in a name, or if cash is to be remitted to a person,
other than that in which the Certificate for Shares surrendered for exchange
is registered, it shall be a condition of such exchange or payment (a) that
the Certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and (b) the person
requesting such exchange shall pay any transfer or other taxes required by
reason of the issuance of certificates in a name of, or payment of cash to a
person, other than that of the registered holder of the Certificate
surrendered, or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 2.6, each Certificate (other
than Certificates representing Shares owned by the Company or any subsidiary
of the Company or by MergerCo or any affiliate of MergerCo and Certificates
representing Dissenting Shares) shall represent for all purposes only the
right to receive the Merger Consideration applicable thereto, without any
interest thereon, subject to any required withholding taxes.

(c) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to unexchanged Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
for Shares with respect to the unexchanged Shares represented thereby and no
cash payment in lieu of fractional Shares shall be paid to any such holder
pursuant to Section 2.6(e) until the surrender of such Certificate in
accordance with Article 2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
Certificate representing whole shares of unexchanged Shares issued in
connection therewith, without interest, at the time of such surrender or as
promptly thereafter as practicable, the amount of any cash payable in lieu of
a fractional Share to which such holder is entitled pursuant to Section 2.6(e)
and the proportionate amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
unexchanged Shares, and at the appropriate payment date, the proportionate
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to
such surrender payable with respect to such whole unexchanged Shares.

(d) No Further Ownership Rights in Shares Exchanged for Cash. The cash paid
upon the surrender for exchange of Certificates representing Shares in
accordance with the terms of Article 2 shall be deemed to have been paid in
full satisfaction of all rights pertaining to the Shares exchanged for cash
theretofore represented by such Certificates.

(e) No Fractional Shares. No certificates or scrip representing fractional
Non-Cash Election Shares shall be issued in connection with the Merger, and
such fractional share interests will not entitle the owner thereof to vote or
to any rights of a shareholder of the Surviving Corporation after the Merger.
Notwithstanding any other

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provision of this Agreement, each record holder of Shares exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of
a Non-Cash Election Share (after taking into account all Shares delivered by
such holder) shall receive, in lieu thereof, a cash payment (without interest)
equal to such fraction multiplied by the Cash Election Price.

(f) Termination of Exchange Fund. Any portion of the Merger Consideration
deposited with the Exchange Agent pursuant to this Section 2.2 (the "Exchange
Fund") which remains undistributed to the holders of the Certificates
representing Shares for six months after the Effective Time shall be delivered
to the Surviving Corporation, upon demand, and any holders of Shares prior to
the Merger who have not theretofore complied with Articles 1 and 2 shall
thereafter look only to the Surviving Corporation and only as general
creditors thereof for payment of their claim for cash, if any, for unexchanged
Shares, if any, for any cash in lieu of fractional Non-Cash Election Shares or
for any dividends or distributions with respect to unexchanged Shares, as
applicable, to which such holders may be entitled.

(g) No Liability. None of MergerCo, the Surviving Corporation nor the
Exchange Agent shall be liable to any person in respect of any Non-Cash
Election Shares (or dividends or distributions with respect thereto) or cash
from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to MergerCo as follows:

Section 3.1 Organization. Each of the Company and each of its subsidiaries
is duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of the Company and each of its
subsidiaries is duly qualified to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where such failures to be so duly qualified and in good standing,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect (as defined in Section 8.1(b)) with
respect to the Company. The Company has previously delivered or made available
to MergerCo correct and complete copies of the articles or certificates of
incorporation and bylaws (or equivalent governing instruments), as currently
in effect, of the Company and each of its subsidiaries.

Section 3.2 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $.33 1/3 per share,
and 4,000,000 shares of Preferred Stock, par value $1.00 per share. As of
December 15, 1999, there were (i) no shares of Preferred Stock issued and
outstanding, (ii) 33,324,721 shares of Common Stock issued and outstanding and
(iii) no shares of Common Stock of the Company held in the treasury of the
Company. Section 3.2 of the letter delivered to MergerCo concurrently herewith
(the "Disclosure Letter") sets forth a complete and accurate schedule as of
the date hereof of all outstanding options to purchase Common Stock,
identifying the holder of each such option and the applicable exercise price.
Since December 15, 1999, no additional shares of capital stock have been
issued by the Company (except such shares of Common Stock, if any, that have
been issued pursuant to the exercise of stock options so identified in Section
3.2 of the Disclosure Letter) and, no additional stock options or other stock
rights have been granted. No stock appreciation rights have been granted or
are outstanding. All of the issued and outstanding shares of Common Stock have
been duly authorized and are validly issued, fully paid, nonassessable and
were not issued in violation of any preemptive rights or rights of any person
to acquire such shares. Except as disclosed in this Section 3.2 or in Section
3.2 of the Disclosure Letter, as of the date hereof, (A) there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or
any of its subsidiaries is a party or by which any of them is bound

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obligating the Company or any of its subsidiaries to issue, sell, redeem or
otherwise acquire or vote any shares of capital stock or other equity
securities of the Company or of any of its subsidiaries and (B) the Company is
not a party to or bound by (x) any agreement or commitment pursuant to which
the Company is or could be required to register any securities under the
Securities Act or (y) any debt agreements or instruments which grant any
rights to vote (contingent or otherwise) on matters on which shareholders of
the Company may vote.

Section 3.3 Subsidiaries. Except as disclosed in the SEC Filings (as
defined in Section 8.1(d)) or in Section 3.3 of the Disclosure Letter, the
Company does not own, directly or indirectly, (a) any shares of capital stock
of any corporation or (b) any other equity interest in any person, domestic or
foreign. All of the outstanding shares of capital stock and all equity
interests of each of the Company's subsidiaries that are owned by the Company
or any other subsidiary of the Company (collectively, the "Subsidiary Shares")
have been duly authorized and are validly issued, fully paid and nonassessable
and were not issued in violation of any preemptive rights or rights of any
person to acquire such shares. There are no irrevocable proxies or similar
obligations with respect to any of the Subsidiary Shares and, except as set
forth in the SEC Filings or in Section 3.3 of the Disclosure Letter, all of
the Subsidiary Shares are owned by the Company free and clear of all liens,
claims, pledges, charges, options, security interests, encumbrances or
restrictions of any kind whatsoever (collectively, "Liens") with respect
thereto. Except as disclosed in Section 3.3 of the Disclosure Letter, the
Company owns and has full voting and disposition power over all of the equity
interests of each of its subsidiaries.

Section 3.4 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to obtaining the necessary approval of its shareholders in
accordance with MBCA, to consummate the transactions contemplated hereby. The
Board at a meeting duly called and held, has unanimously (i) determined that
this Agreement and the transactions contemplated hereby, including the Merger,
are fair to and in the best interests of the shareholders of the Company, (ii)
approved this Agreement and the transactions contemplated hereby, including
the Merger, and (iii) resolved to recommend that the holders of the Shares
approve and adopt this Agreement and the transactions contemplated hereby,
including the Merger. No other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement by a majority of the outstanding
Shares in accordance with the MBCA). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by MergerCo, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).

Section 3.5 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(a) conflict with or result in any violation of any provision of the articles
of incorporation or bylaws (or equivalent governing instruments) of the
Company or any of its subsidiaries, (b) except as set forth in Section 3.5 of
the Disclosure Letter, require any consent, approval or notice under, or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
agreement or other instrument or obligation (collectively, "Contracts and
Other Agreements") to which the Company or any of its subsidiaries is a party
or by which any of them or any portion of their properties or assets may be
bound or (c) subject to the approvals, filings and consents referred to in
Section 3.6, violate any order, judgment, writ, injunction, determination,
aware, decree, law, statute, rule or regulation (collectively, "Legal
Requirements") applicable to the Company or any of its subsidiaries or any
portion of their properties or assets, except in the case of clauses (b) and
(c), with respect to matters that are not, individually or in the aggregate,
reasonably likely to (x) result in a Material Adverse Effect with respect to
the Company, (y) impair the ability of the Company to perform its obligations
under this Agreement in any material respect or (z) delay in any material
respect or prevent the consummation of any of the transactions contemplated by
this Agreement.

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Section 3.6 Governmental Approvals. Except as set forth in Section 3.6 of
the Disclosure Letter, no consent, approval or authorization of, or
declaration or filing with, any foreign, federal or state, governmental
department, commission, board, bureau, agency or instrumentality (each, a
"Governmental Entity") on the part of the Company or any of its subsidiaries
that has not been obtained or made is required in connection with the
execution or delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby, other than (i) the filing
and recordation of the appropriate merger documents as required by the MBCA
and compliance with Sections 302A.471 and 302A.473 of the MBCA regarding
dissenters rights, (ii) the filing with the SEC of the Proxy Statement and the
Form S-4 and compliance with provisions of the Securities Act or Exchange Act
applicable to the transactions contemplated by this Agreement, (iii) such
filings as may be required by any applicable state securities or "blue sky"
laws or state takeover laws, and (iv) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, are not, individually
or in the aggregate, reasonably likely to (x) result in a Material Adverse
Effect with respect to the Company, (y) impair the ability of the Company to
perform its obligations under this Agreement in any material respect or (z)
delay in any material respect or prevent the consummation of any of the
transactions contemplated hereby.

Section 3.7 SEC Filings; Financial Statements. The Company has made all
required SEC Filings. As of their respective dates, the SEC Filings complied
as to form in all material respects with the requirements of the Exchange Act,
and the rules and regulations of the SEC promulgated thereunder applicable to
such SEC Filings, and the SEC Filings did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements set forth
in the SEC Filings comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
promulgated under the Exchange Act and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes to such
financial statements) and fairly present in all material respects the
consolidated financial position of the Company and its subsidiaries at the
respective dates thereof and the consolidated results of operations and cash
flows for the respective periods then ended (subject, in the case of unaudited
interim financial statements, to exceptions permitted by Form 10-Q under the
Exchange Act).

Section 3.8 Information Supplied. Neither the Form S-4 nor the Proxy
Statement will, either at the date the Proxy Statement is first mailed to the
Company's shareholders or at the time of the Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by the Company
with respect to statements made based on information supplied by MergerCo or
any of its affiliates in writing specifically for inclusion therein. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder
except that no representation or warranty is made by the Company with respect
to statements made therein based on information supplied by MergerCo or any of
its affiliates in writing specifically for inclusion therein.

Section 3.9 Absence of Certain Changes. Except as set forth in the SEC
Filings or set forth in Section 3.9 of the Disclosure Letter, since September
30, 1999, except in connection with this transaction, the Company and its
subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been (i) any change, condition, event or
occurrence which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect with respect to the
Company, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, (iii) any split, combination or reclassification
of any of its capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (iv) (x) any granting by the Company or any
of its subsidiaries to any executive officer or other key employee of the
Company or any of its subsidiaries of any increase in compensation, except for
normal increases in the ordinary course of business consistent with past
practice or as required under employment agreements in effect as of September
30, 1999, (y) any granting by the Company or

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any of its subsidiaries to any such executive officer of any increase in
severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of September 30, 1999 or (z)
any entry by the Company or any of its subsidiaries into any employment,
severance or termination agreement with any such executive officer except in
the ordinary course of business consistent with past practice, (v) any damage,
destruction or loss to property, whether or not covered by insurance, that has
had or would reasonably be expected to have a Material Adverse Effect with
respect to the Company or (vi) except insofar as may have been disclosed in
the SEC Filings or required by a change in generally accepted accounting
principles ("GAAP"), any change in accounting methods, principles or
practices.

Section 3.10 Finders and Investment Bankers. Neither the Company nor any of
its officers or directors has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for CSFB and Devon Value
Advisers, or obligated the Company or any of its subsidiaries to pay any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby, except for fees payable to CSFB and Devon Value Advisers. The amount
of such fees payable to CSFB and Devon Value Advisers and the terms related
thereto have been previously and accurately disclosed in writing to MergerCo.

Section 3.11 Voting Requirement. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock in favor of approval and
adoption of this Agreement and the Merger is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby under any applicable law,
rule or regulation or pursuant to the requirements of the Company's articles
of incorporation or bylaws.

Section 3.12 Litigation. Except as disclosed in the SEC Filings or in
Section 3.12 of the Disclosure Letter, there is no action, suit,
investigation, arbitration, claim, or proceeding pending or, to the knowledge
of the Company, threatened, involving the Company or any of its subsidiaries
before any court, arbitral authority or Governmental Entity which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect or have a Material Adverse Effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
court, Governmental Entity or arbitrator outstanding against the Company or
any of its subsidiaries having any such effect.

Section 3.13 Taxes. Each of the Company and any consolidated, combined,
unitary or aggregate group for tax purposes of which the Company is or has
been a member has timely filed all Tax Returns (defined below) required to be
filed by it and has paid, or has set up an adequate reserve in accordance with
GAAP for the payment of, all Taxes (defined below) required to be paid for the
taxable periods covered by such returns, other than Taxes that it is
contesting in good faith in appropriate proceedings and except such an amount
of Taxes the nonpayment of which has not had or would not reasonably be
expected to have a Material Adverse Effect with respect to the Company, and
the most recent financial statements contained in the SEC Filings reflect an
adequate reserve in accordance with GAAP for all material Taxes payable by the
Company and each of its subsidiaries accrued through the date of such
financial statements whether or not shown as being due on any returns. All
material Taxes that the Company and its subsidiaries are required by law to
withhold or to collect for payment have been duly withheld and collected, and
have been paid or accrued. The unpaid Taxes, including any contingent tax
liabilities and net deferred tax liabilities, of the Company and each of its
subsidiaries which have accrued as of the date of the most recent financial
statements contained in the SEC Filings do not materially exceed the reserve
for accrued tax liability set forth or included in such financial statements.
Except as set forth in the SEC Filings or in Section 3.13 of the Disclosure
Letter, neither the Company nor any of its subsidiaries has been notified in
writing that any Tax Return of the Company or any of its subsidiaries is
currently under audit by the Internal Revenue Service (the "IRS") or any state
or local tax agency and no action, suit, investigation, claim or assessment is
pending or, to the knowledge of the Company, proposed with respect to any
material amount of Taxes of the Company or any of its subsidiaries; no
agreements have been made by the Company or any of its subsidiaries for the
extension of time or the waiver of the statute of limitations for the
assessment or payment of any federal, state or local Taxes; neither the
Company nor any of its subsidiaries has

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been notified in writing of that any material claim for unpaid Taxes has
become a lien or encumbrance of any kind against the property of the Company
or any of its subsidiaries or is being asserted against the Company or any of
its subsidiaries; neither the Company nor any subsidiary has made, is
obligated to make, or is party to any agreement that could obligate it to
make, any payment that will not be deductible by the Company either by reason
of Section 280G or Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"); and the Company is not a United States Real Property
Holding Corporation (a "USRPHC") within the meaning of Section 897 of the Code
and was not a USRPHC on any "determination date" (as defined in Section 1.897-
2(c) of the Treasury Regulations) that occurred in the five-year period
preceding the Closing Date. As used herein, "Taxes" shall mean any taxes of
any kind, including but not limited to those on or measured by or referred to
as income, gross receipts, capital, sale, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, real estate, personal property or windfall
profits taxes, customs, duties or similar fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any Governmental Entity. As used herein,
"Tax Return" shall mean any return, report or statement required to be filed
with any Governmental Entity with respect to Taxes.

Section 3.14 Compliance with Laws. (a) Except as disclosed in Section
3.14(a) of the Disclosure Letter, the conduct of business by the Company and
its subsidiaries since January 1, 1997 has not violated or breached and
currently does not violate or breach (and no event has occurred which with
notice or the lapse of time, or both, would constitute a violation or breach
of) any laws, statutes, ordinances or regulations of any Governmental Entity
required for the Company and its subsidiaries to conduct its business as
currently conducted, or applicable to the Company or any of its properties or
assets including, without limitation, federal and state (a) laws and
regulations affecting the protection of the health and safety of employees,
and (b) laws and regulations affecting equal employment opportunity, except
for violations and breaches which, individually or in the aggregate, have not
had and would not reasonably be expected to have a Material Adverse Effect
with respect to the Company. Except as set forth in the SEC Filings or in
Section 3.14(a) of the Disclosure Letter, there are no unresolved notices of
deficiency or charges of violation brought or, to the knowledge of the
Company, threatened or pending against the Company, which individually or in
the aggregate have had or would reasonably be expected to have a Material
Adverse Effect with respect to the Company.

(b) Except as disclosed in Section 3.14(b) of the Disclosure Letter, each
of the Company and each of its subsidiaries has all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, easements, variances, exceptions, consents, certificates,
identification and registration numbers, approvals and orders of any
Governmental Entity (including, but not limited to any nongovernmental self-
regulatory agency) necessary for it to own or lease and to operate its
properties or otherwise to carry on its business as it is now being conducted
(all of these matters are hereinafter referred to collectively as "Company
Permits"), except those the absence of which, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect with respect to the Company. Neither the Company nor
any of its subsidiaries has received any notice or claim pertaining to the
failure to obtain any Company Permit, except for any such notice or claim
regarding any such failure that, individually or in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect with
respect to the Company.

Section 3.15 Environmental Matters. (a) Except for such matters that are
specifically disclosed in the SEC Filings or in Section 3.15 of the Disclosure
Letter (i) the assets, Real Property, Former Real Property, businesses and
operations of the Company and its subsidiaries are and have been in compliance
with applicable Environmental Laws (as defined below); (ii) the Company and
its subsidiaries have obtained and, as currently operating, are and have been
in compliance with all Company Permits necessary under any Environmental Law
for the conduct of the business and operations of the Company and its
subsidiaries in the manner now conducted; (iii) all Hazardous Substances
generated at the Real Property or Former Real Property or in connection with
any operations of the Company have been transported and otherwise handled,
treated and disposed of in compliance with all applicable Environmental Laws
and in a manner that does not result in liability under Environmental Laws;
(iv) no Hazardous Substances have been disposed of or otherwise released,
handled or stored by the

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Company on the Real Property or Former Real Property on which the Company's
business is or has been conducted or elsewhere in violation of applicable
Environmental Laws and (v) neither the Company nor any of its subsidiaries nor
any of their respective assets, Real Property, Former Real Property,
businesses or operations has received or is subject to any outstanding order,
decree, judgment, complaint, agreement, claim, citation, notice,
investigation, inquiry or proceeding indicating that the Company or any of its
subsidiaries is or may be (a) liable for a violation of any Environmental Law
or (b) liable for any Environmental Liabilities and Costs (including, without
limitation, any such Environmental Liabilities and Costs incurred in
connection with being designated as a "potentially responsible party" pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act or
any analogous state law), except to the extent such non-compliance, liability,
violation or failure to hold Company Permits as described in the
representations in the preceding clauses (i) through (v), individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect with respect to the Company.

(b) For purposes of Section 3.15(a), the terms below shall have the
following meanings:

"Environmental Law" means any law (including, without limitation, common
law), regulation, ordinance, guideline, code, decree, judgment, order,
permit or authorization or other legally enforceable requirement of any
Governmental Entity relating to toxic torts, worker or public safety or
health and the indoor and outdoor environment, including, without
limitation, pollution, contamination, Hazardous Substances, cleanup,
regulation and protection of the air, water or soils in the indoor or
outdoor environment;

"Environmental Liabilities and Costs" means all damages, penalties,
obligations or clean-up costs assessed or levied pursuant to any
Environmental Law; and

"Hazardous Substances" means petroleum products, asbestos, radioactive
material, or hazardous or toxic substances or wastes as defined or
regulated under any Environmental Law or the presence of which poses a
hazard to the health or safety of persons.

"Former Real Property" means any real property in which the Company or
any of its Subsidiaries previously held, but no longer holds, any legal,
beneficial, equitable or leasehold interest; provided however, that any
representation or warranty contained in this Section 3.15 shall only apply
to Former Real Property during the periods such real property was owned or
operated by the Company.

Section 3.16 Certain Employment Agreements. Except as disclosed in Section
3.16 of the Disclosure Letter or in the SEC Fillings, neither the Company nor
any of its subsidiaries is a party to or bound by any Contract or Other
Agreement regarding the employment, services, consulting, termination or
severance from employment of any director, officer or employee of the Company
or any of its subsidiaries that provides for or could result in payments in
excess of $200,000 in any twelve month period.

Section 3.17 Employee Benefit Matters. (a) Each of the Company and each of
its subsidiaries since January 1, 1997 has complied, and currently is in
compliance with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code and all other applicable
laws with respect to each compensation or benefit plan, agreement, policy,
practice, program, or arrangement (whether or not subject to ERISA) maintained
by the Company or any of its subsidiaries for the benefit of any employee,
former employee, independent contractor or director of the Company or any of
its subsidiaries (including, without limitation, any employment agreements or
any pension, savings, profit-sharing, bonus, medical, insurance, disability,
severance, executive compensation, fringe benefit, incentive, stock option,
performance pay, loan or loan guarantee, plant closing, change of control,
equity-based or deferred compensation plans) (collectively, the "Plans"),
except where such non-compliance which, individually or in the aggregate, has
not had and would not reasonably be expected to have a Material Adverse Effect
with respect to the Company.

(b) The Company has provided or made available to MergerCo a current,
accurate and complete copy of each Plan and, to the extent applicable to the
Plans, (i) summary plan descriptions, (ii) Forms 5500, for 1998 and (iii)
actuarial reports.

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(c) Each of the Plans that is intended to qualify under Section 401(a) of
the Code has received, or has filed for, a favorable determination letter from
the IRS ruling that the Plan does so qualify and that the trust is exempt from
taxation pursuant to Section 501(a) of the Code.

(d) Except as set forth in Section 3.17(d) of the Disclosure Letter,
neither the Company nor any of its subsidiaries has since January 1, 1997
maintained, adopted or established, contributed or been required to contribute
to, or otherwise participated in or been required to participate in, any
employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA) and a defined benefit plan (as defined in Section
3(35) of ERISA)) or any plan otherwise subject to the minimum funding
standards of ERISA Section 302 or Code Section 412.

(e) Except as set forth in the SEC Filings or Section 3.17(e) of the
Disclosure Letter, no Plan provides any health or medical benefits (whether or
not insured) with respect to current or former employees of the Company beyond
their retirement or other termination of service with the Company (other than
coverage mandated by Code Section 4980B or applicable law).

(f) Except as set forth in Section 3.17(f) of the Disclosure Letter,
neither the Company nor any of its subsidiaries has incurred any withdrawal
liability with respect to any Plan that is a multiemployer plan (within the
meaning of Section 3(37)) of ERISA).

(g) No audit or investigation by any governmental authority is pending or,
to the knowledge of the Company, threatened, nor has any reportable event
(within the meaning of Section 4043 of ERISA) (other than an event for which
the 30-day notice period is waived) prohibited transaction (within the meaning
of Section 4975 of the Code or Section 406 of ERISA) or breach of fiduciary
duty occurred with respect to any Plan that has had or would be reasonably
expected to have a Material Adverse Effect with respect to the Company.

(h) All benefits due under each Plan have been timely paid and there is no
lawsuit or claim, other than routine uncontested claims for benefits, pending,
or to the knowledge of the Company, threatened against any Plan or the
fiduciaries of any such plan or otherwise involving or pertaining to any such
plan, and no basis exists for any such lawsuit or claim, except where such
claim or basis, if proven, would not be reasonably likely to have a Material
Adverse Effect with respect to the Company.

(i) Except as set forth in Section 3.17(i) of the Disclosure Letter, no
payments or benefits under any Plan are triggered (in whole or in part) solely
as a result of the transactions contemplated by this Agreement.

(j) No civil or criminal action brought pursuant to the provisions of Title
I, Subtitle B, Part 5 is pending or, to the knowledge of the Company, is
threatened against any fiduciary of any Plan, and none of the Plans nor any
fiduciary thereof has been the direct or indirect subject of an audit
investigation or examination by any governmental or quasi-governmental agency
that has had or would be reasonably expected to have a Material Adverse Effect
with respect to the Company.

(k) Except as set forth in Section 3.17(k) of the Disclosure letter, no
agreement, commitment or obligation exists to materially increase any benefit
under any Plan or to adopt any new Plan.

(l) Each Plan that is a group health plan has been operated in compliance
in all material respects with Code Section 4980B and Sections 601-609 of
ERISA.

(m) No Plan has any material unfunded accrued benefits that are not fully
reflected in the Company's financial statements.

Section 3.18 Labor Relations. Except as set forth in Section 3.18 of the
Disclosure Letter, there are: (i) no collective bargaining agreements or other
labor agreements to which the Company or any of its subsidiaries is a party or
by which it is bound; and (ii) no pending or, to the knowledge of the Company,
threatened

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developments concerning labor matters with respect to the Company or any of
its subsidiaries; except for such agreements or developments which,
individually or in the aggregate, have not had and would not be reasonably
expected to have a Material Adverse Effect with respect to the Company.

Section 3.19 Intellectual Property. Except as set forth in Section 3.19 of
the Disclosure Letter, the Company or one of its subsidiaries owns or
possesses adequate rights to use all material patents, trademarks, trade
names, inventions, processes, designs, formulas, know-how and other
intellectual property rights necessary for the conduct of the business of the
Company and its subsidiaries as presently conducted (other than commercially
available software). Except as set forth in Section 3.19 of the Disclosure
Letter, neither the Company nor any of its subsidiaries has received any
written notice, nor has any claim been made in writing in the past year, that
any intellectual property owned or used by the Company or any of its
subsidiaries is invalid or ineffective, that its use infringes in any material
respect on similar rights owned or alleged to be owned by others or that any
of such intellectual property is being infringed upon by others.

Section 3.20 Real Property. (a) Set forth in SEC Filings or in Section
3.20(a) of the Disclosure Letter is (i) a complete list of all real property
(the "Owned Property") owned by the Company or any of its subsidiaries,
together with the principal use(s) for which each such Owned Property is used,
and (ii) is a complete list of all real property with respect to which the
Company or any of its subsidiaries is lessee, sublessee, licensee or other
occupant or user (the "Leased Property") together with the principal use(s)
for which each Leased Property is used. The Leased Property is sometimes
referred to collectively herein with the Owned Property as the "Real
Property". A true and complete copy of each material lease with all amendments
and modifications (the "Real Property Leases" has been delivered or made
available to MergerCo.

(b) With respect to the Real Property Leases, the Company has not received
written notice of, and is not aware of, any breach or event of default on its
part except where such breach, default or condition, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect with respect to the Company.

(c) The Company and, as applicable, each of its subsidiaries, has good and
marketable title in fee simple to the Owned Property, in each case free and
clear of any Liens, mortgages, deeds of trust, judgments, rights,
encroachments, easements, rights-of-way, ordinances, covenants, conditions,
restrictions and other matters except where such impairment to title,
individually or in the aggregate, has not had or would not reasonably be
expected to have a Material Adverse Effect with respect to the Company.

Section 3.21 Opinion of Financial Advisor. The Company has received the
written opinion of CSFB, dated the date of this Agreement, to the effect that,
as of the date of such opinion, the consideration to be received in the Merger
by the Company's shareholders (other than members of the Company's management
who will retain, and other shareholders who make a valid election to retain,
an equity interest in the Company after the merger) is fair to the holders of
the Shares from a financial point of view.

Section 3.22 State Takeover Laws. The provisions of Sections 302A.671 and
302A.673 of the MBCA are not applicable to this Agreement or any of the
transactions contemplated by this Agreement.

Section 3.23 Rights Agreement. The Company has taken all necessary action
so that neither the execution of this Agreement nor the consummation of the
Merger will (i) cause the Rights (as such term is defined in the Company's
Rights Agreement, dated July 23, 1998 (the "Rights Agreement")) to become
exercisable, (ii) cause MergerCo or any of its affiliates to become an
Acquiring Person (as such term is defined in the Rights Agreement) or (iii)
give rise to a Distribution Date or a Triggering Event (each as defined in the
Rights Agreement). The Company has furnished or made available to MergerCo
true and complete copies of the Rights Agreement and all amendments thereto.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF MERGERCO

MergerCo hereby represents and warrants to the Company as follows:

Section 4.1 Organization. MergerCo is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. MergerCo is a newly formed corporation, and except for
activities incident to the Merger, has not engaged in any business activities
of any type or kind whatsoever. MergerCo has no direct or indirect
subsidiaries. MergerCo has delivered to the Company true and correct copies of
its articles of incorporation and bylaws as in effect on the date hereof and
as proposed to be in effect immediately prior to the Effective Time.

Section 4.2 Authority Relative to this Agreement. MergerCo has requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by MergerCo and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Board of Directors and shareholders of MergerCo and no other corporate
proceedings on the part of MergerCo are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by MergerCo and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
valid and binding agreement of MergerCo, enforceable against it in accordance
with its terms, except that such enforceability (a) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and (b) is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).

Section 4.3 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(a) conflict with or result in any violation of any provision of the
certificate of incorporation or bylaws of MergerCo, (b) require any consent,
approval or notice under, or conflict with or result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contracts and Other
Agreements to which MergerCo is a party or by which it or any portion of its
properties or assets may be bound or (c) subject to the matters referred to in
clauses (i) and (ii) of Section 4.4 below, violate any Legal Requirements
applicable to MergerCo or any material portion of its properties or assets;
except with respect to matters that, individually or in the aggregate, have
not had and would not reasonably be expected to (x) have a Material Adverse
Effect with respect to MergerCo, (y) impair the ability of MergerCo to perform
its obligations under this Agreement in any material respect or (z) delay in
any material respect or prevent the consummation of any of the transactions
contemplated by this Agreement.

Section 4.4 Governmental Approvals. Except as set forth in Section 3.6 of
the Disclosure Letter, no consent, approval or authorization of, or
declaration or filing with any Governmental Entity on the part of the Company
or any of its subsidiaries that has not been obtained or made is required in
connection with the execution or delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, other
than (i) the filing and recordation of the appropriate merger documents as
required by the MBCA and compliance with Section 302A.471 and 302A.473 of the
MBCA regarding dissenters rights, (ii) the filing with the SEC of the Proxy
Statement and the Form S-4, and compliance with provisions of the Securities
Act or Exchange Act applicable to the transactions contemplated by this
Agreement, (iii) such filings as may be required by any applicable state
securities or "blue sky" laws or state takeover laws, and (iv) consents,
approvals, authorizations, declarations or filings that, if not obtained or
made, individually or in the aggregate, have not had and would not reasonably
be expected to have a Material Adverse Effect with respect to MergerCo, (y)
impair the ability of MergerCo to perform its obligations under this Agreement
in any material respect or (z) delay in any material respect or prevent the
consummation of any of the transactions contemplated hereby.

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Section 4.5 Information Supplied. None of the information supplied or to be
supplied in writing by MergerCo or any of its affiliates specifically for
inclusion in the Form S-4 or the Proxy Statement will, either at the date the
Form S-4 or the Proxy Statement is first mailed to the Company's shareholders
or the time of the Shareholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, MergerCo makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents.

Section 4.6 Financing. MergerCo has provided the Company with true and
correct copies of signed written financing commitments (the "Financing
Commitments") with respect to the Merger obtained as of the date of this
Agreement.

Section 4.7 Management Arrangements. MergerCo has provided the Company with
true and correct copies of agreed upon written term sheets relating to the
participation of certain members of the Company's management in the
transactions contemplated by this Agreement.

Section 4.8 Ownership of Shares. MergerCo does not own any shares of Common
Stock of the Company.

ARTICLE 5

COVENANTS

Section 5.1 Conduct of Business of the Company. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations according to its ordinary and usual
course of business and consistent with past practices, and the Company will,
and will cause each of its subsidiaries to, use their respective reasonable
best efforts, consistent with prudent business judgment, to preserve intact
its business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with licensors,
suppliers, contractors, distributors, customers and others having business
relationships with it. Without limiting the generality of the foregoing, and
except as otherwise expressly contemplated by this Agreement, prior to the
Effective Time, the Company will not, and will cause each of its subsidiaries
not to, without the prior written consent of MergerCo (which consent will not
be unreasonably withheld or delayed):

(a) amend their respective articles or certificates of incorporation or
bylaws (or equivalent governing instruments);

(b) authorize for issuance, issue, sell, pledge, encumber or deliver or
agree or commit to issue, sell, pledge, encumber or deliver any shares of
capital stock, or issue any securities convertible into, exchangeable for
or representing a right to purchase or receive, or enter into any contract
or arrangement with respect to the issuance of, shares of capital stock,
except in the ordinary course of business under current employee benefit
plans and as required by employee stock option agreements in effect on the
date hereof and other than Shares issuable upon exercise of Company Stock
Options in accordance with the terms thereof;

(c) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or to any affiliate of a shareholder, except for the payment
by the Company of regular quarterly cash dividends not to exceed $0.22 per
share of Common Stock and except that any wholly owned subsidiary of the
Company may pay dividends to the Company or to another wholly owned
subsidiary of the Company; or redeem or otherwise acquire any of its
securities or any securities of its subsidiaries;

(d) except as set forth in Section 5.1(d) of the Disclosure Letter, (i)
incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee

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any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition to another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course
of business consistent with past practice, or (ii) make any loans, advances
or capital contributions to, or investments in, any other person other than
to or in the Company or any direct or indirect wholly owned subsidiary of
the Company;

(e) except as set forth in Section 5.1(e) of the Disclosure Letter,
acquire or sell (whether by merger, consolidation or otherwise), or lease,
encumber, transfer or dispose of assets for aggregate consideration in
excess of $5 million, except in the ordinary course of business;

(f) make any material Tax elections, settle or compromise any material
federal, state or local income Tax liability, or waive or extend the
statute of limitations in respect of any such Taxes;

(g) except as set forth in Section 5.1(g) of the Disclosure Letter, (i)
materially modify, amend or terminate any material Contract or Other
Agreement to which it is a party (other than by allowing it to expire in
accordance with its terms if substitute arrangements are made) or waive,
release or assign any material rights or claims thereunder, (ii) settle any
suit or claim of liability against the Company which is reasonably likely
to materially negatively impact the Company's position with respect to any
similar pending or threatened material suit or claim, or (iii) pay or agree
to pay in settlement or compromise of any suits or claims of liability
against the Company, net of insurance recoveries, more than $1 million for
any such suit or claim or more than an aggregate of $5 million for all such
suits and claims;

(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, methods or practices used by it;

(i) except as set forth in Section 5.1(i) of the Disclosure Letter,
adopt a plan of complete or partial liquidation, dissolution,
consolidation, restructuring (except as contemplated by this Agreement),
recapitalization, reorganization or (except with respect to MergerCo)
merger;

(j) change in any material respect its credit policy as to sales of
inventories or collection of receivables or inventory consignment parties;

(k) enter into any collective bargaining agreement; or

(l) take, or agree in writing or otherwise to take, any of the foregoing
actions or take or fail to take any action which would make any
representation or warranty of the Company contained in this Agreement
untrue or incorrect as of the date when made or as if made as of the
Effective Time (other than representations and warranties which address
matters only as of a certain date(s), in which case untrue or incorrect as
of such certain date(s)).

Section 5.2 No Solicitation. Except as set forth below, the Company shall
not, directly or indirectly, solicit, knowingly encourage, participate in or
initiate discussions or negotiations with, or provide any information or
access to, any person or group (other than MergerCo or any of its affiliates
or associates) concerning any merger, sale of assets, sale of shares of
capital stock or similar transaction involving the Company or any subsidiary
or division of the Company (other than as set forth in Section 5.2(a) of the
Disclosure Letter). The Company will notify MergerCo promptly if any
discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any such information is requested in respect of any such
transaction and will promptly communicate to MergerCo the terms of any
material proposal, discussion, negotiation or inquiry which it may receive in
respect of any such transaction and the identity of the offeror or potential
offeror. Notwithstanding the foregoing, if (i) the Company receives an
unsolicited inquiry or proposal from any person or group for the acquisition
of all or substantially all of the assets or outstanding shares of the Company
which the Board reasonably believes in good faith is capable of being
completed, taking into account all legal, financial regulatory and other
aspects of the proposal and the person making the proposal and (ii) the Board
determines in good faith (after consulting with its outside counsel) that
failure to respond to such inquiry or proposal would be reasonably likely to
be inconsistent with its fiduciary duties to the Company's shareholders (an
"Alternative Transaction"), then the Company may, directly or indirectly,
furnish information and access pursuant to an appropriate confidentiality
agreement and may participate in discussions and negotiate with such person or
group.

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The Company agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the
Company may be a party, unless the Board shall have determined in good faith
that failing to release such third party or waive such provisions would be
reasonably likely to be inconsistent with its fiduciary duties to the
Company's shareholders.

Section 5.3 Access and Information. Between the date of this Agreement and
the Effective Time, the Company shall, and shall cause each of its
subsidiaries to, afford MergerCo and its affiliates and their authorized
representatives (including their accountants, financial advisors and legal
counsel) reasonable access during normal business hours to the properties,
personnel, Contracts and Other Agreements, books and records of the Company
and its subsidiaries and shall promptly deliver or make available to MergerCo
(a) a copy of each report, schedule or other document filed by the Company
pursuant to the requirements of federal or state securities laws, (b) monthly
financial statements in the form currently produced for management review and
(c) all other information concerning the business, properties, assets and
personnel of the Company and its subsidiaries as MergerCo and its affiliates
may from time to time reasonably request. MergerCo agrees on its own behalf
and on behalf of its affiliates that any information furnished pursuant to
this Section 5.3 will be subject to the provisions of the letter agreement,
dated August 25, 1999 (the "Confidentiality Agreement") between Devon Value
Advisers and Investcorp International, Inc., the terms of which are
incorporated herein by reference.

Section 5.4 Reasonable Efforts; Additional Action. (a) Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all action, and to
do or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by, and in
connection with, this Agreement, including using all reasonable efforts to (i)
obtain all consents, amendments to or waivers under the terms of any of the
Company's contractual arrangements required by the transactions contemplated
by this Agreement, and (ii) effect promptly all necessary or appropriate
registrations and filings with Governmental Entities, including, without
limitation, filings and submissions pursuant to the Securities Act, the
Exchange Act, the MBCA and shall (A) take all action necessary to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (B) if any state takeover statute or
similar statute or regulations becomes applicable to the Merger, this
Agreement or any other transaction contemplated by this Agreement, take all
action reasonably necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this
Agreement and the other transactions contemplated by this Agreement.
Notwithstanding the foregoing, no party shall be prohibited from taking any
action permitted by the terms of this Agreement.

(b) The Company agrees to provide, and will cause its subsidiaries and its
and their respective officers, employees and advisers to provide, commercially
reasonable cooperation in connection with (i) the arrangement of any financing
to be consummated contemporaneous with or at or after the Effective Time in
respect of the transactions contemplated by this Agreement, including without
limitation, participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, prospectuses
and similar documents, the execution and delivery of any commitment letters,
underwriting or placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates or documents,
including a customary certificate of the chief financial officer of the
Company with respect to solvency matters, comfort letters of accountants,
legal opinions and real estate title documentation as may be reasonably
requested by MergerCo. In addition, in conjunction with the obtaining of any
such financing, the Company agrees, at the request of MergerCo, to call for
prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing indebtedness of the Company; provided that no such
prepayment or redemption shall themselves actually be made until
contemporaneously with or after the Effective Time.

(c) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to de-list the Shares from the New
York Stock Exchange, provided that such de-listing shall not be

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effective until after the Effective Time. The parties also acknowledge that it
is MergerCo's intent that the Shares following the Merger will not be quoted
on the New York Stock Exchange or listed on any other national securities
exchange.

Section 5.5 Fulfillment of Financing Commitments. MergerCo hereby covenants
that, subject to the satisfaction of the conditions set forth in Sections 6.1
and 6.2, MergerCo will have received on the Closing Date, and will have on
hand immediately prior to the Effective Time, cash funds provided to it as
equity in amounts at least equal to the minimum cash equity requirements set
forth in the debt Financing Commitments. MergerCo shall use its commercially
reasonable best efforts to cause the Financing Commitments to be fulfilled in
accordance with their terms (to the extent such fulfillment is within the
control of MergerCo).

Section 5.6 Notification of Certain Matters. The Company shall give notice
to MergerCo, and MergerCo shall give notice to the Company, promptly upon
becoming aware of (a) any occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or is reasonably likely to cause any
representation or warranty in this Agreement to be untrue or inaccurate in any
material respect at any time after the date hereof and prior to the Effective
Time and (b) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided that the delivery of any notice pursuant to this Section
5.6 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.

Section 5.7 Public Announcements. The initial press release or releases
with respect to the transactions contemplated by this Agreement shall be in
the form agreed to by MergerCo and the Company. Thereafter, for as long as
this Agreement is in effect, MergerCo, on the one hand, and the Company, on
the other hand, shall not, and shall cause their subsidiaries and affiliates
not to, issue or cause the publication of any press release or other
announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the consent of the other (which
consent shall not be unreasonably withheld or delayed), except where such
release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities
exchange or any other regulatory requirement.

Section 5.8 Indemnification and Insurance. (a) MergerCo agrees that (i) the
articles of incorporation or the bylaws of the Surviving Corporation and its
subsidiaries immediately after the Effective Time shall contain provisions
with respect to indemnification and exculpation from liability that are at
least as favorable to the beneficiaries of such provisions as those provisions
that are set forth in the articles of incorporation and bylaws of the Company
and its subsidiaries, respectively, on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period
of six years following the Effective Time in any manner that would adversely
affect the rights thereunder of persons who at or prior to the Effective Time
were directors, officers, employees or agents of the Company or any of its
subsidiaries, unless such modification is required by law and (ii) all rights
to indemnification as provided in any indemnification agreements with any
current or former directors, officers and employees of the Company or any of
its subsidiaries as in effect as of the date hereof with respect to matters
occurring at or prior to the Effective Time shall survive the Merger and
thereafter terminate as provided in such agreements.

(b) For a period of six years after the Effective Time, the Surviving
Corporation shall maintain officers' and directors' liability insurance and
fiduciary liability insurance covering the persons described in paragraph (a)
of this Section 5.8 (whether or not they are entitled to indemnification
thereunder) who are currently covered by the Company's existing officers' and
directors' or fiduciary liability insurance policies on terms no less
advantageous to such indemnified parties than such existing insurance;
provided, that the Surviving Corporation shall not be obligated to pay annual
premiums for such insurance in excess of 200% of the last annual premium paid
prior to the date of this Agreement.

(c) The Surviving Corporation shall indemnify and hold harmless (and shall
advance expenses to), to the fullest extent permitted under applicable law,
each director, officer and employee of the Company or any subsidiary of the
Company, including, without limitation, officers and directors, serving as
such on the date

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hereof against any reasonable expenses (including reasonable attorneys' fees
and disbursements), judgments, penalties, fines and settlements in connection
with any threatened, pending or completed civil, criminal, administrative,
arbitration or investigative proceeding relating to any of the transactions
contemplated hereby, and in the event of any such proceeding (whether arising
before or after the Effective Time), the parties hereto will cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent, which consent shall not unreasonably be withheld or delayed.

(d) The Surviving Corporation shall pay all reasonable expenses, including
attorneys' fees, that may be incurred by any indemnified parties in enforcing
the indemnity and other obligations provided for in this Section 5.8 to the
fullest extent permitted by applicable law.

(e) In the event the Surviving Corporation or any of its respective
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, proper provisions shall be made so that
the successors and assigns of the Surviving Corporation assume the obligations
set forth in this Section 5.8.

(f) This Section 5.8, which shall survive the consummation of the Merger at
the Effective Time and shall continue for the periods specified herein, is
intended to benefit the Company, the Surviving Corporation, and any person or
entity referenced in this Section 5.8 or indemnified hereunder, each of whom
may enforce the provisions of this Section 5.8 (whether or not parties to this
Agreement).

Section 5.9 Affiliates. Prior to the Effective Time, the Company shall
deliver to MergerCo a letter identifying all persons who may be deemed, at the
time this Agreement is submitted for approval to the shareholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause
each such person to deliver to MergerCo at or prior to the Effective Time a
written agreement substantially in the form attached as Annex A hereto.

Section 5.10 Rights Agreement. The Company will not (i) redeem the Rights,
(ii) amend the Rights Agreement or (iii) take any action which would allow any
person (as defined in the Rights Agreement) other than pursuant to this
Agreement to acquire beneficial ownership of 20% or more of the Common Shares
without causing a Distribution Date or a Triggering Event (as such terms are
defined in the Rights Agreement) to occur.

Section 5.11 Changes to Charter. During the period from the date of this
Agreement until the time of the mailing of the Proxy Statement, MergerCo may
make any changes it deems necessary to the form of the Company's restated
articles of incorporation described in Section 1.3 and set forth as Exhibit A
hereto with the prior written consent of the Company (which consent shall not
be unreasonably delayed or withheld).

ARTICLE 6

CONDITIONS TO CONSUMMATION OF THE MERGER

Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
fulfillment at or prior to the Effective Time of the following conditions:

(a) this Agreement shall have been adopted by the affirmative vote of
the shareholders of the Company by the requisite vote in accordance with
applicable law;

(b) no Legal Requirements (including, without limitation, any temporary
restraining order or preliminary injunction) shall have been enacted,
entered, promulgated, issued or enforced by any court or Governmental
Entity, and no other legal restraint or prohibition shall be in effect,
that prohibits or prevents the consummation of the Merger; provided, that
the party or parties invoking this condition shall use reasonable efforts
to have any such Legal Requirement vacated or removed;

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<PAGE>

(c) The Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.

Section 6.2 Conditions to Obligation of MergerCo to Effect the Merger. The
obligation of MergerCo to effect the Merger is further subject to the
satisfaction (or waiver by it) at or prior to the Effective Time of the
following:

(a) (i) the representations and warranties set forth in Section 3.2
(Capitalization) shall be true and correct as of the date of this Agreement
and as of the Effective Time as if made at and as of the Effective Time;
and (ii) the other representations and warranties contained in Article 3
hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as if made at and as of the Effective Time, except for
such inaccuracies as in the aggregate have not had and would not reasonably
be expected to have a Material Adverse Effect (ignoring for the purposes of
this clause (ii) any qualifications by Material Adverse Effect or otherwise
by material adversity and any materiality qualification or words of similar
import contained in such representations or warranties);

(b) the Company shall have performed in all material respects all
agreements herein required to be performed at or prior to the Effective
Time;

(c) MergerCo shall have received a certificate signed on behalf of the
Company by the chief executive officer and chief financial officer of the
Company to the effect of subsections (a) and (b) above; and

(d) MergerCo shall have received a statement from the Company that meets
the requirements of Treasury Regulation Section 1.1445-2(c)(3) certifying
that the Company is not a USRPHC;

(e) Each of the conditions to the provision of the financing set forth
in the Financing Commitments provided to the Company, excluding any
provisions regarding the payment of fees within the control of MergerCo
and/or relating to the provision of equity, shall have been satisfied in
all material respects, and the funding shall have occurred.

Section 6.3 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
satisfaction (or waiver by it) at or prior to the Effective Time of the
following:

(a) the representations and warranties of MergerCo shall be true and
correct as of the date of this Agreement and as of the Effective Time as if
made at and as of such time (other than representations and warranties
which address matters only as of a certain date(s) which shall be true and
correct in all material respects as of such certain date(s)).

(b) MergerCo shall have performed in all material respects all
agreements herein required to be performed on or prior to the Effective
Time;

(c) the Company shall have received a certificate signed on behalf of
MergerCo by its chief executive officer to the effect of subsections (a)
and (b) above; and

(d) MergerCo and/or the Company shall have sufficient funds to
consummate the Merger.

ARTICLE 7

TERMINATION

Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval thereof by the shareholders of the Company:

(a) by mutual written consent of MergerCo and the Company;

(b) by MergerCo or the Company if:

(i) any court or other Governmental Entity of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable; or

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<PAGE>

(ii) the Effective Time shall not have occurred on or prior to June
30, 2000; provided, however, that the right to terminate the Agreement
under this Section 7.1(b)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on
or before such date;

(c) subject to the concurrent payment of the amounts required by Section
7.2 below, by the Company if prior to the consummation of Merger, (i) the
Company receives a proposal for an Alternative Transaction which the Board
reasonably believes in good faith, after consultation with its outside
counsel and financial advisors, is more favorable to the Company's
shareholders than the Merger (a "Superior Proposal"), and (ii) the Board
determines in good faith (after consulting with its outside counsel) that
failure to terminate this Agreement in order to accept the Superior
Proposal would be reasonably likely to be inconsistent with the Board's
fiduciary duties to the Company's shareholders;

(d) by MergerCo in the event of a material breach by the Company of this
Agreement which has not been cured within 30 days after the giving of
written notice to the Company and which is incapable of being cured prior
to June 30, 2000;

(e) by the Company in the event of a material breach by MergerCo of this
Agreement which has not been cured within 30 days after the giving of
written notice to MergerCo and which is incapable of being cured prior to
June 30, 2000; or

(f) by MergerCo if prior to the Effective Time the Board shall have (1)
failed to make (or, if necessary, reaffirm), or shall have withdrawn,
modified or amended in any respect adverse to MergerCo, its approval or
recommendation of this Agreement or the Merger, (2) failed to include in
the Proxy Statement such recommendation, (3) recommended another proposal
for an acquisition of all or any substantial part of the business,
properties or capital stock of the Company or any of its subsidiaries,
whether by merger, consolidation, share exchange, tender offer, purchase of
assets or shares of the Company, or (4) resolved to do any of the
foregoing.

Section 7.2 Fees and Expenses. In the event that (i) this Agreement is
terminated by the Company pursuant to Section 7.1(c) to accept a Superior
Proposal, or (ii)(A) the Company's shareholders do not approve the Merger at
the Shareholders Meeting and the Agreement is terminated pursuant to Section
7.1(b)(ii), (B) at the time of the Shareholders Meeting, a proposal for an
Alternative Transaction is pending or has been publicly announced and not
withdrawn, and (C) within 12 months of the date of the Shareholders Meeting,
the Company enters into a definitive agreement for an Alternative Transaction
(which is subsequently consummated) or an Alternative Transaction is otherwise
consummated, then the Company shall pay MergerCo a fee in the amount of
$19,125,000 (the "Termination Fee"). In addition, in any event that the
Termination Fee becomes payable, the Company shall reimburse MergerCo for all
out-of-pocket fees and expenses actually incurred by MergerCo on its behalf in
connection with the Merger (including, without limitation, fees payable to
equity sources, banks, financial institutions, investment bankers and their
respective agents in connection with this Agreement (including, without
limitation, any fees and expenses incurred in connection with any debt or
equity financing) and reasonable attorneys' fees), the amount of such
reimbursement not to exceed $5,000,000. The Company acknowledges that the
Termination Fee and expense reimbursement provided for above are an integral
part of the transactions contemplated by this Agreement and not a penalty, and
that, without the Termination Fee and expense reimbursement provided for
above, MergerCo would not enter into this Agreement. If the Company fails to
pay promptly the Termination Fee and expense reimbursement due pursuant to
this Section 7.2, the Company shall also pay to MergerCo its costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of the unpaid fee under this
section, accruing from its due date, at an interest rate per annum equal to
the prime commercial lending rate quoted by The Chase Manhattan Bank. Any
change in the interest rate hereunder resulting from a change in such prime
rate shall be effective at the beginning of the day of such change in such
prime rate. The Termination Fee shall be due upon the date of termination in
the case of (i) above and on the date of the consummation of the Alternative
Transaction in the case of (ii) above.

Section 7.3 Effect of Termination. In the event that this Agreement is
terminated and the Merger is abandoned pursuant to Section 7.1, written notice
of such termination and abandonment shall forthwith be given

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<PAGE>

to the other parties and this Agreement shall terminate and the Merger shall
be abandoned without further action. If this Agreement is terminated as
provided herein, no party hereto shall have any liability or further
obligation to any other party under the terms of this Agreement except with
respect to the willful breach by any party hereto and except that the
provisions of this Section 7.3, Section 7.2, Article 8 and the final sentence
of Section 5.3 shall survive the termination of this Agreement.

ARTICLE 8

MISCELLANEOUS

Section 8.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this Section 8.1:

(a) "affiliate," with respect to any person, shall mean any person
controlling, controlled by or under common control with such person;

(b) "Material Adverse Effect," with respect to any person, shall mean a
Material Adverse Effect on the business, financial condition or results of
operations of such person and its subsidiaries taken as a whole, excluding
in all cases: any events or conditions generally affecting the industries
in which such person operates or arising from changes in general business
or economic conditions. In the case of the Company, a material adverse
change in the Company's results of operations is not be measured against
any forecasts or projections provided to MergerCo (or its affiliates or
advisors).

(c) "person" shall mean and include an individual, a partnership, a
joint venture, a limited liability company, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof;

(d) "SEC Filings" means filings by the Company required to be made under
the Exchange Act with the SEC since January 1, 1997; provided that, with
respect to all representations and warranties of the Company contained in
Article 3 (except those in Section 3.7), references to SEC Filings shall
refer only to those filings made prior to the date hereof; and

(e) "subsidiary," with respect to any person, shall mean any corporation
50% or more of the outstanding voting power of which, or any partnership,
joint venture, limited liability company or other entity, 50% or more of
the total equity interest of which, is directly or indirectly, owned by
such person.

Section 8.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by a written agreement
signed by each of the parties hereto at any time prior to the Effective Time
with respect to any of the terms contained herein; provided, however, that
after this Agreement is approved and adopted by the Company's shareholders, no
such amendment or modification shall (a) alter or change the amount or kind of
the consideration to be delivered to the shareholders of the Company, (b)
alter or change any term of the articles of incorporation of the Surviving
Corporation or (c) alter or change any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the shareholders
of the Company.

Section 8.3 Survival of Representations and Warranties. The respective
representations and warranties of MergerCo and the Company contained herein
shall terminate at, and not survive, the Closing.

Section 8.4 Waiver of Compliance; Consents. Any failure of MergerCo, on the
one hand, or the Company, on the other hand, to comply with any obligation,
covenant, agreement or condition herein may, subject to Section 8.2, be waived
by MergerCo or the Company, respectively, only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 8.4.

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<PAGE>

Section 8.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties.

Section 8.6 Expenses. Except as otherwise provided herein, whether or not
the Merger is consummated, all fees, charges and expenses incurred in
connection with this Agreement and transactions contemplated hereby shall be
paid by the party incurring such fees, charges or expenses.

Section 8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE CHOICE OF LAW PRINCIPLES THEREOF.

Section 8.8 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given (a) upon receipt if
given by delivery in person or by facsimile; or (b) on the next business day
when sent by overnight courier service, to the parties at the following
addresses (or such other address for a party as shall be specified by like
notice):

if to MergerCo:

MergerCo
c/o Investcorp International, Inc.
280 Park Avenue
37th Floor West
New York, New York 10017
Facsimile: (212) 983-7073
Telephone: (212) 599-4700
Attention: Charles J. Philippin

with a copy to:

Gibson, Dunn & Crutcher LLP
200 Park Avenue
48th Floor
New York, New York 10166
Facsimile: (212) 351-4035
Telephone: (212) 351-4000
Attention: E. Michael Greaney

if to the Company:

Jostens, Inc.
5501 Norman Center Drive
Minneapolis, Minnesota 55437
Facsimile: (612) 830-3380
Telephone: (612) 830-3309
Attention: General Counsel

with a copy to:

Skadden, Arps, Slate, Meagher & Flom, LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
Facsimile: (302) 651-3001
Telephone: (302) 651-3000
Attention: Richard L. Easton, Esq.

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<PAGE>

Section 8.9 Interpretation. The table of contents and descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.

Section 8.10 Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never
been contained herein unless the deletion of such provision or provisions
would result in such a material changes as to cause completion of the
transactions contemplated hereby to be unreasonable.

Section 8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.

Section 8.12 Entire Agreement. This Agreement (including the exhibits and
other documents referred to herein) and the Confidentiality Agreement embody
the entire agreement and understanding of the parties hereto in respect of the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, among the parties, or between any of
them, with respect to the subject matter hereof and thereof.

Section 8.13 No Third Party Beneficiaries. Except as expressly provided in
Section 5.7, this Agreement is not intended to, and does not, create any
rights or benefits of any party other than the parties hereto.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed as of the day and year first above written.

Saturn Acquisition Corporation

/s/ David A. Tayeh
By: _________________________________
David A. Tayeh
Vice President and Secretary

Jostens, Inc.

/s/ Robert C. Buhrmaster
By: _________________________________
Robert C. Buhrmaster
Chairman, President & CEO

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<PAGE>

Exhibit 10.14

PERSONAL AND CONFIDENTIAL

August 13, 1999

John Mann
194 Bank Street
Minneapolis, Minnesota 55414

Dear John:

This letter, when signed by you, will confirm the mutual Separation Agreement
("Agreement") we have reached concerning your termination of employment with
Jostens, Inc. ("Jostens").

Your compensation, perquisites and benefits will continue through the effective
date of your termination of employment. After the effective date of your
termination of employment, you will be entitled to continuing compensation,
perquisites and benefits only to the extent provided in the Jostens, Inc.
Executive Severance Pay Plan (the "Severance Pay Plan") or as described in this
letter.

The following terms and conditions apply:

1. Effective Date: Effective August 20, 1999 your employment with Jostens will
terminate. In this letter, this date is referred to as your "Termination
Date."

2. Accrued Vacation: Your last regular paycheck will include a payment equal to
the value of your accrued, unused vacation pay. You will not accrue vacation
after your Termination Date.

3. Severance Pay Plan Benefits: You will be entitled to the following benefits
under the Severance Pay Plan, subject to the limitations, conditions and
terms set forth in the Severance Pay Plan, a copy of which is attached.

a Salary Continuation: Your base salary (minus federal, state and local
withholdings and any liens) will be continued at your current rate (not
including bonuses or other incentives) in bi-weekly payments until August
20, 2000. At any time, Jostens may, but is not required to, pay the
remaining payments to you in a lump sum payment without your consent.

b Management Bonus: You will receive a pro-rated (through June 30, 1999 or
six (6) months) portion of any management bonus that may be earned based
on Jostens performance for the six month period ending June 30, 1999. Any
bonus earned will be paid to you at the same time that other participants
receive their pay out. You will not be eligible for any management bonus
for any calendar year beginning after your Termination Date.

c COBRA Premiums: Your current group medical, dental and life coverage will
remain in effect until the last day of the pay period that includes your
Termination Date. Your current group vision coverage will remain in
effect until the last day of the calendar month that includes your
Termination Date. You may elect to continue coverage following these
dates by paying the full cost of the premium as provided by COBRA
legislation. You will be advised separately of your coverage continuation
rights by DCA, Inc., the COBRA administrator. If you elect to continue
coverage, Jostens will reimburse you for a portion of your COBRA premium
payments. The

1
<PAGE>

amount of the reimbursement is the amount by which the COBRA premiums
exceed the premiums paid for the coverage in question by similarly
situated active employees of Jostens. The reimbursement payments will be
taxable income subject to withholding and will be reported on a Form W-2.
To be eligible for reimbursement you must comply with reimbursement
procedures specified by Jostens.

(You may also be entitled to convert your group life coverage to an
individual policy. Contact Lisa Triplett if you desire conversion
information.

d Perquisites: Your perquisites, car allowance, financial planning, medical
reimbursement, etc., will remain in effect until August 20, 2000. Your
continued perquisites are subject to any reductions applicable to
similarly situated active Jostens employees.

e Additional Benefits: Pursuant to Section 3.2 of the Plan, you are
entitled to the following benefits: Market Leadership bonus of
$50,000.00, payable in February, 2000; waiver of Paragraph 3. (iii) and
(iv) to extent of limited, part-time consulting for Jostens on an as-
needed basis.

f Conditions and Limitations:

(i) Waiver and Release of Claims: You acknowledge that in order to
receive any payments or benefits under the Plan, you must sign this
Agreement, which includes a waiver and release of claims, (see
Section 16), and you must not revoke the waiver and release of
claims within the period described in Section 17 and 18. If the
waiver and release of claims is at any time determined to be
partially or wholly unenforceable or ineffective in any respect for
any reason, (1) you will no longer be entitled to reimbursement of
health premiums as described in clause (c) or to continued
perquisites as described in clause (d), (2) the payments described
in clauses (a) and (b) will be reduced by 30% (of the gross payments
before any after reductions), (3) you must promptly reimburse
Jostens for the full amount or value of any reimbursements or
perquisites described in clause (c) or (d) that you previously
received and (4) you must promptly reimburse Jostens for 30% (of the
gross payments before any after reductions) of any payments
described in clauses (a) and (b) that were previously made.

(ii) Non-Compete and Confidentiality: You acknowledge that in order to
receive payments or benefits under the Plan, you must not compete
with Jostens or disclose confidential information. If you do, (1)
you will no longer be entitled to reimbursement of health premiums
as described in clause (c) or to continued perquisites as described
in clause (d), (2) the payments described in clauses (a) and (b)
will be reduced by 70% (of the gross payments before any other
reductions), (3) you must promptly reimburse Jostens for the full
amount or value of any reimbursements or perquisites described in
clause (c) or (d) that you previously received and (4) you must
promptly reimburse Jostens for 70% (of the gross payments before any
other reductions) of any payments described in clauses (a) and (b)
that were previously made. You will be deemed to compete with
Jostens if the Administrator of the Plan determines that, directly
or indirectly, alone or as a partner, officer, director,
shareholder, sole proprietor, employee or consultant of any other
firm or entity, you have engaged, are engaging or intend to engage
in any commercial activity in competition with any part of the
business of Jostens or any affiliate as conducted at the time in
question or solicit, or you have solicited or interfered, are
soliciting or interfering or intend to solicit or interfere with the
relationship of Jostens or any affiliate with, any customers,
suppliers, employees or sales representatives of Jostens or any
affiliate. Confidential information means any

2
<PAGE>

information relating to the business or affairs of Jostens or any
affiliate, including but not limited to information relating to
financial statements, customer identities, potential customers,
employees, sales representatives, suppliers, servicing methods,
equipment, programs, strategies and information, analyses, profit
margins or other proprietary information used by Jostens or an
affiliate except for information in the public domain or known in
the industry through no wrongful act on your part.

(iii) Return to Jostens: If you return to work for Jostens or one of its
affiliates, you will not be entitled to any further benefits under
the Plan.

(iv) Other Work: Except for part time consulting, if you perform any
services for which you receive, directly or indirectly, remuneration
as an employee, consultant, sole proprietor, partner, member, owner
or otherwise (other than as an employee of Jostens or an affiliate),
then (1) your salary continuation payments will be reduced by an
amount equal to your rate of base pay or the equivalent of base pay,
(2) you will receive any management bonus to which you become
entitled as described in clause (a) and (3) your COBRA premium
reimbursements and perquisites described in clauses (c) and (d) will
end. You agree to promptly notify Jostens if you perform any such
services during your salary continuation period. You also agree to
promptly notify Jostens of your remuneration for your services, and
any change in remuneration and the effective date of the change.

(v) Other: You acknowledge that you have carefully reviewed the Plan,
and particularly Section 4.5 of the Plan, and understand the other
limitations on the benefits described above.

4. AD&D and Business Travel Accident Insurance: Your current accidental death
and dismemberment insurance coverage and business travel accident coverage
will remain in effect until the last day of the pay period that includes
your Termination Date.

5. Spending Accounts: If you participated in either the Health Care Expense
Account or Dependent Care Account, deductions will stop as of the last day
of the pay period that includes your Termination Date. Your Health Care
Expense account may be continued through COBRA. You will be advised
separately of coverage continuance rights by DCA, Inc., the COBRA
administrator.

6. Pension Plan: Under the current terms of Jostens Pension Plan "D" you will
continue to be credited with service during your salary continuation period
and your salary continuation payments count as annual salary, subject in
each case to the terms of Pension Plan "D." Jostens is in the process of
amending Pension Plan "D" so that no service will be credited during the
salary continuation period and salary continuation payments will not count
as annual salary. When the amendment is adopted it will apply to you for the
portion of your salary continuation period following the effective date of
the amendment. Your entitlement to benefits under the Pension Plan [and the
Supplemental Pension Plan] will be determined in accordance with the terms
of the Plan[s].

7. 401(k) Retirement Savings Plan: Under the current terms of the Jostens, Inc.
401(k) Retirement Savings Plan, you may elect to make 401(k) contributions
from your salary continuation payments, subject to the terms of the 401(k)
Retirement Savings Plan. Jostens is in the process of amending the 401(k)
Retirement Savings Plan so that 401(k) contributions may not be made from
salary continuation payments. When this amendment is adopted, it will apply
to you for the portion of your salary continuation period following the
effective date of the amendment. Any outstanding loans will become due in
full as of your Termination Date. Distribution of your account balances, if
any, will be made after your Termination Date in accordance with the terms
of the Plan.

3
<PAGE>

8. Deferred Compensation Plan: You may elect to defer your salary continuation
payments made during the 2-year period beginning on your Termination Date
under the Deferred Compensation Plan. Your account under the Deferred
Compensation Plan will not be distributed until after the end of your salary
continuation period or the second anniversary of your Termination Date,
whichever is earlier.

9. Executive Supplemental Retirement Agreement: You will not accrue additional
benefits [or earn additional service for vesting or any other purposes]
under your Executive Supplemental Retirement Agreement after your
Termination Date. Your entitlement to benefits under your Executive
Supplemental Retirement Agreement will be determined in accordance with the
terms of the Agreement. You acknowledge that you are not entitled to receive
any benefits under your Executive Supplemental Retirement Agreement because
you have not completed at least 7 years as an executive officer of Jostens.

10. Short and Long Term Disability: Short-and Long-Term Disability coverage will
cease on your Termination Date. Contact your HR representative if you desire
conversion information on the Long-Term Disability Plan.

11. Performance Pays Bonus: You will not be entitled to receive any Performance
Pays bonus for the performance period ending this calendar year or for any
subsequent performance period.

12. Stock Options: You have a period of 12 months following your Termination
Date to exercise your stock options which have vested and not expired as of
your Termination Date. Option exercises must be in accordance with the terms
of the applicable Stock Option Plan. Your restricted stock shall be
considered 100% vested.

13. Confidentiality/No Admission: You agree to keep the existence and all
specific terms of this Agreement confidential and you further agree not to
disclose any information concerning this Agreement to any person, company,
entity or third party other than your attorney, accountant, tax advisor,
spouse and other immediate family. You and Jostens also agree that the
existence of this Agreement is not an admission by Jostens that the
termination of your employment was in any way wrongful or discriminatory or
violated any law.

14. Confidentiality Duty: You acknowledge that while employed by Jostens you had
access to Jostens' confidential and proprietary information and/or trade
secrets. You further acknowledge your continuing duty not to disclose,
furnish or otherwise make available such information and/or trade secrets to
any person, company, entity or third party.

15. Return of Company Property: You acknowledge that prior to the date on which
you sign this Agreement, you have returned all Jostens' property in your
possession or control, including, but not limited to, any company credit
card (or any credit card on which the company is guarantor), Jostens'
business files, documents or data in any form, computer, fax, printer or
other equipment. Further, you agree to repay to Jostens the amount of any
permanent or temporary advances and balance owing on any credit cards of any
monies due and owing Jostens or for which Jostens is a guarantor.

16. Waiver and Release of Claims: In consideration of the benefits provided to
you under this Agreement you agree: you release and forever discharge
Jostens, its subsidiaries and affiliated companies including each of their
officers, directors, agents and employees from and waive all causes of
action, damages, liability and claims of whatever nature relating to or
arising out of your employment with Jostens, its subsidiaries and affiliated
companies and the termination of your employment, including but not limited
to, claims under federal, state or local discrimination laws, claims arising
out of wrongful termination, whistle blowing claims and the Age
Discrimination in Employment Act. The prior sentence does not release or
discharge Jostens or you from obligations under this Agreement or which
arise after the date you sign this

4
<PAGE>

Agreement. Nothing in this Agreement prevents you from filing a charge or
complaint, including a challenge to the validity of this Agreement or the
waiver and release of claims in this section, with the Equal Employment
Opportunity Commission or participating in any investigation or proceeding
conducted by the Equal Employment Opportunity Commission.

17. Revocation:

a You have the right to revoke only that portion of this waiver and release
which relate to claims under the Age Discrimination in Employment Act
within 7 days from the date you sign this Agreement. You likewise have
the right to rescind only that portion of this waiver and release which
relates to claims under the Minnesota Human Rights Act by written notice
to Jostens within 15 days from the date you sign this Agreement. To be
effective, this rescission or revocation must be in writing and hand-
delivered or mailed to Jostens to the attention of Rodney Jordan,
Jostens, 5501 Norman Center Drive, Bloomington, Minnesota 55437 and sent
by certified mail, return-receipt requested. Rescission or revocation of
the release will result in cessation of any future separation payments to
be paid.

b You agree that if you exercise any right of rescission or revocation,
payments made to you by Jostens under this Agreement will be sufficient
consideration for the release of all other claims you have against
Jostens, except those under the Age Discrimination in Employment Act and
in Minnesota, those under the Minnesota Human Rights Act.

18. Miscellaneous: You acknowledge that you have been at least 21 days from the
date you receive this Agreement to consider this Agreement and that you have
been advised to and have had the opportunity to consult legal counsel of
your own choosing concerning this Agreement and that you have entered into
it of your own free will and without compulsion. Both you and Jostens agree
that any written changes to this Agreement, whether material or immaterial
will not restart the running of the 21-day period.

This Agreement contains the entire agreement and understanding of the
parties. No representations have been made or relied upon by either party
other than those that are expressly set forth in this Agreement, and each
party has entered into this Agreement voluntarily and without coercion. If
any portion or provision of this Agreement is deemed unenforceable, the
Agreement will be deemed modified to remaining provisions will remain in
full force and effect.

This Agreement may not be altered, amended or modified unless done in
writing and signed by an executive officer of Jostens and you. Nothing in
this Agreement, however, in any way prevents or limits Jostens from amending
or terminating any of its benefit plans, policies or practices and in such a
case, your rights would be determined solely under the terms of the plan,
policy or practice in question.

5
<PAGE>

If this Agreement is acceptable to you, please sign and return this letter
to Rodney Jordan, Jostens, 5501 Norman Center Drive, Minneapolis, Minnesota
55437 by September 6, 1999. Should any overpayments be made to you under
this Agreement or after a revocation or rescission of this Agreement, you
are responsible for immediate repayment to Jostens.

Yours truly,

By /s/ Robert Burhmaster
- ------------------------------------------
Robert Burhmaster
Chief Executive Officer

AGREED AND ACCEPTED:

By /s/ John Mann
- ------------------------------------------
John Mann

August 13, 1999
- ------------------------------------------
DATE

6
<PAGE>

ACKNOWLEDGMENT

I acknowledge that on August 13, 1999, I was provided with the attached
Separation Agreement ("Agreement").

I further acknowledge that I have been advised to consult with an attorney
before entering into the attached Agreement, and that I have been given a period
of at least 21 days to consider whether to accept the Agreement.

I have received and read the above acknowledgment, and I fully understand
its meaning.

By /s/ John Mann
- ------------------------
John Mann

August 13, 1999
- ------------------------
Date

<PAGE>
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Jostens, Inc. and subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED YEARS ENDED
------------------------------ ------------------ --------------------
(UNAUDITED) JANUARY 1 JANUARY 2 JANUARY 3 DECEMBER 28 JUNE 30 JUNE 30
DOLLARS IN THOUSANDS 2000 1999 1998 1996 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS

Income from continuing operations
before income taxes .................... $ 74,659 $ 83,520 $ 93,383 $ 26 $ 87,479 $ 93,893

Interest expense
(excluding capitalized interest) ....... 7,312 7,014 6,854 4,324 9,296 5,350

Portion of rent expense under
long-term operating leases
representative of an interest factor ... 1,483 1,233 2,133 1,070 2,103 2,100

Amortization of debt expense ........... 174 12 12 6 107 102
- ------------------------------------------------------------------------- -------- -------------------
Total earnings ......................... $ 83,628 $ 91,779 $102,382 $ 5,426 $ 98,985 $101,445
========================================================================= ======== ===================

FIXED CHARGES

Interest expense
(including capitalized interest) ....... 7,713 7,717 6,854 4,324 9,296 5,350

Portion of rent expense under
long-term operating leases
representative of an interest factor ... 1,483 1,233 2,133 1,070 2,103 2,100

Amortization of debt expense ........... 174 12 12 6 107 102
- ------------------------------------------------------------------------ -------- -------------------
Total fixed charges .................... $ 9,370 $ 8,962 $ 8,999 $ 5,400 $ 11,506 $ 7,552
======================================================================== ======== ===================
Ratio of earnings to fixed charges ..... 8.9 10.2 11.4 1.0 8.6 13.4
</TABLE>

<PAGE>

EXHIBIT 21

JOSTENS, INC. AND SUBSIDIARIES AS OF MARCH 1, 2000.

NAME OF COMPANY Jurisdiction of Incorporation
- -------------- -----------------------------

American Yearbook Company, Inc. Kansas
Jostens Canada, Ltd. Canada
Balfirm Canada, Inc. Canada
Jostens Can Investments B.V. The Netherlands
Jostens International Holding B.V. The Netherlands
C.V. Jostens Global Trading The Netherlands
JC Trading, Inc. Puerto Rico
Conceptos Jostens, S.A. de C.V. Mexico
Reconocimientos E Incentivos, S.A. de C.V. Mexico

<PAGE>

EXHIBIT 23

CONSENT OF ERNST & YOUNG LLP

We consent to the incorporation by reference in the Registration Statements on
Form S-3 (Registration Statement 33-40233 and 333-83649) and the Registration
Statements on Form S-8 (Registration Statement 2-95076, 33-19308, 33-58414,
333-00713, 333-13221, 333-13223, 333-56455 and 333-72347), of our report dated
February 2, 2000, with respect to the consolidated financial statements of
Jostens, Inc., included in this Annual Report (Form 10-K), and our report
included in the following paragraph with respect to the financial statement
schedule included in this Annual Report (Form 10-K) of Jostens, Inc. for the
year ended January 1, 2000.

Our audits also included the financial statement schedule of Jostens, Inc.
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP
---------------------

Minneapolis, Minnesota
March 6, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Jostens, Inc. as of and for the year ended
January 1, 2000 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 38,517
<SECURITIES> 0
<RECEIVABLES> 113,413
<ALLOWANCES> (5,775)
<INVENTORY> 87,839
<CURRENT-ASSETS> 286,309
<PP&E> 271,790
<DEPRECIATION> (181,150)
<TOTAL-ASSETS> 407,716
<CURRENT-LIABILITIES> 357,142
<BONDS> 3,600
0
0
<COMMON> 11,108
<OTHER-SE> 25,402
<TOTAL-LIABILITY-AND-EQUITY> 407,716
<SALES> 782,438
<TOTAL-REVENUES> 782,438
<CGS> 349,691
<TOTAL-COSTS> 349,691
<OTHER-EXPENSES> 351,089
<LOSS-PROVISION> 1,882
<INTEREST-EXPENSE> 7,486
<INCOME-PRETAX> 74,659
<INCOME-TAX> 31,480
<INCOME-CONTINUING> 43,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,179
<EPS-BASIC> 1.27
<EPS-DILUTED> 1.27

</TABLE>