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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS 240.14a-11(c) or SS 240.14a-12
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Gibson Greetings, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
5) Total Fee Paid:
____________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________________________
3) Filing Party:
____________________________________________________________________________
4) Date Filed:
____________________________________________________________________________
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GIBSON GREETINGS, INC.
2100 Section Road
Cincinnati, Ohio 45237
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of Gibson Greetings, Inc. will
be held at The Phoenix, 812 Race Street, Cincinnati, Ohio, at 12:00 p.m.,
Eastern Daylight time, on April 24, 1997 for the following purposes:
1. To elect two directors;
2. To approve the Gibson Greetings, Inc. 1991 Stock Incentive
Plan, as amended and restated; and
3. To transact such other business as properly may come before
the meeting.
Stockholders of record at the close of business on March 7, 1997
are entitled to receive notice of, and to vote at, the meeting.
_____________________________________________________________________________
BY ORDER OF THE BOARD OF DIRECTORS, March 17, 1997
HAROLD L. CALDWELL
SECRETARY
_____________________________________________________________________________
IMPORTANT:
TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED
PROXY CARD AND MAIL IT PROMPTLY. THE ENCLOSED RETURN ENVELOPE REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES OR CANADA.
_____________________________________________________________________________
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GIBSON GREETINGS, INC.
2100 Section Road
Cincinnati, Ohio 45237
(513) 841-6600
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Gibson Greetings, Inc. of proxies
to be voted at the Annual Meeting of Stockholders on April 24, 1997.
Except as otherwise indicated, "the Company" as used herein refers to
Gibson Greetings, Inc. and its subsidiary corporations taken as a whole.
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about March 17, 1997.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on
March 7, 1997, the record date for the meeting, was 16,251,806 shares of
common stock, $.01 par value, all of one class and each entitled to one
vote. The holders of at least a majority of the outstanding shares of
common stock must be represented in person or by proxy at the Annual
Meeting for the meeting to be held.
PROXIES AND VOTING
Stockholders are urged to: read carefully the material in this
Proxy Statement; specify their choice on each matter by marking the
appropriate boxes on the enclosed proxy card; and sign, date and return the
card in the enclosed stamped envelope. A stockholder who executes a proxy
may revoke or revise that proxy in writing at any time before the meeting
by notice to the Company's Secretary or may, by voting by ballot at the
meeting, cancel any proxy previously returned.
The Company's Proxy Committee consists of two individuals, each
of whom is an officer of the Company. If a stockholder's proxy card is
properly executed and returned, but no choice is specified, the shares will
be voted by the Proxy Committee as recommended by the Company. At the
present time it is intended that proxies which contain no instructions to
the contrary will be voted "for" the nominees for director named in this
Proxy Statement and "for" the proposal to approve the amended and restated
1991 Stock Incentive Plan. Should any nominee not be available for
election, the proxies will be voted for the election of such other person
as may be recommended by the Company in place of such nominee. Proxy
cards, unless otherwise indicated by the stockholder, also confer upon the
Proxy Committee discretionary authority to vote all shares of the stock
represented by the proxies on any matter which properly may be presented
for action at the meeting. At the present time, the Company is not aware
of any business or matter which properly may be presented for action at the
meeting other than as is described in this Proxy Statement.
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In accordance with the General Corporation Law of the State of
Delaware and the Company's By-Laws, the affirmative vote of a plurality of
the shares of the Company's common stock present in person or represented
by proxy at the meeting and entitled to vote on the election of directors
will be sufficient for election of the nominees as directors. Any other
matter presented at the meeting will be determined by a vote of a majority
of the shares of common stock present in person or represented by proxy and
voting on that matter. Abstentions have the effect of negative votes;
broker non-votes are deemed to be absent shares. Votes at the meeting will
be tabulated by officers of the Company, who act as Judges of Election.
The Company has not established a system for confidential voting.
ATTENDANCE AT ANNUAL MEETING
To ensure the availability of adequate space for stockholders
wishing to attend the meeting, attendance may be limited to stockholders of
record or their proxies, beneficial owners of the Company's stock having
evidence of such ownership, and invited guests of Management. Please
indicate whether you plan to attend the Annual Meeting by checking the
appropriate box on the enclosed proxy card.
THE BOARD OF DIRECTORS
Pursuant to the Delaware General Corporation Law, as implemented
by the Company's Restated Certificate of Incorporation and By-Laws, all
corporate powers are exercised, and the Company's business, property and
affairs are managed, by or under the direction of the Board of Directors.
Currently the number of the Company's directors is set at seven,
divided into three classes, with Class I composed of three directors and
Classes II and III each containing two directors. The nominees in Class II
will be nominated for election as directors to serve until the Annual
Meeting in 2000 and until their successors are elected and qualified. The
directors in Class III will serve until the Annual Meeting in 1998 and the
directors in Class I will serve until the Annual Meeting in 1999.
Set forth below is certain information with respect to each of
the nominees and continuing directors.
Class I
(Terms expiring in 1999)
CHARLES D. LINDBERG, age 68. Mr. Lindberg has been a partner in
the law firm of Taft, Stettinius & Hollister, counsel to the Company, for
more than the past five years and currently serves as Managing Partner. He
has been a director of the Company since May 1991.
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ALBERT R. PEZZILLO, age 68. Mr. Pezzillo has been Chairman of
the Board of the Company since February 1996 and also served as the
Company's Chief Executive Officer from February until August 1996. He was
a business consultant from 1990 until 1996 after his retirement in 1990
from his position as Senior Vice President of American Home Products
Corporation, a manufacturer and marketer of ethical pharmaceuticals,
medical supplies and hospital, consumer health care, food and household
products. Prior to joining American Home Products in 1981, he held a
variety of executive positions with Warner Lambert Company and Colgate
Palmolive Company. Mr. Pezzillo became a director of the Company in April
1990.
C. ANTHONY WAINWRIGHT, age 63. Mr. Wainwright retired in
February 1997 from his position as Chairman of Harris, Drury, Cohen, Inc.,
an advertising agency located in Ft. Lauderdale, Florida. He was Chairman
of Compton Partners, Saatchi & Saatchi (formerly Campbell-Mithun-Esty), a
national advertising agency from 1994 to 1995 and was Vice Chairman of that
company from 1989 to 1994. From 1980 until 1989 he was President, Chief
Operating Officer and a director of The Bloom Companies, Inc., a holding
company for a national advertising agency group. Prior to 1980, Mr.
Wainwright held various executive positions with companies in the
advertising and marketing industries. He is also a director of All-Comm
Media Co., American Woodmark Corporation, Del Webb Corp. and Advanced
Polymer Systems. He has been a director of the Company since March 1988.
Class II
(Nominees for election to serve until 2000)
GEORGE M. GIBSON, age 62. Mr. Gibson retired in 1992 from The
Procter & Gamble Company, having served as its Vice President - Treasurer
from 1987 to 1992 and as Vice President - Comptroller from 1973 to 1987.
He was associated with Procter & Gamble, a manufacturer of consumer
household products, for over 35 years. Mr. Gibson was elected a director
of the Company in April 1996 to fill a vacancy in the Class II directors.
FRANK STANTON, age 67. Until his retirement in 1990, Mr. Stanton
had served as Chairman and Chief Executive Officer of MRB Group, Inc., a
world-wide media and marketing research organization, which he founded in
1987. From 1974 until 1989 he was President and Chief Executive Officer of
Simmons Market Research Bureau, a leading rating service for the magazine
industry and now a subsidiary of MRB Group, Inc. He has been a director of
the Company since June 1985.
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Class III
(Terms expiring in 1998)
FRANK J. O'CONNELL, age 53. Mr. O'Connell has been the Company's
Chief Executive Office and President since August 1996. He was a business
consultant from May 1995 to August 1996. He served as the President and
Chief Executive Officer of SkyBox International, Inc. ("SkyBox"), a
trading card manufacturer, from July 1991 to May 1995. Prior to joining
SkyBox, he was a venture capital consultant from February 1990 to July 1991
and served as President of Reebok Brands, North America from February 1988
to February 1990. He became a director of the Company in August 1996.
CHARLOTTE A. ST. MARTIN, age 51. Ms. St. Martin has been
Executive Vice President of Marketing of Loews Hotels since November 1996.
From 1989 to November 1996, she served as Executive Vice President,
Operations and Marketing for Loews Hotels. Previously she served Loews
Hotels in a variety of other executive capacities. Loews Hotels owns and
operates fourteen hotels nationally and internationally. Ms. St. Martin
is a former President of the Dallas Convention and Visitors' Bureau. She
is also a director of Ryland Group, Inc. She has been a director of the
Company since August 1993.
Compensation of Directors. Since January 1, 1993, directors have
been entitled to receive fees of $900 for each Board meeting attended and
$650 for each committee meeting attended, plus reimbursement of expenses.
In addition to these fees, the Company pays an annual fee of $18,000 for
services of directors who are not employees of the Company and an annual
fee of $2,500 per chairmanship to each committee chairman. Pursuant to the
Company's 1996 Nonemployee Director Stock Plan (the "Stock Plan"),
nonemployee directors are required to take one-half their annual retainer
in shares of the Company's common stock. Additionally, pursuant to the
Company's 1989 Stock Option Plan for Nonemployee Directors (the "Directors
Plan"), each nonemployee director of the Company, at the close of business
on the day of the Annual Meeting of Stockholders, receives an option to
purchase 1,000 shares of common stock.
The Board of Directors established an Office of the Chairman in
February 1996 with Mr. Pezzillo as Chairman of the Board and Messrs.
Stanton and Wainwright as members of the Office. Each received $900 per
day devoted to the business of the Company. During 1996, Messrs.
Pezzillo, Stanton and Wainwright received $54,275, $10,800 and $7,875,
respectively, for these services. The Office was disbanded in August 1996,
but Mr. Pezzillo remained as Chairman of the Board. Additionally, in
August 1996, the Compensation Committee granted Mr. Pezzillo an option to
purchase 24,750 shares of common stock and authorized a special fee of
$50,000 per year for his services as Chairman of the Board. Mr. Pezzillo
received $17,473 for 1996 under this arrangement.
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In order to continue to attract and retain outstanding
individuals to serve as nonemployee directors of the Company ("Outside
Directors"), the Company has a Retirement Plan for Outside Directors (the
"Directors Retirement Plan"). Outside Directors are defined by the
Directors Retirement Plan as directors not employed by the Company or a
subsidiary and include former or retired employees if they are not vested
under any other Company retirement plan. In order to qualify for benefits
under the Directors Retirement Plan, an Outside Director must have served
the Company as such for at least nine years. An Outside Director who does
qualify for benefits under the Directors Retirement Plan will receive an
annual benefit, payable quarterly for life, equal to the amount of the
Company's annual fee (not including payments for serving as chairman of a
Board committee) paid to Outside Directors on the date on which the Outside
Director's service to the Company ceases (the "Annual Retainer"). Benefits
under the Directors Retirement Plan commence upon termination of service
for directors who have attained age 65 and are payable beginning at age 65
to those whose services terminate prior to that age. Should an Outside
Director who has qualified for benefits under the Plan die before receiving
any benefits, the Outside Director's designated beneficiary or estate will
be entitled to receive a payment equal to five times the Annual Retainer.
Should an Outside Director die after the commencement of benefits but prior
to having received them for five years, the beneficiary or estate will
receive an amount equal to five times the Annual Retainer less any benefits
already paid.
Meetings; Committees of the Board. The Board of Directors held 5
meetings in 1996. The Board of Directors currently has an Audit Committee
and a Compensation Committee. The Audit Committee deals with financial
reporting and control of the Company's assets. This Committee, consisting
of Frank Stanton, Chairman, Charles D. Lindberg, George M. Gibson and
Albert R. Pezzillo in 1996, held 4 meetings during that year. The
Compensation Committee, composed in 1996 of C. Anthony Wainwright,
Chairman, Charlotte A. St. Martin and Frank Stanton, sets cash
compensation for the Company's executive officers and certain other key
employees, approves terms and conditions of employment contracts for
certain key executives and establishes terms and conditions of the
Company's bonus and retirement plans. The Committee also administers all
of the Company's Stock Option and Incentive Plans (except the Directors
Plan, which is administered by the full Board), selects the persons to whom
awards will be made under those Plans and, subject to the limitations
imposed by the Plans, establishes the terms and conditions of each award.
The Compensation Committee held 10 meetings in 1996. Each incumbent
director attended at least 75% of the aggregate of the total number of
Board of Directors meetings which he or she was eligible to attend and of
the total number of meetings of committees of the Board on which the
director served during the 1996 calendar year, except Ms. St. Martin who
attended 73% of the aggregate number of meetings.
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APPROVAL OF AMENDED AND RESTATED
1991 STOCK INCENTIVE PLAN
On March 11, 1997, subject to stockholder approval, the Board of
Directors amended and restated the Gibson Greetings, Inc. 1991 Stock
Incentive Plan (the "Plan"). The Plan provides for the grant to key
personnel of the Company and its subsidiaries of options to purchase shares
of common stock and for the allocation of shares of common stock which are
subject to restriction on transfer and to a right of repurchase by the
Company. The purposes of the Plan are to provide material incentives for
the continued services of key employees and to enable the Company to
attract able executives to employment, thereby advancing the interests of
the Company. Any regular, full-time key employee of the Company in a
salaried position, including officers and employee-directors, is eligible
to participate in the Plan.
The Plan was originally adopted by the Board of Directors and
approved by the Company's stockholders in 1991; in 1993, with stockholder
approval, it was amended to increase, from 500,000 to 1,000,000, the number
of shares of common stock issuable.
The Amendments. The amendments contained in the Plan, as amended
and restated on March 11, 1997, (i) increase from 1,000,000 to 2,500,000
the number of shares of the Company's common stock issuable pursuant to the
Plan, (ii) conform the Plan to certain requirements of Section 162(m) of
the Internal Revenue Code (the "Code"), (iii) change the minimum exercise
price for nonqualified options, (iv) delete provisions relating to the
cancellation and regrant of options, (v) change the method of counting
shares available for issuance under the Plan, (vi) revise certain
provisions relating to Plan administration and (vii) provide that
nonqualified options may be transferred to such persons or entities, and
under such terms and conditions, as may be permitted by the committee
administering the Plan.
The increase in the number of shares issuable under the Plan will
enable the Company to fulfill its agreements to grant to Frank J.
O'Connell, the Company's Chief Executive Officer, and Greg Ionna, the
Company's Executive Vice President, options to purchase 1,000,000 and
50,000 shares of common stock, respectively. It also will provide
sufficient remaining shares in the Plan for future grants. The grant to
Mr. O'Connell is one of the terms of his employment agreement with the
Company (see "Executive Compensation and Other Information -- Employment
Contracts"); however, when he and the Company entered into the employment
agreement in August 1996, only approximately 787,000 shares remained
available for option grants under all of the Company's Stock Option and
Stock Incentive Plans. Therefore, Mr. O'Connell and the Company agreed
that options for 250,000 shares of the 1,000,000 total would be granted
contingent upon stockholder approval of additional shares. Mr. Ionna's
50,000 share option grant, made in connection with his December 1996
employment agreement, also is contingent upon stockholder approval of the
amended Plan. If the Plan is not approved, Mr. O'Connell has the right,
during the 60 days following the Annual Meeting, to terminate his
employment agreement. In that case he would receive, in addition to any
accrued and unpaid salary and benefits, a pro-rata portion of any incentive
compensation which, under the terms of his agreement, would become payable
with respect to 1997.
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The amended Plan contains provisions necessary for options (which
have exercise prices of at least 100% of the fair market value of the
common stock on the date of grant) to meet the requirement for
performance-based compensation pursuant to Section 162(m) of the Code and
its regulations (together, "Code Section 162(m)"). If these requirements
are not met, Code Section 162(m) requires that the stock price appreciation
of an exercised option be included in a $1,000,000 annual cap on the
deductibility of compensation to each of a company's named executive
officers (as identified on the Summary Compensation Table). Specifically,
the Plan provides that, for compensation resulting from an option grant to
be excluded from the deduction limitation of Code Section 162(m), the
option must be granted by a committee composed of "outside directors"
within the meaning of Code Section 162(m). Additionally, under the terms
of the Plan, options for no more than 750,000 shares of common stock may be
granted to any eligible employee during any period of twelve consecutive
months. By approving the amended Plan, stockholders will satisfy the
performance goal approval requirements of Code Section 162(m). If the Plan
is not approved, in accordance with the Internal Revenue Service's
interpretation of Code Section 162(m), there can be no additional grants
under the Plan to the Company's named executive officers.
Previously, the Plan provided that the per share exercise price
for any nonqualified option must be at least 50% of the fair market value
of the common stock on the date of grant. This provision gave the Company
flexibility to grant deeply discounted options, should it so desire.
Historically, however, the Company has granted all options at a price equal
to 100% of fair market value. The Company does not foresee a future need
to grant nonqualified options at a price other than either 100% of fair
market value or a small discount. Therefore, the Plan has been amended to
provide that the exercise price per share for a nonqualified option must be
at least 90% of the fair market value of the common stock on the date the
option is granted. For purposes of the Plan, "fair market value" is the
closing price of the common stock on the relevant date.
It is the Company's present intention not to "reprice" options
granted under the Plan. Therefore, the Plan also has been amended to
delete provisions expressly setting forth the authority to cancel
outstanding options and grant new, substitute options.
As amended, the Plan changes the method of counting shares
available for future issuance. The Plan permits payment of an option's
exercise price in cash, by the tender of shares of the Company's common
stock or by a combination of these methods. In the past, shares tendered
have not been available for issuance under the Plan. As a result of a
change in the Securities and Exchange Commission's position regarding share
counting, it now is permissible for such shares to be counted as available
for issuance under a plan, and the Plan so provides. As in the past,
appropriate adjustments in the total number of shares issuable under the
Plan and in the number and prices of shares covered by outstanding options
may be made to give effect to any changes in the Company's capitalization
(stock splits, stock dividends, etc.).
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The amended Plan also contains revised provisions relating to its
administration. The Plan is administered by a committee (the "Committee")
of the Board of Directors. Previously, in accordance with the requirements
of Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Committee was required to be composed of
"disinterested directors." Rule 16b-3 has been amended and, as a result,
the Plan also has been amended to provide that, for the purpose of grants
to and transactions with persons who are subject to Section 16 of the
Exchange Act, each committee member must be a "Non-Employee Director" as
now defined in Rule 16b-3. Each member of the Company's Compensation
Committee, which currently administers the Plan, qualifies as a
Non-Employee Director. Alternatively, the Plan provides that any functions
of the Committee may be performed by the Board of Directors itself.
In connection with its amendments to Rule 16b-3, the Securities
and Exchange Commission eliminated prior restrictions on the
transferability of options. Therefore, the Plan has been amended to allow
the transfer of nonqualified options to persons or entities, and under
circumstances, approved by the Committee.
To date, the Committee has made no decisions regarding the
persons to whom, or the conditions under which, it would permit the
transfer of an option. Nonqualified options also have been, and continue
to be, transferable pursuant to domestic relations orders.
Grants. Approximately 200 individuals may be eligible to receive
option grants or allocations of restricted shares under the Plan. The Plan
has no limitation on the maximum number of participants. No restricted
shares have been allocated under the Plan. As of the date of this Proxy
Statement, options for the following numbers of shares were outstanding
under the Plan: Mr. O'Connell, 495,000 shares; Mr. Ionna, 8,000 shares;
Mr. Farley, 15,000 shares; Mr. Pezzillo, none; Mr. Sottile, none; Mr.
Flaherty, none; Mr. Sweeney, 15,000 shares; all current executive officers
as a group, 533,000 shares; all current directors who are not executive
officers, none; and all employees, including all current officers who are
not executive officers, as a group, 340,485 shares. In addition, options
for 250,000 shares and 50,000 shares have been granted to Messrs.
O'Connell and Ionna, respectively, which are contingent on stockholder
approval of the amended Plan. The balance of the options held by Mr.
O'Connell were granted under the Company's 1989 Stock Incentive Plan. The
recipients of, and numbers of shares subject to, future grants under the
Plan are not determinable at this time.
Accounting Effects. Generally, under applicable accounting
practices, neither the grant at fair market value nor the exercise of an
option results in any charge against earnings. On the other hand, the
grant of an option or the sale of restricted shares at a price below fair
market value will result in compensation expense to the Company, with the
expense and related tax benefits being recognized systematically in the
Company's financial statements over the applicable vesting or restricted
period.
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The Company historically has granted all options at an exercise
price equal to 100% of the fair market value of its common stock on the
date of grant. Indeed, with regard to Mr. O'Connell's options (which were
granted on August 25, 1996), 400,000 have an exercise price of $12.50 per
share (100% of fair market value on the date of grant), 300,000 have an
exercise price of $14.50 per share (116% of fair market value), 200,000
have an exercise price of $15.50 per share (124% of fair market value) and
100,000 have an exercise price of $16.50 per share (132% of fair market
value). Of these, options for 150,000 shares at $15.50 per share and for
100,000 shares at $16.50 per share are contingent on stockholder approval
of the amended Plan. As previously noted, Mr. Ionna's 50,000 share option
grant, which has an exercise price of $19.00 per share (100% of fair market
value on December 18, 1996, the date of grant), also is contingent on
stockholder approval.
Despite the general rule described above, current accounting
practices treat the date of stockholder approval of a contingent option,
instead of the date on which the Board or Committee granted the option, as
the date of grant for purposes of measuring whether an option was granted
at 100% of fair market value. Accordingly, if the fair market value of the
Company's common stock on the date of the Annual Meeting exceeds the
exercise prices of the contingent options held by Messrs. O'Connell and
Ionna, these options will be treated as having been granted below fair
market value and, assuming stockholder approval of the Plan, the Company
will incur a non-cash charge to earnings in an amount equal to the
difference. On March 7, 1997, the fair market value of the common stock
was $20.875 per share. Assuming a fair market value on the date of
stockholder approval of $20.875 per share, the Company would record a
non-cash charge of $1,337,500. This compensation expense would be
recognized over the period that corresponds to the options' vesting period
(through September 1998 for the O'Connell options and December 1999 for the
Ionna options).
Recommendation of the Board. The Board of Directors recommends
that stockholders vote "FOR" approval of the Plan as amended and restated.
Only 44,238 shares were available for grants under the Company's Stock
Option and Stock Incentive Plans (excluding the Directors Plan) at December
31, 1996. The Company believes that there should be at all times
sufficient shares available for issuance under its plans so that the
selection of an appropriate mix of cash and non-cash incentive compensation
is not limited by a lack of available shares. Additionally, the Board
believes that its Stock Option and Stock Incentive Plans provide effective
long-term incentives to management to maximize shareholder value. If the
amended Plan is approved, there will be 1,221,405 shares remaining
available under it for future grants and a total of 1,232,838 shares under
all of the Company's Stock Option and Incentive Plans (excluding the
Directors Plan).
A summary of the amended Plan, to the extent not previously
described, is given below. The full text of the Plan is set forth as
Exhibit A to this Proxy Statement and should be read for complete
information.
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Options. Subject to the limitations imposed by the Plan, the
Committee selects participants to whom options are granted and decides the
number of shares covered by each option grant, the type of option and the
terms and provisions of each option agreement. In its discretion, the
Committee may provide for restrictions on exercise which may vary from one
option agreement to another.
More than one option and more than one form of option may be
granted to any optionee. Options may be either "incentive stock options"
pursuant to Section 422 of the Code or "nonqualified" options. The option
price for any incentive stock option may not be less than 100% of the fair
market value of the Company's common stock on the date the option is
granted, and no incentive stock option may be exercised after ten years
from date of grant. Incentive stock options granted to an optionee holding
more than 10% of the Company's outstanding shares must be granted at a
price of at least 110% of fair market value on the date of grant and may be
for a term no longer than five years. An incentive stock option is not
transferable, except upon on optionee's death, and during his or her
lifetime may be exercised only by the optionee.
An option which is not exercisable terminates at the time of an
option holder's termination of employment with the Company. An option
which is then exercisable terminates, if not exercised, (i) 30 days after
termination of employment, if the termination was not a result of
retirement, death or disability, or (ii) three months after termination of
employment because of retirement or (iii) one year after the date of death
or commencement of disability. The Plan contains authority to vary these
termination provisions with respect to the exercise of nonqualified
options, and the Board has provided that an optionee may exercise a
nonqualified option following termination of employment because of
retirement, death or disability until the earlier of three years following
the date of retirement, death or commencement of disability or the fixed
expiration date of the option.
Generally, an optionee recognizes no income upon the grant or
exercise of an incentive stock option and, if the stock purchased on option
exercise is not disposed of within two years from the date of grant nor
within one year after exercise, then the amount realized on the sale or
taxable exchange of such stock in excess of the option price is treated as
a long-term capital gain and the Company is not entitled to a federal
income tax deduction. If stock acquired through the exercise of an
incentive stock option is disposed of before the expiration of either of
the prescribed holding periods, the lesser of (i) the difference between
the option price and the fair market value at the time of exercise or (ii)
the difference between the option price and the amount realized upon
disposition is treated as ordinary income to the optionee at the time of
disposition and is allowed as a deduction to the Company; any excess of the
amount realized upon sale over the fair market value at the time of
exercise is generally treated as capital gain to the optionee.
-11-
PAGE
<PAGE>
Under most circumstances, an optionee who exercises a
nonqualified option recognizes taxable ordinary income, and the Company is
entitled to a deduction, at the time of exercise of the option in an amount
equal to the excess of the fair market value of the shares purchased over
the option price. At the time of a subsequent sale of the shares, the
optionee recognizes a taxable capital gain or loss based upon the
difference between the fair market value at the time of exercise and the
selling price.
Restricted Shares. The Committee also may offer restricted
shares of common stock to participants selected by it. The number of
shares which may be purchased, the purchase price per share (which may be
none or a nominal amount) and any other terms, conditions and restrictions
are determined by the Committee. If the participant purchases the
restricted shares, he or she must pay the purchase price, if any, in full
prior to issuance of share certificates and the certificates will bear a
legend stating that the shares are subject to the restrictions contained in
the Plan and the participant's Restricted Share Agreement.
For a period of time determined by the Committee (the Restricted
Period), the restricted shares may not be transferred, pledged, sold or
disposed of in any manner. On the last day of the Restricted Period, or
the earlier lapse or release of the restrictions as described below, the
restricted shares cease to be subject to restriction. If a participant's
employment with the Company terminates because of death or disability, the
restrictions on transfer automatically terminate as to that number of
restricted shares which is equal to the total number of such shares
multiplied by a fraction, the numerator of which is the number of months
which have elapsed from the date of allocation and the denominator of which
is the total number of months during the Restricted Period. The remaining
restricted shares must be resold to the Company at their original purchase
price or at such other price as is set in the Restricted Share Agreement.
If a participant's employment terminates during the Restricted Period for
any other reason, the participant is required to resell all restricted
shares to the Company, also at their original purchase price or at such
other price as is set in the Restricted Share Agreement. Restrictions and
resale requirements may be waived or removed by the Committee in its
discretion.
For federal income tax purposes, a participant may elect to treat
as income for the year in which the restricted shares are received the
difference between the purchase price and the fair market value of the
restricted shares at the date of purchase. If such an election is not
made, the participant realizes taxable income equal to the difference
between the purchase price and the then fair market value of the restricted
shares on the date on which the restrictions lapse. In general, the
Company is entitled to deduct amounts realized as income by a participant.
Other Matters. The Board of Directors may amend the Plan at any
time, but the Board may not, without stockholder approval, increase the
number of shares issuable under the Plan, change the option price of
optioned stock, change the requirement that the option price per share for
an incentive stock option be at least 100% of the fair market value of the
stock on the date of grant, extend the period during which incentive stock
options may be granted or exercised or, without the consent of the
optionee, change any option previously granted to that optionee.
-12-
PAGE
<PAGE>
Although the Plan has no fixed termination date, no incentive
stock option may be granted under it subsequent to February 2, 2001. The
Board of Directors may terminate the Plan at any time, in which case
unexercised options will continue in accordance with their terms and any
restricted shares will continue to be subject to the terms of the Plan for
the duration of their Restricted Periods. If the Company consolidates
with, merges into or transfers all of its assets to another corporation or
corporations, the Plan and any outstanding options will terminate unless
the surviving or acquiring corporation obligates itself to continue the
Plan.
The proceeds of the sale of stock under the Plan constitute
general funds of the Company and may be used by it for any purpose.
The Board of Directors intends to cause the following resolution
to be presented to stockholders for action at the Annual Meeting. The
affirmative vote of a majority of the shares of common stock present or
represented by proxy and entitled to vote will be required for approval,
with abstentions having the effect of votes against the proposal and broker
non-votes deemed to be absent shares.
RESOLVED, that the Gibson Greetings, Inc. 1991 Stock Incentive
Plan, as amended and restated on March 11, 1997, be, and it hereby is,
approved and adopted.
The Board of Directors recommends a vote "FOR" approval and
adoption.
-13-
PAGE
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Information. The following table sets forth, for each of
the three years in the period ending December 31, 1996, amounts of cash and
certain other compensation paid by the Company in respect of the year to
(i) Frank J. O'Connell, the Company's Chief Executive Officer since August
1996, Albert R. Pezzillo who, as Chairman of the Board, also served as a
non-employee Chief Executive Officer from February to August 1996, and
Benjamin J. Sottile, the Company's Chief Executive Officer until February
1996, (ii) each of the two other executive officers of the Company who were
serving as executive officers at the end of 1996 and whose 1996 salary and
bonus exceeded $100,000 (Greg Ionna and Paul W. Farley) and (iii) two
former executive officers of the Company whose 1996 salary and bonus
exceeded $100,000. These persons are sometimes referred to hereafter as
the "named executive officers."
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
----------------------------------+-----------------------+----------
| Secur- |
Other | ities | All
Annual | Restricted Under- | Other
Compen- | Stock lying | Compen-
Salary Bonus sation | Award(s) Options | sation
Name and Principal Position Year ($) ($) ($)(1) | ($) (#) | ($)(2)
- --------------------------- ---- --------- --------- --------- + --------- --------- + ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank J. O'Connell (3) 1996 $124,744 $200,000 $15,952 | --- 1,000,000 | $218,601
Chief Executive Officer | |
| |
Albert R. Pezzillo (4) 1996 $111,911 --- --- | --- 25,750 | ---
Chief Executive Officer | |
| |
Benjamin J. Sottile 1996 $461,300 --- --- | --- --- | $54,512
Chief Executive Officer 1995 $472,250 $69,000 --- | --- --- | $53,025
1994 $462,900 --- --- | --- 30,000 | $53,025
| |
Greg Ionna 1996 $195,625 $145,000 --- | --- 55,000 | $4,308
Executive Vice President, 1995 $165,625 $100,000 --- | --- 52,000 | $2,828
Card Division 1994 $150,000 --- --- | --- 12,000 | $2,673
| |
Paul W. Farley 1996 $109,000 $71,000 --- | --- --- | $4,134
Vice President - Finance, 1995 $104,000 $80,000 --- | --- 18,000 | $2,922
Card Division 1994 $103,250 --- --- | --- 6,000 | $2,909
| |
William L. Flaherty 1996 $172,083 --- $18,891 | --- 5,000 | $143,939
Senior Vice President 1995 $210,000 $160,000 $16,110 | --- --- | $22,115
1994 $179,375 --- $24,353 | --- 12,000 | $52,781
| |
Stephen M. Sweeney 1996 $154,000 --- --- | --- --- | $8,736
Vice President 1995 $154,000 $80,000 --- | --- --- | $5,283
1994 $154,000 --- --- | --- 12,000 | $5,283
____________________________
-14-
PAGE
<PAGE>
<FN>
(1) For 1996 perquisites did not exceed the lesser of $50,000 or
10% of salary and bonus for any named executive officer.
(2) For 1996 includes the following: (i) matching contributions
to the Company's 401(k) Plan on behalf of each of Messrs. Sottile
($2,250), Ionna ($2,250), Farley ($2,250), Flaherty ($1,125) and
Sweeney ($2,250) in respect of their 1996 contributions to the
Plan; (ii) group term life insurance payments for Messrs.
O'Connell ($576), Sottile ($5,400), Ionna ($2,058), Farley
($1,884), Flaherty ($1,566) and Sweeney ($6,486); (iii) whole-life
and other insurance premiums of $46,862 for the benefit of Mr.
Sottile; (iv) reimbursement of relocation, temporary living and/or
travel expenses for Messrs. O'Connell ($218,025) and Flaherty
($21,345); and (v) a pro rata incentive payment ($100,000) and the
value of an automobile purchase ($19,903) for Mr. Flaherty.
(3) Mr. O'Connell was first employed by the Company in 1996.
(4) Salary amount represents fees paid for service as Chairman of
the Board and in the Office of the Chairman, annual retainer (half
of which was paid in shares of common stock) and Board and
committee meeting fees. See "The Board of Directors --
Compensation of Directors."
-15-
PAGE
<PAGE>
Stock Options. The following table contains information
concerning stock option grants to the named executive officers during the
year ended December 31, 1996. None of the Company's Stock Option or Stock
Incentive Plans provides for the grant of stock appreciation rights
("SARs").
</TABLE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants (1)
+-----------------+-----------------+-----------------+-----------------+
| | % of Total | | |
| | Options Granted | Exercise | | Grant Date
| Options Granted | to Employees in | or Base Price | Expiration |Present Value
Name | (#) | Fiscal Year | ($/Sh) | Date | $ (2)
- --------------------------+-----------------+-----------------+-----------------+-----------------+--------------
<S> <C> <C> <C> <C> <C>
Frank J. O'Connell | 400,000 | 36.0% | $12.500 | 8/24/06 | $2,633,240
| 300,000 | 27.0% | $14.500 | 8/24/06 | $394,860
| 200,000 (3) | 18.0% | $15.500 | 8/24/06 | $394,880
| 100,000 (4) | 9.0% | $16.500 | 8/24/06 | $171,250
| | | | |
Albert R. Pezzillo | 1,000 | 0.1% | $14.000 | 5/23/06 | $7,226
| 24,750 (5) | 2.2% | $12.500 | 8/25/06 | $162,932
| | | | |
Benjamin J. Sottile | --- | --- | --- | --- | ---
| | | | |
Greg Ionna | 5,000 | 0.5% | $14.375 | 6/12/06 | $37,097
| 50,000 (4) | 4.5% | $19.000 | 12/17/06 | $498,175
| | | | |
Paul W. Farley | --- | --- | --- | --- | ---
| | | | |
William L. Flaherty (6) | 5,000 | 0.5% | $14.375 | 6/12/06 | $37,097
| | | | |
Stephen M. Sweeney | --- | --- | --- | --- | ---
-16-
PAGE
<PAGE>
<FN>
(1) Mr. O'Connell's options vest as follows: 400,000 shares on
August 25, 1996, 300,000 shares on August 25, 1997 and 300,000
shares on August 25, 1998. Mr. Pezzillo's options vest as
follows: 1,000 shares on May 23, 1997 and 24,750 shares on August
25, 1996. Mr. Ionna's options vest at an annual rate of one-third
per year commencing (i) June 13, 1997 for the options expiring
June 12, 2006 and (ii) December 18, 1997 for the options expiring
December 17, 2006. The exercise price of all options may be paid
in cash or by the transfer of shares of the Company's common stock
valued at their fair market value on the date of exercise. Each
option becomes exercisable in full (i) if any person becomes, or
commences a tender offer which could result in the person
becoming, the beneficial owner of more than 50% of the outstanding
shares of the Company's common stock or (ii) unless the survivor
or transferee corporation agrees to continue the option, in the
event of the execution of an agreement of merger, consolidation or
reorganization pursuant to which the Company is not to be the
surviving corporation or the execution of an agreement of sale or
transfer of all or substantially all of the assets of the Company.
(2) In accordance with Securities and Exchange Commission rules,
the Black-Scholes option pricing model was used to estimate the
grant date present value of the options shown. The Company's use
of this model should not be construed as an endorsement of its
accuracy at valuing options. All stock option valuation models,
including Black-Scholes model, require a prediction about the
future movement of the stock price. The real value of an option,
if any, depends upon the actual performance of the Company's stock
during the applicable period.
(3) Options for 150,000 shares are subject to stockholder
approval. See "Approval of Amended and Restated 1991 Stock
Incentive Plan."
(4) Subject to stockholder approval. See "Approval of Amended and
Restated 1991 Stock Incentive Plan."
(5) The shares of common stock issuable upon exercise of these
options have not been registered under the Securities Act of 1933
and will be restricted when issued.
(6) All options terminated unexercised prior to fiscal year-end as
a result of Mr. Flaherty's termination of employment with the
Company.
-17-
PAGE
<PAGE>
With respect to each named executive officer, the following table
sets forth information concerning stock option exercises during 1996 and
unexercised options held at December 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
| | | Number of |
| | | Securities | Value of
| | | Underlying | Unexercised
| |Value Realized ($)|Unexercised Options| In-the-Money
| | | at FY-End (#) | Options at FY-End
| | (Market Price on | | ($)
|Shares Acquired| Exercise Less | Exercisable/ | Exercisable/
Name |on Exercise (#)| Exercise Price) | Unexercisable | Unexercisable
- ------------------------+---------------+------------------+-------------------+-----------------------
<S> <C> <C> <C> <C>
Frank J. O'Connell | --- | --- | 400,000/600,000 | $2,850,000/$2,675,000
| | | |
Albert R. Pezzillo | --- | --- | 30,750/1,000 | $185,844/$5,625
| | | |
Benjamin J. Sottile (1) | 25,000 | $40,625 | ---/--- | ---/---
| | | |
Greg Ionna | 17,333 | $162,497 | ---/89,667 | ---/$399,837
| | | |
Paul W. Farley | --- | --- | 8,500/12,000 | $79,875/$118,500
| | | |
William L. Flaherty (1) | --- | --- | ---/--- | ---/---
| | | |
Stephen M. Sweeney | 2,000 | $15,750 | 30,500/4,000 | $38,750/$10,000
<FN>
(1) All previously unexercised options terminated prior to fiscal
year-end as a result of Messrs. Sottile's and Flaherty's
terminations of employment with the Company.
-18-
PAGE
<PAGE>
Pension Plans. The Pension Plan Table set forth below shows
estimated annual pension benefits payable to a covered participant under
the Company's Retirement Income Plan (the "Retirement Plan"), a qualified
defined benefit pension plan, and under the Gibson Greetings, Inc. ERISA
Makeup Plan (the "Makeup Plan"), a nonqualified supplemental pension plan
providing benefits that would otherwise be denied participants because of
certain Internal Revenue Code limitations on qualified plan benefits.
Benefits shown are computed as a straight life annuity for an employee
retiring at age 65 in 1996 with no offsets.
</TABLE>
<TABLE>
<CAPTION>
Pension Plan Table
Years of Service
--------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 6,600 $ 13,200 $ 19,800 $ 26,400 $ 33,000 $ 39,600 $ 46,200
200,000 14,100 28,200 42,300 56,400 70,500 84,600 98,700
300,000 21,600 43,200 64,800 86,400 108,000 129,600 151,200
400,000 29,100 58,200 87,300 116,400 145,500 174,600 203,700
500,000 36,600 73,200 109,800 146,400 183,000 219,600 256,200
600,000 44,100 88,200 132,300 176,400 220,500 264,600 308,700
700,000 51,600 103,200 154,800 206,400 258,000 309,600 361,200
800,000 59,100 118,200 177,300 236,400 295,500 354,600 413,700
900,000 66,600 133,200 199,800 266,400 333,000 399,600 466,200
1,000,000 74,100 148,200 222,300 296,400 370,500 444,600 518,700
Benefits under the Retirement and Makeup Plans are based upon the
highest average sixty consecutive months' salary and bonus (as shown on the
Summary Compensation Table) during the 120 months immediately preceding
retirement. Compensation covered by the Plans at the end of 1996 for each
named executive officer (except Mr. Pezzillo, who does not participate in
the Plans) is as follows: Mr. O'Connell, $159,132; Mr. Ionna, $249,962;
Mr. Farley, $147,585; and Mr. Sweeney, $223,940. For the purpose of
computing a benefit under the table above, on December 31, 1996, Mr.
O'Connell had no years of credited service, Mr. Ionna, 22 years; Mr.
Farley, 25 years; and Mr. Sweeney, 9 years. Covered compensation amounts
differ from amounts shown on the Summary Compensation Table due to
differences in the recognition of pensionable earnings.
-19-
PAGE
<PAGE>
In addition to the Retirement Plan and the Makeup Plan, certain
executives designated by the Compensation Committee are eligible for
benefits under the Company's Supplemental Executive Retirement Plan (the
"SERP"), which was adopted to attract and retain highly qualified
executives by providing retirement benefits at levels which the Company
believes to be competitive.
A participant in the SERP who retires at age 65 is entitled to
receive supplemental retirement benefits equal to the difference between
(i) that percentage of the participant's final monthly average earnings (as
defined in the Retirement Plan without regard to certain limitations
imposed by the Internal Revenue Code on qualified plans) determined by
crediting 2%, 1-2/3% and 1-1/3% per year, respectively, for each of the
first 10, next 10 and next 10 years of credited service, up to a maximum of
30 years of credited service (the "SERP percentage") and (ii) the aggregate
of the participant's monthly benefits from the Retirement Plan and the
Makeup Plan plus supplemental retirement benefits under any individual
agreement with the Company. The SERP provides for adjustments to the basic
benefit formula in the event of a participant's early retirement,
disability retirement, death or other termination of employment. At the
normal retirement age each named executive officer's years of credited
service and SERP percentage would be as follows: Mr. O'Connell, 12 years
and 23%; Mr. Ionna, 30 years and 50%; Mr. Farley, 30 years and 50%; and Mr.
Sweeney, 11 years and 21%. For SERP purposes only, Mr. O'Connell's
retirement compensation base is $500,000. Mr. Pezzillo does not
participate in the SERP.
At normal retirement age, Mr. Sottile's benefit payments with a
"life only" annuity option under the Company's defined benefit plans will
be $17,156 per month. Mr. Flaherty had no vested benefits at the time of
his termination of employment with the Company.
Employment Contracts. Each of the named executive officers
(other than Mr. Pezzillo) has or had an employment agreement with the
Company. Mr. O'Connell's agreement runs from August 25, 1996 until
December 31, 1999, and renews automatically from year to year thereafter
unless notice is given by either party. The agreement sets a minimum
annual salary of $350,000, subject to increase from time to time. In
addition, it provides for a signing bonus of $200,000 in 1996 and,
beginning in 1997, for annual incentive bonuses based upon the percentage
increase in the Company's current year operating income over the operating
income of the previous year. No bonus will be paid if the growth rate is
less than 5%; a bonus equal to 36% of base salary will be paid for
operating income growth of 5%, increasing proportionately to a payment of
143% of base salary for operating income growth of 15% or more. The Board
also has discretion to grant additional incentive compensation. Pursuant
to the employment agreement, Mr. O'Connell has been granted options to
purchase 1,000,000 shares of the Company's common stock; should the
necessary stockholder approval for these options not be received, he has
the right, during the following 60 days, to terminate his employment. See
"Approval of Amended and Restated 1991 Stock Incentive Plan." Mr.
O'Connell's agreement further provides that if there is a change in control
(as defined) of the Company and thereafter his employment terminates, he is
-20-
PAGE
<PAGE>
entitled under specific circumstances to be paid an amount equal to 2.99
times the sum of his then current base salary and the average incentive
compensation for the period after fiscal year December 31, 1996. The
agreement also provides for severance pay equal to twelve months salary in
the event that the Company elects not to extend its initial term.
Mr. Ionna has an employment agreement, entered into during 1996,
which currently expires on March 31, 1999 and may be extended thereafter on
an indefinite basis by mutual agreement. The agreement provides for an
annual salary of $230,000 (subject to increase from time to time) and for
participation in the Company's incentive compensation program. It also
provides for severance pay equal to six months' salary in the event of
death, for a payment equal to 2.9 times annual salary then in effect in the
event of termination of employment under certain circumstances after a
change in control of the Company and for severance pay equal to two times
then base salary in the event that the Company elects not to extend the
initial term.
Mr. Farley's employment agreement provides for a base annual
salary of $85,000, subject to increase by the Company from time to time,
and for participation in the Company's incentive bonus plan. Generally,
the agreement is subject to termination by the Company upon one year's
advance written notice and as is otherwise provided therein. Mr. Farley's
agreement also provides that he is entitled to one year's salary (subject
to offset under certain circumstances) if he is not retained in
substantially the same capacity and salary for at least six months after
any person becomes the beneficial owner of 50% or more of the Company's
securities.
The Company had an employment agreement with Benjamin J. Sottile,
which was entered into as of April 1, 1993 and continued until March 31,
1998, subject to the Company's right to terminate Mr. Sottile's employment
prior to that time. The Company notified Mr. Sottile that his employment
was terminated under that agreement as of June 15, 1996. The agreement
provided that, upon termination under these circumstances, Mr. Sottile was
entitled to receive his base salary ($460,000), incentive compensation and
fringe benefits in the amount and manner as if both parties had fully
performed their obligations under the agreement until March 31, 1998.
Effective February 26, 1997, the Company and Mr. Sottile entered into a
settlement agreement which terminated the employment agreement. Under the
terms of the settlement agreement, Mr. Sottile's base salary and medical
coverage will be paid through March 31, 1998; through that date, the
Company also either will continue its contributions to Company retirement
plans in which Mr. Sottile participated or will make substitute
arrangements. In lieu of all other contractual compensation and benefits,
the Company agreed to pay to or on behalf of Mr. Sottile a total of
$286,545 and to sell him his Company-provided automobile for a nominal
amount. Pursuant to the settlement agreement, Mr. Sottile has resigned as
a director of the Company.
-21-
PAGE
<PAGE>
Mr. Flaherty, who was Senior Vice President and Chief Financial
Officer, had an employment agreement which was scheduled to expire on
November 17, 1996. The agreement provided for an annual salary of
$175,000, subject to increase by the Company from time to time, and
participation in the Company's incentive bonus plan. Mr. Flaherty resigned
from the Company on September 15, 1996. In that connection, the Company
agreed to pay Mr. Flaherty $100,000, representing a pro rata portion of his
1996 incentive compensation, and to sell him his Company-provided
automobile for a nominal amount; Mr. Flaherty agreed to cooperate with the
Company on an as-needed basis during the pendency of certain Company
litigation and arbitration.
Mr. Sweeney's employment agreement provides for a base annual
salary of $136,000, subject to increase by the Company from time to time,
and for participation in the Company's incentive bonus plan. Generally,
the agreement is subject to termination by the Company upon one year's
advance written notice and as is otherwise provided therein. Mr. Sweeney's
agreement also provides that he is entitled to one year's salary (subject
to offset under certain circumstances) if he is not retained in
substantially the same capacity and salary for at least six months after
any person becomes the beneficial owner of 50% or more of the Company's
securities and that, upon the occurrence of a change in controlling
ownership of the Company or a sale of all or substantially all of the
assets of the Company, the term of the agreement is extended for two years
and thereafter is subject to termination upon six months' prior written
notice. Effective in September 1996, the Company relieved Mr. Sweeney of
his responsibilities as an executive officer.
The Company's employment agreements also generally provide
additional miscellaneous compensation in the form of some combination of
perquisites such as club membership fees, use of automobiles, insurance
benefits and tax and estate planning services.
Report of the Compensation Committee on Executive Compensation.
The Compensation Committee submits this report, which covers the objectives
and components of the Company's Executive Compensation Program, 1996
actions taken by the Company and the Chief Executive Officer's
compensation.
Objectives of the Executive Compensation Program
* To provide compensation opportunities that approximate those
offered by successful consumer products companies, so that the Company can
attract and retain the key executive talent needed to achieve its goals.
* To reward executives for achieving the financial goals of the
Company and its business units and for accomplishing their individual goals
that relate to improved management of internal operations and to the needs
of the Company's customers.
* To motivate executives to take a long-term view of the
Company's opportunities, so as to produce long-term value for stockholders.
-22-
PAGE
<PAGE>
Components of the Executive Compensation Program
The executive compensation program is comprised of four elements:
base salary, annual incentives, long-term incentives, and benefits.
Base Salaries. Generally, minimum base salaries for the
Company's executive officers are established in employment agreements with
the Company. Base salaries are targeted at the 50th percentile of those
provided by other consumer products companies with which the Company
competes for key executive talent. Levels of salary of various jobs are
reviewed periodically to determine their competitiveness. Executives'
salaries are reviewed every 15 months, and are subject to adjustment based
on the general movement in salaries in the job market, as well as the
individuals' job performance, their relative contributions to the Company,
and changes in their job responsibilities and accountabilities. These
reviews are subjective in the sense that they are not based upon
predetermined specific criteria. Because the Company competes with a wide
and diverse range of consumer products companies for executive talent, the
group of companies used for compensation comparisons is not the same as
that believed appropriate for a comparison of stockholder returns in the
Performance Graph shown below, although there may be some overlap between
the groups.
Annual Incentives. The Company places significant emphasis on
achieving its annual profit objectives. Accordingly, under the annual
incentive plan, specific targeted levels of before-tax income are
established for each fiscal year at both the corporate and division levels.
A pool for incentive awards is funded after year-end results are known,
with the size of the pool calculated based upon the achievement of
predetermined percentages of the target levels. Individual awards are made
from this pool, with the size of each award based on (1) the objective
level of corporate/division profitability and (2) a subjective assessment
of the individual's contributions to the business.
Eligibility for annual incentive awards is limited to key
executives who play important roles in the achievement of the Company's
objectives. In addition, other managers may receive incentive awards in a
particular year, to reward their extraordinary results or achievements for
that year.
Achievement of target incentives (for meeting the Company's
demanding profit objectives) can place executives' annual cash compensation
(that is, base salary plus annual incentive award) somewhat above the
median for competitive practice.
Long-Term Incentives. The Company provides two different types
of long-term incentives to its senior executives: (1) stock options
(nonqualified and incentive stock options), which are typically awarded
every other year, and (2) restricted stock grants, awarded on a selective
basis, and only to the most senior executives.
-23-
PAGE
<PAGE>
Eligibility for long-term incentives is targeted to key corporate
and division executives and managers who can have a significant effect on
the achievement of the Company's long-term strategic objectives. The use
of Company stock as a key element of the executive compensation program is
intended to strengthen the link between the interests of senior management
and the Company's stockholders. Long-term incentives are granted based
upon a subjective assessment of the individual's performance and
responsibilities.
Benefits. The Company's benefits program is comprised of
retirement income and group insurance plans. The objective of the program
is to provide executives with reasonable and competitive levels of
protection against the four contingencies (retirement, death, disability,
and ill health) that can interrupt their employment and/or income.
The Company's retirement income program consists of two
tax-qualified plans (a defined benefit pension plan and a 401(k) plan) that
cover all salaried full-time employees, including the Company's executives,
and two non-tax-qualified plans for executives (an ERISA "Makeup" plan,
that restores defined benefit pension benefits denied by the federal tax
laws, and a supplemental defined benefit retirement plan).
The group insurance program consists of life, disability, and
health insurance benefit plans that cover all salaried full-time employees,
including the Company's executives. The employment agreements of
individual executive officers may also provide for perquisites in the form
of supplemental insurance benefits and/or Company payment of the premiums
relating to insurance benefits.
1996 Actions
In March 1996, the cost reduction program initiated in December
1994, which included the salary freeze for all employees of the Company,
was modified. The freeze on the salaries was lifted and the granting of
appropriate salary increases resumed. Additionally, in accordance with a
resolution of the Board of Directors, certain officers and employees,
remaining in the Company's employment through April 1, 1996, received
bonuses equal to 15% of salary.
The Company does not anticipate that the total annual taxable
compensation of any of its executive officers will exceed $1,000,000 in
1997 or the near term. Therefore, it expects that all taxable compensation
for these individuals will be tax-deductible to the Company. The Company
intends to preserve its tax deduction for executive officers and to take
steps necessary to do so if and as appropriate.
-24-
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<PAGE>
CEO Compensation
All of Mr. O'Connell's 1996 compensation, including salary,
bonus, stock options and relocation payments, was negotiated and prescribed
by the terms of his employment agreement. Commencing with fiscal year
1997, and also in accordance with his employment agreement, Mr. O'Connell's
incentive bonus will be based primarily upon the percentage increase in the
Company's operating income over the operating income of the prior fiscal
year. See "Executive Compensation and Other Information - Employment
Contracts" and "Approval of Amended and Restated 1991 Stock Incentive Plan"
for further information.
As described under "The Board of Directors - Compensation of
Directors," Mr. Pezzillo received per diem payments from February through
August 1996 for his services as Chairman of the Board and as an interim,
non-employee Chief Executive Officer of the Company. In August 1996, when
the Office of the Chairman was disbanded, the Committee approved a $50,000
per year stipend for Mr. Pezzillo in his continuing capacity as Chairman of
the Board and also granted him nonqualified options to purchase 24,750
shares of the Company's common stock. The Committee believes that Mr.
Pezzillo's compensation has been well-earned in light of his significant
efforts on behalf of the Company, as both Chairman and interim CEO.
Mr. Sottile's 1996 compensation was dictated by the terms of his
employment agreement with the Company.
Compensation Committee C. Anthony Wainwright, Chairman
Charlotte A. St. Martin
Frank Stanton
-25-
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<PAGE>
Performance Graph. The following graph and table compare, over
the period shown, the cumulative total stockholder return of the Company's
common stock to the cumulative total return of companies included in the
Standard & Poor's 500 Stock Index and in a peer group index. (1) In each
case it is assumed that $100 was invested on December 31, 1991 and that all
dividends were reinvested.
Gibson Greetings, Inc.
Relative Market Performance
Total Return 1991 - 1996
[graph to be inserted]
</TABLE>
<TABLE>
<CAPTION>
+-----------------------+--------+--------+--------+--------+--------+--------+
| | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 |
+-----------------------+--------+--------+--------+--------+--------+--------+
<S> <C> <C> <C> <C> <C> <C>
| Gibson Greetings, Inc.| 100.00 | 69.69 | 80.10 | 57.27 | 62.13 | 76.20 |
+-----------------------+--------+--------+--------+--------+--------+--------+
| S&P 500 Index | 100.00 | 107.62 | 118.46 | 120.03 | 165.13 | 203.05 |
+-----------------------+--------+--------+--------+--------+--------+--------+
| Peer Group Index | 100.00 | 106.69 | 110.83 | 94.52 | 98.72 | 110.89 |
+-----------------------+--------+--------+--------+--------+--------+--------+
<FN>
(1) The peer group is composed of companies having seasonal
businesses which market consumer products through similar channels
of distribution. The returns of each company have been weighted
according to their respective stock market capitalization for
purposes of arriving at a group average. The members of the group
are as follows: Action Industries, Inc., American Greetings
Corporation, A.T. Cross & Co., CSS Industries, Inc., Devon Group,
Inc., Fisher-Price, Inc. (until acquired in January 1994), C.R.
Gibson Co. (until acquired in December 1995), Handleman Co.,
Jostens, Inc., Russ Berrie & Co., Inc., Tyco Toys, Inc. and Golden
Books Family Entertainment (name changed from Western Publishing
Group, Inc.).
-26-
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<PAGE>
PRINCIPAL STOCKHOLDERS AND
HOLDINGS OF MANAGEMENT
The following table sets forth certain information with regard to
the beneficial ownership of the Company's common stock by (i) each of the
Company's stockholders known to hold more than 5% of the outstanding shares
of common stock, (ii) except as noted, each director, nominee and executive
officer named on the Summary Compensation Table, individually, and (iii)
all directors and executive officers as a group. Information relating to
the Company's directors and executive officers is as of March 7, 1997.
Information on 5% stockholders is as reported by them to the Company
subsequent to December 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Name Position Beneficial Ownership (1)(2)
- ------------------ ------------------------ ---------------------------
Number of Shares Percent
---------------- -------
<S> <C> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, MA 02109 2,099,100 12.9%
John Hancock Mutual Life
Insurance Company and
subsidiaries,
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02177 1,269,258 7.8%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202 1,447,000 8.9%
The Prudential Insurance Company
of America
Prudential Plaza
Newark, New Jersey 07102 3,211,900 19.8%
Albert R. Pezzillo Chairman of the Board 35,092
Frank J. O'Connell President & Chief Executive Officer 400,000 2.4%
George M. Gibson Director 1,642
Charles D. Lindberg Director 5,242
Charlotte A. St. Martin Director 2,642
Frank Stanton Director 17,942
C. Anthony Wainwright Director 7,742
Greg Ionna Executive Vice President 17,928
Paul W. Farley Vice President 14,500
All directors and executive officers
as a group (9 persons) 502,730 3.0%
-27-
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<PAGE>
<FN>
(1) Except as indicated, the percentage of shares held by each
person is less than 1%. Includes shares which may be purchased
upon exercise of presently exercisable options and options
exercisable within 60 days after March 7, 1997, in the following
amounts: Mr. O'Connell, 400,000 shares; Messrs. Stanton and
Wainwright, 7,000 shares each; Mr. Pezzillo, 30,750 shares; Mr.
Lindberg, 4,000 shares; Ms. St. Martin, 2,000 shares; Mr. Gibson,
none; Mr. Ionna, 17,333 shares; Mr. Farley, 14,500 shares; and all
directors and executive officers as a group, 482,583 shares. No
information is presented for Messrs. Sottile, Sweeney and
Flaherty, each of whom was no longer an executive officer or
director of the Company on March 7, 1997.
(2) Includes the following numbers of shares as to which beneficial
ownership is disclaimed: 300 shares held by the wife of Mr. Stanton
and 100 shares held by the wife of Mr. Wainwright.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially
own more than ten percent of the Company's equity securities, to file
reports of security ownership and changes in such ownership with the
Securities and Exchange Commission (the "SEC"). These persons also are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based upon a review of such forms and written representations
from its executive officers and directors, the Company believes that all
Section 16(a) filing requirements were complied with on a timely basis
during and for 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants are selected by, and
serve subject to change by, the Board of Directors. The Board has voted to
appoint Deloitte & Touche LLP, Certified Public Accountants ("Deloitte &
Touche"), as independent public accountants of the Company for the year
1997. Deloitte & Touche has served as the Company's principal independent
public accountants since 1994. Representatives of Deloitte & Touche are
expected to be present at the meeting, with the opportunity to make a
statement if they desire. Additionally, they will be available to respond
to appropriate questions from stockholders.
PROXY STATEMENT PROPOSALS
Stockholder proposals will be considered for inclusion in the
Proxy Statement for the 1998 Annual Meeting if they are received by the
Company before the close of business on November 15, 1997.
-28-
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<PAGE>
PROXY SOLICITATION AND REVOCATION
The solicitation of the enclosed proxy is being made on behalf of
the Board of Directors, and the Company will bear the cost of solicitation.
In addition to solicitation by mail, officers and regular employees of the
Company may solicit proxies personally, by telephone or by telegraph. The
Company will reimburse brokers, banks or other persons for their reasonable
out-of-pocket expenses in sending proxy material to beneficial owners. To
assist in the solicitation of proxies, the Company has engaged Georgeson &
Company, Inc. for a fee estimated at $7,500, plus out of pocket expenses.
Any stockholder giving a proxy has the power to revoke it at any time prior
to the voting thereof.
-29-
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<PAGE>
Exhibit A
GIBSON GREETINGS, INC.
1991 STOCK INCENTIVE PLAN
(As amended and restated through March 11, 1997)
1. Name and Purpose. This Plan, as it may be amended and
restated from time to time, shall be known as the "Gibson Greetings, Inc.
1991 Stock Incentive Plan" (the "Plan"). The purpose of the Plan is to
advance the interests of Gibson Greetings, Inc. (the "Company") by
providing material incentive for the continued services of key employees
and by attracting able executives to employment with the Company and its
Subsidiaries. The term "Subsidiary" as used herein means a subsidiary
corporation of the Company as the term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code"). Reference to any
Code Section in this Plan includes the provisions of such Section as it may
be amended or as it may be replaced by any other section or sections of the
Code of like intent and purpose.
2. Administration. The Plan shall be administered by a committee
(the "Committee") of at least two members of the Board of Directors of the
Company (the "Board"). For the purpose of option grants or allocations of
Restricted Shares to, and the approval of other transactions with, persons
who are subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the Company, each member of
the Committee shall be a "Non-Employee Director" as defined in Rule 16b-3
under the Exchange Act; provided, however, that nothing in this Plan shall
prohibit these, or any other functions of the Committee under this Plan,
from being performed by the Board. To the extent that it is desired that
compensation resulting from an option grant be excluded from the deduction
limitation of Section 162(m) of the Code, all directors comprising the
Committee granting such option also shall be "outside directors" within the
meaning of Code Section 162(m). Subject to and consistent with the
provisions of the Plan, the Committee shall establish such rules and
regulations as it deems necessary or appropriate for the proper
administration of the Plan, shall interpret the provisions of the Plan,
shall decide all questions of fact arising in the application of Plan
provisions and shall make such other determinations and take such actions
in connection with the Plan and the options and Restricted Shares provided
for herein as it deems necessary or advisable.
3. Eligibility. Regular full-time employees of the Company and
its Subsidiaries who are key executive or other key salaried employees,
including officers, whether or not directors of the Company, shall be
eligible to participate in the Plan. Such employees are herein referred to
as "Eligible Employees." Those directors who are not regular employees of
the Company or its Subsidiaries are not eligible to participate in the
Plan.
-30-
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<PAGE>
4. Shares Subject to Plan.
(a) The shares to be issued and delivered by the Company upon
exercise of options granted under the Plan, or issued as Restricted Shares
under the Plan, are the Company's shares of Common Stock, $.01 par value,
("Common Shares") which may be either authorized but unissued shares or
treasury shares.
(b) Except as provided in Paragraph 8, the aggregate number of
Common Shares which may be issued under the Plan shall not exceed 2,500,000
shares and options for no more than 750,000 Common Shares may be granted to
any Eligible Employee during any period of twelve (12) consecutive months.
(c) Common Shares covered by an option which is no longer
exercisable with respect to such shares, or Restricted Shares which have
been resold to the Company and in respect of which no benefits of ownership
have been received by the Participant, shall again be available for
issuance under this Plan. Common Shares transferred as payment for the
option price pursuant to Paragraph 7 also shall be available for issuance
under the Plan. The Committee may make such other determinations regarding
the counting of Common Shares issued pursuant to the Plan as it deems
necessary or advisable, provided that such determinations shall be
permitted by law.
5. Grant of Options. The Committee may from time to time, in its
discretion and subject to the provision of the Plan, grant either
non-qualified or Incentive Stock Options (as defined in Section 422 of the
Code) to Eligible Employees. Employees to whom options have been granted
are herein referred to as "Optionees." Each option shall be embodied in an
option agreement signed by the Optionee and the Company providing that the
option shall be subject to the provisions of this Plan and containing such
other provisions as the Committee may prescribe not inconsistent with the
Plan. The option agreement shall specify whether the option is a
non-qualified option or an Incentive Stock Option.
6. Terms and Conditions of Options. All options granted under
the Plan shall contain such terms and conditions as the Committee from time
to time determines, subject to the following limitations and requirements.
(a) Option price: The option price per share for Incentive Stock
Options shall be not less than 100% of the fair market value of the
Company's Common Shares on the date the option is granted, as determined by
the Committee in a manner consistent with the requirements of the Code for
Incentive Stock Options. The option price per share for non-qualified
options shall be at least 90% of the fair market value of a Common Share on
the date of option grant, determined in the same manner.
(b) Period within which option may be exercised: The period of
each option shall be fixed by the Committee, but no Incentive Stock Option
may be exercised after the expiration of ten years from the date the option
is granted. The Committee may, in its discretion, determine as a condition
of any option that a stated percentage of the shares covered by such option
shall be exercisable in any one year or other stated period of time.
-31-
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<PAGE>
(c) 10% Shareholder: Notwithstanding any other provision of this
Plan, with respect to an Incentive Stock Option granted to an Eligible
Employee who, at the time such option is granted owns shares possessing
more than 10% of the total combined voting power of all classes of shares
of the Company or its Subsidiaries, the option price per share shall be at
least 110% of the fair market value of the Common Shares subject to the
option and such option may not be exercised after the expiration of five
years from the date the option is granted.
(d) Termination of option by reason of termination of employment:
If an Optionee's employment with the Company and its Subsidiaries
terminates, all options granted under this Plan to such Optionee which are
not exercisable on the date of such termination of employment shall
immediately terminate, and any remaining options shall terminate if not
exercised before the expiration of one of the following periods, or at such
earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i)
thirty (30) days following such termination of employment, if such
termination was not a result of retirement under a Company Pension Plan or
of death or disability (disability within the meaning of Section 22(e)(3)
of the Code), or (ii) three (3) months following the Optionee's termination
of employment because of retirement under a Company Pension Plan, or (iii)
one (1) year following date of death or commencement of disability, if the
Optionee was an employee of the Company and/or Subsidiary at the time of
his death or the commencement of his disability; provided that such
termination provisions may be varied by the Committee with respect to
non-qualified options which are exercisable on the date of termination of
employment.
(e) Non-transferability: Each option and all rights thereunder
shall be exercisable during the Optionee's lifetime only by him, or by his
guardian or legal representative, and shall be non-assignable and
non-transferable by the Optionee, except that a non-qualified option may be
transferred (i) pursuant to a "domestic relations order" as defined in
Section 414(p)(1)(B) of the Code or (ii) to such other persons or entities,
in accordance with such terms and conditions, as the Committee may permit.
In the event of the Optionee's death, any option shall be transferable by
the Optionee's Will or by the laws of descent and distribution, and the
representative or representatives of his estate, or the person or persons
who acquired (by bequest or inheritance) the rights to exercise his options
granted under this Plan, may exercise any of the unexercised options in
whole or in part prior to the expiration of the applicable exercise period,
as specified in Paragraph 6(d) above.
(f) More than one option granted to an Optionee: More than one
option may be granted to an Optionee under this Plan and both non-qualified
and Incentive Stock Options may be granted to an Optionee.
(g) Compliance with securities laws: Options granted and shares
issued by the Company upon exercise of options shall be granted and issued
only in full compliance with all applicable securities laws, including
laws, rules and regulations of the Securities and Exchange Commission and
applicable state Blue Sky Laws. With respect thereto, the Committee may
impose such conditions on transfer, restrictions and limitations as it may
deem necessary and appropriate to assure compliance with such applicable
securities laws.
-32-
PAGE
<PAGE>
7. Method of Exercise. An option granted under this Plan may be
exercised by written notice to the Committee, signed by the Optionee, or by
such other person as is entitled to exercise such option. The notice of
exercise shall state the number of Common Shares in respect of which the
option is being exercised, and shall either be accompanied by the payment
of the full option price for such shares, or shall fix a date (not more
than ten business days from the date of such notice) for the payment of the
full option price of the shares being purchased. All or any portion of the
payment may be made by the transfer of Common Shares of the Company from
the Optionee to the Company, to the extent permitted by law. Such shares
shall be valued for this purpose at their fair market value on the date
they are transferred to the Company as payment, determined in the same
manner as is provided in Paragraph 6(a) hereof. A certificate or
certificates for the Common Shares of the Company purchased through the
exercise of an option shall be issued in regular course after the exercise
of the option and payment therefor. During the option period no person
entitled to exercise any option granted under this Plan shall have any of
the rights or privileges of a shareholder with respect to any shares
issuable upon exercise of such option until certificates representing such
shares shall have been issued and delivered.
8. Share Adjustments. In the event there is any change in the
Company's Common Shares resulting from stock splits, stock dividends,
combinations or exchanges of shares, or other similar capital adjustments,
equitable proportionate adjustments shall automatically be made without
further action by the Committee in (i) the number of shares available for
option grant or issuance under this Plan, (ii) the number of shares subject
to options granted under this Plan, and (iii) the option price of optioned
shares.
9. Allocation and Purchase of Restricted Shares.
(a) The Committee may from time to time, in its discretion and
subject to the provisions of the Plan, allocate Common Shares to any or all
Eligible Employees. Common Shares allocated under this Paragraph 9 of the
Plan are referred to herein as "Restricted Shares." Employees to whom
Restricted Shares have been allocated are herein referred to as
"Participants." Each Participant to whom an allocation of Restricted
Shares has been made shall be offered the right to purchase such Restricted
Shares as herein provided.
(b) The Committee shall advise each Participant to whom an
allocation of Restricted Shares has been made in writing of the terms of
the offer, including the number of shares which such person shall be
entitled to purchase, the purchase price per share, and any other terms,
conditions and restrictions relating thereto. The Participant shall have
thirty (30) days from the date of the offer to accept such offer. The
Committee may, in the exercise of its discretion, extend the term of any
offer. Subject to the express provisions of the Plan, the Committee shall
have the power to make such offer subject to any terms and conditions it
may establish and the offers made to different persons, or to the same
person at different times, may be subject to terms, conditions and
restrictions which differ from each other. Each allocation and offer shall
be embodied in a "Restricted Share Agreement" signed by the Participant and
the Company providing that the Restricted Shares shall be subject to the
provisions of this Plan and containing such other provisions as the
Committee may prescribe not inconsistent with the Plan.
-33-
PAGE
<PAGE>
(c) The purchase price of the Restricted Shares offered under
this Plan shall be any lawful consideration established by the Committee in
its discretion. If a Participant elects to purchase Restricted Shares, he
shall pay the purchase price in full, at the principal office of the
Company, prior to expiration of the offer. Upon payment of the purchase
price, certificates representing the shares shall be issued to the
Participant, which certificates shall bear an appropriate legend reflecting
that such shares are subject to the restrictions contained in the Plan. At
the Committee's election, such certificates may be held by the Company on
behalf of the Participant until the restrictions applicable to such shares
shall have lapsed.
10. Restrictions Applicable to Restricted Shares.
(a) By purchasing the Restricted Shares allocated to him under
this Plan, the Participant agrees and consents to the restrictions
described in this Plan for a period determined by the Committee at the time
of such allocation, said period referred to herein as the "Restricted
Period." For the duration of the Restricted Period (unless the
restrictions earlier lapse or are removed by the Committee), Restricted
Shares issued under this Plan shall not be transferred, delivered,
assigned, sold, or disposed of in any manner, nor pledged or otherwise
hypothecated. On the last day of the Restricted Period, or upon the
earlier lapse or removal of restrictions, such Restricted Shares shall
cease to be subject to the restrictions under this Paragraph 10(a) of the
Plan.
(b) Restricted Shares issued by the Company under the Plan shall
be issued only in full compliance with all applicable securities laws,
including laws, rules and regulations of the Securities and Exchange
Commission and applicable state Blue Sky laws. With respect thereto, the
Committee may impose such conditions on transfer, restrictions and
limitations as it may deem necessary and appropriate to assure compliance
with such applicable securities laws.
11. Termination of Employment During Restricted Period.
(a) If a Participant's employment with the Company and its
Subsidiaries terminates because of death or disability, the restrictions
under Paragraph 10(a) of this Plan shall automatically terminate as to that
number of the Restricted Shares owned by the Participant which is equal to
the total number of such Restricted Shares multiplied by a fraction, the
numerator of which is the number of full months which have elapsed from the
date of allocation and the denominator of which is the total number of
months during the Restricted Period. The Participant (or his estate,
heirs, or legatee) shall be required to resell the remaining Restricted
Shares to the Company at a price per share equal to the original purchase
price paid by the Participant for such shares, or such other price as may
be set by the Committee in the Restricted Share Agreement, unless the
Committee shall, in its discretion, waive the restrictions under Paragraph
10(a) as to any part or all of such remaining Restricted Shares.
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<PAGE>
(b) If a Participant's employment with the Company and its
Subsidiaries terminates during the Restricted Period other than by reason
of death or disability, the Participant shall be required to resell all of
the Restricted Shares to the Company at a price per share equal to the
original purchase price paid by the Participant for such shares, or such
other price as may be set by the Committee in the Restricted Share
Agreement, unless the Committee shall, in its discretion, waive the
restrictions under Paragraph 10(a) as to any part or all of the Restricted
Shares.
12. Resale of Restricted Shares. In the event a Participant is
required to resell Restricted Shares to the Company as the result of the
termination of the Participant's employment as described in Paragraph 11,
the Company by written notice to the Participant shall specify a date not
less than five nor more than ten days from the date of such notice to
consummate the purchase and sale of such Restricted Shares at the principal
office of the Company. The Participant shall deliver to the Company
certificates representing such Restricted Shares, duly endorsed and in
proper form for transfer, and upon the receipt of such share certificates,
the Company shall deliver to the Participant a check in the amount of the
purchase price. If the Participant fails to deliver the share certificates
to the Company at the time specified in such notice, the Company may
deposit the purchase price with the Treasurer of the Company, and
thereafter the shares shall be deemed to have been transferred to the
Company and the Participant, despite his failure to deliver the share
certificates, shall have no further rights as a stockholder of the Company.
In such event, the Treasurer of the Company shall continue to hold the
purchase price for such shares and shall make payment thereof, without
interest, upon delivery of the share certificates to the Company.
13. Merger, Consolidation or Sale of Assets. In the event the
Company shall consolidate with, merge into, or transfer all or
substantially all of its assets to another corporation or corporations
(herein referred to as "successor employer corporation"), such successor
employer corporation may obligate itself to continue this Plan and to
assume all obligations under the Plan in a manner consistent with the
provisions of Section 424(a) of the Code. In the event that such successor
employer corporation does not obligate itself to continue this Plan as
above provided, this Plan shall terminate effective upon such
consolidation, merger, or transfer, and any unexercised option previously
granted hereunder shall terminate. If practical, the Company shall give
each Optionee twenty (20) days prior notice of any possible transaction
which might terminate this Plan and the options previously granted
hereunder.
14. Amendment or Termination. The Board may terminate this Plan
at any time, and may amend the Plan at any time or from time to time,
without obtaining any approval of the Company's stockholders; except that
the Plan may not be so amended (i) to increase the aggregate number of
shares issuable under the Plan (excepting proportionate adjustments made
-35-
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<PAGE>
under Paragraph 8 to give effect to stock splits, etc.); (ii) to change the
option price of optioned stock (excepting proportionate adjustments made
under Paragraph 8); (iii) to change the requirement that the option price
per Common Share covered by an Incentive Stock Option granted under this
Plan not be less than 100% of the fair market value of the Company's Common
Shares on the date such option is granted; (iv) to extend the time within
which Incentive Stock Options may be granted or the time within which a
granted Incentive Stock Option may be exercised; or (v) to change, without
the consent of the Optionee (or his, or his estate's, legal
representative), any option previously granted to him under the Plan. If
the Plan is terminated, any unexercised option shall continue to be
exercisable in accordance with its terms, except as provided in Paragraph
13 above, and any Restricted Shares shall continue to be subject to the
terms of this Plan for the duration of the Restricted Period.
15. Company Responsibility. All expenses of this Plan,
including the cost of maintaining records, shall be borne by the Company.
The Company shall have no responsibility or liability (other than under
applicable Securities Acts) for any act or thing done or left undone with
respect to the price, time, quantity, or other conditions and circumstances
of the purchase of shares under the terms of the Plan, so long as the
Company acts in good faith.
16. Tax Withholding. Any grant of an option or issue of
Restricted Shares hereunder shall provide as determined by the Committee
for appropriate arrangements for the satisfaction by the Company and the
Optionee or Participant of all federal, state, local or other income,
excise or employment taxes or tax withholding requirements applicable to
the exercise of the option, the receipt of Restricted Shares or the later
disposition of the Common Shares thereby acquired and all such additional
taxes or amounts as determined by the Committee in its discretion,
including, without limitation, the right of the Company or any subsidiary
thereof to receive transfers of Common Shares or other property from the
Optionee or to deduct or withhold in the form of shares from any transfer
to an Optionee or Participant, in such amount or amounts deemed required or
appropriate by the Committee in its sole and absolute discretion.
17. Implied Consent. Every Optionee or Participant, by his
acceptance of an option or Restricted Shares under this Plan, shall be
deemed to have consented to be bound, on his own behalf and on behalf of
his heirs, assigns, and legal representatives, by all of the terms and
conditions of this Plan.
18. No Effect on Employment Status. The fact that an employee
has been granted an option or Restricted Shares under this Plan shall not
limit or otherwise qualify the right of his employer to terminate his
employment at any time.
19. Duration and Termination of the Plan. This Plan became
effective on February 3, 1991. No Incentive Stock Option shall be granted
subsequent to February 2, 2001, or subsequent to any earlier date as of
which the Plan is terminated pursuant to Paragraph 14.
20. Delaware Law to Govern: This Plan shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
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<PAGE>
GIBSON GREETINGS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harold L. Caldwell and Paul
W.Farley, and each of them, attorneys with the powers which the undersigned
would possess if personally present, including the power of substitution,
to vote all shares of the undersigned at the Annual Meeting of Stockholders
of Gibson Greetings,Inc. to be held at The Phoenix, Cincinnati, Ohio at
12:00 p.m., Eastern Daylight time, on April 23, 1997, and at any
adjournments thereof.
The proxy will be voted as specified. If no specification is
made, the proxy shall be voted FOR the nominees listed on the reverse side.
As to any other matter or if any of said nominees are not available for
election, said attorneys shall vote in accordance with their best judgment.
[CONTINUED AND TO BE SIGNED ON REVERSE SIDE]
Gibson Greetings, Inc.
P.O.Box 11084
New York, N.Y. 10203-0084
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1. Election of Directors.
FOR all nominees [ ] WITHHOLD AUTHORITY to vote for [ ] *EXCEPTIONS [ ]
listed below all nominees listed below
Nominees: George M. Gibson and Frank Stanton
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "EXCEPTION" box and write that nominee's name
in the space provided below.)
*Exceptions _________________________________________________________
2. Approval of the Gibson Greetings, Inc. 1991 Stock Incentive Plan, as
amended and restated.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon such other business as may properly come before the meeting. (Strike
through if you wish authority withheld.)
[ ] Mark here if you plan [ ] Mark here for address
to attend the meeting. change and note at left.
IMPORTANT: Please date and sign exactly as
name appears. If shares are held jointly,
each stockholder named should sign.
Executors, administrators, trustees, etc.
should so indicate when signing. If the
signer is a corporation, please sign full
corporate name by duly authorized officer.
Dated ________________________________, 1997
____________________________________________
____________________________________________
(Signature of Stockholder)
Votes must be indicated (x) in Black
or Blue ink.
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
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</TABLE>
