<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GIBSON GREETINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(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: ...........................................................
================================================================================
<PAGE> 2
GIBSON GREETINGS, 1NC.
2100 Section Road
Cincinnati, Ohio 45237
NOTICE OF ANNUAL MEETING
The Annual Meeting of Stockholders of Gibson Greetings, Inc. will be held at the
Cincinnati Museum Center, 1301 Western Avenue, Cincinnati, Ohio, at 11:00 a.m.
Eastern Daylight Time, on April 23, 1998 for the following purposes:
1. To elect two directors; and
2. To transact such other business as properly may come before the
meeting.
Stockholders of record at the close of business on March 6, 1998 are entitled to
receive notice of, and to vote at, the meeting.
- --------------------------------------------------------------------------------
BY ORDER OF THE BOARD OF DIRECTORS, March 24, 1998
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.
- --------------------------------------------------------------------------------
<PAGE> 3
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 23, 1998. 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 24, 1998.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on March 6, 1998, the
record date for the meeting, was 16,339,705 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. 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.
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.
2
<PAGE> 4
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 III will be nominated for
election as directors to serve until the Annual Meeting in 2001 and until their
successors are elected and qualified. The directors in Class I will serve until
the Annual Meeting in 1999 and the directors in Class II will serve until the
Annual Meeting in 2000.
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 69. Mr. Lindberg has been a partner in the law
firm of Taft, Stettinius & Hollister LLP, 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.
ALBERT R. PEZZILLO, age 69. Mr. Pezzillo was Chairman of the Board of
the Company from February 1996 until April 1997. He 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 64. Mr. Wainwright has been Vice President
of McKinney and Silver Inc., an advertising agency, since April 1997. From 1995
to 1997, he was Chairman of the advertising agency, Harris, Drury, Cohen, Inc.
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 Marketing Services Group,
Inc. (formerly All-Comm Media Co.), American Woodmark Corporation, Del Webb
Corp., Advanced Polymer Systems and Caribiner International. He has been a
director of the Company since March 1988.
CLASS II
(Terms expiring in 2000)
GEORGE M. GIBSON, age 63. 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 has been a director of the Company since April 1996.
ROBERT P. KIRBY, age 61. Mr. Kirby has been Chairman and Chief
Executive Officer of Castleberry/Snow's Brands, Inc., an independent meat
canner, since 1990. Previously, he served as President and Chief Executive
Officer of Murray Bakery Products, Inc., a manufacturer of cookies, from 1985 to
1988 and as Group Vice President of Borden, Inc., with responsibility for the
Dairy Group, from 1980 to 1984. Mr. Kirby initially was elected as a director of
the Company in September 1997 to fill a vacancy in Class III. In February 1998,
as a result of the resignation for health reasons of Frank Stanton, a Class II
director, Mr. Gibson, the remaining Class II director, elected Mr. Kirby as a
Class II director and Mr. Kirby resigned as a Class III director. This was
necessary in order to better equalize the Classes.
3
<PAGE> 5
CLASS III
(Nominees for election to serve until 2001)
FRANK J. O'CONNELL, age 54. Mr. O'Connell has been Chairman of the
Board of the Company since April 1997 and has been the Company's Chief Executive
Officer 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 52. 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, including as President of Loews Anatole Hotel for eight
years. Loews Hotels owns and operates 14 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. The Company pays an annual fee of $20,000 for
services of directors who are not employees of the Company and an annual fee of
$2,500 per chairmanship to each committee chairman. In addition, nonemployee
directors receive fees of $1,000 for each Board meeting attended and $900 for
each committee meeting attended, plus reimbursement of expenses. 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 3,000 shares of common
stock.
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
directors 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 seven meetings in
1997. The Board of Directors currently has an Audit Committee, a Compensation
Committee and a Nominating Committee. The Audit Committee deals with financial
reporting and control of the Company's assets. This Committee, consisting in
1997 of Frank Stanton (Chairman), Charles D. Lindberg and George M. Gibson, held
four meetings during that year. Mr. Stanton retired as a director of the Company
in January 1998. The Compensation Committee, composed in 1997 of C. Anthony
Wainwright (Chairman), Charlotte A. St. Martin and Albert R. Pezzillo, sets cash
compensation for the Company's executive officers, approves terms and conditions
of employment contracts for the Company's executive officers 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
executive officers 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 seven meetings in 1997. The
Nominating Committee, composed in 1997 of Messrs. Gibson (Chairman) and
Wainwright, recommends to the Board for nomination, or to a class for election
in the event of a vacancy, nonemployee directors of the Company. The Nominating
Committee met one time in 1997. Each incumbent director attended at least 75% 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 1997 calendar year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Mr. O'Connell is a
member of the Board of Directors of Castleberry/Snow's Brands, Inc., of which
Mr. Kirby is Chairman and Chief Executive Officer. As a director, Mr. O'Connell
is involved in executive compensation decisions for the executive officers of
Castleberry/Snow's Brands, Inc.
4
<PAGE> 6
EXECUTIVE COMPENSATION
AND OTHER INFORMATION
SUMMARY INFORMATION. The following table sets forth, for the years indicated,
amounts of cash and certain other compensation paid by the Company and its
subsidiaries, for services in all capacities, to (i) Mr. O'Connell and (ii) each
of the Company's four other most highly compensated executive officers during
1997. These persons are sometimes referred to as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
---------------------------------------- -------------------------------
Securities
Other Annual Restricted Underlying All Other
Salary Bonus Compensation Stock Options Compensation
Name and Principal Year ($) ($) ($) Award(s) (#) ($) (1)
Position ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank J. O'Connell (2) 1997 $370,833 -- -- -- -- $4,184
Chief Executive 1996 $124,744 $200,000 $15,952 -- 1,000,000 $218,601
Officer
Gregory Ionna 1997 $237,500 -- -- -- 50,000 $3,288
Executive Vice 1996 $195,625 $145,000 -- -- 55,000 $4,308
President, Card 1995 $165,625 $100,000 -- -- 52,000 $2,828
Division
Karen L. Kemp (2) 1997 $121,378 $30,000 $80,592 -- 60,000 $109,103
Senior Vice President,
Human Resources
Gregory A. Brown (2) 1997 $139,904 $180,000 $47,725 -- 100,000 $70,358
Senior Vice
President, Sales,
Card Division
Paul W. Farley 1997 $128,333 -- -- -- 35,000 $3,418
Vice President, 1996 $109,000 $71,000 -- -- -- $4,134
Controller 1995 $104,000 $80,000 -- -- 18,000 $2,922
<FN>
(1) For 1997 includes the following: (i) matching contributions to the
Company's 401(k) Plan on behalf of each of Messrs. O'Connell ($728),
Ionna ($1,200), and Farley ($1,200) in respect of their 1997
contributions to the Plan; (ii) group term life insurance payments for
Messrs. O'Connell ($3,456), Ionna ($2,088), Ms. Kemp ($914), Messrs.
Brown ($870) and Farley ($2,218); (iii) reimbursement of relocation,
temporary living and/or travel expenses for Ms. Kemp ($108,189) and Mr.
Brown ($69,488).
(2) Mr. O'Connell was first employed by the Company in 1996. Ms. Kemp and
Mr. Brown were first employed in 1997.
</TABLE>
5
<PAGE> 7
STOCK OPTIONS. The following table contains information concerning stock option
grants to the named executive officers during the year ended December 31, 1997.
None of the Company's Stock Option or Stock Incentive Plans provides for the
grant of stock appreciation rights ("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
% of Total Options
Granted to Exercise or Grant Date
Options Granted Employees in Base Price Present Value
Name (#) Fiscal Year ($/Sh) Expiration Date $ (2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Frank J. O'Connell - - - - -
Gregory Ionna 50,000 7.50% $23.000 11/18/07 $ 361,490
Karen L. Kemp 30,000 4.50% $19.250 04/22/07 $ 194,787
30,000 4.50% $23.000 11/18/07 $ 216,894
Gregory A. Brown 50,000 7.50% $20.875 06/18/07 $ 334,095
50,000 7.50% $23.000 11/18/07 $ 361,490
Paul W. Farley 20,000 3.00% $19.875 03/05/07 $ 125,670
15,000 2.25% $23.000 11/18/07 $ 108,447
<FN>
(1) All options vest at the rate of one-third per year commencing one year
after the grant date. 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.
</TABLE>
With respect to each named executive officer, the following table sets forth
information concerning stock option exercises during 1997 and unexercised
options held December 31, 1997.
6
<PAGE> 8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
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 --- --- 700,000/300,000 $5,962,500/$1,812,500
Gregory Ionna 19,000 $238,665 16,667/104,000 $47,918/$331,005
Karen L. Kemp --- --- ---/60,000 ---/$78,750
Gregory A. Brown --- --- ---/100,000 ---/$50,000
Paul W. Farley 2,500 $32,813 12,000/41,000 $145,500/$112,750
</TABLE>
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
non-qualified 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 1997 with no offsets.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35 40
- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $6,600 $13,200 $19,800 $26,400 $33,000 $39,600 $46,200 $52,800
200,000 14,100 28,200 42,300 56,400 70,500 84,600 98,700 112,800
300,000 21,600 43,200 64,800 86,400 108,000 129,600 151,200 172,800
400,000 29,100 58,200 87,300 116,400 145,500 174,600 203,700 232,800
500,000 36,600 73,200 109,800 146,400 183,000 219,600 256,200 292,800
600,000 44,100 88,200 132,300 176,400 220,500 264,600 308,700 352,800
700,000 51,600 103,200 154,800 206,400 258,000 309,600 361,200 412,800
800,000 59,100 118,200 177,300 236,400 295,500 354,600 413,700 472,800
900,000 66,600 133,200 199,800 266,400 333,000 399,600 466,200 532,800
1,000,000 74,100 148,200 222,300 296,400 370,500 444,600 518,700 592,800
</TABLE>
Benefits under the Retirement and Makeup Plans are based upon the highest
average 60 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 1997 for each named executive
officer is as follows: Mr. O'Connell, $875,409(1); Mr. Ionna, $340,349; Ms.
Kemp, $306,136(1); Mr. Brown, $425,158(1); and Mr. Farley, $157,710. For the
purpose of computing a benefit under the table above, on December 31, 1997, Mr.
O'Connell had one year of credited service; Mr. Ionna, 23 years; Ms. Kemp, one
year; Mr. Brown, one year; and Mr. Farley, 26 years. Covered compensation
amounts differ from amounts shown on the Summary Compensation Table due to
differences in the recognition of pensionable earnings.
(1) Includes relocation and similar nonrecurring payments. For persons
employed less than one year, amounts are estimated based on annual base
salary.
7
<PAGE> 9
In addition to the Retirement Plan and the Makeup Plan, certain executives 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%; Ms. Kemp, 19 years and 35%; Mr. Brown, 17
years and 32%; and Mr. Farley, 30 years and 50%. For SERP purposes only, Mr.
O'Connell's retirement compensation base is $500,000.
EMPLOYMENT CONTRACTS. Each of the named executive officers has 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, 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. 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 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 12 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 his then-current base salary in the event that the Company
elects not to extend the initial term.
Each of Mr. Brown, Ms. Kemp and Mr. James T. Wilson, the Company's Executive
Vice President - Finance and Operations and Chief Financial Officer hired in
September 1997, has an employment agreement with the Company. These agreements
became effective May 19, 1997, April 22, 1997 and September 29, 1997,
respectively; each extends indefinitely until terminated by the Company, or by
the executive officer on 30 days' advance notice to the Company. Under the
agreements, Mr. Brown, Ms. Kemp and Mr. Wilson receive annual salaries, which
are subject to adjustment from time to time, of $225,000, $175,000 and $250,000,
respectively. Each is eligible to receive an annual bonus of up to 112.5% of
base salary, as well as to participate in the Makeup Plan and the SERP. In
connection with their employment agreements, each executive officer also
received, or is entitled to receive, specified relocation expense payments or
reimbursements and the following additional items of compensation: Mr. Brown, a
signing bonus of $80,000, a guaranteed 1997 annual bonus of at least $100,000
and options to purchase 50,000 shares of the Company's common stock; Ms. Kemp, a
signing bonus of $30,000 and options to purchase 30,000 shares of common stock;
and Mr. Wilson, a signing bonus of $100,000 ($50,000 after beginning employment
and $50,000 after closing on a home in Cincinnati) and options to purchase
125,000 shares of common stock. If Mr. Brown's or Ms. Kemp's employment
agreement is terminated by the Company other than for cause (as defined in the
agreement), he or she is entitled to a lump sum payment equal, during the first
year of employment, to 24 months' salary, reduced by one month for each month
employed, and, during subsequent years of employment, to one year of base
salary. If Mr. Wilson's agreement is terminated by the Company other than for
cause or as a result of a material breach by the Company, he is entitled to a
lump sum payment from the Company equal to two times his then-current annual
salary, reduced by one twenty-fourth for each month of employment, but not
reduced by more than 50%.
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.
8
<PAGE> 10
The Company had an employment agreement with Benjamin J. Sottile, the Company's
former chief executive officer, 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 resigned as a director
of the Company on February 18, 1997.
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, 1997 actions taken by the Company and
the Chief Executive Officer's compensation.
Objectives of the Executive Compensation Program
- - To provide 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.
Components of the Executive Compensation Program
The executive compensation program is composed 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 set
between the 50th and the 75th percentile of those
provided by other consumer products companies with
which the Company competes for key executive talent.
Executives' salaries are reviewed periodically but
not less than 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 show 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
Gibson Greetings, Inc. Management Incentive Plan,
specific targeted levels of pretax operating income
are established for each fiscal year at the
corporate, division and strategic business unit
("SBU") 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 or division profitability, (2) the
objective level of the SBU profitability, and (3) a
subjective assessment of the individual's
contributions to the business objectives.
Eligibility for annual incentive awards is limited to
key executives (other than the CEO) and managers 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. Annual incentive opportunity for the
CEO is prescribed by contract.
9
<PAGE> 11
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 75th percentile 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 year, and (2)
restricted stock grants, awarded on a selective
basis, and only to the most senior executives.
Eligibility for long-term incentives is targeted to
key 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 composed 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.
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.
1997 Actions
Certain named executives received adjustments to annual salary based on their
individual job performances and relative contributions to the Company during
1997.
Because the Company did not achieve its targeted operating income levels, no
named executive officer received a bonus under the Gibson Greetings, Inc.'s
Management Incentive Plan. Certain executive officers, however, did receive
signing and/or bonus payments in accordance with their employment agreements.
In accordance with the Company's standard practice and in recognition of their
contributions toward achieving the Company's strategic goals, all executive
officers, with the exception of the CEO, received stock option grants during
1997.
CEO Compensation
The elements of Mr. O'Connell's compensation are prescribed by the terms of his
employment agreement. The employment agreement requires that his base salary be
reviewed annually. As a result of this review, the Committee approved a base
salary increase of $50,000, effective August 1, 1997. The Committee believes
this adjustment was appropriate, both in view of the progress made during the
year toward attaining the Company's strategic goals and in order to keep Mr.
O'Connell's base salary at the 50th percentile level for CEO's of other
comparably sized consumer products companies. Because the Company's operating
income did not reach the target levels required by the employment agreement, Mr.
O'Connell received no bonus for 1997. Also, because of the large stock option
grants made to Mr. O'Connell under the employment agreement, no additional
grants were made in 1997. For further information, see "Executive Compensation
and Other Information - Employment Contracts."
Compensation Committee:
C. Anthony Wainwright, Chairman
Charlotte A. St. Martin
Albert R. Pezzillo
10
<PAGE> 12
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, 1992 and that any dividends were reinvested.
Gibson Greetings, Inc.
Relative Market Performance
Total Return 1992 - 1997
[GRAPHIC]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gibson Greetings, Inc. 100.00 114.94 82.19 89.15 109.35 121.88
- ----------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 110.08 111.53 153.45 188.68 251.63
- ----------------------------------------------------------------------------------------------------------------
Peer Group Index 100.00 103.88 88.60 92.54 103.93 132.84
- ----------------------------------------------------------------------------------------------------------------
<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.).
</TABLE>
11
<PAGE> 13
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) 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 6, 1998. Information on 5% stockholders is as reported
by them to the Company subsequent to December 31, 1997.
<TABLE>
<CAPTION>
Beneficial Ownership (1) (2)
-----------------------------
Name Position Number of Shares Percent
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Prudential Insurance Company of America 3,000,900 18.4%
Prudential Plaza
Newark, NJ 07102
Royce & Associates, Inc. 1,370,400 8.4%
1414 Avenue of the Americas
New York, NY 10019
FMR Corp. 1,268,010 7.8%
82 Devonshire Street
Boston, MA 02109
John Hancock Mutual Life Insurance Company 886,182 5.4%
John Hancock Place
Boston, MA 02117
Frank J. O'Connell Chairman, President and 700,000 4.1%
Chief Executive Officer
George M. Gibson Director 4,103
Robert P. Kirby Director -
Charles D. Lindberg Director 7,703
Albert R. Pezzillo Director 37,553
Charlotte A. St. Martin Director 5,103
C. Anthony Wainwright Director 10,103
Gregory A. Brown Senior Vice President, Sales, Card -
Division
Paul W. Farley Vice President, Controller 27,167
Gregory Ionna Executive Vice President, Card Division 34,596
Karen L. Kemp Senior Vice President, Human Resources 10,000
All directors and executive officers as a group 836,328 4.9%
(12 persons)
<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 6,
1998, in the following amounts: Mr. O'Connell, 700,000 shares; Mr.Gibson,
2,000 shares; Mr. Kirby, none; Mr. Lindberg, 6,000 shares; Mr. Pezzillo,
32,750 shares; Ms. St. Martin, 4,000; Mr. Wainwright, 9,000 shares; Mr.
Brown, none; Mr. Farley, 24,667 shares; Mr. Ionna, 34,001 shares; Ms. Kemp,
10,000 shares; and all directors and executive officers as a group, 822,418
shares.
(2) Includes the following numbers of shares as to which beneficial ownership
is disclaimed: 100 shares held by the wife of Mr. Wainwright.
</TABLE>
12
<PAGE> 14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 10%
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 1997; except
that an option grant to Mr. Ionna was inadvertently omitted from his fiscal year
1996 Form 5 (the Form 5 was amended promptly after the error was discovered) and
a Form 4 for Mr. Ionna was filed nine days after its due date.
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 1998. 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 1999 Annual Meeting if they are received by the Company before the close
of business on November 23, 1998.
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.
13
<PAGE> 15
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors. FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
listed below [ ] for all nominees [ ] [ ]
listed below
Nominees: Frank J. O'Connell and Charlotte A. St. Martin
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
Exceptions
------------------------------------------------------------------
2. 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: , 1998
----------------------------------------------
----------------------------------------------
----------------------------------------------
(Signature of Stockholder)
Vote must be indicated
(x) in Black or Blue ink. [ ]
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
</TABLE>
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
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 Cincinnati Museum Center, Cincinnati, Ohio at 11:00 a.m.,
Eastern Daylight Saving time, on April 23, 1998, 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
- ----------------------------------------------------------------------------
