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SCHEDULE 14A
(RULE 14A-101)
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 Rule 14a-11(c) or Rule 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: ...........................................................
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<PAGE> 2
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
Metropolitan Club, 50 E. RiverCenter Blvd., Covington, Kentucky, at 11:00 a.m.
Eastern Daylight Time, on August 26, 1999 for the following purposes:
1. To elect three directors;
2. To approve the Gibson Greetings, Inc. 1999 Stock Incentive Plan;
3. To consider, if presented at the meeting, a stockholder proposal;
and
4. To transact any other business that properly may come before the
meeting.
Stockholders of record at the close of business on July 9, 1999 are entitled to
receive notice of, and to vote at, the meeting.
- --------------------------------------------------------------------------------
BY ORDER OF THE BOARD OF DIRECTORS, July 26, 1999
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. (the "Company") of proxies to be
voted at the Annual Meeting of Stockholders on August 26, 1999. This Proxy
Statement and the accompanying proxy card are being mailed to stockholders on or
about July 26, 1999.
OUTSTANDING VOTING SECURITIES
On July 9, 1999, the record date for the meeting, there were 15,831,897 shares
of the Company's common stock issued and outstanding and entitled to vote at the
Annual Meeting. Each share is entitled to one vote. The holders of at least a
majority of these shares 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 at
any time before it is voted by written 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, "For" the Gibson
Greetings, Inc. 1999 Stock Incentive Plan and "Against" the stockholder
proposal. If any nominee for director is not available for election, the proxies
will be voted for the election of such other substitute nominee as may be
recommended by the Company. 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.
The affirmative vote of a plurality of the shares of the Company's common stock
voting in the election of directors will be sufficient to elect the nominees as
directors. Any other matter described in this Proxy Statement or 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.
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.
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THE BOARD OF DIRECTORS
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 composed of two directors. The
nominees in Class I will be nominated for election as directors to serve until
the Annual Meeting in 2002 or until their successors are elected and qualified.
The directors in Class II will serve until the Annual Meeting in 2000 and the
directors in Class III will serve until the Annual Meeting in 2001.
Two of our Class I director-nominees, Messrs. Lindberg and Pezzillo, initially
planned to retire at the time of the Annual Meeting in accordance with the
Company's Bylaw provision providing for retirement at the time of the Annual
Meeting following a director's 70th birthday. After considering the Company's
currently ongoing comprehensive review of its operations and organization,
however, the Board determined that the continued advice and experience of these
directors is needed. Therefore, the Board unanimously waived the application of
the Bylaw provision and nominated Messrs. Lindberg and Pezzillo for re-election.
Information about each of the nominees and continuing directors is given below.
CLASS I
(Nominees for election to serve until 2002)
CHARLES D. LINDBERG, age 70. 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. He has been a director of the Company since May 1991.
ALBERT R. PEZZILLO, age 70. 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 65. Mr. Wainwright has been Vice Chairman 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 Campbell-Mithun-Esty 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., 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 65. 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 62. 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 has been a director of the Company
since September 1997.
CLASS III
(Terms expiring in 2001)
FRANK J. O'CONNELL, age 56. 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
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1995 to August 1996. He served as President and Chief Executive Officer of
SkyBox International, Inc., 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. He is also a director of Moto Guzzi Corporation.
CHARLOTTE A. ST. MARTIN, age 54. 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 15 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. Under the
Company's 1996 Nonemployee Director Stock Plan (the "Stock Plan"), nonemployee
directors are required to take one-half of their annual retainer in shares of
the Company's common stock. Additionally, under the Company's 1989 Stock Option
Plan for Nonemployee Directors, each nonemployee director of the Company, at the
close of business on the day of the Annual Meeting, has received an option to
purchase 3,000 shares of common stock. This plan has now expired. The Company
intends to continue annual option grants to nonemployee directors from the new
1999 Stock Incentive Plan, assuming stockholder approval of that proposed Plan.
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
qualifies 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 begin upon termination of service for directors who
have reached age 65 and begin at age 65 for those whose services terminate prior
to that age. If an Outside Director who has qualified for benefits under the
Directors Retirement Plan dies before receiving any benefits, his or her
designated beneficiary or estate will receive a payment equal to five times the
Annual Retainer. If an Outside Director dies 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 15 meetings in
1998. The Board of Directors currently has an Executive Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee. The Executive
Committee was composed in 1998 of Messrs. Albert R. Pezzillo (Chairman), Frank
J. O'Connell and, until his retirement from the Board in February 1998, Frank
Stanton. The Executive Committee, which held one meeting during 1998, may
exercise all of the powers of the Board, except to the extent restricted by
Delaware law. The Audit Committee deals with financial reporting and control of
the Company's assets. This Committee, consisting in 1998 of George M. Gibson
(Chairman), Charles D. Lindberg and Robert P. Kirby, held four meetings during
that year. The Compensation Committee, composed through June 1998 of C. Anthony
Wainwright (Chairman), Charlotte A. St. Martin and Albert R. Pezzillo, and
thereafter of C. Anthony Wainwright, Charlotte A. St. Martin and George M.
Gibson, 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 the Company's Stock Option and
Incentive Plans (except that option grants to nonemployee directors are made by
the full Board), selects the executive officers to whom awards will be made
under the 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 1998. The Nominating Committee, composed in 1998 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 did not meet during 1998. For
1998, each director attended at least 75% of the aggregate of the total number
of Board of Directors meetings and the total number of meetings of committees of
the Board on which the director served.
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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.
APPROVAL OF 1999 STOCK INCENTIVE PLAN
The Gibson Greetings, Inc. 1999 Stock Incentive Plan (the "1999 Plan" or the
"Plan") was adopted by the Board of Directors, subject to stockholder approval,
on March 23, 1999. The Plan provides for the grant to the Company's employees,
directors and advisors of options to purchase common stock and, in limited
numbers, for awards of restricted shares of common stock.
Previously the Company maintained separate plans for key employees and
nonemployee directors. However, when the 1989 Stock Option Plan for Nonemployee
Directors expired earlier this year, the Company decided to create a new plan
from which all grants could be made. Whereas the Company's existing plans only
permit grants to key employees, any employee of the Company or its subsidiaries
may be selected for an award under the 1999 Plan. The ability to grant awards to
advisors was added so that the Company also may use stock to compensate them for
their efforts.
RECOMMENDATION OF THE BOARD. The Board of Directors recommends that stockholders
vote "FOR" approval of the 1999 Plan. The Plan will enable the Company to
continue its annual stock option grants to nonemployee directors, who are not
eligible to receive grants under the Company's other plans. In addition, the
Plan will provide shares for new grants to key employees. As of July 9, 1999,
only 158,033 shares remain available for grants under the Company's existing
stock option and incentive plans. Moreover, because of the drop in the Company's
stock price, all outstanding stock options are "under water." The Board of
Directors believes that the Company's ability to continue to attract and retain
highly qualified employees will be impaired if it does not have additional
shares available to provide a mix of cash and non-cash incentive compensation.
A summary of the 1999 Plan follows. The full text of the Plan is set forth as
Exhibit A to this Proxy Statement and should be read for complete information.
THE PLAN. Up to 723,000 shares of the Company's common stock may be issued under
the Plan. Of these, 23,000 are shares that remained available for grant under
the 1989 Stock Option Plan for Nonemployee Directors when that Plan expired and
that are being moved over to the 1999 Plan. The 1999 Plan provides that stock
options for no more than 200,000 shares may be granted to any director or
employee during any period of twelve consecutive months, and no more than 20% of
the Plan's shares may be issued as restricted shares. Options which expire
unexercised and shares which are tendered in payment of an option's exercise
price, will be available for re-issuance under the Plan. Similarly, restricted
shares which are reacquired by the Company and as to which no benefits of
ownership have been received (i.e., voting and dividend rights) will be
available for re-issuance and will not count against the 20% limitation.
Appropriate adjustments in the number of shares issuable and in the number and
price of shares covered by outstanding options will be made to give effect to
changes in the Company's capitalization (stock splits, stock dividends, etc.).
The Plan provides that it will be administered and interpreted by the Board of
Directors. Subject to the terms and conditions of the Plan, the Board will have
the authority to select the recipients of Plan awards, determine the number of
shares of common stock covered by an award and the award's exercise or purchase
price, and set all other terms and conditions of an award. The Board also may
waive or amend the terms and conditions of an award, or accelerate the award's
exercisability or vesting, under circumstances selected by it. However, stock
options may not be "repriced." The Board may delegate its authority to a
committee of directors. Furthermore, either the Board or the committee may
delegate its authority to the Company's Chief Executive Officer except as it
relates to awards to the Company's executive officers and directors. The Company
currently anticipates that the 1999 Plan will be administered by the
Compensation Committee of the Board except in respect of stock option grants to
nonemployee directors, which will be the province of the full Board.
Only the Board may amend or terminate the Plan, and it may do so at any time.
Stockholder approval will be sought for amendments to the extent required by law
and the rules of The Nasdaq Stock Market. The 1999 Plan has no set termination
date, but no Incentive Stock Option may be granted after March 22, 2009 or after
any earlier date on which the Plan is terminated.
STOCK OPTIONS. Options granted under the Plan may be either "incentive stock
options" as defined in Section 422 of the Internal Revenue Code (the "Code") or
"nonqualified" options. More than one option may be granted to any participant
in the Plan, and more than one form of option may be granted to any
employee-participant. Nonemployee directors and advisors may only receive
nonqualified options.
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The per share exercise price of an 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 its date of grant. Incentive stock options granted to a person who
holds more than 10% of the Company's voting stock 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 the optionee's death, and during his or her lifetime may be exercised only
by the optionee.
Generally, the exercise price of a nonqualified option also must be no less than
100% of fair market of the Company's common stock on the date of grant. However,
up to an aggregate of 5% of the authorized Plan shares may be issued without
regard to this limitation and to the vesting limitations for restricted shares
discussed below. A nonqualified option may be transferred pursuant to a domestic
relations order and under other circumstances, terms and conditions set by the
Board.
Although the 1999 Plan contains no limitations on option grants to nonemployee
directors, the Board intends to adopt a compensation resolution relating to
these grants which mirrors the terms of the expired 1989 Stock Option Plan for
Nonemployee Directors. Specifically, each person who is a nonemployee director
of the Company at the close of business on the day of the Company's Annual
Meeting of Stockholders will be granted an option to purchase 3,000 shares of
common stock. Each option will have an exercise price of 100% of fair market
value on the date of grant and will be for a term of ten years. The Board will
have discretion to change this compensation policy in the future.
For purposes of the Plan, the "fair market value" of the Company's common stock
is the last sale price reported on The Nasdaq Stock Market on a given date. On
July 9, 1999, the fair market value of the common stock was $6.125 per share.
An option's exercise price may be paid, at the election of the optionee, in
cash, with shares of the Company's common stock which have been owned for at
least six months, or by a combination of these methods. Shares used for this
purpose will be valued at their fair market value on the date of payment.
An option which is not exercisable will terminate when the optionee's employment
or service as a director terminates. If an option is exercisable at the time of
termination of employment or service as a director, it usually will terminate on
the earliest of its full exercise, its expiration date, or 30 days after the
termination date. If, however, the option is then exercisable and the
termination of employment or service as a director is due to (a) retirement, the
option may be exercised for three months after retirement or (b) death or
disability, the option may be exercised for one year after the date of death or
commencement of disability. An option granted to an advisor terminates upon the
earlier of its full exercise or its expiration date. The termination provisions
applicable to an option apply even if the option has been transferred to someone
other than the person to whom the option was originally granted. The Plan allows
the Board to extend these option exercise periods.
RESTRICTED SHARES. The Board may grant awards of restricted shares under the
Plan. Except as specified in the Plan, the Board has discretion to determine the
number of shares of common stock awarded, the purchase price (if any) per share
and the conditions and restrictions applicable to the award. The Board may
condition the ultimate receipt of restricted shares on continued employment,
attainment of specified performance goals, or other conditions.
Generally, the vesting period for restricted shares must be at least three
years. If performance-based conditions are imposed, the vesting period must be
at least one year. Also, up to a total of 5% of the authorized Plan shares may
be issued without regard to these vesting limitations and the 100% of fair
market value exercise price requirement for stock options.
Unless otherwise provided in the award, restricted shares will have no voting or
dividend rights until they are fully vested.
CHANGE IN CONTROL. If the Company consolidates with, merges into or transfers
all or substantially all its assets to another corporation, the Plan and any
then unexercised options and unvested restricted shares will terminate unless
the successor corporation assumes the Plan's obligations. However, all options
will become exercisable and all restricted shares will become fully vested in
the event of a "change in control." Under the Plan a change in control includes
(a) the acquisition by a person or group of 30% or more of the Company's voting
power, (b) certain changes in the composition of the Board, (c) stockholder
approval of certain mergers and (d) stockholder approval of a plan of
liquidation or agreement for the sale of all or substantially all of the
Company's assets. The Plan provides that, unless otherwise provided in a
separate agreement with the Company, if payments to a participant would
constitute "excess parachute payments" under the Code when added to other
payments made to the participant, amounts payable in accordance with the Plan's
change in control provisions will be reduced so that the holder of an award is
not subject to the 20% excise tax on the payments and, therefore, the Company is
able to deduct the payments.
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FEDERAL INCOME TAX CONSEQUENCES. Generally, the recipient of an incentive stock
option recognizes no income upon the grant or exercise of the option. If the
stock purchased on exercise of an incentive stock option is not disposed of
within two years from the date of grant nor within one year after exercise, the
amount realized on the sale or taxable exchange of the 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 (a) the difference
between the option price and the fair market value at the time of exercise or
(b) 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, represents a preference item for purposes of calculating
alternative minimum tax, 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.
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.
The recipient of restricted shares 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 this election is not made, the recipient 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 the
recipient.
ACCOUNTING CONSIDERATIONS. 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.
Under accounting practices currently in effect and followed by the Company,
neither the grant at fair market value nor the exercise of a stock option
results in any charge against the Company's 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 periods.
The Financial Accounting Standards Board intends to issue an Interpretation of
the accounting rules which would require the recognition of compensation expense
for stock options granted to nonemployee directors and advisors. An Exposure
Draft of the proposed Interpretation has been issued for public comment, and may
or may not ultimately be adopted as proposed. If adopted, the Company does not
believe that the effect of the Interpretation, as it relates to the Company's
option grants to nonemployee directors, will be material, due to the relatively
small numbers of shares covered by those grants. The Company will take
then-applicable accounting rules into consideration in connection with any
option grants to advisors.
GRANTS. No awards will be granted under the Plan until it has been approved by
the Company's stockholders. Assuming approval, the contemplated annual stock
option grants to the Company's nonemployee directors will begin on the date of
the Annual Meeting. The recipients of, and number of shares covered by, other
grants under the 1999 Plan are not known at this time. The Plan has no
limitation on the maximum number of participants. As of July 9, 1999, options
were outstanding under the Company's other stock option and incentive plans for
the following numbers of shares: Mr. O'Connell, 1,500,000 shares; Mr. Wilson,
150,000 shares; Mr. Ionna, 120,667 shares; Mr. Brown, 100,000 shares; Ms. Kemp,
60,000 shares; all current executive officers as a group, 1,983,667 shares; and
all employees, including all current officers who are not executive officers, as
a group, 337,068 shares. The Company's nonemployee directors, who have received
"formula" grants under the now expired 1989 Stock Option Plan for Nonemployee
Directors, hold outstanding options as follows: Mr. Gibson, 5,000 shares; Mr.
Kirby, 3,000 shares; Mr. Lindberg, 9,000 shares; Mr. Pezzillo, 29,750 shares;
Ms. St. Martin, 7,000 shares; and Mr. Wainwright, 8,000 shares.
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. 1999 Stock Incentive Plan be, and it
hereby is, approved and adopted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL AND ADOPTION.
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STOCKHOLDER PROPOSAL
The Plumbers' Union, Local No. 12, 1230-1236 Massachusetts Avenue, Boston,
Massachusetts 02125, the beneficial owner of 3,300 shares of the Company's
common stock, has submitted the proposal set forth below for consideration by
stockholders at the Annual Meeting.
PROPOSAL
Resolved, that the shareholders of Gibson Greetings ("Company") urge that the
Board of Directors take the necessary steps to declassify the Board of Directors
for the purpose of director elections. The Board declassification shall be done
in a manner that does not affect the unexpired terms of directors previously
elected.
SUPPORTING STATEMENT
The election of corporate directors is the primary avenue in the American
corporate governance system for shareholders to influence corporate affairs and
exert accountability on management. We strongly believe that our Company's
financial performance is closely linked to its corporate governance policies and
procedures and the level of management accountability they impose. Therefore, as
shareholders concerned about the value of our investment, we are very disturbed
by our Company's current system of electing only one-third of the Board of
directors each year. We believe this staggering of director terms prevents
shareholders from annually registering their views on the performance of the
Board collectively and on each director individually.
Concerns that the annual election of all directors would leave our Company
without experienced Board members in the event that all incumbents are voted out
is unfounded. If the owners should choose to replace the entire board, it would
be obvious that the incumbent directors' contributions were not valued.
Most alarming is that the staggered Board can help insulate directors and senior
executives from the consequences of poor performance by denying shareholders the
opportunity to replace an entire Board which is pursuing failed policies.
Irrespective of whether you believe the current Board and management team is
performing satisfactorily or not, we believe it is clearly in the best interest
of the Company and its shareholders that a process be in place that allows
shareholders to take definitive action if they believe the Board is failing to
realize the full potential of the Company's assets.
The performance of Gibson's stock relative to the S&P 500 and the Company's peer
group index raises serious concerns about the performance of the current Board
and management team. According to the performance chart in the 1998 proxy
statement, Gibson's stock was essentially flat from December 31, 1992 through
December 31, 1996, with only a slight increase in 1997. Over this same period,
the S&P 500 index precipitously rose, increasing its value by more than 150%.
The Company's performance deficit has a tangible, monetary effect on the wealth
of shareholders. We believe this performance deficit is a compelling reason to
reconsider the wisdom of a staggered Board. We believe that allowing
shareholders to annually register their views on the performance of the Board
collectively and on each director individually is one of the best methods to
insure that our Company will be managed in the best interests of the
shareholders.
We strongly urge the support of this proposal.
STATEMENT OF THE COMPANY IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
In April 1986, the Company's stockholders adopted the Company's Restated
Certificate of Incorporation (the "Certificate") which provides for a classified
Board of Directors. After 13 years, the Company continues to firmly believe that
a classified Board is in the best interests of its stockholders.
The Company believes that classification gives the Board a greater continuity,
since at any one time, at least one-third of the Board usually will be in its
third year of experience. This experience enables the directors to plan in a
reasonable manner for the future of the Company and to judge the performance of
management against long-term goals established by the Board. Moreover, the
existence of three-year, as opposed to one-year, terms for directors assists the
Company in attracting director candidates who are willing to make longer-term
commitments to serving the Company, which in turn increases the overall
knowledge and experience of the Board with respect to the Company's operations.
Directors who are elected for three-year terms
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<PAGE> 10
are no less accountable to stockholders than directors elected annually because
the same standards of performance apply regardless of the length of a director's
term.
The Company also strongly supports a classified Board because it serves as an
obstacle to any sudden attempt to obtain control of the Company. Such an attempt
is likely to be highly disruptive to the Company's business and to adversely
affect the Company's relationships with its employees, customers, business
partners and others, all to the detriment of stockholders. The Company believes
that, if the Board were declassified, its ability to negotiate effectively and,
in an appropriate case, to achieve full value for stockholders in any
transaction involving the Company would be severely impaired.
The Company's current system of electing directors to three-year terms is very
common and is permitted by the laws of the State of Delaware. Approximately half
of the Fortune 500 companies provide for the staggered election of directors.
Further, stockholders should bear in mind that the proposal does not itself
repeal the board classification provisions found in the Company's Certificate.
If approved, the proposal would serve as a recommendation to the Board of
Directors to take steps to eliminate the classified Board. Actual repeal of the
classified board provision in the Company's Certificate then would have to be
approved both by the Board of Directors and, in accordance with the Certificate,
by stockholders holding at least 80% of the then-outstanding shares of voting
stock of the Company at a future stockholder's meeting.
The Company believes that its obligation is to enhance its business
competitiveness for the long term, so as to provide a strong long-term return to
stockholders. The Company continues to believe that the present system of
three-year terms is in the best interest of the stockholders, and urges the
stockholders to oppose all efforts to eliminate the classified Board.
ACCORDINGLY, THE BOARD OF DIRECTORS STRONGLY RECOMMENDS A VOTE "AGAINST" THE
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STOCKHOLDER PROPOSAL.
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<PAGE> 11
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
1998. These persons are sometimes referred to as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Frank J. O'Connell (2) 1998 $462,500 -- -- -- 500,000 $ 25,150
Chief Executive Officer 1997 $370,833 -- -- -- -- $ 4,184
1996 $124,744 $200,000 $15,952 -- 1,000,000 $218,601
James T. Wilson (2) 1998 $250,000 $ 50,000 -- -- 25,000 $ 28,997
Executive Vice 1997 $ 64,423 $ 50,000 -- -- 125,000 $ 11,728
President, Finance and
Operations
Gregory Ionna 1998 $230,000 -- -- -- -- $ 3,288
Executive Vice 1997 $237,500 -- -- -- 50,000 $ 3,288
President, Card Division 1996 $195,625 $145,000 -- -- 55,000 $ 4,308
Gregory A. Brown (2) 1998 $225,000 -- $41,706 (3) -- -- $ 2,532
Senior Vice President, 1997 $139,904 $180,000 $47,725 -- 100,000 $ 70,358
Sales, Card Division
Karen L. Kemp (2) 1998 $175,000 -- -- -- -- $ 1,827
Senior Vice President, 1997 $121,378 $ 30,000 $80,592 -- 60,000 $109,103
Human Resources
</TABLE>
(1) For 1998 includes the following: (i) matching contributions to the
Company's 401(k) Plan on behalf of Messrs. O'Connell ($1,200), Ionna
($1,200), and Brown ($444) in respect of their 1998 contributions to
the Plan; (ii) group term life insurance payments for Messrs. O'Connell
($5,400), Wilson ($3,456), Ionna ($2,088) and Brown ($2,088), and Ms.
Kemp ($1,827); (iii) reimbursement of relocation, temporary living
and/or travel expenses for Mr. Wilson ($25,541); and (iv) split-dollar
life insurance payments for Mr. O'Connell ($18,550).
(2) Mr. O'Connell was first employed by the Company in 1996. Messrs. Wilson
and Brown, and Ms. Kemp were first employed by the Company in 1997.
(3) Reflects total executive perquisites and related tax gross up payments.
Total perquisites include club membership initiation fee ($15,900) and
personal auto usage ($10,256).
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<PAGE> 12
STOCK OPTIONS. The following table contains information concerning stock option
grants to the named executive officers during the year ended December 31, 1998.
None of the Company's Stock Option or Stock Incentive Plans provides for the
grant of stock appreciation rights ("SARs").
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS (1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE PRESENT
OPTIONS GRANTED EMPLOYEES IN FISCAL BASE PRICE VALUE
NAME (#) YEAR ($/SH) EXPIRATION DATE ($) (4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. O'Connell (2) 166,667 30.64% $20.750 08/10/08 $1,202,085
166,666 30.64% $28.000 08/10/08 $ 788,230
166,667 30.64% $30.000 08/10/08 $ 702,351
James T. Wilson (3) 25,000 4.60% $19.625 09/03/08 $ 172,428
Gregory Ionna -- -- -- -- --
Gregory A. Brown -- -- -- -- --
Karen L. Kemp -- -- -- -- --
</TABLE>
(1) 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.
(2) Mr. O'Connell's options vest as follows, by exercise price: $20.75 --
immediately upon grant; $28.00 -- April 15, 1999; and $30.00 -- April
15, 2000. The options are transferable to members of Mr. O'Connell's
immediate family and to specified entities owned by them or for their
benefit. Mr. O'Connell's options become immediately exercisable (a) in
the event of a "change in control" of the Company, as defined in his
employment agreement, (b) if the average closing price for the
Company's common stock over a 20-day period equals or exceeds $35.00
per share or (c) if his employment terminates due to death, disability
or failure to renew his employment agreement or is terminated by the
Company without just cause or by him for good reason. Under certain
circumstances, Mr. O'Connell is entitled to tax "gross up" payments in
connection with the exercise of the options.
(3) Mr. Wilson's options vest at the rate of one-third per year beginning
September 4, 1999. The options become exercisable in full (a) if any
person becomes, or commences a tender offer which could result in the
person becoming the beneficial owner of more than 30% of the Company's
common stock or (b) unless the survivor or transferee corporation
agrees to continue the option, in the event of the execution of an
agreement of merger, consolidation or reorganization pursuant to which
the Company is not to be the surviving corporation or the execution of
an agreement of sale or transfer of all or substantially all of the
assets of the Company.
(4) The Black-Scholes option-pricing model was used to estimate the grant
date present value of the options shown. The Company's use of this
model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including
Black-Scholes, require a prediction about the future movement of the
stock price. The real value of an option, if any, depends upon the
actual performance of the Company's stock during the applicable period.
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<PAGE> 13
With respect to each named executive officer, the following table sets forth
information concerning stock option exercises during 1998 and unexercised
options held December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FY-END (#) OPTIONS AT FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank J. O'Connell -- -- 1,166,667/333,333 --/--
James T. Wilson -- -- 41,666/108,334 --/--
Gregory Ionna -- -- 69,001/51,666 $36,835/--
Gregory A. Brown -- -- 33,333/66,667 --/--
Karen L. Kemp -- -- 20,000/40,000 --/--
</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 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 1999 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>
$200,000 $14,010 $28,020 $42,030 $56,040 $70,050 $84,060 $98,070 $112,080
300,000 21,510 43,020 64,530 86,040 107,550 129,060 150,570 172,080
400,000 29,010 58,020 87,030 116,040 145,050 174,060 203,070 232,080
500,000 36,510 73,020 109,530 146,040 182,550 219,060 255,570 292,080
600,000 44,010 88,020 132,030 176,040 220,050 264,060 308,070 352,080
700,000 51,510 103,020 154,530 206,040 257,550 309,060 360,570 412,080
800,000 59,010 118,020 177,030 236,040 295,050 354,060 413,070 472,080
900,000 66,510 133,020 199,530 266,040 332,550 399,060 465,570 532,080
1,000,000 74,010 148,020 222,030 296,040 370,050 444,060 518,070 592,080
</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 1998 for each named executive
officer (which includes relocation and similar nonrecurring payments) is as
follows: Mr. O'Connell, $725,919; Mr. Wilson, $382,626; Mr. Ionna, $344,735; Mr.
Brown, $446,380; and Ms. Kemp, $317,078. For the purpose of computing a benefit
under the table, on December 31, 1998, Mr. O'Connell had two years of credited
service; Mr. Wilson, one year; Mr. Ionna, 24 years; Mr. Brown, two years; and
Ms. Kemp, two years. Covered compensation amounts differ from amounts shown on
the Summary Compensation Table due to differences in the recognition of
pensionable earnings.
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<PAGE> 14
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, 20 years and
37%; Mr. Wilson, 16 years and 30%; Mr. Ionna, 30 years and 50%; Mr. Brown, 17
years and 32%; and Ms. Kemp, 19 years and 35%. For SERP purposes, Mr.
O'Connell's retirement compensation base is $500,000.
Pursuant to his employment agreement, Mr. O'Connell received, in 1998,
additional credit for five years of service for all purposes under the Company's
retirement plans. He will receive credit for one additional year of deemed
service (up to a maximum of five years) for each year of actual service after
1997. Mr. O'Connell also will receive credit for one year of additional deemed
service in the event of termination of employment due to disability, death or
non-renewal of his employment agreement by the Company and credit for three
years of additional deemed service if the Company terminates his employment
without "just cause" or if he terminates his employment for "good reason" (each
as defined in the employment agreement).
EMPLOYMENT CONTRACTS. Each of the named executive officers has an employment
agreement with the Company.
Mr. O'Connell initially had an agreement that ran from August 1996 through
December 1999. This agreement provided for a minimum annual salary of $350,000,
subject to increase from time to time, and for annual bonuses based upon
specified increases in the Company's operating income from year to year.
Effective August 1, 1997, Mr. O'Connell's salary was set at $400,000. In August
1998, the Company entered into a new employment agreement with Mr. O'Connell
which expires on December 31, 2002 and automatically renews from year to year
thereafter. Under the new agreement, Mr. O'Connell's base salary was set at
$500,000 effective August 1, 1998, subject to adjustment over the term of the
agreement. Mr. O'Connell is entitled to an annual bonus, in an amount up to 200%
of then-current base salary, based 50% on the percentage increase in the
Company's operating income over the prior year and 50% on the percentage
increase in the Company's revenue over the prior year. Additionally, Mr.
O'Connell was granted an option to purchase 500,000 shares of the Company's
common stock at exercise prices increasing from 100% of fair market value on the
date of grant to 145% of that fair market value.
Under most circumstances which result in Mr. O'Connell's termination of
employment, he will receive payments based upon his "Current Compensation." The
employment agreement defines "Current Compensation" as then-current base salary
plus the average of bonuses earned over the prior two fiscal years, with a
deemed bonus of $500,000 for 1997. In the event of Mr. O'Connell's disability,
he will receive at least one year of Current Compensation. In the event of
either the non-renewal of his employment agreement by the Company or of his
death, he or his spouse or estate will receive one year of Current Compensation.
If his employment is terminated by the Company without "just cause" or
voluntarily by him for "good reason," he will receive three times Current
Compensation. The employment agreement also provides for continuation of various
insurance benefits under these circumstances and for crediting of one or more
extra years under the Company's retirement plans. If, after a change in control,
(a) Mr. O'Connell terminates his employment for "good reason" or (b) his
employment is terminated without "just cause" or because of a failure to renew
his employment agreement, Mr. O'Connell is entitled to receive a tax "gross up"
of up to $5,000,000 on any resulting payments on which an "excess parachutes
payments" tax is imposed.
Mr. Ionna has an employment agreement, entered into during 1996, which had an
original expiration date of March 31, 1999 that has been extended to March 31,
2000 and may be extended further on an indefinite basis by mutual agreement. The
agreement provides for an annual base 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 he or the Company elects not to
extend further the agreement.
Each of Messrs. Wilson and Brown and Ms. Kemp has an employment agreement with
the Company. These agreements became effective September 29, 1997, May 19, 1997
and April 22, 1997, respectively; each extends indefinitely until terminated by
the
13
<PAGE> 15
Company, or by the executive officer on 30 days' advance notice to the Company.
Under the agreements, Mr. Wilson, Mr. Brown and Ms. Kemp are entitled to annual
base salaries, which are subject to adjustment from time to time, of $250,000,
$225,000 and $175,000, 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 specified relocation expense payments or reimbursements and the
following additional items of compensation: Mr. Wilson, a signing bonus of
$100,000 ($50,000 after beginning employment and $50,000 after closing on a home
in the greater Cincinnati area) and options to purchase 125,000 shares of common
stock; 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; and Ms. Kemp, a signing bonus of $30,000 and options to purchase 30,000
shares of common stock. If the terms of Mr. Wilson's employment agreeement are
materially breached by the Company or his employment is terminated by the
Company other than for cause, he is entitled to a lump sum payment equal to two
times the total of his base salary and any bonus awarded over the prior 12
months. If, within 24 months of a change in control of the Company, such a
breach occurs or Mr. Wilson's employment is terminated by the Company without
cause or by him for good reason, the lump sum payment will be three times base
salary and bonus. 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 to two years of base salary.
Effective February 1, 1999, the annual salaries of Messrs. Wilson, Ionna and
Brown and Ms. Kemp were increased to $275,000, $260,000, $255,000 and $195,000,
respectively.
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, 1998 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 frequently 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 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
Gibson Greetings, Inc. Management Incentive Plan,
specific targeted levels of pretax
14
<PAGE> 16
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.
Achievement of target incentives (for meeting the
Company's 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.
Code Section 162(m) generally limits the Company's tax deduction to $1 million
for compensation paid to each of the named executive officers. However, the
statute exempts qualifying performance-based compensation from the deduction
limit if certain conditions are met. The Committee believes that under most
circumstances executive officer compensation will fall within the limitations of
Code Section 162(m), but retains the right to make subjective decisions and to
award compensation that might be subject to the tax deductibility limitation
under Code Section 162(m).
1998 Actions
During 1998, the annual salaries of the Company's named executive officers
(other than the CEO) were maintained at the levels set in their employment
agreements. In February 1999, based upon a review of individual job performances
and competitive conditions in the job market, each person received an increase
in annual salary.
Because the Company did not achieve its targeted operating income levels, no
named executive officer received a bonus under the Company's Management
Incentive Plan for 1998.
15
<PAGE> 17
In addition to the CEO, one named executive officer received a stock option
grant in 1998.
CEO Compensation
As discussed above under "Employment Contracts," in August 1998, the Company
entered into a new employment agreement with Mr. O'Connell which extends until
December 31, 2002. Although Mr. O'Connell's prior agreement would have continued
until December 31, 1999, the Committee believed it was in the best interest of
the Company to enter into a new employment agreement with Mr. O'Connell in order
to ensure retention of his services beyond December 1999. The terms of Mr.
O'Connell's new agreement were established after consideration of the report of
an outside compensation consulting firm hired by the Committee which analyzed
components of compensation on a comparative basis. The new agreement provides
for a base salary of $500,000, beginning August 1, 1998, an increase from the
$400,000 salary in effect at that time. The increase in base salary was made in
order to ensure that the CEO's base salary was competitive with a peer group,
which was selected for analysis. Because the Company competes with a wide and
diverse range of consumer products companies for executive talent, the group of
companies used for compensation comparison is not the same as that believed
appropriate for a comparison of stockholders returns on the performance graph
shown below although there may be overlap between the groups. Additionally, the
formula for Mr. O'Connell's incentive bonuses was changed from one based solely
on operating income to a formula based 50% on revenue growth and 50% on
operating income growth. The Committee believed that growth in revenue and
operating income are more appropriate metrics for measuring and rewarding
short-term performance results. Because neither target level required by the new
employment agreement was met, Mr. O'Connell received no bonus for 1998.
In connection with his new employment agreement, Mr. O'Connell was granted
options to purchase 500,000 shares of common stock at exercise prices increasing
from 100% of fair market value on the date of grant to 145% of that fair market
value. In determining the size of the option grant, the Committee considered
competitive information as supplied by the compensation expert. For further
information, see "Executive Compensation and Other Information -- Employment
Contracts."
Compensation Committee:
C. Anthony Wainwright, Chairman
Charlotte A. St. Martin
Albert R. Pezzillo (until June 1998)
George M. Gibson (June 1998 through present)
16
<PAGE> 18
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, 1993 and that any dividends were reinvested.
[LINEGRAPH]
GIBSON GREETINGS, INC.
Relative Market Performance
Total Return 1993-1998
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gibson Greetings, Inc. 100.00 71.50 77.56 95.14 106.04 57.57
----------------------------------------------------------------------------------------------------------------
S&P 500 Index 100.00 101.32 139.40 171.40 228.59 293.91
----------------------------------------------------------------------------------------------------------------
Peer Group Index 100.00 85.29 89.08 100.05 127.88 132.18
----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The peer group is composed of companies having seasonal businesses that
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., 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.).
17
<PAGE> 19
PRINCIPAL STOCKHOLDERS AND
HOLDINGS OF MANAGEMENT
The following table sets forth, as of July 9, 1999, 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 and each executive officer named on the
Summary Compensation Table, individually, and (iii) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------------------
NUMBER
NAME POSITION OF SHARES (1) PERCENT (2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Prudential Insurance Company 3,018,160 (3) 19.1%
of America
Prudential Plaza
Newark, NJ 07102
Royce & Associates, Inc. 1,606,100 10.1%
1414 Avenue of the Americas
New York, NY 10019
Lazard Freres & Co. LLC 1,090,565 (4) 6.9%
30 Rockefeller Plaza
New York, NY 10020
Maxus Investment Group 847,123 (5) 5.4%
1301 East Ninth Street
Cleveland, OH 44114
New Valley Corporation 793,200 5.0%
100 S.E. Second Street
Miami, FL 33131
Frank J. O'Connell Chairman, President and 1,333,333 7.8%
Chief Executive Officer
George M. Gibson Director 7,490
Robert P. Kirby Director 3,387
Charles D. Lindberg Director 11,090
Albert R. Pezzillo Director 31,690
Charlotte A. St. Martin Director 8,490
C. Anthony Wainwright Director 9,590 (6)
Gregory A. Brown Senior Vice President, Sales, Card Division 50,000
Gregory Ionna Executive Vice President, Card Division 71,262
Karen L. Kemp Senior Vice President, Human Resources 30,000
James T. Wilson Executive Vice President, Finance and 49,999
Operations, and Chief Financial Officer
All directors and executive officers 1,645,165 9.4%
as a group (12 persons)
</TABLE>
(1) Except as otherwise noted, each owner has sole voting and dispositive power
over the shares shown. The numbers of shares shown for directors and
executive officers include shares which may be purchased upon exercise of
presently exercisable options and options exercisable within 60 days after
July 9, 1999, in the following amounts: Mr. O'Connell, 1,333,333 shares;
Mr. Gibson, 5,000 shares; Mr. Kirby, 3,000 shares; Mr. Lindberg, 9,000
shares; Mr. Pezzillo, 29,750 shares; Ms. St. Martin, 7,000 shares; Mr.
Wainwright, 8,000 shares; Mr. Brown, 50,000 shares; Mr. Ionna, 70,667
shares; Ms. Kemp, 30,000 shares; Mr. Wilson, 49,999 shares; and all
directors and executive officers as a group, 1,632,083 shares.
(2) Except as indicated, the percentage of shares held by each owner is less
than 1%. The percentage is based on shares outstanding on July 9, 1999.
(3) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission (the "SEC") dated February 2, 1999, The Prudential Insurance
Company of America has sole power to vote and/or dispose of 3,100 shares
and shared power to vote and/or dispose of 3,015,060 shares.
18
<PAGE> 20
(4) Based upon a Schedule 13G filed with the SEC dated February 16, 1999,
Lazard Freres & Co. LLC has sole power to vote 803,005 shares and sole
power to dispose of 1,090,565 shares.
(5) Based upon a Schedule 13D filed with the SEC dated April 16, 1999, Maxus
Investment Group has sole power to vote and/or dispose of 56,500 shares and
shared power to vote and/or dispose of 790,623 shares.
(6) Includes 100 shares held by Mr. Wainwright's wife as to which beneficial
ownership is disclaimed.
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 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 1998.
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, as independent public accountants of
the Company for the year 1999. 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
The Company currently expects to mail proxy material to stockholders on or about
April 17, 2000 for a mid-May 2000 Annual Meeting. The dates given below reflect
this anticipated schedule. Should the expected dates change by more than 30
days, the Company will provide notice in a filing with the SEC.
Stockholder proposals will be considered for inclusion in the Proxy Statement
for the 2000 Annual Meeting if they are received by the Company before the close
of business on December 20, 1999.
In addition, in order for a stockholder properly to introduce business for
action at the Company's 2000 Annual Meeting (other than business specified in
the Notice of the meeting), the Company must be given written notice no later
than March 3, 2000. The Company will retain discretionary authority to vote
proxies on matters of which it is not properly notified and also may retain that
authority under other circumstances.
PROXY SOLICITATION
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.
19
<PAGE> 21
EXHIBIT A
---------
GIBSON GREETINGS, INC.
1999 STOCK INCENTIVE PLAN
ARTICLE I
---------
Objectives
----------
1.1 The objectives of this Stock Incentive Plan (the "Plan") are to enable
Gibson Greetings, Inc. ("Gibson") to compete successfully in retaining
and attracting Eligible Employees and Advisors of outstanding ability,
to stimulate the efforts of these persons toward Gibson's objectives
and to encourage their ownership of shares of Gibson's Common Stock.
ARTICLE II
----------
Definitions
-----------
2.1 For purposes of the Plan each of the following terms shall have the
definition which is attributed to it, unless another definition is
clearly indicated by a particular usage and context.
A. "ADVISOR" means any natural person who provides bona fide
advisory or consulting services to the Company other than
services in connection with the offer or sale of securities in a
capital-raising transaction or services, which directly or
indirectly promote or maintain a market for Gibson's securities.
B. "AWARD" means an Option or Restricted Shares granted under the
Plan.
C. "BOARD" means the Board of Directors of Gibson.
D. "CODE" means the Internal Revenue Code of 1986. Reference to any
Section of the Code includes the provisions of that Section as it
may be amended or replaced by any other section(s) of like intent
and purpose and also includes any regulations or rulings
promulgated thereunder.
E. "COMPANY" means Gibson and any subsidiary of Gibson, as the term
"subsidiary" is defined in Section 424(f) of the Code.
F. "DISABILITY" means permanent and total disability as defined in
Section 22(e)(3) of the Code.
G. "EFFECTIVE DATE OF GRANT" means the date on which, or such later
date as of which, the Board makes an Award.
H. "ELIGIBLE EMPLOYEE" means any individual (other than one who
receives retirement benefits, stipends, consulting fees,
honorariums and the like) who performs services for the Company
and is included on the regular payroll of the Company. A director
of the Company who does not otherwise qualify as an Eligible
Employee pursuant to the previous sentence shall nonetheless be
considered an Eligible Employee with respect to the grant of
Nonqualified Stock Options.
I. "EXCHANGE ACT" means the Securities Exchange Act of 1934.
J. "FAIR MARKET VALUE" means the last sale price reported on The
Nasdaq Stock Market, or on any stock exchange on which the Shares
are traded, on a specified date or, if there are no reported
sales on such date, then the last reported sales price on the
next preceding day on which such a sale was transacted. If the
Shares are not then traded as described in the preceding
sentence, then the average of the closing bid and asked prices on
the specified date or last preceding day on which bid and asked
prices were
20
<PAGE> 22
reported, or such other method as the Board may select, shall be
used in determining Fair Market Value for a Share.
K. "INCENTIVE STOCK OPTION" shall have the same meaning as is given
to that term by Section 422 of the Code.
L. "MATURE SHARES" means Shares which have been fully paid and held,
of record or beneficially, by the holder of an Option for at
least six months.
M. "NONQUALIFIED STOCK OPTION" means any Option other than an
Incentive Stock Option.
N. "OPTION" means the right, designated as a stock option and
subject to the terms of this Plan and to such other terms and
conditions as the Board may establish, to purchase from Gibson a
stated number of Shares at a specified price.
O. "OPTION PRICE" means the purchase price per Share subject to an
Option. The Option Price shall not be (i) less than 100% of the
Fair Market Value of a Share on the Effective Date of Grant in
the case of a Nonqualified Stock Option, except as otherwise
provided in Section 4.4, or (ii) less than 100% of the Fair
Market Value of a Share on the Effective Date of Grant in the
case of an Incentive Stock Option, except as otherwise provided
in Section 8.1.
P. "RESTRICTED SHARES" means Shares awarded under the Plan which are
designated as restricted and are subject to forfeiture and to
such other terms and conditions as are set forth in the Plan and
as the Board may establish.
Q. "SHARE" means one share of the Common Stock, $.01 par value, of
Gibson.
ARTICLE III
-----------
Administration
--------------
3.1 The Plan shall be administered by the Board. Subject to and consistent with
the provisions of the Plan, the Board 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 Awards granted under the Plan as it
deems necessary or advisable. At any time, or from time to time, the Board
may appoint a committee of at least two directors (the "Committee") to
administer, or to approve transactions pursuant to, the Plan. In the event
a Committee is so appointed, it may carry out all of the functions of the
Board with respect to the Plan, except for amendments to or suspension or
termination of the Plan.
3.2 Except as specifically limited by the provisions of the Plan, the Board
shall have authority to:
A. Determine which Eligible Employees or Advisors shall be granted
Awards;
B. Determine the number of Shares which may be subject to each
Award;
C. Determine the term and the Option Price of each Option;
D. Determine whether an Option is an Incentive Stock Option or a
Nonqualified Stock Option (except that only Nonqualified Stock
Options may be granted to nonemployee directors of the Company
and to Advisors);
E. Determine the purchase price, if any, and all other terms and
conditions of a grant of Restricted Shares;
F. Determine the time or times when Awards will be granted; and
21
<PAGE> 23
G. Determine all other terms and conditions of each Award, including
(but not limited to) the terms of any Award agreement. The Board
may, in its discretion, determine as a condition of any Award
that a stated percentage of Shares covered by such Award shall
become exercisable (in the case of an Option) or vested (in the
case of Restricted Shares) in any one year or other stated period
of time. The Board may also waive or amend the terms and
conditions of, or accelerate the exercisability or vesting of, an
Award under circumstances selected by the Board, except that no
Option may be "repriced" within the meaning of Item 402(i) of
Regulation S-K under the Exchange Act.
3.3 Any action, decision, interpretation or determination by the Board
with respect to the application or administration of this Plan shall
be final and binding upon all persons, and need not be uniform with
respect to its determination of recipients, amount, timing, form,
terms or provisions of Awards.
3.4 No member of the Board shall be liable for any action or determination
taken or made in good faith with respect to the Plan or any Award
granted hereunder and, to the extent not prohibited by applicable law,
all members shall be indemnified by the Company for any liability and
expenses which they may incur as a result of any claim or cause of
action, or threatened claim or cause of action, arising in connection
with the administration of this Plan or the grant of any Award
hereunder.
3.5 The Board or the Committee may delegate, from time to time, to the
Chief Executive Officer of Gibson the authority to grant Awards and to
establish the terms and conditions of those Awards, except that this
authority may not be delegated for Awards to persons who are subject
to Section 16 of the Exchange Act with respect to Gibson. The Board or
the Committee may set such other limitations on any delegation, as it
deems necessary or advisable.
ARTICLE IV
----------
Shares Issuable
---------------
4.1 Except as provided in Article XII, the number of Shares, which may be
issued under the Plan, shall not exceed 723,000 Shares in the
aggregate. Shares issued under the Plan may be either authorized and
un-issued shares or treasury shares.
4.2 Options for no more than 200,000 Shares may be granted to any Eligible
Employee during any period of twelve (12) consecutive months. If any
Option expires or terminates for any reason without being completely
exercised, the Shares with respect to which such Option was not
exercised may again be subject to other Options. Shares tendered as
payment for the Option Price pursuant to Section 7.1 shall be
available for issuance under the Plan.
4.3 No more than 20% of the Shares issued under the Plan may be granted as
Restricted Shares. Restricted Shares which are resold to, or
reacquired by, Gibson and in respect of which no benefits of ownership
have been received by the Eligible Employee or Advisor shall not count
against the 20% limit and shall be available for reissuance under the
Plan.
4.4 Options and Restricted Shares for an aggregate of up to 5% of the
Shares authorized for issuance under the Plan may be issued without
regard to the restrictions on Option Price and Restricted Share
vesting imposed by Sections 2.1(O)(i) and 11.2(D), respectively.
22
<PAGE> 24
ARTICLE V
---------
Stock Option Grants
-------------------
5.1 Subject to the terms and conditions of the Plan, the Board may, from
time to time, grant Options to Eligible Employees or Advisors on such
terms and conditions as it shall determine. More than one Option and,
subject to the restriction of Section 3.2(D), more than one form of
Option may be granted to the same individual.
ARTICLE VI
----------
Exercise of Options
-------------------
6.1 Any person entitled to exercise an Option may do so, without the need
for further approval pursuant to Exchange Act Rule 16b-3, in whole or
in part by delivering to Gibson, attention: Stock Option Plan
Administrator, at its principal office, a written notice of exercise.
The written notice shall specify the number of Shares for which the
Option is being exercised and shall be accompanied by full payment of
the Option Price for the Shares being purchased.
6.2 Certificates for Shares acquired upon exercise of an Option will be
issued in the regular course after exercise of the Option and payment
of the Option Price. No person holding an Option or entitled to
exercise an Option granted under this Plan shall have any rights or
privileges of a shareholder of Gibson with respect to any Shares
issuable upon exercise of the Option until certificates representing
such Shares shall have been issued and delivered.
ARTICLE VII
-----------
Payment of Option Price
-----------------------
7.1 Subject to such administrative requirements as the Board may impose,
payment of the Option Price may be made, at the election of the holder
of an Option, in cash or with Mature Shares or by a combination of the
foregoing. If payment with Mature Shares is selected, the value of
each Mature Share shall be the Fair Market Value of a Share on the day
the Mature Shares are tendered for payment, which shall be the date on
which the Mature Shares, duly endorsed or accompanied by a stock power
duly endorsed for transfer to Gibson, are received by Gibson. In lieu
of delivering Mature Shares to Gibson, the holder of an Option may
attest to their ownership on a form prescribed by Gibson, in which
case the value of each Mature Share shall be the Fair Market Value of
a Share on the date the attestation form is received by Gibson and the
number of Shares issued by Gibson shall be net of the number of Mature
Shares to which ownership has been attested. An Option's exercise
price also may be paid pursuant to an exercise/sale procedure
involving a simultaneous sale by a broker, in which case the exercise
date shall be the trade date, provided that proceeds of such sale in
full payment of the Option Price are received by Gibson on such date.
ARTICLE VIII
------------
Incentive Stock Options and Nonqualified Stock Options
------------------------------------------------------
8.1 Any option designated as an Incentive Stock Option will be subject to
the general provisions applicable to all Options granted under the
Plan. In addition, an Incentive Stock Option shall be subject to the
following specific provisions:
A. No Incentive Stock Option may be exercised after the expiration
of ten years from the Effective Date of Grant.
B. At the time the Incentive Stock Option is granted, if the
Eligible Employee owns, directly or indirectly, stock
representing more than 10% of the total combined voting power of
all classes of stock of the Company then:
23
<PAGE> 25
(i) The Option Price must equal at least 110% of the Fair Market
Value on the Effective Date of Grant; and
(ii) The term of the Option shall not be greater than five years
from the Effective Date of Grant.
C. The aggregate Fair Market Value (determined as of the Effective
Date of Grant) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any holder
during any calendar year (under all plans of the Company) shall
not exceed $100,000.
8.2 If any Option is not granted, exercised or held pursuant to the
provisions of Code Section 422, it will be considered to be a
Nonqualified Stock Option to the extent that any or all of the grant
is in conflict with those provisions.
ARTICLE IX
----------
Transferability of Options
--------------------------
9.1 During the lifetime of an Eligible Employee or Advisor to whom an
Option has been granted, such Option is non-assignable and
non-transferable and may be exercised only by such individual or that
individual's legal representative or guardian, except that a
Nonqualified Stock Option may be transferred (A) pursuant to a
"domestic relations order" as defined in Section 414(p)(1)(B) of the
Code or (B) under such other circumstances and in accordance with such
other terms and conditions as may be established by the Board. In the
event of the death of an Eligible Employee or Advisor to whom an
Option has been granted, the Option shall be transferable pursuant to
the holder's will or by the laws of descent and distribution and may
thereafter be exercised by the transferee(s) as provided in Article X.
ARTICLE X
---------
Termination of Options
----------------------
10.1 Unless earlier terminated pursuant to Article XIV, an Option granted to
an Eligible Employee will terminate as follows:
A. During the period of the Eligible Employee's continuous
employment with, or service as a director of, the Company, the
Option will terminate upon the earlier of the date on which it
has been fully exercised, it expires by its terms or it is
terminated by the mutual agreement of the Company and the
Eligible Employee.
B. Upon termination of the Eligible Employee's employment with, or
service as a director of, the Company for any reason, any
unexercisable Option shall immediately terminate. Any Option
which is exercisable on the date of termination of employment, or
service as a director, will terminate upon the earliest of its
full exercise, the expiration of the Option by its terms or,
except as provided in Sections 10.1(C) and 10.1(D), the end of
the thirty day period following the date of termination. For
purposes of the Plan, a leave of absence approved by the Company
shall not be deemed to be termination of employment.
C. If an Eligible Employee to whom an Option was granted retires
(either as a director or under the retirement provisions of the
Company's Retirement Income Plan or successor plan), the Option
may be exercised at any time within three months after the date
of retirement, to the extent that it was exercisable on the date
of retirement.
D. If an Eligible Employee to whom an Option was granted dies or
becomes subject to a Disability while employed by, or serving as
a director of, the Company, the Option may be exercised at any
time within one year after the date of death or the commencement
of Disability, to the extent that it was exercisable at the time
of death or the commencement of Disability.
24
<PAGE> 26
10.2 An Option granted to an Advisor will terminate upon the earlier of the
full exercise of the Option or the expiration of the Option by its
terms.
10.3 The provisions of Sections 10.1 and 10.2 above shall apply irrespective
of whether an Option has been transferred to a person or entity other
than the Eligible Employee or Advisor to whom the Option was granted.
10.4 The Board, at its discretion, may extend the periods for Option
exercise set forth in this Article X.
ARTICLE XI
----------
Restricted Share Awards
-----------------------
11.1 Subject to the terms and conditions of the Plan, the Board may, from
time to time, grant Awards of Restricted Shares to Eligible Employees
and Advisors. Each Restricted Share Award shall specify the number of
Shares covered by the Award, the date of issuance of the Shares, the
price (if any) to be paid for the Shares, any requirements for the
resale of the Shares to Gibson and the restrictions imposed on the
Shares. The Board may grant Awards of Restricted Shares subject to the
attainment of specified performance goals, continued employment or
other conditions specified by it.
11.2 Awards of Restricted Shares shall be subject to the following
provisions:
A. Restricted Shares may be issued at the time of grant or upon
vesting, as determined by the Board.
B. If Restricted Shares are issued at the time of grant, the
Board may require the Eligible Employee or Advisor to
deliver a duly signed stock power, endorsed in blank,
covering the Restricted Shares. The Board also may require
that the stock certificates evidencing the Restricted Shares
be held in custody by the Company until the Restricted
Shares are fully vested.
C. Unless otherwise determined by the Board at the time of
grant, Restricted Shares shall have no dividend or voting
rights until they are fully vested.
D. Except as provided in Section 4.4, the vesting period for
Restricted Shares shall be no shorter than three years
unless performance-based conditions are imposed, in which
case the vesting period shall be no shorter than one year.
ARTICLE XII
-----------
Adjustments
-----------
12.1 The Board shall make appropriate adjustments in the number of Shares
available for issuance under the Plan, the number of Shares subject to
outstanding Options and the Option Price of optioned Shares in order to
give effect to changes in the Shares as a result of any merger,
consolidation, recapitalization, reclassification, combination, stock
dividend, stock split, or other similar event. The determination as to
the method and extent of such adjustments shall be within the sole
discretion of the Board.
ARTICLE XIII
------------
Amendment or Termination of Plan
--------------------------------
13.1 The Board may at any time amend, suspend or terminate the Plan;
provided, however, that no amendment to the Plan shall adversely affect
any Award granted under the Plan without the consent of the holder
thereof.
25
<PAGE> 27
13.2 If the Plan is terminated, an outstanding Award shall continue in
accordance with its terms except as is otherwise provided in Article
XIV.
ARTICLE XIV
-----------
Certain Events
--------------
14.1 In the event Gibson consolidates with, merges into, or transfers all or
substantially all of its assets to another corporation or corporations
(a "successor corporation"), the successor corporation may obligate
itself to continue this Plan and to assume all obligations under the
Plan. In the event that the successor corporation does not obligate
itself to continue this Plan as above provided, the Plan shall
terminate effective upon such consolidation, merger or transfer, and
any unexercised Option shall terminate and any unvested Restricted
Shares shall be forfeited. If practical, Gibson shall give each holder
of an Award twenty (20) days prior notice of any possible transaction
which might terminate this Plan and any unexercised or unvested Awards.
14.2 In the event of a Change in Control (as defined in Section 14.3 below),
all Options which are outstanding at the time of such event shall
immediately become exercisable in full and all Restricted Shares shall
become fully vested and freed of any restrictions.
14.3 A Change in Control shall be deemed to have occurred if the conditions
set forth in any one of the following subparagraphs shall have been
satisfied:
A. Any Person is or becomes the beneficial owner ("Beneficial
Owner"), as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of securities of Gibson representing
30% or more of the combined voting power of Gibson's then
outstanding securities; or
B. During any period of two consecutive years (not including
any period prior to the adoption of this Plan), individuals
who at the beginning of such period constitute the Board and
any new director (other than a director designated by a
Person who has entered into an agreement with Gibson to
effect a transaction described in clause A., C. or D. of
this definition) whose election by the Board or nomination
for election by Gibson's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority of the Board; or
C. The stockholders of Gibson approve a merger or consolidation
of Gibson with any other corporation, other than (i) a
merger or consolidation which would result in the voting
securities of Gibson outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding
securities prior to such merger or consolidation under an
employee benefit plan of Gibson at least 50% of the combined
voting power of the voting securities of Gibson or such
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a
recapitalization of Gibson (or similar transaction) in which
no Person acquires more than 50% of the combined voting
power of Gibson's then outstanding securities; or
D. The stockholders of Gibson approve a plan of complete
liquidation of Gibson or an agreement for the sale or
disposition by Gibson of all or substantially all of
Gibson's assets.
As used in this Paragraph, "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not include (i) Gibson
or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of Gibson or any of its
subsidiaries,
26
<PAGE> 28
which held stock of Gibson prior to the Change in Control, (iii) an
underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly,
both immediately before and immediately after the Change in Control
event, by the stockholders of Gibson in substantially the same
proportions as their ownership of stock of Gibson.
14.4 The grant of Awards under the Plan shall in no way affect the right of
Gibson to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or
assets.
14.5 Notwithstanding the foregoing (unless otherwise provided in a separate
agreement between the Company and an Eligible Employee), in the event
the amounts deemed payable under this Article XIV, when added to all
other payments by the Company to the holder of an Award, would, if
made, constitute Excess Parachute Payments within the meaning of
Sections 280G and 4999 of the Code, the amounts deemed payable by the
Company under this Article shall be reduced by the amount deemed
necessary to cause the holder to receive $1,000.00 less than three
times the holder's Base Amount (as that term is defined in Code Section
280G) from all such payments to the holder from the Company. In the
event the amount of the payments exceeds the amount subsequently
determined to have been due, the excess benefits over three times the
Base Amount shall constitute a loan by the Company to the holder,
payable on demand by the Company, with interest at a rate equal to 120%
of the applicable federal rate determined under Section 1274 of the
Code, compounded semi-annually.
ARTICLE XV
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Effective Date
--------------
15.1 This Plan shall become effective on the date on which it is approved by
the stockholders of Gibson. No Incentive Stock Option shall be granted
pursuant to this Plan subsequent to March 22, 2009 or subsequent to any
earlier date as of which this Plan is terminated.
ARTICLE XVI
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Miscellaneous
-------------
16.1 Nothing contained in this Plan shall constitute the granting of an
Award. Each Award shall be represented by a written Award agreement
executed by both the Eligible Employee or Advisor and Gibson.
16.2 No Option may be transferred or exercised, and no Shares shall be
issued and delivered upon exercise of an Option or in connection with
the grant of Restricted Shares, unless and until Gibson has complied
with all applicable securities laws, the listing requirements of any
market or national securities exchange on which Gibson's Shares may
then be traded and any other requirements of law. Any certificate
representing Shares acquired under the Plan may bear such legends, as
the Company deems advisable to assure compliance with all applicable
laws and regulations.
16.3 To the extent deemed necessary or appropriate by the Board, an Award
under the Plan shall contain provisions for the satisfaction of all
applicable tax withholding requirements.
16.4 Nothing contained in this Plan or in any Award granted pursuant to it
shall confer upon any person any right to continue in the employ of, as
a director of or in any business relationship with the Company or to
interfere in any way with the right of the Company to terminate a
person's employment or business relationship with the Company at any
time.
16.5 This Plan shall be construed and administered in accordance with and
governed by the laws of the State of Delaware.
27
<PAGE> 29
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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
Metropolitan Club, 50 E. RiverCenter Blvd., Covington, Kentucky, at
11:00 a.m., Eastern Daylight time, on August 26, 1999, and at any
adjournments thereof.
THE PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THE PROXY SHALL BY 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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<S> <C> <C> <C>
[ ]
1. To elect three directors. FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] * EXCEPTIONS [X]
listed below for all nominees listed below
Nominees: Charles D. Lindberg, Albert R. Pezzillo and C. Anthony Wainwright
(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. To approve the Gibson Greetings, Inc. 1999 Stock 3. To consider, if presented at the meeting, a stockholder
Incentive Plan. proposal to declassify the Company's Board of Directors.
FOR [X] AGAINST [X] ABSTAIN [X]
FOR [X] AGAINST [X] ABSTAIN [X]
4. To transact any other business that properly may
come before the meeting.
[X] Mark here if you plan Mark here for address [X]
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:_______________________________, 1999
__________________________________________
__________________________________________
(Signature of Stockholder)
VOTES MUST BE INDICATED [x]
PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY (x) IN BLACK OR BLUE INK.
USING THE ENCLOSED ENVELOPE.
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