ARTISTIC GREETINGS INCORPORATED
ONE KOMER CENTER, ELMIRA, NEW YORK 14902
STUART KOMER
Chairman, Chief Executive Officer
and President
March 29, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders which will be held at 9:00 a.m. on Thursday, May 2, 1996 at our
Corporate Headquarters in The Komer Center, One Komer Center, Elmira, New
York.
The enclosed Notice and Proxy Statement contain information about matters
to be considered at the Annual Meeting, at which the business and operations
of Artistic Greetings will also be reviewed. Discussions at our Annual
Meeting have generally been interesting and useful, and we hope that you will
be able to attend. Only stockholders and their proxies will be permitted to
attend the Annual Meeting.
Whether or not you plan to attend, we urge you to complete, sign and
return the enclosed proxy card so that your shares will be represented and
voted at the Annual Meeting.
Sincerely yours,
Stuart Komer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 2, 1996
The Annual Meeting of Stockholders (the "Meeting") of ARTISTIC GREETINGS
INCOR-PORATED (the "Company") will be held at the Company's Corporate
Headquarters, One Komer Center, Main and Water Streets, Elmira, New York 14902
on Thursday, May 2, 1996 at 9:00 a.m. for the following purposes:
1. To elect members of the Board of Directors of the Company
("Directors") to serve until the next Annual Meeting of Stockholders
and until the election and qualification of their successors;
2. To take action on a proposal to ratify the selection of Arthur
Andersen LLP as auditors of the books and financial records of the
Company for its fiscal year ending December 31, 1996; and
3. To transact such other business as may properly come before the
Meeting.
The Board of Directors (the "Board") has fixed the close of business on
March 4, 1996, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Meeting.By Order of the
Board of Directors
MARIE B. BELT
Senior Vice President - Administration
and Secretary
March 29, 1996
ENCLOSED IS A PROXY FORM. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, THE BOARD OF DIRECTORS URGES YOU TO MARK, DATE, SIGN AND RETURN THE
PROXY, WHICH YOU MAY REVOKE AT ANY TIME PRIOR TO ITS USE. A SELF-ADDRESSED
PREPAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE IN RETURNING THE SIGNED
PROXY.
<PAGE>
ARTISTIC GREETINGS INCORPORATED
One Komer Center, Elmira, New York 14902
Telephone (607) 737-5235
PROXY STATEMENT
GENERAL
The enclosed proxy is solicited by the Board for use at the Meeting to be
held at the Company's Corporate Headquarters, One Komer Center, Main and Water
Streets, Elmira, New York 14902 on Thursday, May 2, 1996 at 9:00 a.m. The
mailing of this Proxy Statement and the enclosed proxy to stockholders of
record on March 4, 1996 (each a "Stockholder" and collectively, the
"Stockholders"), will commence on or about March 29, 1996.
Any proxy properly given and received prior to the commencement of the
Meeting will be voted with respect to all shares represented by it and will be
voted in accordance with the instructions, if any, given therein. If no
contrary instructions are given, the proxy will be voted (1) FOR the election
as Directors of the nominees named herein; (2) FOR the ratification of the
Board's selection of the firm of Arthur Andersen LLP, Certified Public
Accountants, as the Company's independent auditors for its fiscal year ending
December 31, 1996; and (3) in accordance with the proxyholder's best judgment
on any other matters which may properly come before the Meeting (each a
"Proposal" and collectively, the "Proposals"). A Stockholder giving a proxy
has the right to revoke it by a duly executed proxy bearing a later date, by
attending the Meeting and voting in person, or by otherwise notifying the
Company in writing prior to the Meeting.
Under Delaware law, the total votes received, including abstentions and
votes by brokers holding shares in "street name" or other fiduciary capacity
on "routine" matters, are counted in determining the presence of a quorum at
the Meeting. With respect to the election of the Directors, votes may be cast
for or withheld from voting with respect to any or all of the Directors.
Votes that are withheld will have no effect on the election of the Directors.
Abstentions may be specified on all Proposals other than the election of the
Directors and will be counted as present for purposes of the matter with
respect to which the abstention is noted. Under the Company's Certificate of
Incorporation, Directors are elected by a plurality of the votes cast, while
the approval of Proposal 2 will require the affirmative vote of a majority of
the shares present, in person or by proxy, and entitled to vote. Therefore,
under the Company's Certificate of Incorporation and under Delaware law,
assuming the presence of a quorum at the Meeting, non-votes by brokers will
have no effect on either the election of Directors or Proposal 2. However,
abstentions would have the effect of "no" votes with respect to Proposal 2.
Only Stockholders of record at the close of business on the Record Date
are entitled to vote at the Meeting. The total number of shares of common
stock of the Company ("Common Stock") outstanding as of that date was
6,323,075. Each share of Common Stock is entitled to one vote at the Meeting.
For a description of the principal holders of the Company's Common Stock and
any voting arrangements among them, see the discussion under "PRINCIPAL
HOLDERS OF COMMON STOCK."
A copy of the Company's 1995 Annual Report containing financial statements
for the fiscal year ended December 31, 1995 is enclosed with this Proxy
Statement.
The cost of solicitation of proxies will be borne by the Company. In
addition to this solicitation by mail, Directors, officers and employees of
the Company may solicit proxies by telephone, mail, fax or personal
interviews, and arrangements will be made with banks, brokerage firms and
others to forward proxy material to their principals. The Company will bear
the expense of any such additional solicitations.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, six Directors, making up the entire membership of the
Board as designated by the Board, are to be elected to hold office until the
next Annual Meeting of Stockholders and until the election and qualification
of their successors. Bernard M. Komer, a Director of the Company since 1980,
resigned on December 15, 1995 and will not be standing for re-election to the
Board. Unless authority is withheld with respect to any individual nominee or
all of the nominees, the shares represented by the proxies received as a
result of this solicitation will be voted in favor of the nominees listed
below. In the event any nominee declines or is unable to serve, proxies will
be voted for the election of the others so named and may be voted for
substitute nominees. The Board does not anticipate that any nominee will
decline or be unable to serve.
The following sets forth information concerning the principal occupations
and business experience during the past five years of the nominees for
election as the Directors of the Company:
NORMAN S. EDELCUP, 60, serves as Chairman and Chief Executive Officer of
Item Processing of America, a data processing center for financial
institutions located in Miami, Florida, a position he has held since July
1987. During 1988 and 1989, Mr. Edelcup served as Chief Operating Officer of
Catalina Lighting, Inc., Miami, Florida. Since 1975, Mr. Edelcup has been a
Director of Valhi, Inc. and since 1987 he has served as a Trustee of Baron
Asset Fund. Mr. Edelcup has been a Director of the Company since 1985.
LYNDON E. GOODRIDGE, 55, is Dean of the Whittemore School of Business and
Economics, University of New Hampshire, Durham, New Hampshire and has held
this post since July 1990. Mr. Goodridge has been a Company Director since
1985.
STUART KOMER, 70, has served as the Company's Chairman of the Board and
President since 1966, and was elected its Chief Executive Officer in July 1994
at which time David C. Lee became President of the Company. He also has
served in the capacity of President of the Company since the resignation of
David C. Lee on September 15, 1995, and as Treasurer from 1966 through July
1994.
ALAN SCHULTZ, 37, was elected to the Board in June 1995 as the
representative of Valcheck Company ("Valcheck"), a subsidiary of Valassis
Communications, Inc. ("Valassis") pursuant to the terms of the Purchase
Agreement under which the Company purchased the assets of Valcheck's mail
order check business in May 1995. In connection with the transaction,
Valcheck also received 500,000 shares of the Company's Common Stock, as
discussed further under "PRINCIPAL HOLDERS OF COMMON STOCK." Mr. Schultz is
the Chief Operating Officer and Executive Vice President of Valassis and has
held various other positions in operations, finance and sales management since
joining Valassis in 1984.
IRVING I. STONE, 86, was elected a Director in June 1990, as one of two
Directors designated by American Greetings Corporation ("American") under the
terms of a Standstill Agreement between the Company and American, executed in
connection with American's purchase of 2,250,000 shares of the Company's
Common Stock in May 1990 (the "Original Standstill Agreement") and discussed
further under "PRINCIPAL HOLDERS OF COMMON STOCK." Mr. Stone now serves as
Founder<circle>Chairman and as a member of the Board of Directors of American,
headquartered in Cleveland, Ohio and for a number of years prior to 1992,
served as its Chairman.
MORRY WEISS, 55, was elected a Director in September 1991. Mr. Weiss is
one of the two Directors designated by American under the Original Standstill
Agreement. In March 1992, Mr. Weiss was named Chairman and Chief Executive
Officer of American. For more than five years prior thereto, he had served as
President of American. He is also a Director of National City Bank,
Cleveland, Ohio and of Syratech Corp., Boston, Massachusetts. Mr. Weiss is
the son-in-law of Irving I. Stone.
EXECUTIVE OFFICERS
The following sets forth information concerning the principal occupations
and business experience of the executive officers of the Company, in addition
to Stuart Komer, for the past five years:
WILLIAM D. BANFIELD, 49, has served as the Company's Controller since
August 1992 and has been an employee of the Company since December 1991.
For more than five years prior to December 1991, Mr. Banfield served as the
Controller of Deanco, Inc., an electronic components distributor
headquartered in Ithaca, New York.
MARIE B. BELT, 52, has served as the Company's Senior Vice President -
Administration and Secretary since January 1996 and formerly served as Vice
President - Administration since June 1992 and Assistant Secretary since April
1990. Ms. Belt has served in a number of key supervisory and managerial
capacities with the Company, including order processing, customer service,
quality control and telemarketing since 1976.
JOSEPH A. CALABRO, 55, has served as the Company's Senior Vice President -
Manufacturing since January 1996 and was formerly a consultant to the Company
in the area of check production. In 1993, after seven years, Mr. Calabro left
PRISM Group Inc., a publicly traded software manufacturing and distribution
company where he held the position of Director, Vice President and Chief
Operating Officer of the Corporation and President and Chief Executive Officer
of its largest subsidiary. Mr. Calabro then formed Calabro and Associates
where he had a consulting practice in the Pacific Northwest before being
retained by the Company in August 1995.
DENNIS G. COGAN, 46, has served as the Company's Senior Vice President -
Information Systems since January 1996 and formerly served as Vice President -
Information Systems from August 1994 through December 1995. Mr. Cogan has
been an employee of the Company since August 1992. From February 1990 through
July 1992, Mr. Cogan served as the Director of Management Information Systems
of Sunbelt Sportswear, San Antonio, Texas, a direct marketer of sportswear.
MICHELLE CRANE, 27, has served as Vice President - Catalogs and Mass Media
since January 1996 and prior to that as Vice President - Catalog Division
since September 1995. Ms. Crane has served in a number of managerial
positions with the Company, including International Sales, Retail Sales and
Data Entry since 1988.
ROBERT E. JOHNSON, 44, has served as the Company's Senior Vice President -
Finance and Chief Financial Officer since October 1995. From October 1994 to
October 1995, Mr. Johnson was engaged in financial and general management
consulting. From April 1991 to April 1994, Mr. Johnson was Vice President
Finance of a subsidiary of Asea Brown Boveri Ltd., a Zurich-based company.
ROBERT T. MCDONOUGH, 47, has served as the Company's Senior Vice President
- - Marketing/ Sales since January 1996 and formerly served as Vice President of
General Merchandise from February 1995 through December 1995. For more than
five years prior thereto, Mr. McDonough served first as the Company's Catalog
Manager and then as its Manager of Domestic Mass Media Sales.
THOMAS C. WYCKOFF, 29, has served as the Company's Senior Vice President,
General Counsel and Assistant Secretary since January 1996 and prior to that
served as General Counsel of the Company from July 1995 through December 1995.
From September 1991 through July 1995, Mr. Wyckoff was associated with Cahill
Gordon & Reindel, a law firm headquartered in New York, New York where his
practice focused on corporate securities and transactional law.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN PERSONS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of March 4, 1996 by
(1) each beneficial owner of more than 5% of the outstanding Common Stock of
the Company, (2) each nominee for Director of the Company, (3) the two other
Executive Officers of the Company (in addition to Stuart Komer) named in the
compensation table that appears hereafter in this Proxy Statement, and (4) all
Directors and Executive Officers of the Company as a group. The Company
believes that each of the following persons has sole investment and voting
power in respect of his/her/its shares owned except as otherwise noted.
NUMBER OF SHARES OF PERCENTAGE OWNERSHIP OF
NAME COMMON STOCK COMMON STOCK{1}
American Greetings Corporation 2,250,000 {2} 35.6%
One American Road
Cleveland, OH 44144
Valcheck Company 500,000 {3} 7.9
c/o Valassis Communications, Inc.
36111 Schoolcraft Road
Livonia, MI 48150
Stuart Komer 558,244 {4} 8.6
One Komer Center
Elmira, NY 14902
Norman S. Edelcup 8,000 *
Lyndon E. Goodridge 7,000 *
Alan F. Schultz -0- {5} *
Irving I. Stone 1,500 {6,7} *
Morry Weiss 2,293 {7} *
Aloysius F. Stanton 42,550 {8} *
All Directors and Executive Officers
of the Company as a group 15 persons 695,787 {4,5,6,7,8,9} 10.6
________________________________
* Indicates less than 1% of the Company's issued and outstanding shares.
1 Percentages have been calculated assuming, in the case of each person, the
exercise of all options owned (which are exercisable within 60 days
following February 26, 1996) by each such person, respectively, but not the
exercise of any options owned by any other person listed. The calculation
of percentage ownership for all Directors and Officers as a group assumes
the exercise of all options owned (which are exercisable within 60 days
following February 26, 1996) by each such person.
2 For a description of certain arrangements between the Company and American
see, "PRINCIPAL HOLDERS OF COMMON STOCK."
3 For a description of certain voting and other arrangements between the
Company and Valcheck see, "PRINCIPAL HOLDERS OF COMMON STOCK."
4 Includes options to purchase 143,458 shares that are currently or will
become exercisable by Mr. Komer within the next 60 days and 3,000 shares
owned by Mr. Komer's wife.
5 Does not include the 500,000 shares of Common Stock owned by Valassis
discussed further under "PRINCIPAL HOLDERS OF COMMON STOCK."
6 These shares are held in the Judith Stone Weiss Trust for the benefit of
Mr. Stone, who has sole voting and investment power with respect to these
shares.
7 Does not include the 2,250,000 shares of the Company's Common Stock owned
by American discussed further under "PRINCIPAL HOLDERS OF COMMON STOCK."
8 Includes options to purchase 23,250 shares that are currently or will
become exercisable by Mr. Stanton within the next 60 days.
9 Includes all shares referred above and an aggregate of 53,600 shares that
are currently or will become exercisable by seven other executive officers
of the Company, in addition to those named above, within the next 60 days.
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires the Company's officers, Directors and persons who own more than ten
percent of the Company's Common Stock (each a "reporting person" and
collectively, "reporting persons"), to file reports of their ownership of and
changes in ownership in shares of the Company's Common Stock with the
Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc. ("NASD"), and to furnish the Company with copies of
all such forms (known as Forms 3, 4 and 5) filed.
Based solely on its review of the copies of such forms received by it,
or on written representations received from certain reporting persons that
they were not required to file a Form 5 report with respect to 1995, the
Company believes that, with respect to transactions occurring in 1995, all
Form 3, 4 and 5 filing requirements applicable to its reporting persons were
complied with, except that William D. Banfield, the Company's Controller, was
late in filing a Form 4 to report a sale he made of shares of the Company's
Common Stock.
BOARD MEETINGS AND COMMITTEES
The Board conducts its business through meetings of the Board and
through the activities of its Committees. The Board held four meetings during
1995. The Board currently has a Marketing Committee and an Audit, Finance and
Compensation Committee.
The Audit, Finance and Compensation Committee (the "AFC Committee")
periodically reviews the Company's auditing practices and procedures and makes
recommendations to the Board with respect to these matters. It also
periodically reviews the compensation and benefits paid to the Company's
executives and administers the Company's Employee Long Term Incentive Plan
("LTI Plan") in all respects. The members of this Committee are listed below
under "Compensation Committee Interlocks and Insider Participation" and met
four times during 1995.
The Marketing Committee periodically explores new ideas for marketing
the Company's products and services. Its members are: Lyndon E. Goodridge,
Chairman, Alan F. Schultz, Irving I. Stone and Morry Weiss. This Committee
met once during 1995.
Each of the incumbent Directors, except for Messrs. Schultz, Stone and
Weiss, attended at least 75% of the meetings held during 1995 by the Board and
by each Committee of which he is a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Directors who were for 1995 the members of the AFC Committee were
Norman S. Edelcup, Chairman, Bernard M. Komer (a former Director) and Morry
Weiss. Bernard M. Komer, in addition to having served as a Director and a
member of this Committee, was also the Secretary of the Company. Bernard
Komer is a licensed stockbroker and an account executive with PaineWebber
Incorporated ("PaineWebber"). The Company maintains certain of its investment
accounts with PaineWebber and Bernard Komer acts as the account executive with
respect to these accounts. In this capacity, for 1995, Bernard Komer earned
brokerage commissions of $21,350 related to transactions in these accounts.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
In compliance with the SEC's executive compensation disclosure rules,
what follows below is a Report of the AFC Committee, a series of tables
detailing certain cash compensation and stock option information, and a five-
year total return stock performance chart, all of which are intended by the
SEC to standardize the reporting of such information by public companies to
their stockholders.
REPORT OF THE AFC COMMITTEE
GENERAL. The compensation of the Company's senior executives is made
up of three key components: base salary, performance bonuses and stock option
grants under the LTI Plan. The proportion of the executive's total
compensation that each of these elements constitutes differs between Stuart
Komer and the Company's other senior executives, as explained further below.
COMPENSATION OF STUART KOMER, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT. The base salary and bonuses paid to Mr. Komer are based upon the
Employment Agreement with the Company that the Board negotiated and executed
with him in August 1993 (the "Agreement"). A key goal of the terms negotiated
in the Agreement was the desire to reward Mr. Komer for his more than 40 years
of dedicated service to the Company in many capacities. In particular, during
the difficult years the Company endured during the 1970's, when it suffered
through the 1972 flood that devastated the Elmira, New York area and the
subsequent filing by the Company for protection under Chapter 11 of the
Bankruptcy Code. Mr. Komer at various times took substantial pay reductions,
received no pay raises and placed his personal assets at risk to guaranty the
Company's debts. Another goal of the Agreement was to establish a five-year
timeframe within which the Board must devise a succession plan to address Mr.
Komer's planned retirement. The Agreement provides for his employment as
Chairman, Chief Executive Officer and/or President for a five-year term from
August 31, 1993 (the "Initial Period"). It also provides that, at the end of
the Initial Period, Mr. Komer has the option to elect to serve as a consultant
to the Company for a two-year term ending on August 31, 2000. During the
Initial Period, Mr. Komer will receive a minimum annual base salary of
$225,000 or such greater amount as the Board shall determine and an annual
bonus determined by a formula based upon the Company's annual pre-tax net
income, plus various insurance and other benefits provided for in the
Agreement. At the end of the Initial Period, Mr. Komer will also receive a
lump-sum payment of $400,000 as consideration for the three years that will
then remain on the term of the non-competition covenant contained in the
agreement, regardless of whether he elects to serve as a consultant to the
Company for the next two years. At the end of the Initial Period, should Mr.
Komer elect to serve as a consultant to the Company for two years, his
compensation for such services will consist of an annual bonus determined by a
formula based upon the Company's annual pre-tax net income, plus various
insurance and other benefits provided in the Agreement. In the event that, at
any time during the term of the Agreement, Mr. Komer's employment is
terminated without "Cause" as defined in the Agreement or he resigns for "Good
Reason" as defined in the Agreement, he shall nevertheless be entitled to
receive all compensation and benefits provided under the Agreement for the
remainder of its term, with the value of all cash compensation payable being
calculated and paid in a lump sum within 30 days following the occurrence of
any such event of termination. In the event of his disability during the term
of the Agreement, Mr. Komer will be entitled to receive all compensation and
benefits payable under the Agreement for the remainder of its term. In the
event of his death during the term of the Agreement, Mr. Komer's estate will
be entitled to receive a lump-sum payment of the present value of the amount
of all compensation and benefits payable for the remainder of the contract
term. The Tax Reform Act of 1984 denies an income tax deduction to a company
for payments that are made as a result of a change in control if those
payments, when made, have a present value in excess of 300% of the employee's
average compensation for the last five years and are made pursuant to an
agreement, such as this contract, entered into after June 14, 1984.
It is the Board's view that Mr. Komer's minimum $225,000 base salary
established by the Agreement is generally in line with the salaries paid to
the CEOs of other corporations of similar size. Mr. Komer's annual bonuses
are not discretionary; they are determined based upon a formula contained in
the Agreement. This arrangement ties Mr. Komer's fortunes directly to the
Company's annual operating performance because it is based upon the Company's
net income before taxes, which the Agreement defines to exclude any
extraordinary, unusual or non-recurring items of loss, expense or income.
Therefore, one-time charges and extraordinary events will not affect the
determination of his annual bonus; it is computed directly on the Company's
yearly performance results.
The Committee uses grants of stock options to Mr. Komer under the
Company's LTI Plan with a similar motivation. Since the LTI Plan was
instituted in 1983, this Committee has generally awarded substantial Incentive
Stock Option ("ISO") grants to Mr. Komer annually as a further incentive to
tie his compensation as directly as possible to the financial performance of
the Company as reflected in its stock price; this also ensures that his
financial interest in increasing the value of the Company is closely aligned
with that of the stockholders. The Committee's other motivation with respect
to the size of Mr. Komer's ISO grants has been to reward him in years when the
Company has been performing well for the prior years when his compensation did
not reflect his substantial efforts on the Company's behalf. The Board
granted no ISO's to Mr. Komer in 1995.
COMPENSATION OF THE COMPANY'S OTHER EXECUTIVE OFFICERS. A study of the
compensation of the Company's other executive officers was last completed by
the AFC Committee in 1992. Therefore, during 1995, the Company's Human
Resources Department undertook an analysis of the compensation paid to the
Company's senior management to determine whether it was competitive with the
marketplace and whether it was sufficient to attract and retain competent
senior management. Based upon the salary survey information obtained from
both the Human Resources Department and from outside consultants, beginning in
January of 1996 the base salaries for certain of the Company's executive
officers were adjusted upward, based primarily upon the size of the Company
and the executive's level of responsibility.
In addition, a formula is used for determining annual bonuses to be
paid to the Company's executive officers. This formula is keyed to how well
the Company performed in the current year when compared to the prior year
based upon the Company's operating net income before taxes in each such year,
with the current year's results being given the greater weight. Because the
Committee believes that this measure of the Company's financial performance
has a significant impact on the Company's stock price, it intends, by using
this yardstick, to link executive bonuses to both the financial performance of
the Company and its stock price. The Company paid no executive bonuses for
1995.
As in Mr. Komer's case, the Committee uses grants under the Company's
LTI Plan with a similar motivation. Since the LTI Plan was instituted in
1983, the Committee has generally awarded annual ISO grants to the Company's
executive officers as a further incentive to tie their compensation as
directly as possible to the financial performance of the Company as reflected
in its stock price; this also ensures that their financial interest in
increasing the value of the Company is closely aligned with that of the
stockholders. In determining the size of the ISO grants to individual
executives, the Committee also makes judgments as to how well the individual
executive met or exceeded his or her performance goals during the past year,
based in part on consultations with Stuart Komer and on evaluations received
from the Human Resources Department. The Board granted ISO's in 1995 only to
two newly hired executives of the Company.
Because the Company's executive compensation levels do not approach the
$1 million per year range for any of its most highly paid executives, the
Committee does not believe that at the present time it is necessary to take
additional measures to comply with the tax deductibility requirements for
executive compensation that exceeds $1 million per year imposed by the Revenue
Reconciliation Act of 1993. The Committee will continue to monitor this issue
and will take further action as developments warrant.
This report was prepared by the current members of the AFC Committee:
Norman S. Edelcup, Chairman, and Morry Weiss.
RESIGNATION OF CERTAIN OFFICERS. On September 15, 1995 (the
"Resignation Date"), David C. Lee, President of the Company since August 25,
1994, resigned his position with the Company and the Company entered into an
agreement with Mr. Lee as of the Resignation Date (the "Severance Agreement")
providing for the payment to Mr. Lee of $120,000 in three installments of
$40,000 on each of the Resignation Date, January 2, 1996 and April 1, 1996.
Mr. Lee also received from the Company the benefit of six months of post-
employment services. As of the Resignation Date, Mr. Stuart Komer began to
serve in the capacity of President of the Company, an office he continues to
hold as of the date hereof. Additionally, Mr. Stanton, the Company's former
Vice President - Check Sales resigned his position with the Company as of
March 8, 1996.
EXECUTIVE COMPENSATION
Under the SEC's executive compensation disclosure rules, information is
required to be provided with respect to the compensation and benefits paid by
the Company for all services rendered during 1995, 1994 and 1993 to up to
seven individuals: the person who was, at December 31, 1995 serving as the
Company's Chief Executive Officer; the four other individuals who were, as of
December 31, 1995, the other four most highly compensated executive officers
of the Company whose 1995 salary and bonus exceeded $100,000 in amount; and,
if applicable, up to two other individuals for whom disclosure would be
required but for the fact that they were no longer serving as an executive
officer of the Company as of December 31, 1995 (individually, a "Named
Executive" and collectively, the "Named Executives"). However, as of year-end
1995, in addition to Stuart Komer, there were only two other executive
officers, David C. Lee and Aloysius F. Stanton, whose 1995 salary and bonus
exceeded $100,000; accordingly, the following tables set forth this
information with respect to only three, not seven, Named Executives.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM ALL
COMPENSATION OTHER
Annual Compensation Awards COMPENSATION
<S> <C> <C> <C> <C> <C>
Securities
Name and Underlying
POSITION YEAR SALARY{1} BONUS OPTIONS
Stuart Komer 1995 $225,547 $ 0 0 $10,796{2}
Chairman, CEO 1994 $233,503 $ 0 25,000{3} $ 9,455{2}
and President 1993 $214,395 $149,101 25,000{3} $14,133{2}
David C. Lee 1995 $167,039 $ 0 0 $ 931{4}
Former President 1994 $150,489 $ 2,703 7,000{5} $2,336{4}
and COO 1993 $127,555 $14,930 7,000{5} $6,643{4}
Aloysius F. Stanton 1995 $112,527 $ 0 0 $2,275{6}
Former Vice President - 1994 $108,980 $ 2,027 5,000{7} $1,438{6}
Checks Division 1993 $103,248 $11,197 5,000{7} $4,888{6}
_________________________
</TABLE>
1 Includes all compensation deferred for the years shown under the
Company's 401(k) Plan and/or its Deferred Compensation Plan (the "401(k)
Plan"), as further described under "COMPENSATION PURSUANT TO PLANS."
2 The amounts shown represent the Company's matching contributions to Mr.
Komer's account under the 401(k) Plan in the amount of: $98 for 1995;
$92 for 1994; and $89 for 1993; plus its profit-sharing contributions to
his 401(k) account of $7,374 for 1993; plus additional group term life
insurance premiums paid on Mr. Komer's behalf in the amount of: $4,014
for 1995; $2,520 in 1994; and $2,520 in 1993. The Company also has
insurance policies on Mr. Komer's life as to all of which policies Mr.
Komer's children are the beneficiaries. These are all split-dollar,
whole-life policies whose net cash surrender values will be paid to the
Company upon Mr. Komer's death. The value of the premiums paid by the
Company for Mr. Komer's benefit with respect to the term life insurance
component of these policies was: $6,684 for 1995; $6,843 in 1994 and
$4,150 in 1993. These amounts are also included in the totals shown
above.
3 In each of April 1994 and 1993, Mr. Komer was awarded ISOs to purchase
25,000 shares of the Company's Common Stock at an exercise price of $5.50
and $10.31 per share, respectively, exercisable over a five-year term.
4 The amounts shown represent the Company's matching contributions to Mr.
Lee's 401(k) account in the amount of: $31 for 1995; $1,481 for 1994 and
$1,269 for 1993; plus its profit-sharing contributions to his 401(k)
account of $4,680 for 1993; plus additional group term life insurance
premiums paid on Mr. Lee's behalf in the amount of: $900 for 1995; $855
in 1994 and $694 in 1993.
5 In each of April 1994 and 1993, Mr. Lee was awarded ISOs to purchase
7,000 shares of the Company's Common Stock at an exercise price of $5.00
and $9.38 per share, respectively, exercisable over a five-year term.
All such options were canceled upon 90 days from the Resignation Date.
6 The amounts shown represent the Company's matching contributions to Mr.
Stanton's 401(k) account in the amount of: $1,874 for 1995; $1,090 for
1994 and $1,032 for 1993; plus its profit-sharing contributions to his
401(k) account of $3,542 for 1993; plus additional group term life
insurance premiums paid on Mr. Stanton's behalf in the amount of: $401
for 1995; $348 in 1994 and $314 in 1993.
7 In each of April 1994 and 1993, Mr. Stanton was awarded ISOs to purchase
5,000 shares of the Company's Common Stock at an exercise price of $5.00
and $9.38 per share, respectively, exercisable over a five-year term.
COMPENSATION OF DIRECTORS
The Company has an Outside Directors Compensation Plan which enables
all outside Directors of the Company to elect to take payment of their annual
retainer fees in shares of the Company's Common Stock, in compliance with
relevant SEC rules. Under this Plan, outside Directors are paid the following
schedule of fees: an annual retainer of $5,000; an additional annual retainer
of $7,500 to the Chairman of each Board Committee; a fee of $800 for each
Board meeting attended; and a fee of $400 per Committee meeting attended. The
per-meeting fees are payable only in cash. The annual retainer fees are
earned for a full year of service and are reduced in proportion to the number
of Board or Committee meetings from which an outside Director is absent out of
the total number of such meetings held during that year. Annually, on the
date of the Board's annual meeting, held each year immediately following the
Company's annual meeting of stockholders, the outside Directors may elect to
receive all or a portion of their annual retainer fees accrued and payable for
the past year of service in shares of the Company's Common Stock. The number
of shares payable is then determined by dividing the amount of such fees to be
paid in stock by the closing price for the Company's Common Stock on that
date.
The Company also provides between $30,000 and $50,000 in face amount of
term life insurance to each of its Directors, for which the Company pays an
annual premium of between $403 and $672 per Director. Directors are also
compensated at the rate of $350 per day for each day otherwise spent in this
capacity on Company business.
Prior to his resignation from the Board, Bernard M. Komer received an
additional $6,000 in each of the first three quarters of 1995 for the
additional responsibilities he assumed as Secretary for both the Board and
each of the Committees of which he was a member. Mr. Komer resigned as
Secretary of the Company on October 27, 1995. The position is now held by
Marie B. Belt, Senior Vice President - Administration and former Assistant
Secretary.
<PAGE>
COMPENSATION PURSUANT TO PLANS
COMPENSATION PURSUANT TO THE EMPLOYEE LONG-TERM INCENTIVE PLAN
The Company's Employee Long-Term Incentive Plan provides long-term
incentives to key employees as determined by the AFC Committee. Under the
Plan, key employees can be awarded stock incentive rights ("SIRs") and ISOs.
The Plan is administered by the AFC Committee, whose duties include
selecting the employees who will receive grants and determining the amounts
and types (I.E., ISOs, SIRs or a combination thereof) of grants awarded. In
making its selections and determinations, the AFC Committee has substantial
flexibility and makes its judgments based largely on the functions and
responsibilities of the particular employee, the employee's past and potential
contributions to the Company's profitability and growth, and the value of the
employee's services to the Company. The AFC Committee also interprets and
implements the Plan and the grants made thereunder. The members of the
Committee are all outside Directors and outside Directors are not eligible to
receive grants under the Plan.
The ISOs granted under the Plan represent rights to purchase shares of
the Company's Common Stock within a fixed period of time and at a cash price
per share ("exercise price") specified by the AFC Committee on the date of
grant. The exercise price cannot be less than the fair market value of a
share of Common Stock on the date of grant. Options are exercisable during
the period fixed by the AFC Committee, except that no option may be exercised
more than ten years from the date of grant.
SIRs are rights to receive shares of the Company's Common Stock without
any cash payment to the Company, conditioned only on continued employment with
the Company throughout a specified four-year period. When awarding SIRs, the
Committee has the discretion to establish a full four-year ("100%") incentive
period or a staggered 25% per year four-year incentive period with regard to
the earnout of an SIR. If the Committee awarded an SIR with a 100% four-year
incentive period requirement, the recipient would have to remain employed by
the Company for four years before receiving the shares subject to the SIR
award; earlier termination of employment, except in the event of death,
permanent disability or normal retirement, would result in the automatic
cancellation of the SIR. If the Committee awarded an SIR with a staggered 25%
per year four-year incentive period, the recipient would be entitled to
receive 25% of the total number of shares subject to the SIR grant at the end
of each year of the four year incentive period, so long as the recipient was
still employed by the Company at the end of each such year, with exceptions
made in the event of death, permanent disability or normal retirement. Should
a recipient die, become permanently disabled or retire during an SIR incentive
period, he/she or his/her estate, as the case may be, would receive a pro-
rated number of the shares underlying the SIR award based upon the ratio that
the number of months since the SIR had been granted bore to the full four-year
incentive period, less any shares already issued in the case of a 25% per year
four-year incentive period.
During an SIR incentive period, should the Company declare any cash
dividends on its Common Stock, the holder of an SIR would be entitled to
receive from the Company cash "dividend equivalent" payments equal to any such
cash dividends that the holder would have received had he/she owned the shares
of Common Stock underlying the SIR. However, the holder of an SIR would not
have any other rights with respect to the shares underlying an SIR award,
E.G., the right to vote or pledge such shares, until such shares are actually
issued to the holder.
An employee can be awarded both SIRs and ISOs in any combinations that
the Committee may determine. In such an event, an exercise of an ISO would
not in any way affect or cancel any SIRs an employee may have received.
Subject to the provisions of the Plan, the individuals to whom grants of
ISOs and/or SIRs are awarded, the number of shares covered by each award, the
incentive period applicable to each SIR award, the times when options may be
exercised, the term and other provisions of each option are fixed by the
Committee. No ISO may be granted to a person who owns at the time of grant or
would own after full exercise of all options and rights to acquire the
Company's shares, more than 10% of the total combined voting power of the
Company's stock, unless at the time of grant, the ISO price is at least 110%
of the fair market value of the shares subject to the ISO and the ISO is not
exercisable after the expiration of five years from the date of grant.
During 1995, no ISO's or SIRs were granted to any of the Named
Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
AT FISCAL YEAR-END AT FISCAL YEAR-END{(1)}
NAME Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Stuart Komer{(2)} 138,458/39,992 $-0-/$-0-{(2)}
David C. Lee{(2)} -0-/-0- $-0-/$-0-{(2)}
Aloysius F. Stanton{(2)} 12,125/6,500 $-0-/$-0-{(2)}
</TABLE>
_____________________
(1) On December 29, 1995, the closing price of the Company's Common Stock in
Nasdaq trading was $2.50 per share, which was less than the exercise
price of any tranche of options held by any of the Named Executives.
Consequently, none of the options held by any of the Named Executives as
of December 31, 1995 were in-the-money.
(2) During 1995, none of the Named Executives exercised any options which
they had under the Plan.
As of December 31, 1995, 663,430 shares of the Company's Common Stock
were available for grants under the Plan. As of that date, there were 500,900
options outstanding, with a weighted average exercise price of $5.10 per
share. The expiration dates of these option grants ranged from April 25, 1996
through October 24, 2000.
PROFIT SHARING 401(K) PLAN
The Company has a Profit Sharing 401(k) Plan, in which employees who are
21 years of age or older and who work at least 1,000 hours during one year of
continuous service are eligible to participate. All contributions to an
electing employee's account are made in accordance with the regulations set
forth under Section 401 of the Internal Revenue Code of 1986, as amended.
Both the Company's matching and profit-sharing contributions, as described
below, are forfeitable until a participating employee has five years of
employment with the Company with a minimum of 1,000 hours of service in each
of those years. Under the Plan, participating employees can elect to
contribute, on a tax-deferred basis, up to 15% of their annual compensation,
subject to a ceiling of $9,500 for 1996. The Company makes a matching
contribution of 25% of each employee's contributions to the Plan, up to the
first 4% of the employee's compensation deferred each year. Also under this
Plan, the Company may make annual, discretionary profit-sharing contributions
to the accounts of participating employees based upon the Company's
profitability for the year. These contributions, when made, are calculated
under a formula which is based upon the percentage that an eligible employee's
compensation for the fiscal year bears to the total compensation of all
employees participating in the Plan, after taking into account the Company's
contribution to Social Security.
DEFERRED COMPENSATION PLAN
Stuart Komer is the only participant in the Company's Deferred
Compensation Plan, whereby he can elect to defer payment of all or a portion
of his compensation to a future date, all in accordance with the terms of such
Plan, and by such deferral, likewise defer the payment of income taxes on such
amounts. All amounts deferred by Mr. Komer under this Plan are included,
whether or not deferred, for the years shown as earned in the Summary
Compensation Table above. Interest on amounts deferred is accrued monthly and
is calculated at the prime rate as in effect from time to time.
CERTAIN TRANSACTIONS
The Company rented portions of its facilities located in Elmira, New York
from Stuart Komer, its Chairman, Chief Executive Officer and President, under
three leases, two of which expired between March 31, 1995 and December 31,
1995 and were not renewed. Under the amended lease for 406 Academy Place that
is cancelable at any time by the Company, the Company is obligated to pay Mr.
Komer $3,465 per month in rent. For 1995, the Company paid Mr. Komer a total
of $90,600 in rents under these three leases.
For information concerning certain transactions involving Bernard M.
Komer, reference is made to the discussion under "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION" above.
As further described under "PRINCIPAL HOLDERS OF COMMON STOCK," as a
result of an investment that American made in the Company during 1990,
American and the Company have been exploring joint marketing and sales
opportunities for each other's products. During 1995, these efforts centered
on the Company selling certain American products, primarily greeting cards and
gift wraps, through the Company's "The Amy Allison Card
Shop{<reg-trade-mark>}" catalog, which was discontinued in 1995. During 1995,
the Company purchased approximately $129,181 worth of such inventory from
American to sell through this catalog and in its retail locations.
As further described under "PRINCIPAL HOLDERS OF COMMON STOCK," as a
result of the Advertising Agreement described therein, the Company has the
right of first refusal for FSI advertising circulation from Valassis.
Additionally, as a result of the Purchase Agreement in connection therewith
and further described thereunder, Valassis has the right to elect one member
of the Company's Board during the time which it owns shares of Common Stock in
the Company. During 1995, the Company purchased approximately $8.1 million
worth of such advertising from Valassis, in addition to the payments described
under "PRINCIPAL HOLDERS OF COMMON STOCK."
In May 1994, the Company entered into a new consulting agreement with a
consulting firm headed by the late Manford D. Rosenbloom, a former Director of
the Company, which provided that Mr. Rosenbloom would render consulting
services to the Company for a guaranteed minimum of 100 days per year through
April 1999, at a per-day rate of $600, which rate would be reviewed annually.
This agreement also provided that Mr. Rosenbloom was eligible to be paid an
annual performance bonus equal to 4% of the Company's net income before taxes
in excess of $500,000 for each year during its term, prorated over the number
of days during such year that Mr. Rosenbloom rendered services under the
agreement, plus the reimbursement of all reasonable travel, living and out-of-
pocket expenses incurred in connection with his services rendered thereunder.
It also provided that should Mr. Rosenbloom die before the end of its term,
the Company would pay his estate an amount equal to 60% of the average of the
consulting compensation plus any performance bonuses paid during the two years
prior to his death, multiplied by the number of years then remaining in the
term of the agreement. As a result of Mr. Rosenbloom's death in October of
1994, his estate was paid $189,416 in 1995 under the terms of this agreement.
<PAGE>
STOCKHOLDER RETURN PERFORMANCE INFORMATION
The following graph compares the cumulative total stockholder return on
the Company's Common Stock against the cumulative total return of the CRSP
TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET (which includes all U.S. and
foreign common stocks and American Depositary Receipts traded on the NASDAQ
Stock Market) and the NASDAQ RETAIL TRADE TOTAL RETURN INDEX for the five-year
period beginning December 31, 1990 and ending December 29, 1995, assuming the
reinvestment of all dividends throughout the period shown, and assuming the
value of the investment in the Company and in each Index was $100 on December
31, 1990.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
ARTISTIC GREETINGS INCORPORATED
[Note: Per Regulation S-T, rule 304(d), this EDGAR submission contains
the tabular numerical data produced by CRSP on which the performance graph
points are plotted in the printed version of this Proxy Statement,
as follows:]
Date Company Market Market Peer Peer
Index Index Count Index Count
12/31/90 100.000 100.000 4231 100.000 142
01/31/91 108.333 110.647 4196 111.324 141
02/28/91 116.667 121.244 4180 122.339 139
03/28/91 236.111 129.388 4165 138.902 142
04/30/91 327.778 130.190 4123 141.123 139
05/31/91 285.656 136.199 4124 149.434 144
06/28/91 310.861 128.225 4143 143.517 141
07/31/91 365.471 135.757 4143 154.350 142
08/30/91 537.705 142.229 4156 157.865 145
09/30/91 512.500 142.934 4159 162.328 146
10/31/91 411.680 147.659 4170 162.773 145
11/29/91 302.459 142.742 4179 163.042 142
12/31/91 252.049 159.611 4188 189.957 144
01/31/92 369.672 169.175 4203 194.378 147
02/28/92 336.065 172.943 4203 197.894 144
03/31/92 277.254 164.938 4221 188.520 148
04/30/92 210.041 157.901 4219 170.938 153
05/29/92 260.451 159.934 4208 168.106 156
06/30/92 218.443 153.746 4186 157.241 156
07/31/92 252.049 158.880 4152 162.349 156
08/31/92 252.049 154.131 4135 152.593 157
09/30/92 205.840 159.564 4133 164.041 158
10/30/92 260.451 165.523 4150 168.494 159
11/30/92 243.648 178.488 4165 176.418 161
12/31/92 302.459 185.193 4190 178.772 164
01/29/93 294.057 190.705 4177 175.357 167
02/26/93 310.861 183.862 4209 166.082 167
03/31/93 378.074 189.410 4239 169.276 169
04/30/93 310.861 181.834 4279 159.241 172
05/28/93 286.496 192.770 4306 167.542 179
06/30/93 235.938 194.010 4347 167.318 182
07/30/93 202.232 194.349 4380 170.417 182
08/31/93 177.661 204.464 4422 180.088 186
09/30/93 156.511 210.197 4464 185.539 186
10/29/93 203.041 215.050 4514 192.956 190
11/30/93 195.427 208.265 4598 185.584 191
12/31/93 191.179 214.394 4678 188.936 201
01/31/94 191.179 221.233 4706 188.563 200
02/28/94 186.930 218.837 4748 184.738 201
03/31/94 170.831 205.420 4804 173.819 205
04/29/94 175.102 202.737 4831 174.180 204
05/31/94 180.227 202.979 4870 170.148 205
06/30/94 193.100 194.986 4889 166.739 205
07/29/94 180.227 199.607 4909 166.983 207
08/31/94 176.794 211.741 4926 179.515 206
09/30/94 168.170 211.445 4931 182.261 208
10/31/94 135.830 215.127 4954 184.460 209
11/30/94 146.610 207.649 4971 177.459 209
12/30/94 103.489 207.369 4980 172.278 206
01/31/95 120.737 208.171 4974 166.255 206
02/28/95 107.801 218.952 4977 169.639 205
03/31/95 90.553 225.110 4971 170.382 210
04/28/95 94.865 231.590 4986 169.348 212
05/31/95 129.361 237.450 4987 173.732 209
06/30/95 120.737 256.042 5010 188.059 203
07/31/95 114.269 273.702 5032 198.262 203
08/31/95 129.361 278.740 5056 197.725 202
09/29/95 125.049 286.921 5055 201.305 201
10/31/95 120.737 283.977 5097 197.750 202
11/30/95 99.177 289.866 5131 196.702 205
12/29/95 86.241 287.971 5178 190.308 208
The index level for all series was set to $100 on 12/31/90
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
Arthur Andersen LLP, independent certified public accountants, has been
selected by the Board to serve as the auditors of the Company's books and
financial records for its current fiscal year. This firm has no material
financial interest in the Company and its only connection with the Company
during the past fiscal year has been in its role as the Company's independent
auditors. Representatives of Arthur Andersen LLP are expected to be present
at the Meeting to make a statement if they wish, and to respond to appropriate
questions from stockholders.
The Board recommends that the stockholders vote FOR this proposal to
ratify the selection of Arthur Andersen LLP to serve as the Company's
independent auditors for the Company's fiscal year ending December 31, 1996.
Proxies solicited by the Board will be voted FOR this proposal unless
otherwise indicated.
PRINCIPAL HOLDERS OF COMMON STOCK
A table reflecting the security ownership of those persons who are known
to the Company to have been the beneficial owners of more than 5% (316,100
shares) of the Company's Common Stock as of March 4, 1996 appears above under
"SECURITY OWNERSHIP OF CERTAIN PERSONS."
STANDSTILL AGREEMENT
Pursuant to the Original Standstill Agreement, American purchased
2,250,000 shares of the Company's Common Stock, for an aggregate net purchase
price of $6,450,000. American acquired its interest in the Company primarily
as an investment. However, in addition, the Company has agreed to promote
certain of American's greeting card products through its catalogs and American
may promote certain of the Company's personalized products through American's
retail outlets.
On June 16, 1992, the Company and American amended the Original
Standstill Agreement (the "Amended Standstill Agreement") governing the
control over and disposition of the 2,250,000 shares of the Company's Common
Stock owned by American.
The Amended Standstill Agreement superseded and terminated in their
entirety both the Original Standstill Agreement, which was among the Company,
American and Stuart Komer, the Company's Chairman, Chief Executive Officer and
President, and the Voting Trust Agreement of the same date and among the same
parties, under which American's shares had been held since that date.
Under the Amended Standstill Agreement, American is generally prohibited
from purchasing any additional shares of the Company's stock and has agreed to
vote such shares only in accordance with the recommendations made to the
Company's stockholders by the Board. American retains the right to nominate a
maximum of two Directors to the Board, so long as it owns more than 20% of the
Company's outstanding shares. It can nominate only one Director if its
percentage ownership drops to between 10% and 20% of the Company's outstanding
shares and loses these nomination rights if its percentage ownership ever
drops below 10%. American also has certain anti-dilution rights to enable it
to maintain its present proportionate ownership of approximately 36% of the
Company's outstanding shares.
Additionally, during the term of the Amended Standstill Agreement
American is permitted to sell any of its Company shareholdings only to the
public, either in a registered offering or under Securities Act Rule 144,
subject, however, to the Company's prior right of first refusal to purchase
any or all of such shares at their then-current market price. American also
has certain "demand" and "piggyback" registration rights to enable it to have
its Company shares registered for public sale.
Under the Original Standstill Agreement, American had certain rights
relating to the purchase of the Company. However, those rights have been
terminated and under the Amended Standstill Agreement American can acquire the
balance of the Company's stock or assets only in a transaction approved by the
Board (excluding any Directors nominated by American).
Unless earlier terminated, the Amended Standstill Agreement will expire
on December 31, 2000. However, it can be terminated at any time by American
upon 90 days advance notice to the Company. After April 30, 1996, the Company
can also terminate this Agreement at any time upon giving one year's advance
notice to American and under certain other circumstances. This Agreement also
can be terminated by either party upon notice given within 90 days following
any termination of a certain Marketing Agreement (discussed below), and
automatically terminates at such time as American's holdings constitute less
than 5% of the Company's outstanding shares. Within 60 days prior to the
effective date of any termination of the Amended Standstill Agreement,
however, the Company has the right to purchase all or any part of its shares
held by American at their then-current market price, and/or to require
American to sell all or part of such shares in a registered public offering.
Stuart Komer is not a party to the Amended Standstill Agreement.
However, in a letter to American dated June 16, 1992, he has agreed that,
during the term of the Amended Standstill Agreement, any sales of his Company
shareholdings will only be made through an underwritten public offering or
under Rule 144.
Simultaneously with the signing of the Amended Standstill Agreement, the
Company and American also executed a Direct Mail Agreement that gives the
Company exclusive rights to market and sell by mail certain paper products
based on American's designs through the Company's catalogs, order fulfillment
and other direct mail marketing programs. This Agreement likewise expires on
December 31, 2000, unless earlier terminated upon nine months advance notice
given by either party.
VALCHECK AGREEMENTS
In May 1995, the Company purchased various assets from Valcheck Company
("Valcheck"), a subsidiary of Valassis Communications, Inc. ("Valassis"),
related to Valcheck's manufacture and direct mail marketing and sale of
checks. Under the terms of the Purchase Agreement governing this transaction,
the Company purchased Valcheck's customer lists, machinery and equipment,
inventory and artwork related to Valcheck's mail order check business, and
assumed the obligation to fulfill Valcheck's current check orders and check
orders received by Valcheck after closing. In consideration for the assets
purchased, the Company: (1) issued Valcheck 500,000 shares of the Company's
Common Stock pursuant to the terms of a related Investment Agreement between
the Company and Valcheck; and (2) agreed to pay Valcheck 20% of the revenues
it receives, less certain adjustments, for both the existing check orders it
assumed the obligation to fulfill for Valcheck as well as for all first-time
check orders Valcheck receives within one year following the closing date of
this transaction.
Under the terms of the Investment Agreement, the Company has granted
Valcheck a put option which calls for the Company, at Valcheck's option, to
repurchase up to all of these shares at the end of two years following the
closing date of this transaction at a price of $5.00 per share. The closing
price of the Company's Common Stock in Nasdaq trading on May 31, 1995 was
$3.75 per share. The Investment Agreement also provides that, so long as
Valcheck controls at least 300,000 shares, Valcheck will have the right to
designate one representative as a member of the Company's Board and that so
long as Valcheck controls any of the shares, it will vote all such shares in
accordance with the recommendations made by the Board with respect to any
matters put before the Company's stockholders for action. The Company's
shares issued to Valassis in this transaction are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended
(the "Act"), and can only be disposed of in an offering registered under the
Act or in a transaction exempt from registration thereunder. Alan F. Schultz
currently is Valcheck's representative on the Board.
Additionally, the Company entered into a five-year advertising placement
contract with Valassis, the parent of Valcheck. In consideration for the
Company's payment of an annual fee as set forth in the agreement, the Company
has an annual right of first refusal to purchase up to a maximum FSI
circulation from Valassis at a cost set forth in the agreement. Under the
agreement, the Company paid a fee of $3 million at the closing of the Valcheck
asset acquisition and must pay annual fees of $2 million in each of 1996, 1997
and 1998 and $1 million in 1999 to preserve its right to place advertising
under the agreement. These payments are required to be paid by the Company
regardless of whether any advertising is purchased under the agreement, unless
the agreement is terminated.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to be presented at the 1997
Annual Meeting of Stockholders must be received by the Company at its
executive offices no later than November 24, 1996.
OTHER MATTERS
It is the intention of the proxyholder named in the proxy card to vote
all proxies received in accordance with his best judgment with respect to
ratification of the minutes of the previous Annual Meeting and on matters
incident to the conduct of this Meeting. The Board knows of no other matters
which are likely to come before the Meeting. However, if any other matters
are presented, it is the intention of the person named in the proxy to vote
such proxy in accordance with his best judgment on any such matters.
Stockholders are urged to mark, date, sign and return promptly the
enclosed proxy in the accompanying envelope, which requires no postage if
mailed in the United States.
By Order of the Board of Directors
MARIE B. BELT
Senior Vice President - Administration
Dated: March 29, 1996 and Secretary
<PAGE>
STOCKHOLDER'S PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF ARTISTIC GREETINGS
INCORPORATED
MAY 2, 1996
THE UNDERSIGNED HEREBY APPOINTS MARIE B. BELT ATTORNEY AND PROXY WITH FULL
POWER OF SUBSTITUTION TO REPRESENT THE UNDERSIGNED AT THE ANNUAL MEETING
OF STOCKHOLDERS OF THE COMPANY TO BE HELD AT THE COMPANY'S CORPORATE
HEADQUARTERS, ONE KOMER CENTER, MAIN AND WATER STREETS, ELMIRA, NEW YORK
AT 9:00 AM ON THURSDAY, MAY 2, 1996, AND AT ALL ADJOURNMENTS THEREOF TO
VOTE AS AUTHORIZED BELOW ALL OF THE SHARES OF ARTISTIC GREETINGS INCORPORATED
WHICH THE UNDERSIGNED MAY BE ENTITLED TO VOTE AT SAID MEETING, AND IN
ACCORDANCE WITH HER BEST JUDGMENT IN CONNECTION WITH SUCH OTHER BUSINESS
AS MAY COME BEFORE THE MEETING.
________________________________________________, 1996
________________________________________________, 1996
Signature of Stockholder(s) Date
(Name of stockholder should be signed exactly as it appears on this proxy.)
<PAGE>
THIS PROXY WILL BE VOTED AS SPECIFIED BY YOU. IF NOT OTHERWISE SPECIFIED,
THIS PROXY WILL BE VOTED FOR election of the nominees named below as
Directors and FOR Proposal 2.
1. NOMINEES for DIRECTORS:
Stuart Komer Norman S. Edelcup
Lyndon E. Goodridge Alan F. Schultz
Irving I. Stone Morry Weiss
( ) VOTE FOR all nominees listed above.
INSTRUCTIONS: IF YOU WANT TO WITHHOLD YOUR VOTE FOR AN INDIVIDUAL NOMINEE
NAMED ABOVE, DRAW A LINE THROUGH THAT NAME.
( ) VOTE WITHHELD from all nominees.
2. Proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent auditors.
( ) FOR ( ) AGAINST ( ) ABSTAIN
(TO BE SIGNED ON REVERSE SIDE)
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