-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GslK1bPkWf3lU+eaIu78I8mzo6Ea1sGZCbdLXhTteUCE/M+tLFE9Xa3BN4Hq5Btr +kqUapHpppJ2KBsNg8d7dg== 0000717829-94-000003.txt : 19940322 0000717829-94-000003.hdr.sgml : 19940322 ACCESSION NUMBER: 0000717829-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIBSON GREETINGS INC CENTRAL INDEX KEY: 0000717829 STANDARD INDUSTRIAL CLASSIFICATION: 2771 IRS NUMBER: 521242761 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-11902 FILM NUMBER: 94517108 BUSINESS ADDRESS: STREET 1: 2100 SECTION RD STREET 2: P.O BOX 371804 CITY: CINCINNATI STATE: OH ZIP: 45222-1804 BUSINESS PHONE: 5138416600 MAIL ADDRESS: STREET 1: 2100 SECTION STREET 2: PO BOX 371804 CITY: CINCINNATI STATE: OH ZIP: 45222-1804 10-K 1 1993 FORM 10-K [TEXT] SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-11902 GIBSON GREETINGS, INC. Incorporated under the laws IRS Employer of the State of Delaware Identification No. 52-1242761 2100 Section Road, Cincinnati, Ohio 45237 Telephone Number: Area Code 513-841-6600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value; Preferred Stock Purchase Rights Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the Common Stock, $.01 par value, of the registrant held by non-affiliates of the registrant as of March 11, 1994 was approximately $365,872,000. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 16,085,953 shares of Common Stock, $.01 par value, at March 11 , 1994. Documents incorporated by reference: Portions of Gibson Greetings, Inc.'s Proxy Statement for the 1994 Annual Meeting of Stockholders are incorporated by reference in Part III. PAGE PART I Item 1. Business Gibson Greetings, Inc. and its wholly-owned and majority-owned subsidiaries (the "Company") operate in a single industry segment -- the design, manufacture and sale of everyday and seasonal greeting cards, gift wrap and accessories, paper partywares and related specialty products. Products The Company's major products are extensive lines of greeting cards (both everyday and seasonal) and gift wrap. Everyday cards are categorized as conventional greeting cards and alternative market cards. Seasonal cards are devoted to holiday seasons, which include, in declining order of net sales, Christmas, Valentine's Day, Mother's Day, Easter, Father's Day, Graduation and Thanksgiving. In 1993, approximately 58% of net sales of cards were derived from everyday cards and approximately 42% from seasonal cards. The Company produces gift wrap and gift wrap accessories (including tissue and kraft paper, tags, ribbons, bows and gift trims) predominately for the Christmas season. The Company's products also include paper partywares, candles, calendars, gift items and holiday decorations. The following table sets forth, in thousands of dollars for the years indicated, the Company's net sales attributable to each of the principal classes of the Company's products: Years Ended December 31, ---------------------------------- 1993 1992 1991 -------- -------- -------- Greeting cards $268,952 $243,647 $270,579 Gift wrap 192,862 187,965 196,352 Other products 84,351 52,506 55,235 -------- -------- -------- Total net sales $546,165 $484,118 $522,166 ======== ======== ======== Many of the Company's products incorporate well-known proprietary characters. Net sales associated with licensed properties accounted for approximately 14% of overall 1993 net sales. The Company believes it benefits from the publication of cartoon strips, television programming, advertising and other promotional activities by the creators of such licensed characters. The Company has also developed proprietary properties of its own. See "Trademarks, Copyrights and Licenses." PAGE Approximately 2% of the Company's revenues in 1993 were attributable to export sales and royalty income from foreign sources. During 1993, the Company acquired The Paper Factory of Wisconsin, Inc. ("The Paper Factory"), a Wisconsin corporation, to strengthen the Company's position in the rapidly-growing party segment of the industry. During 1992, the Company formed Gibson de Mexico, S.A. de C.V., a Mexican corporation, which purchased the net assets of a Mexican manufacturer and marketer of greeting cards, to market the Company's products primarily in Mexico. During 1991, the Company formed Gibson Greetings International Limited, a Delaware corporation, to market the Company's products in the United Kingdom and other European countries. Sales and Marketing The Company's products are sold in more than 50,000 retail outlets worldwide. Because of the value consumers place on convenience, the Company continues to concentrate its distribution through one-stop-shopping outlets. To market effectively through these outlets, the Company has developed specific product programs and new product lines and introduced new in-store displays. The Company's products are primarily sold under the Gibson and Cleo brand names and are primarily distributed to supermarkets, deep discounters, mass merchandisers, variety stores and drug stores. During 1993, the Company's five largest customers accounted for approximately 35% of the Company's net sales and only one customer, Wal-Mart Stores Inc., accounted for more than 10% of the Company's net sales The Company's products under the Gibson brand name are usually stocked in a department where only these products are displayed. Product displays are expressly designed for the presentation of greeting cards, gift wrap, paper partywares, candles and other products. The Company also supplies corrugated displays for seasonal specialties. The Company's method of selling greeting cards requires frequent and attentive merchandising service and fast delivery of reorders. The Company employs a direct field sales force that regularly visits most of the Company's customers, supported by a larger, nationwide merchandising service force. PAGE In order to properly display and service these products, a sizable initial investment is made in store display fixtures, sometimes totaling 300 linear feet, and in the hiring and training of service associates. To minimize costs and disruption, in the short-term, caused by the loss of a customer, the Company has entered into longer term contracts with certain retailers, consistent with general industry practice. These contracts generally have terms of from three to six years, and sometimes specify a minimum sales volume commitment. Some of the advantages to the Company include: less disruption to its distribution channels; the ability to plan product offerings into the future; and establishment of a reliable service network to ensure the best product display and salability. In certain of these contracts, cash payments or credits are negotiated constituting advance discounts against future sales. These payments are capitalized and amortized over the initial term of the contract. In the event of contract default by a retailer, such as bankruptcy or liquidation, a contract may be deemed impaired and unamortized amounts may be charged against operations immediately following the default. Use of these contracts has expanded in recent years within the industry and the Company currently has contracts with a number of customers including two of its top five customers. Most of the Company's gift wrap is Christmas-related and is sold under the Cleo brand name. These products are usually shipped in corrugated cartons which may be used as temporary free-standing displays. Separate free-standing product displayers and display planning services are also made available for the purpose of enhancing the presentation of Cleo products. The Company's Cleo brand gift wrap is typically sold at lower unit retail price levels than the Company's other brands of gift wrap. In general, the Company does not provide in-store merchandising services with respect to Cleo products but rather ships these products directly to the retailers' stores or their warehouses for subsequent distribution to individual stores. It is characteristic of the Company's business and of the industry that accounts receivable for seasonal merchandise are carried for relatively long periods, typically as long as six months. Consistent with general industry practice, the Company allows customers to return for credit certain seasonal greeting cards. Design and Production Most of the Company's greeting cards are designed, printed and finished at its Cincinnati, Ohio facility and then sent to its facilities in Berea or Covington, Kentucky for shipment directly to retail stores. Most of the Company's gift wrap is designed, printed and finished at the Company's facilities in Memphis, Tennessee and distributed from the Company's facilities in Memphis, Tennessee and Cerritos, California. The Company also purchases for resale certain finished and semi-finished products, such as gift items, from both domestic and foreign sources. The Company maintains a full-time staff of artists, writers, art directors and creative planners who design a majority of the Company's products. Design of everyday products begins approximately 12 months in advance of shipment. The Company's seasonal greeting cards and other items are designed and printed over longer periods than the everyday cards. Designing seasonal products begins approximately 18 months before the holiday date. Seasonal designs go into production about 12 months before the holiday date. Production of the Company's products increases throughout the year until late September. Because a substantial portion of the Company's shipments are typically concentrated in the latter half of the year, the Company normally is required to carry large inventories. The Company believes that adequate quantities of raw materials used in its business are and will continue to be available from many suppliers. Paper costs are the most significant component of the Company's product cost structure. Competition The greeting card and gift wrap industry is highly competitive. Based upon its general knowledge of the industry and the limited public information available about its competitors, the Company believes it is the third largest producer of greeting cards and gift wrap in the United States. The Company's principal competitors are Hallmark Cards, Inc. and American Greetings Corporation, which are predominant in the industry, and CPS/Artfaire, Inc. Certain of the Company's competitors have greater financial and other resources than the Company. The Company believes that the principal areas of competition with respect to its products are quality, design, service to the retail outlet, price and terms, which may include payments and other concessions to retail customers under long-term agreements, and that it is competitive in all of these areas. See "Sales and Marketing". Trademarks, Copyrights and Licenses The Company has approximately 40 registrations of trademarks in the United States and foreign countries. Although the Company does not generally register its creative artwork and editorial text with the U.S. Copyright Office, it does obtain certain copyright protection by printing notice of a claim of copyright on its products. The Company has rights under various license agreements to incorporate well-known proprietary characters into its products. These licenses, most of which are exclusive, are generally for terms of one to four years and are subject to certain renewal options. There can be no assurance that the Company will be able to renew license agreements as to any particular proprietary character. The Company believes that its business is not dependent upon any individual trademark, copyright or license. Employees As of December 31, 1993, the Company employed approximately 4,600 persons on a full-time basis. In addition, as of December 31, 1993, the Company employed approximately 4,800 persons on a part-time basis. Because of the seasonality of the Company's sales, the number of the Company's production and warehousing employees varies during the year, normally reaching a peak level in September. Approximately 800 hourly employees in the Company's Memphis, Tennessee facilities are represented by a local union affiliated with the United Paper Workers International Union and are employed under a contract which expires in 1996. Approximately 300 hourly employees currently on the payroll at the Company's Berea, Kentucky facility are represented by a local union affiliated with the International Brotherhood of Firemen and Oilers Union. Unfair labor practice charges have been filed against the Company as an outgrowth of a strike at the Berea facility in 1989. See "Legal Proceedings." Environmental Issues The Company, over the past ten years, has taken a proactive approach to environmental concerns. In 1986, Cleo, Inc. ("Cleo") converted its printing operations to water-based inks. Likewise, since early 1990, the Company's subsidiary, the Gibson Card Division ("Gibson") has converted its card and related products production to water-based inks. Previously, Gibson had its Cincinnati-produced waste solvents incinerated. All but one underground storage tank on Company owned and leased premises were removed in or before 1988. In 1990, the last underground storage tank, which had contained isopropyl alcohol, was also removed in accordance with governmental closure regulations. For the past seven years, the Company has consulted with professional firms for environmental audits before entering into potential long-term real estate transactions. Historically, expenditures associated with managing and limiting pollution or hazardous substances, as well as expenditures to remediate previously contaminated sites, have not been material to the Company's financial statements. At December 31, 1993, the Company was aware of two environmental liabilities as discussed below: DIAZ REFINERY - JACKSON COUNTY, ARKANSAS In 1989, the Company was identified by the Arkansas Department of Pollution Control and Ecology ("ADPC&E") as a potentially responsible party ("PRP") in connection with the Diaz Refinery Site in Jackson County, Arkansas. The Company is participating with approximately 700 other PRPs in a settlement with ADPC&E for remediation of the Site. To date, the Company's share of total Site costs has been approximately $46,000. The nature and extent of the contamination, if any, is still being investigated. Thus, it is not possible at this time to provide an estimate of total clean-up costs for the Site or the Company's share of such costs. PAGE KIRK LANDFILL - DYER COUNTY, TENNESSEE In December 1993, the Company was advised by the Tennessee Department of Environment and Conservation ("TDEC") that Cleo had been identified by the State as a potentially liable party for reimbursement of Superfund Expenditures made by the State of Tennessee for site identification, investigation, containment and clean-up, including monitoring and maintenance activities. The Company has ascertained that Cleo's alleged responsibility involves the alleged disposal of certain waste solvents at the Site during the period 1972-1975. At this time, insufficient information is available to determine the Company's potential liability, if any; however, the TDEC has requested payment of approximately $13,000, representing full reimbursement of costs incurred to date. The Company is investigating whether insurance provisions under policies in existence during the time period will be applicable. PAGE Item 2. Properties The following is a summary of the Company's principal manufacturing, distribution and administrative facilities: Approximate Floor Space Location Principal Use (Sq Ft) - -------------------- ------------------------------------- ----------- Cincinnati, Ohio Corporate headquarters, manufacturing and administration 593,700 Memphis, Tennessee Manufacturing, distribution and administration 1,002,800 Berea, Kentucky Manufacturing and distribution 597,100 Mexico City, Mexico Manufacturing and distribution 26,900 Telford, England Manufacturing, distribution and administration 58,800 Memphis, Tennessee Manufacturing and distribution 1,153,200 Covington, Kentucky Manufacturing and distribution 293,000 Florence, Kentucky Manufacturing and distribution 80,000 Reynosa, Tamaulipas, Mexico Manufacturing 86,700 Bloomington, Indiana Distribution 167,700 Memphis, Tennessee Distribution (3 facilities) 796,600 Cerritos, California Distribution 214,600 Neenah, Wisconsin Distribution 31,000 --------- Total 5,102,100 ========= The first three facilities listed above are all currently leased for an initial term expiring in 2002. The Company has the right to renew the lease for two additional terms of five years each. The Company also has an option to purchase these facilities in 2002 at the higher of $35,400,000 or the fair market value of the properties at that time. For accounting purposes, this lease has been treated as an operating lease. See Note 11 of Notes to Consolidated Financial Statements set forth in Item 8 below. PAGE The Company's 1.1 million square foot manufacturing and distribution facility in Memphis, Tennessee has been financed primarily through the issuance, by the Industrial Development Board of the City of Memphis and County of Shelby, Tennessee (the "Board"), of both taxable and tax-exempt economic development revenue bonds for the benefit of the Company's subsidiary, Cleo. Title to the facility will be held until 2004 by the Board. See Note 6 of Notes to Consolidated Financial Statements set forth in Item 8 below. The Telford, England, Covington, Kentucky and Bloomington, Indiana manufacturing and distribution facilities are owned by the Company. The Covington, Kentucky facility has been financed principally through tax-exempt debt and is pledged to secure the repayment of such debt. See Note 6 of Notes to Consolidated Financial Statements set forth in Item 8 below. The Florence, Kentucky facility, the Mexico City, Mexico facility, the Reynosa, Tamaulipas, Mexico facility and the distribution facilities at Memphis, Tennessee, Cerritos, California and Neenah, Wisconsin are leased. The Company also leases sales offices, other manufacturing, distribution and administrative facilities and, on a temporary basis, uses public warehouse space in various locations throughout the United States. The Paper Factory leases approximately 140 stores averaging approximately 3,000 to 4,000 square feet per store. Certain of these leases contain contingent payments based upon individual store sales. Leases for such facilities expire at various dates through 2003. The Company believes that its facilities are adequate for its present needs and that its properties, including machinery and equipment, are generally in good condition, well maintained and suitable for their intended uses. Item 3. Legal Proceedings In 1989, unfair labor practice charges were filed against the Company as an outgrowth of a strike at its Berea, Kentucky facility. Remedies sought include back pay from August 8, 1989 and reinstatement of employment for approximately 200 employees. In February 1990, the General Counsel of the National Labor Relations Board ("NLRB") issued a complaint based on certain of the allegations of these charges (In the Matter of Gibson Greetings, Inc. and International Brotherhood of Fireman and Oilers, AFL-CIO, Cases 9-CA-26706, 27660, 26875.) On December 18, 1991, an Administrative Law Judge of the NLRB issued a recommended order, which included reinstatements and back pay affecting approximately 160 strikers, based on findings that the Company had violated certain provisions of the National Labor Relations Act. On May 7, 1993, the NLRB upheld the Administrative Law Judge's decision in some respects, and enlarged the number of strikers entitled to back pay to approximately 240. A prompt notice of appeal was filed in the PAGE United States Court of Appeals for the District of Columbia Circuit. The Company believes it has substantial defenses to the charges, and these defenses will be presented in briefs in the Company's appeal. The appeal is scheduled to be heard on September 14, 1994. In addition, the Company is a defendant in certain other litigation. Management does not believe that an adverse outcome as to any or all of these matters would have a material adverse effect on the Company's net worth or total cash flows; however, the impact on the statement of operations in a given year could be material. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Registrant See Item 10. Directors and Executive Officers of the Registrant. PAGE PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The Company's debt agreements contain certain covenants including limitations on dividends based on a formula related to net income, stock sales and certain restricted investments. At December 31, 1993, the amount of unrestricted retained earnings available for dividends (in thousands of dollars) was $50,760. The Company's business is seasonal with a significant amount of its net sales and net income historically occurring in the last two quarters of the year. The following table presents certain consolidated quarterly financial data (unaudited) for 1993 and 1992:
(Dollars in thousands except First Second Third Fourth per share amounts) Quarter Quarter Quarter Quarter Year -------- -------- -------- -------- -------- 1993 - ------------------- Net sales $ 84,896 $ 83,796 $142,137 $235,336 $546,165 Total revenues 84,907 83,964 142,296 235,759 546,926 Cost of products sold 30,996 30,813 76,119 130,375 268,303 Net income 1,802 1,215 4,145 18,690 25,852 Net income per share 0.11 0.08 0.26 1.16 1.61 Dividends per share 0.10 0.10 0.10 0.10 0.40 Market price of common stock (1): Low 17 7/8 18 17 7/8 18 3/4 17 7/8 High 20 3/8 20 3/4 22 5/8 21 1/4 22 5/8 1992 - ------------------- Net sales $ 79,097 $ 78,219 $115,238 $211,564 $484,118 Total revenues 79,428 78,736 115,556 212,103 485,823 Cost of products sold 27,257 28,344 70,643 121,096 247,340 Income (loss) before cumulative effect of accounting changes 2,427 1,202 (12,329) 16,685 7,985 Cumulative effect of accounting changes, net of income taxes of $1,609 (1,449) - - - (1,449) Net income (loss) 978 1,202 (12,329) 16,685 6,536 Income (loss) per share before cumulative effect of accounting changes 0.15 0.07 (0.75) 1.03 0.50 Cumulative effect of accounting changes (0.09) - - - (0.09) Net income (loss) per share 0.06 0.07 (0.75) 1.03 0.41 Dividends per share 0.09 0.10 0.10 0.10 0.39 Market price of common stock (1): Low 25 1/8 22 16 1/4 16 1/4 16 1/4 High 31 27 5/8 24 1/4 20 31
[FN] (1) Per share prices are based on the closing price as quoted in the Nasdaq National Market. (2) Quarterly results for 1992 have been restated to reflect the adoption of Statement of Financial Accounting Standards (SFAS) No. 106 and SFAS No. 109 in the first quarter. The impact of the adoption of these standards was to reduce income before cumulative effect of accounting changes by $73 and $74 in the first and second quarters, respectively, and reduce earnings per share in the second quarter by $.01. PAGE Item 6. Selected Financial Data The following summaries set forth selected financial data for the Company for each of the five years in the period ended December 31, 1993. Selected financial data should be read in conjunction with the Consolidated Financial Statements set forth in Item 8 below.
Income Statement Data (Dollars and shares in thousands except per share amounts) Years Ended December 31, -------------------------------------------------------- 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- Revenues: Net sales $546,165 $484,118 $522,166 $511,211 $463,290 Royalty income 761 1,705 2,148 1,985 1,980 -------- -------- -------- -------- -------- Total revenues 546,926 485,823 524,314 513,196 465,270 -------- -------- -------- -------- -------- Cost of products sold 268,303 247,340 252,217 254,182 231,664 Selling, distribution and administrative expenses 227,863 218,642 194,872 187,282 166,415 Interest expense 7,737 7,803 9,380 8,667 3,842 Interest income (949) (1,023) (342) (819) (2,319) -------- -------- -------- -------- -------- Income before income taxes and cumulative effect of accounting changes 43,972 13,061 68,187 63,884 65,668 Income taxes 18,120 5,076 26,303 24,084 23,299 -------- -------- -------- -------- -------- Income before cumulative effect of accounting changes 25,852 7,985 41,884 39,800 42,369 Cumulative effect of accounting changes - (1,449) - - - -------- -------- -------- -------- -------- Net income $ 25,852 $ 6,536 $ 41,884 $ 39,800 $ 42,369 ======== ======== ======== ======== ======== Income per share before cumulative effect of accounting changes $ 1.61 $ 0.50 $ 2.61 $ 2.51 $ 2.68 ======== ======== ======== ======== ======== Net income per share $ 1.61 $ 0.41 $ 2.61 $ 2.51 $ 2.68 ======== ======== ======== ======== ======== Dividends per share $ 0.40 $ 0.39 $ 0.36 $ 0.34 $ 0.33 ======== ======== ======== ======== ======== Average common shares and equivalents 16,103 16,104 16,039 15,848 15,784 ======== ======== ======== ======== ========
Other Financial Data (Dollars in thousands except per share amounts) December 31, -------------------------------------------------------- 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- Working capital $213,856 $224,261 $215,011 $128,489 $146,676 Plant and equipment, net 116,900 112,712 110,769 101,996 75,067 Total assets 580,411 501,104 544,261 553,499 438,888 Debt due within one year (1) 66,187 31,911 71,208 148,302 89,197 Long-term debt 74,365 70,175 71,079 21,755 30,425 Excess of fair value of companies acquired over cost, net - - - 1,430 2,880 Stockholders' equity 323,681 303,341 300,743 261,402 226,043 Equity per share 20.15 18.92 18.86 16.58 14.41 Capital expenditures 31,049 30,970 31,736 42,706 31,959
[FN] (1) Includes the current portion of long-term debt which consisted of $3,917 in 1993, $1,811 in 1992, $708 in 1991, $6,702 in 1990 and $2,697 in 1989. PAGE Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Unless specifically stated otherwise, dollars in thousands except per share amounts. Results of Operations The Company's 1993 results reflected a recovery from the prior year which was adversely impacted by the Chapter 11 bankruptcy filing by Phar-Mor, Inc. (Phar-Mor) during 1992. Total revenues in 1993 increased 12.6% to $546.9 million compared to a decrease of 7.3% in 1992 and an increase of 2.2% in 1991. The revenue gains in 1993 were attributable to The Paper Factory of Wisconsin, Inc. (The Paper Factory) which was acquired in June 1993, as well as increased domestic and international sales of greeting cards, partially offset by a modest decline in sales of gift wrap and related products. Consistent with general industry practice, the Company allows customers to return for credit certain seasonal greeting cards. Also, consistent with general industry practice, and where deemed prudent to secure substantial long-term volume commitments, the Company enters into long-term sales contracts with certain retailers, some of which include advance payments. Returns and allowances were 13.3% in 1993 compared to 15.9% in 1992 and 17.2% in 1991. The decline in 1993 returns and allowances was due to lower returns of certain seasonal products and lower allowances for certain everyday products. The Company does not believe that its 1993 results were materially affected by recessionary pressures. Royalty income of $.8 million for 1993 declined by $.9 million from 1992 primarily due to the expiration of certain international licensing agreements. The Company's 1992 results reflected lower revenues from Phar-Mor of $28.1 million, including the write-off of long-term contracts totaling $16.4 million. In addition, lower unit sales for everyday and seasonal greeting cards, partially offset by higher unit sales of gift wrap and lower returns of certain seasonal products contributed to the decline. The 1991 increase in total revenues resulted from higher selling prices and unit sales for everyday and seasonal greeting cards partially offset by unit decreases in gift wrap and increased returns and allowances. PAGE Total costs and expenses were $503.0 million or 92.0% of total revenues in 1993 compared to 97.3% in 1992 and 87.0% in 1991. Cost of products sold was 49.1% of total revenues in 1993 compared to 50.9% and 48.1% in 1992 and 1991, respectively. The decline in 1993 compared to 1992 was due to higher revenues and product sales mix, reflecting the acquisition of The Paper Factory. The increase in 1992 compared to 1991 was due to lower revenues and product sales mix. Selling, distribution and administrative expenses were 41.7% of total revenues in 1993 compared to 45.0% in 1992 and 37.2% in 1991. The decline in these expenses, as a percentage, reflected higher revenues, partially offset by acquisition costs associated with The Paper Factory and start-up costs for international operations. Additionally, 1992 expenses included Phar-Mor related items including write-offs of accounts receivable of $5.9 million and card display fixtures of $5.1 million. Expenses associated with international operations as well as domestic restructuring charges also adversely impacted 1992. Interest expense, net of interest income, decreased to 1.2% of total revenues in 1993 compared to 1.4% and 1.7% in 1992 and 1991, respectively. Lower interest rates were partially offset by higher average borrowings, largely resulting from the acquisition of The Paper Factory as well as higher working capital levels. The decrease in the 1992 percentage versus 1991 was attributable to lower average borrowing levels combined with lower interest rates. Also included in 1991 were a $.5 million prepayment penalty on the Company's 13.625% senior notes which were retired and increased interest expense associated with debt incurred to finance a new manufacturing and distribution center. Income before income taxes and cumulative effect of accounting changes was $44.0 million, an increase of $30.9 million over 1992 compared to a decrease in 1992 of $55.1 million from 1991 and an increase of $4.3 million in 1991 over 1990. This represented 8.0% of total revenues in 1993 compared to 2.7% and 13.0% in 1992 and 1991, respectively. The effective income tax rate for 1993 was 41.2% compared to 38.9% in 1992 and 38.6% in 1991. See Notes 1 and 7 of Notes to Consolidated Financial Statements set forth in Item 8 below. Income before cumulative effect of accounting changes was $25.9 million in 1993 compared to $8.0 million in 1992 and $41.9 million in 1991, and represented 4.7% of total revenues compared to 1.6% and 8.0% in 1992 and 1991, respectively. PAGE During 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106 - "Employer's Accounting for Postretirement Benefits Other Than Pensions" retroactive to January 1, 1992. Upon adoption, the Company incurred a one-time charge of $2.5 million, net of income taxes of $1.6 million, attributable to the cumulative effect of the adoption of this accounting change. The impact on net income per share was $.15. In addition, the Company adopted SFAS No. 109 - "Accounting for Income Taxes" which resulted in a credit of $1.1 million or $.06 per share for the cumulative effect of this change. Net income of $25.9 million in 1993 increased $19.3 million compared to a decrease in 1992 of $35.3 million and an increase of $2.1 million in 1991, and represented 4.7% of total revenues compared to 1.3% and 8.0% in 1992 and 1991, respectively. The Company attempts to minimize the impact of inflation by controlling its cost of raw materials, labor and other expenses, and pricing its products in light of general economic conditions. Liquidity and Capital Resources Cash flows from operating activities for 1993 provided $31.6 million in cash compared to $74.8 million in 1992 and $47.0 million in 1991. The decline in 1993 of $43.2 million was primarily the result of decreased amortization of deferred costs and other intangibles of $14.5 million combined with higher working capital requirements. Trade receivables increased 13.3% largely reflecting increased revenues. Inventories increased 12.8% resulting from the acquisition of The Paper Factory combined with higher gift wrap and related products inventories. The increase in other assets, excluding amortization, primarily reflected additional commitments made for long-term customer agreements combined with goodwill associated with the acquisition of The Paper Factory. Cash used in investing activities for plant and equipment purchases totaled $31.0 million in both 1993 and 1992 compared to $31.7 million in 1991. The Company anticipates that the 1994 expenditure levels will be in line with historical trends based upon existing business conditions. Cash provided by financing activities in 1993 was $23.7 million compared to cash used in financing activities in 1992 and 1991 of $44.3 million and $30.4 million, respectively. The 1993 increase in short-term borrowings reflected higher working capital levels combined with funds used to acquire The Paper Factory. Long-term debt increased in 1993 due to the issuance of unsecured notes to the former shareholders of The Paper Factory, payable over the next four years. During 1991, the Company prepaid $6.0 million of its 13.625% senior notes and privately placed $50.0 million of 9.33% senior notes. Proceeds from the private placements were used to reduce short-term debt. PAGE In April 1993, the Company consummated a new $210 million, three-year revolving credit facility, replacing a similar existing facility. The facility will provide funds for general corporate purposes and future growth. On March 4, 1994, the Company announced that, based on trading of swap/derivative positions subsequent to year-end, the Company entered into two new contracts which will result in a minimum loss of $3.0 million and a maximum potential loss of $27.5 million. The new contracts, which mature in June and August 1995, may be liquidated at any time prior to maturity and have an estimated cost of termination of approximately $17.5 million at March 4, 1994. Management believes that its cash flows from operations and credit sources will provide adequate funds, both on a short-term and on a long-term basis, for currently foreseeable debt payments, lease commitments and payments under existing customer agreements, all of which total approximately $19 million to $29 million per year for the next five years, as well as for financing existing operations, currently projected capital expenditures, anticipated long-term sales agreements consistent with industry trends and other contingencies. Management does not believe that there are any trends, events, commitments or uncertainties, except for previously disclosed items, and aside from normal seasonal fluctuations and general industry competitive conditions, that should be expected to have a material effect on the results of operations, financial condition, liquidity, or capital resources of the Company. For additional financial information see Consolidated Financial Statements and Notes to Consolidated Financial Statements set forth in Item 8 below. PAGE Item 8. Financial Statements and Supplementary Data
Gibson Greetings, Inc. Consolidated Statements of Income Years Ended December 31, 1993, 1992 and 1991 (Dollars in thousands except per share amounts) 1993 1992 1991 --------- --------- --------- Revenues: Net sales $ 546,165 $ 484,118 $ 522,166 Royalty income 761 1,705 2,148 --------- --------- --------- Total revenues 546,926 485,823 524,314 --------- --------- --------- Costs and expenses: Cost of products sold 268,303 247,340 252,217 Selling, distribution and administrative expenses 227,863 218,642 194,872 Interest expense, net of capitalized interest 7,737 7,803 9,380 Interest income (949) (1,023) (342) --------- --------- --------- Total costs and expenses 502,954 472,762 456,127 --------- --------- --------- Income before income taxes and cumulative effect of accounting changes 43,972 13,061 68,187 Income taxes 18,120 5,076 26,303 --------- --------- --------- Income before cumulative effect of accounting changes 25,852 7,985 41,884 --------- --------- --------- Cumulative effect of change in accounting for postretirement benefits other than pensions, net of income taxes of $1,609 - (2,487) - Cumulative effect of change in accounting for income taxes - 1,038 - --------- --------- --------- Net income $ 25,852 $ 6,536 $ 41,884 ========= ========= ========= Income per share before cumulative effect of accounting changes $ 1.61 $ 0.50 $ 2.61 Cumulative effect per share of change in accounting for postretirement benefits other than pensions, net of income taxes - (0.15) - Cumulative effect per share of change in accounting for income taxes - 0.06 - --------- --------- --------- Net income per share $ 1.61 $ 0.41 $ 2.61 ========= ========= =========
[FN] See accompanying notes to consolidated financial statements. PAGE
Gibson Greetings, Inc. Consolidated Balance Sheets December 31, 1993 and 1992 (Dollars in thousands except per share amounts) 1993 1992 --------- --------- Assets Current assets: Cash and equivalents $ 9,477 $ 9,505 Trade receivables, net 192,163 169,605 Inventories 133,944 118,758 Prepaid expenses 4,207 4,301 Deferred income taxes 36,796 31,947 --------- --------- Total current assets 376,587 334,116 Plant and equipment, net 116,900 112,712 Other assets, net 86,924 54,276 --------- --------- $ 580,411 $ 501,104 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Debt due within one year $ 66,187 $ 31,911 Accounts payable 18,835 14,738 Income taxes payable 17,230 9,931 Other current liabilities 60,479 53,275 --------- --------- Total current liabilities 162,731 109,855 Deferred income taxes (1,102) 2,693 Long-term debt 74,365 70,175 Other liabilities 20,736 15,040 --------- --------- Total liabilities 256,730 197,763 --------- --------- Stockholders' Equity: Preferred stock, par value $1.00; 5,000,000 shares authorized, none issued - - Preferred stock, Series A, par value $1.00; 300,000 shares authorized, none issued - - Common stock, par value $.01; 50,000,000 shares authorized, 16,533,267 and 16,506,919 shares issued, respectively 165 165 Paid-in capital 45,209 44,436 Retained earnings 283,904 264,469 Foreign currency adjustment 291 159 --------- --------- 329,569 309,229 --------- --------- Less treasury stock, at cost, 473,344 and 473,344 shares, respectively 5,888 5,888 --------- --------- Total stockholders' equity 323,681 303,341 --------- --------- Commitments and contingencies (Notes 11 and 12) $ 580,411 $ 501,104 ========= =========
[FN] See accompanying notes to consolidated financial statements. PAGE
Gibson Greetings, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 1993, 1992 and 1991 (Dollars in thousands) 1993 1992 1991 --------- --------- --------- Cash flows from operating activities: Net income $ 25,852 $ 6,536 $ 41,884 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and write-down of display fixtures 22,688 24,870 18,495 Loss on disposal of plant and equipment 5,817 3,816 4,441 Deferred income taxes (9,157) (6,708) (3,246) Amortization of excess of fair value of companies acquired over cost - - (1,430) Amortization and write-down of deferred costs and other intangibles 19,547 34,087 15,822 Change in assets and liabilities: (Increase) decrease in trade receivables, net (22,529) 36,422 (5,466) Increase in inventories (6,963) (4,119) (29) (Increase) decrease in prepaid expenses 286 (182) 3,898 Increase in other assets, net of amortization (25,999) (23,356) (8,085) Increase (decrease) in accounts payable 2,579 (524) 386 Increase (decrease) in income taxes payable 7,173 (9,967) 4,456 Increase (decrease) in other current liabilities 6,603 6,169 (24,544) Increase in other liabilities 5,696 7,511 457 All other, net (22) 272 (89) --------- --------- --------- Total adjustments 5,719 68,291 5,066 --------- --------- --------- Net cash provided by operating activities 31,571 74,827 46,950 --------- --------- --------- Cash flows from investing activities: Purchase of plant and equipment (31,049) (30,970) (31,736) Proceeds from sale of plant and equipment 550 63 27 Acquisition of The Paper Factory of Wisconsin, Inc., net of cash acquired (24,782) - - --------- --------- --------- Net cash used in investing activities (55,281) (30,907) (31,709) --------- --------- --------- Cash flows from financing activities: Net increase (decrease) in short-term borrowings 23,062 (40,400) (71,100) Issuance of long-term debt, net 8,075 875 50,000 Payments on long-term debt (1,811) (708) (6,702) Issuance of common stock 773 2,277 3,243 Acquisition of common stock for treasury - (49) (222) Dividends paid (6,417) (6,251) (5,638) --------- --------- --------- Net cash provided by (used in) financing activities 23,682 (44,256) (30,419) --------- --------- --------- Net decrease in cash and equivalents (28) (336) (15,178) Cash and equivalents at beginning of year 9,505 9,841 25,019 --------- --------- --------- Cash and equivalents at end of year $ 9,477 $ 9,505 $ 9,841 ========= ========= ========= Supplemental disclosure of cash flow information Cash paid during the year for: Interest, net of amounts capitalized $ 7,544 $ 8,201 $ 9,264 Income taxes 20,243 19,015 24,851
[FN] See accompanying notes to consolidated financial statements. PAGE
Gibson Greetings, Inc. Consolidated Statements of Changes in Stockholder's Equity Years Ended December 31, 1993, 1992 and 1991 (Dollars in thousands except per share amounts) 1993 1992 1991 --------- --------- --------- Common stock, par value $.01: Balance at beginning of year $ 165 $ 164 $ 162 Exercise of stock options - 1 2 --------- --------- --------- 165 165 164 --------- --------- --------- Paid-in capital: Balance at beginning of year 44,436 42,160 38,919 Exercise of stock options 773 2,276 3,241 --------- --------- --------- 45,209 44,436 42,160 --------- --------- --------- Retained earnings: Balance at beginning of year 264,469 264,184 227,938 Net income 25,852 6,536 41,884 Cash dividends paid ($.40, $.39, and $.36 per share in 1993, 1992 and 1991, respectively) (6,417) (6,251) (5,638) --------- --------- --------- 283,904 264,469 264,184 --------- --------- --------- Foreign currency translation adjustment: Balance at beginning of year 159 74 - Aggregate adjustments resulting from translation of financial statements into U.S. dollars 132 85 74 --------- --------- --------- 291 159 74 --------- --------- --------- Less treasury stock, at cost: Balance at beginning of year 5,888 5,839 5,617 Common stock acquired - 49 222 --------- --------- --------- 5,888 5,888 5,839 --------- --------- --------- Total stockholders' equity $ 323,681 $ 303,341 $ 300,743 ========= ========= =========
[FN] See accompanying notes to consolidated financial statements. PAGE Gibson Greetings, Inc. Notes to Consolidated Financial Statements Years Ended December 31, 1993, 1992 and 1991 (Dollars in thousands except per share amounts) Note 1--Nature of Business and Statement of Accounting Policies Principles of consolidation The consolidated financial statements include the accounts of Gibson Greetings, Inc. and its wholly-owned and majority-owned subsidiaries (the Company). All intercompany transactions have been eliminated. Nature of business The Company operates in a single industry segment: the design, manufacture and sale of greeting cards, gift wrap and related products. The Company sells to customers in several channels of the retail trade principally located in the United States. The Company recognizes sales at the time of shipment from its facilities. Provisions for sales returns are recorded at the time of the sale, based upon current conditions and the Company's historic experience. The Company conducts business based upon periodic credit evaluations of its customers' financial condition and generally does not require collateral. The Company does not believe a concentration of risk exists due to the diversity of channels of distribution and geographic location of its retail customers. During the year ended December 31, 1993, the Company's largest customer accounted for approximately 12% of total revenues and during the year ended December 31, 1992, the same customer accounted for approximately 11% of total revenues. During the year ended December 31, 1991, a different customer accounted for approximately 13% of total revenues. International Operations During 1992, the Company formed Gibson de Mexico, S.A. de C.V. (Gibson de Mexico) to purchase certain assets and assume certain liabilities of Pagina Once, S.A. de C.V. (Pagina Once). Pagina Once was primarily engaged in the manufacturing and marketing of greeting cards. Minority stockholders of Gibson de Mexico are principal officers of Gibson de Mexico. The total cost of the acquisition exceeded the fair value of the net assets by $583. During 1991, the Company formed Gibson Greetings International Limited (Gibson International) to market the Company's products primarily in the United Kingdom and other European countries. The minority stockholders of Gibson International are principal officers of Gibson International. The activities of these subsidiaries were not material to consolidated operations in either 1993 or 1992. PAGE Retail Operations On June 1, 1993, the Company acquired The Paper Factory of Wisconsin, Inc. (The Paper Factory) for $25.1 million in a business combination accounted for as a purchase. The Paper Factory operates retail stores located primarily in manufacturers' outlet shopping centers. The results of The Paper Factory are not material and are included in the consolidated financial statements since the date of acquisition. The total cost of the acquisition exceeded the fair value of the net assets of The Paper Factory by $26.2 million. In connection with the acquisition, the Company assumed liabilities of approximately $11.6 million. Accumulated goodwill amortization at December 31, 1993 was $792. Cash and equivalents Cash and equivalents are stated at cost. Cash equivalents include time deposits, money market instruments and short-term debt obligations with original maturities of three months or less. The carrying amount approximates fair value because of the short maturity of these instruments. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. Plant and equipment Plant and equipment are stated at cost. Plant and equipment, except for leasehold improvements, are depreciated over their related estimated useful lives, using the straight-line method. Leasehold improvements are amortized over the terms of the respective leases, using the straight-line method. Expenditures for maintenance and repairs are charged to operations currently; renewals and betterments are capitalized. Other assets Other assets include deferred and prepaid costs, goodwill and other intangibles. Deferred and prepaid costs represent costs incurred relating to long-term customer sales agreements. Deferred and prepaid costs are amortized ratably over the terms of the agreements, generally three to six years. Goodwill and other intangibles are amortized over periods ranging from three to twenty years, using the straight-line method. PAGE Income taxes Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109 - "Accounting for Income Taxes." This Statement utilizes the liability method of accounting for income taxes. Deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of currently enacted tax laws. Prior to 1992, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. Investment tax credits are amortized to income over the lives of the related assets. Excess of fair value of companies acquired over cost The excess of fair value of companies acquired over cost was amortized to income over ten years, using the straight-line method. Amortization was complete in 1991. Accumulated amortization at December 31, 1993 and 1992 was $14,480. Interest rate swap agreements The difference between the amount of interest to be paid and the amount of interest to be received under interest rate swap agreements due to changing interest rates is charged or credited to interest expense over the life of the agreements. The fair value of interest rate swaps (used for hedging purposes) is the estimated amount that the Company would receive or pay to terminate the swap agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. Other Postretirement Benefits Effective January 1, 1992, the Company adopted SFAS No. 106 - "Employers' Accounting for Postretirement Benefits Other Than Pensions" (OPEB). This Statement requires that the cost of these benefits be recognized in the financial statements during the employee's active working career. Computation of net income per share The computation of net income per share is based upon the weighted average number of shares of common stock and equivalents outstanding during the year: 16,102,709 shares for 1993, 16,103,897 shares for 1992, and 16,039,259 shares for 1991. PAGE Reclassifications Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the 1993 presentation. Note 2--Trade Receivables Trade receivables at December 31, 1993 and 1992, consist of the following:
1993 1992 --------- --------- Trade receivables $ 245,682 $ 223,022 Less reserve for returns, allowances, cash discounts and doubtful accounts 53,519 53,417 --------- --------- $ 192,163 $ 169,605 ========= =========
Note 3--Inventories Inventories at December 31, 1993 and 1992, consist of the following:
1993 1992 --------- --------- Finished goods $ 83,074 $ 67,736 Work-in-process 13,147 12,867 Raw materials and supplies 37,723 38,155 --------- --------- $ 133,944 $ 118,758 ========= =========
PAGE Note 4--Plant and Equipment Plant and equipment at December 31, 1993 and 1992, consist of the following:
1993 1992 --------- --------- Land and buildings $ 35,936 $ 32,807 Machinery and equipment 60,842 54,010 Display fixtures 84,117 84,334 Leasehold improvements 10,001 9,164 Construction in progress 4,233 3,761 --------- --------- 195,129 184,076 Less accumulated depreciation 78,229 71,364 --------- --------- $ 116,900 $ 112,712 ========= =========
Note 5--Other Assets Other assets at December 31, 1993 and 1992, consist of the following:
1993 1992 --------- --------- Deferred and prepaid costs $ 112,157 $ 87,895 Goodwill and other intangibles 31,601 5,384 --------- --------- 143,758 93,279 Less accumulated amortization 56,834 39,003 --------- --------- $ 86,924 $ 54,276 ========= =========
PAGE Note 6--Debt Debt at December 31, 1993 and 1992, consists of the following:
1993 1992 --------- --------- Debt due within one year: Commercial paper bearing interest at a weighted average rate of 3.60% $ 13,020 $ - Loans payable to banks under a revolving credit agreement bearing interest at a weighted average rate of 3.70% 10,000 - Loans payable to banks under uncommitted borrowing facilities bearing interest at weighted average rates of 3.55% and 3.58%, respectively 39,250 30,100 Current portion of long-term debt 3,917 1,811 --------- --------- $ 66,187 $ 31,911 ========= ========= Long-term debt: Senior notes bearing interest at 9.33%, with annual serial maturities from 1995 through 2001 $ 50,000 $ 50,000 Economic development revenue bonds (tax-exempt) bearing interest at a weighted average rate of 7.17%, with annual serial maturities from 1993 through 1999 and a term maturity in 2004, less unamortized discount of $163 and $179 in 1993 and 1992, respectively, to yield an effective rate of 7.29% 9,277 9,821 Economic development revenue bonds (taxable) bearing interest at 9.10%, with annual sinking fund payments required in 1993 through 2004, less unamortized discount of $159 and $175 in 1993 and 1992, respectively, to yield an effective rate of 9.35% 6,431 6,760 Notes payable to former shareholders of The Paper Factory of Wisconsin, Inc. bearing interest at 5.01%, payable in annual installments of $2,019 8,075 - Industrial revenue bonds bearing interest at 9.25%, payable in semi-annual installments of $300, secured by plant and equipment with a carrying value of $6,275 and $6,792 at December 31, 1993 and 1992, respectively 3,000 3,600 Urban development action grant bearing interest at 8.00%, payable in quarterly installments, secured by land, building and equipment with a carrying value of $16,183 and $16,262 at December 31, 1993 and 1992, respectively 682 875 Other notes bearing interest at a weighted average rate of 5.20%, payable in quarterly installments, secured by the same assets securing the industrial revenue bonds 817 930 --------- --------- 78,282 71,986 Less portion due within one year 3,917 1,811 --------- --------- $ 74,365 $ 70,175 ========= =========
PAGE In 1991, the Company privately placed $50,000 in long-term senior notes with proceeds being used for general corporate purposes. In 1993, the Company entered into a new three-year revolving credit agreement, replacing a similar existing facility, which expires April 26, 1996. The amount which can be borrowed under this agreement is $210,000. The fair value of the Corporation's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Corporation for debt of the same remaining maturities. The estimated fair value of the Company's gross long-term debt at December 31, 1993 was $83,992. The Company periodically enters into interest rate swap or derivative transactions with the intent to manage the interest rate sensitivity of portions of its debt. At December 31, 1993, the Company had four outstanding interest rate swap/derivative positions with a total notional amount of $96,000. Two agreements, with terms similar to the related bonds, are constituted as hedges and effectively change the Company's interest rate on $3,000 of industrial revenue bonds to 6.67% through February 1998. One of the other two agreements attempts to limit the Company's exposure against rising short-term rates on a notional amount of $60,000 through 1995. The last position provides the Company with a maximum 1.0% annuity on $30,000 through August 1994 predicated on short-term rates remaining in a specified range. Based on the estimated cost of terminating these two positions, the Company has an unrealized net loss at December 31, 1993 of approximately $1,000. On March 4, 1994, the Company announced that, based on trading of swap/derivative positions subsequent to year-end, the Company entered into two new contracts which will result in a minimum loss of $3,000 and a maximum potential loss of $27,500. The new contracts, which mature in June and August 1995, may be liquidated at any time prior to maturity and have an estimated cost of termination of approximately $17,500 at March 4, 1994. The annual principal payments due on long-term debt for each of the years in the five-year period ended December 31, 1998, are $3,917, $11,164, $11,269, $11,116 and $9,205, respectively. Capitalized interest for the years ended December 31, 1993, 1992 and 1991 were $0, $74 and $322, respectively. PAGE The Company's debt agreements contain certain covenants including limitations on dividends based on a formula related to net income, stock sales and certain restricted investments. At December 31, 1993, the amount of unrestricted retained earnings available for dividends was $50,760. Note 7--Income Taxes The Company adopted the provisions of SFAS No. 109 effective January 1, 1992, and recorded a credit of $1,038 and increased earnings per share by $.06 for the cumulative effect of this change in accounting principle. There was no effect on income before income taxes for the year ended December 31, 1992, resulting from the adoption of SFAS No. 109. The provision for income taxes for the years ended December 31, 1993, 1992 and 1991, consists of the following:
1993 1992 1991 --------- --------- --------- Federal: Current $ 21,355 $ 7,257 $ 23,915 Deferred (7,052) (4,594) (2,617) Deferred investment tax credits, net (122) (124) (195) --------- --------- --------- 14,181 2,539 21,103 --------- --------- --------- State and local: Current 5,240 2,093 5,829 Deferred (1,390) (1,076) (629) --------- --------- --------- 3,850 1,017 5,200 --------- --------- --------- Foreign: Current - - - Deferred 89 (89) - --------- --------- --------- 89 (89) - --------- --------- --------- $ 18,120 $ 3,467 $ 26,303 ========= ========= =========
PAGE For the year ended December 31, 1992, provision for income taxes was included in the financial statements as follows:
1992 --------- Continuing operations $ 5,076 Transition effect of change in accounting for postretirement benefits other than pensions (1,609) --------- $ 3,467 =========
Recently enacted tax laws raised the statutory tax rate for corporations from 34% to 35%, retroactive to January 1, 1993. Partially offsetting the adverse impact of the 1% increase in effective tax rates in 1993 and future periods is the favorable adjustment of $.7 million recorded in 1993 due to the revaluation of certain deferred tax assets. The effective income tax rate for the years ended December 31, 1993, 1992 and 1991, varied from the statutory federal income tax rate as follows:
1993 1992 1991 --------- --------- --------- Statutory federal income tax rate 35.0% 34.0% 34.0% State and local income taxes, net of federal income tax benefit 5.7 6.8 5.0 Other 0.5 (1.9) (0.4) --------- --------- --------- 41.2% 38.9% 38.6% ========= ========= =========
PAGE The tax effect of significant temporary differences representing deferred tax assets and liabilities is as follows for the year ended December 31, 1991:
1991 --------- Reserve for returns, allowances, cash discounts and doubtful accounts $ (2,780) Reserve for inventories and related items 616 Depreciation of plant and equipment 617 Reserve for display fixtures (500) Accrued compensation and benefits (1,479) Other 280 --------- $ (3,246) =========
Deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of currently enacted tax laws. The net deferred taxes are comprised of the following:
1993 1992 --------- --------- Current deferred taxes: Gross assets $ 37,573 $ 32,646 Gross liabilities (777) (699) --------- --------- 36,796 31,947 --------- --------- Noncurrent deferred taxes: Gross assets 12,745 8,180 Gross liabilities (11,241) (10,350) Deferred investment tax credits (402) (523) --------- --------- 1,102 (2,693) --------- --------- $ 37,898 $ 29,254 ========= =========
The Company did not record any valuation allowances against deferred tax assets at January 1, 1992, December 31, 1992 or December 31, 1993, due to the substantial amounts of taxable income generated over the last three to five years. PAGE The tax balances of significant temporary differences representing deferred tax assets and liabilities for the years ended December 31, 1993 and 1992 were as follows:
1993 1992 --------- --------- Reserve for returns, allowances, cash discounts and doubtful accounts $ 22,279 $ 21,828 Reserve for inventories and related items 7,655 4,959 Postretirement benefits 1,885 1,851 Depreciation of plant and equipment (11,078) (10,294) Reserve for display fixtures 1,644 1,476 Accrued compensation and benefits 10,854 7,700 Other accruals and reserves 5,061 2,257 Deferred investment tax credits benefits other than pensions (402) (523) --------- --------- $ 37,898 $ 29,254 ========= =========
Note 8--Other Current Liabilities Other current liabilities at December 31, 1993 and 1992, consist of the following:
1993 1992 --------- --------- Compensation, payroll taxes and related withholdings $ 14,110 $ 10,626 Sales, service and advertising costs 22,915 23,157 Other 23,454 19,492 --------- --------- $ 60,479 $ 53,275 ========= =========
PAGE Note 9--Postretirement Benefits The Company sponsors a defined benefit pension plan (the Retirement Plan) covering substantially all employees who meet certain eligibility requirements. Benefits are based upon years of service and average compensation levels. The Company's general funding policy is to contribute amounts deductible for federal income tax purposes. Contributions are intended to provide not only for benefits earned to date, but also for benefits expected to be earned in the future. The following table sets forth the Retirement Plan's funded status on the measurement dates, September 30, 1993 and 1992, and a reconciliation of the funded status to the amounts recognized in the Company's consolidated balance sheets at December 31, 1993 and 1992:
1993 1992 --------- --------- Actuarial present value of benefit obligations: Vested benefit obligation $ 49,995 $ 42,871 ========= ========= Accumulated benefit obligation $ 54,203 $ 46,296 ========= ========= Projected benefit obligation for services rendered to date $ 66,183 $ 59,329 Plan assets at fair market value 62,106 56,457 --------- --------- Plan assets less than projected benefit obligation (4,077) (2,872) Unrecognized net asset at January 1, 1986, being recognized over 9.9 years (873) (1,332) Unrecognized prior service cost 1,852 2,553 Unrecognized net gain resulting from experience different from assumed and effects of changes in assumptions (4,565) (3,639) --------- --------- Accrued pension expense included in other liabilities $ (7,663) $ (5,290) ========= =========
The fair market value of the Retirement Plan's assets at December 31, 1993 and 1992, was $61,559 and $58,474, respectively. The changes in asset values relative to the measurement dates are primarily due to fluctuations in the market value of the plan's equity investments. PAGE In 1990, the Company established a nonqualified defined benefit plan for employees whose benefits under the Retirement Plan are limited by provisions of the Internal Revenue Code. Additionally in 1990, the Company established a nonqualified defined benefit plan to provide supplemental retirement benefits for selected executives in addition to benefits provided under other Company plans. A nonqualified plan was also established to provide retirement benefits for members of the Company's Board of Directors who are not covered under any of the Company's other plans. All plans established in 1990 were unfunded at December 31, 1993 and 1992, although assets for those plans are held in certain grantor tax trusts known as "Rabbi" trusts. These assets are subject to claims of the Company's creditors but otherwise must be used only for purposes of providing benefits under the plans. The following table sets forth the nonqualified defined benefit plans' benefit obligations on the measurement dates, September 30, 1993 and 1992, and a reconciliation of those obligations to the amounts recognized in the Company's consolidated balance sheets at December 31, 1993 and 1992:
1993 1992 --------- --------- Actuarial present value of benefit obligations: Vested benefit obligation $ 3,431 $ 2,402 ========= ========= Accumulated benefit obligation $ 4,396 $ 3,206 ========= ========= Projected benefit obligation for services rendered to date $ 5,321 $ 3,870 Plan assets at fair market value - - --------- --------- Unfunded projected benefit obligation (5,321) (3,870) Unrecognized prior service cost 2,254 2,163 Unrecognized net loss resulting from experience different from assumed and effects of changes in assumptions 834 169 --------- --------- Accrued pension expense included in other liabilities $ (2,233) $ (1,538) ========= =========
PAGE The assumed weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation for the plans was 7.0% and 5.0% in 1993 and 8.0% and 6.0% in 1992, respectively. The assumed long-term rate of return on plan assets used for valuation purposes was 9.0% for 1993 and 1992. A summary of the components of net pension expense for all of the Company's defined benefit plans for the years ended December 31, 1993, 1992 and 1991, is as follows:
1993 1992 1991 --------- --------- --------- Service cost-benefits earned during the period $ 2,917 $ 2,834 $ 2,529 Interest cost on projected benefit obligation 5,092 4,758 4,323 Net amortization and deferral income tax benefit 128 159 6,923 Expected return on plan assets (4,941) (4,610) (11,064) -------- --------- --------- $ 3,196 $ 3,141 $ 2,711 ======== ========= =========
The Company has a defined contribution pension plan for employees who are members of a collective bargaining unit. Benefits under this plan are determined based upon years of service and an hourly contribution rate. Pension expense for this plan for the years ended December 31, 1993, 1992 and 1991, was $451, $479 and $410, respectively. The Company has two defined contribution plans pursuant to Section 401(k) of the Internal Revenue Code. The plans provide that employees meeting certain eligibility requirements may defer a portion of their salary subject to certain limitations. The Company pays certain administrative costs of the plans and contributes to the plans based upon a percentage of the employee's salary deferral and an annual additional contribution at the discretion of the Board of Directors. The total expense for these plans for the years ended December 31, 1993, 1992 and 1991, was $501, $481 and $511, respectively. In addition to providing pension benefits, the Company provides medical and life insurance benefits for certain eligible employees upon retirement from the Company. Substantially all employees may become eligible for such benefits upon retiring from active employment of the Company. Medical and life insurance benefits for employees and retirees are paid by a combination of company and employee or retiree contributions. Retiree insurance benefits are provided by insurance companies whose premiums are based on claims paid during the year. The PAGE Company adopted the provisions of SFAS No. 106 effective January 1, 1992. This standard requires companies to accrue an actuarially determined charge for postretirement benefits during the period in which active employees become eligible, under existing plan agreements, for such future benefits. The cumulative effect of this change resulted in a charge to net income of $2,487 or $.15 per share, after taxes of $1,609. Prior to January 1, 1992, the Company recognized these costs, which were not significant to operations, on a cash basis. Net periodic cost of these benefits for the years ended December 31, 1993 and 1992 is as follows:
1993 1992 --------- --------- Service cost-benefits earned during the period $ 148 $ 139 Interest cost on accumulated benefits 470 343 Net amortization 61 - --------- --------- $ 679 $ 482 ========= =========
A reconciliation of the accumulated postretirement benefit obligation (APBO) measured as of September 30, 1993 and 1992 to the Company's consolidated balance sheets at December 31, 1993 and 1992 was as follows:
1993 1992 --------- --------- Retirees $ 3,514 $ 2,681 Fully eligible active employees 1,228 1,257 Other active employees 1,084 479 --------- --------- Accumulated benefit obligation 5,826 4,417 Unrecognized prior service cost (771) - Unrecognized net loss (383) - --------- --------- Accrued APBO included in other liabilities $ 4,672 $ 4,417 ========= =========
PAGE The accumulated benefit obligation for 1993 and 1992 was determined using the following assumptions: 1993 1992 ----------------------- ----------------------- Discount rate 7% 8% Health care cost trend rate 11% for 1994 graded down 16% for 1993 and 1994, 1% per year to 5% in the gradually declining to year 2000, 5% thereafter a rate of 6% by 2003 The health care cost trend rate assumption does not have a significant effect on the amounts reported. For example, a 1% increase in the health care cost trend rate would increase the accumulated postretirement benefit obligation as of December 31, 1993, and the net periodic cost for the year then ended by approximately 5% and 4%, respectively. Note 10--Stockholders' Equity Employee stock plans Under various stock option and incentive plans, the Company may grant incentive and nonqualified stock options to purchase its common stock. All incentive options are granted at the fair market value on the date of grant. Incentive stock options generally become exercisable one year after the date granted and expire ten years after the date granted, if not earlier expired due to termination of employment. Nonqualified stock options become exercisable according to a vesting schedule determined at the date granted and expire on the date set forth in the option agreement, if not earlier expired due to termination of employment. A summary of stock option activity during the years ended December 31, 1993, 1992 and 1991, is as follows:
1993 1992 1991 --------- --------- --------- Number of options to purchase common stock: Outstanding at beginning of year 1,073,470 646,958 782,529 Granted 47,500 534,900 37,000 Exercised (26,348) (93,021) (151,338) Expired (31,580) (15,367) (21,233) --------- --------- -------- Outstanding at end of year 1,063,042 1,073,470 646,958 ========= ========= ======== Exercisable at end of year 666,594 439,641 408,294 ========= ========= ========
The exercise prices of options granted in 1993 ranged from $18.88 to $21.25. The exercise prices of options granted in 1992 ranged from $18.38 to $28.63 and the exercise price of options granted in 1991 ranged from $24.75 to $28.00. Options exercised were at prices of $2.38 to $23.50, in 1993, 1992 and 1991. Options outstanding at December 31, 1993, are at prices ranging from $11.38 to $28.63. Under certain stock incentive plans, the Company may grant the right to purchase restricted shares of its common stock. Such shares are subject to restriction on transfer and to repurchase by the Company. The purchase price of restricted shares is determined by the Company and may be nominal. In 1993, 1992 and 1991, 0, 5,000 and 38,500 restricted shares, respectively, were purchased at a price of $1.00 per share. At December 31, 1993, 621,192 shares were available under the stock option and incentive plans, of which 563,166 shares could be issued as restricted shares. Stock rights On December 4, 1987, the Company's Board of Directors declared a dividend distribution of one right for each outstanding share of the Company's common stock to stockholders of record on December 21, 1987. Each right entitles the holder to purchase, for the exercise price of $40 per share, 1/100th of a share of Series A Preferred Stock. Until exercisable, the rights are attached to all shares of the Company's common stock outstanding. The rights are exercisable only in the event that a person or group of persons (i) acquires 20% or more of the Company's common stock and there is a public announcement to that effect, (ii) announces an intention to commence or commences a tender or exchange offer which would result in that person or group owning 30% or more of the Company's common stock, or (iii) beneficially owns a substantial amount (at least 15%) of the Company's common stock and is declared to be an Adverse Person (as defined in the Rights Agreement) by the Company's Board of Directors. Upon a merger or other business combination transaction, each right may entitle the holder to purchase common stock of the acquiring company worth two times the exercise price of the right. Under certain other circumstances (defined in the Rights Agreement) each right may entitle the holder (with certain exceptions) to purchase common stock, or in certain circumstances, cash, property or other securities of the Company, having a value worth two times the exercise price of the right. The rights are redeemable at one cent per right at anytime prior to 20 days after the public announcement that a person or group has acquired 20% of the Company's common stock. Unless exercised or redeemed earlier by the Company, the rights expire on December 28, 1997. PAGE Note 11--Commitments Lease commitments The Company has a long-term lease agreement for certain of its principal facilities. The initial lease term runs through January 31, 2002, with two five-year renewal options available. The basic rent under the lease is subject to adjustment based on changes in the Consumer Price Index for the preceding five years, effective March 1, 1987, and every five years thereafter including renewal periods. The lease provides a purchase option exercisable in 2002. The option price is the higher of $35,400 or the fair market value on the date of exercise. As a condition of the lease, all property taxes, insurance costs and operating expenses are to be paid by the Company. The Company also leases additional manufacturing, distribution and administrative facilities, sales offices and personal property under noncancellable leases which expire on various dates through 2003. Certain of these leases contain renewal and escalating rental payment provisions. Rental expense for the years ended December 31, 1993, 1992 and 1991, on all real and personal property, was $20,297, $15,846 and $13,777, respectively. Minimum future annual rentals under noncancellable leases for each of the years in the five-year period ended December 31, 1998 are $17,444, $16,242, $14,190, $12,759 and $9,842, respectively. After 1998, these commitments aggregate $25,364. Contract commitments The Company has several long-term customer sales agreements which require payments and credits for each of the years in the five-year period ended December 31, 1998, of $3,959, $1,347, $707, $443 and $242, respectively. After December 31, 1998, these commitments aggregate $100. All of these amounts have been recorded as other current liabilities or other liabilities in the accompanying balance sheet as of December 31, 1993. Employment agreements The Company has employment agreements with certain executives which provide for, among other things, minimum annual salaries adjusted for cost-of-living changes, continued payment of salaries in certain circumstances and incentive bonuses. Certain agreements further provide for signing bonuses, deferred compensation payable upon expiration of the agreements and employment termination payments, including payments contingent upon any person becoming the beneficial owner of 50% or greater of the Company's outstanding stock. PAGE Note 12--Legal Proceedings In 1990, a complaint was issued against the Company alleging certain unfair labor practices in connection with a strike at one of its facilities. On December 18, 1991, an Administrative Law Judge of the National Labor Relations Board ("NLRB") issued a recommended order, which included reinstatement and back pay affecting approximately 160 strikers, based on findings that the Company had violated certain provisions of the National Labor Relations Act. On May 7, 1993, the NLRB upheld the Administrative Law Judge's decision in some respects, and enlarged the number of strikers entitled to back pay to approximately 240. A prompt notice of appeal was filed in the United States Court of Appeals for the District of Columbia Circuit. Management believes it has substantial defenses to these charges and these defenses will be presented in briefs in the Company's appeal. In addition, the Company is a defendant in certain other litigation. Management does not believe that an adverse outcome as to any or all of these matters would have a material adverse effect on the Company's net worth or total cash flows; however, the impact on the statement of operations in a given year could be material. PAGE Report of Independent Public Accountants To Gibson Greetings, Inc.: We have audited the accompanying consolidated balance sheets of Gibson Greetings, Inc. (a Delaware corporation) and its subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 1993. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gibson Greetings, Inc. and its subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in notes to consolidated financial statements, effective January 1, 1992, the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index of financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Cincinnati, Ohio, March 4, 1994. PAGE Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Except as set forth below, the information required by this Part is included in the Company's definitive Proxy Statement, filed with the Securities and Exchange Commission in connection with the Company's 1994 Annual Meeting of Stockholders, and is incorporated by reference herein. Item 10. Directors and Executive Officers of the Registrant The Executive Officers of the Company (at March 18, 1994) are as follows: Name Age Title ------------------- --- ---------------------------- Benjamin J. Sottile 56 Chairman of the Board, President and Chief Executive Officer Ralph J. Olson 49 Vice President and Director William L. Flaherty 46 Vice President, Finance and Chief Financial Officer James H. Johnsen 52 Vice President, Controller and Treasurer Stephen M. Sweeney 57 Vice President, Human Resources Information about Mr. Sottile is incorporated by reference from the Company's definitive Proxy Statement for the 1994 Annual Meeting of Stockholders. RALPH J. OLSON. Mr. Olson is a Vice President of the Company and is President and Chief Operating Officer of the Company's Gibson Card Division, positions he has held since 1991. From 1989 until 1991, he was President of the E-Z Go Division of Textron, Inc., a manufacturer of golf and utility vehicles. During the period from 1984 until 1989, he was President of the Material Handling Division of Interlake Corp., specializing in material handling, automation and storage systems. WILLIAM L. FLAHERTY. Mr. Flaherty has been Vice President, Finance and Chief Financial Officer of the Company since November 1993. Prior to that time, he served as Vice President and Corporate Treasurer of FMR Corp., the parent company of Fidelity Investments Group, a mutual fund management and discount stock brokerage firm (1989 - 1992) and as Vice President and Treasurer of James River Corporation , an integrated manufacturer of pulp, paper and converted paper and plastic products (1987 - 1989). JAMES H. JOHNSEN. Mr. Johnsen is the Company's Vice President, Controller and Treasurer and Assistant Secretary. He joined the Accounting Department of the Company in 1964 and served as the Company's Corporate Controller from 1978 until 1986 and as its Treasurer from 1980 until 1986, at which time he was elected Vice President, Control and Treasurer. STEPHEN M. SWEENEY. Mr. Sweeney joined the Company as Vice President, Human Resources in 1987. He held similar positions with Coca Cola Enterprises, Inc. from 1985 until 1987, the Tribune Company from 1983 until 1985 and Contel, Inc. from 1976 to 1983. Officers serve with the approval of the Board of Directors. PAGE PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K a) The following documents are filed as part of this report: 1. Financial Statements: Page Herein Financial Statement ------ ----------------------------------------------------- 11 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 12 Consolidated Balance Sheets as of December 31, 1993 and 1992 13 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 14 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1993, 1992 and 1991 15 Notes to Consolidated Financial Statements 26 Report of Independent Public Accountants 2. Financial Statement Schedules required to be filed by Item 8 of this Form 10-K: Schedules Filed: Page Herein Schedule ------ ----------------------------------------------------- 30 II Amounts Receivable from Related Parties 31 VIII Valuation and Qualifying Accounts 32 IX Short-term Borrowings 33 X Supplementary Income Statement Information All other schedules are omitted because of the absence of conditions under which they are required or because the information is shown in the financial statements or notes thereto. 3. Exhibits: See Index of Exhibits (page 34) for a listing of all exhibits filed with this annual report on Form 10-K b) Reports on Form 8-K: None. PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of the 18th day of March 1994. Gibson Greetings, Inc. By /s/ Benjamin J. Sottile ----------------------- Benjamin J. Sottile President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated as of the 18th day of March 1994. Signature Title ---------- ----- Chairman of the Board, /s/ Benjamin J. Sottile President and Chief Executive Officer ------------------------- Benjamin J. Sottile (principal executive officer) Vice President, Finance /s/ William L. Flaherty Chief Financial Officer ------------------------- William L. Flaherty (principal financial officer) Vice President, Controller /s/ James H. Johnsen and Treasurer ------------------------- James H. Johnsen (principal accounting officer) /s/ Thomas M. Cooney ------------------------- Thomas M. Cooney Director /s/ Julius Koppelman ------------------------- Julius Koppelman Director /s/ Charles D. Lindberg ------------------------- Charles D. Lindberg Director /s/ Ralph J. Olson ------------------------- Ralph J. Olson Director /s/ Albert R. Pezzillo ------------------------- Albert R. Pezzillo Director /s/ Thomas J. Smith ------------------------- Thomas J. Smith Director /s/ Burton B. Staniar ------------------------- Burton B. Staniar Director /s/ Frank Stanton ------------------------- Frank Stanton Director /s/ Charlotte St. Martin ------------------------- Charlotte St. Martin Director /s/ Roger T. Staubach ------------------------- Roger T. Staubach Director /s/ C. Anthony Wainwright ------------------------- C. Anthony Wainwright Director ------------------------- Harry N. Walters Director PAGE
GIBSON GREETINGS, INC. SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES (Thousands of dollars) Column A Column B Column C Column D Column E - ----------------------- ---------- --------- ------------------------- ----------------------- Deductions Balance at End of Period Balance at ------------------------- ------------------------ Beginning Amounts Amounts Name of Debtor of Period Additions Collected Written Off Current Noncurrent - ----------------------- ---------- --------- --------- ----------- --------- ---------- M. Sillence, Operations Director, Gibson Greetings International Limited: Twelve months ended 12/31/93 $ 249 $ - $ 249 $ - $ - $ - Twelve months ended 12/31/92 322 (72) (A) - - 249 - Twelve months ended 12/31/91 - 322 (B) - - 322 - P.M. Osman, Managing Director, Gibson Greetings International Limited: Twelve months ended 12/31/93 - - - - - - Twelve months ended 12/31/92 99 45 (A) 144 - - - Twelve months ended 12/31/91 - 99 (C) - - 99 - S. Kosmalski, Senior Vice President Sales: Twelve months ended 12/31/93 - - - - - - Twelve months ended 12/31/92 - 120 (D) 120 - - - Twelve months ended 12/31/91 - - - - - -
[FN] - ----------------------- (A) Includes foreign currency translation adjustments. (B) Real estate assistance loan, secured, bearing interest at 12% if note not repaid by May 12, 1993 or upon sale of principal residence, whichever occurs first. (C) Real estate assistance loan, secured, bearing interest at 12% if note not repaid by November 14, 1992 or upon sale of principal residence, whichever occurs first. (D) Real estate assistance loan, secured, bearing interest at 12% if note not repaid by September 15, 1992 or upon sale of principal residence, whichever occurs first. PAGE
GIBSON GREETINGS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (Thousands of dollars) Column A Column B Column C Column D Column E - -------------------- ---------- ------------------------- ---------- ---------- Additions ------------------------- Balance at Charged to Charged to Balance at Beginnng Costs and Other End of Description of Period Expenses Accounts Deductions Period - -------------------- ---------- ---------- ---------- ---------- ---------- Deducted from trade receivables Allowance for doubtful accounts: Twelve months ended 12/31/93 $ 7,515 $ 4,188 $ - $ 1,102 (A) $ 10,601 Twelve months ended 12/31/92 8,950 11,549 - 12,984 (A) 7,515 Twelve months ended 12/31/91 6,850 4,094 - 1,994 (A) 8,950 Allowance for sales returns, allowances and cash discounts: Twelve months ended 12/31/93 45,902 89,987 - 92,971 (B) 42,918 Twelve months ended 12/31/92 45,490 100,813 - 100,401 (B) 45,902 Twelve months ended 12/31/91 41,020 116,414 - 111,944 (B) 45,490
[FN] - -------------------- (A) Accounts that were judged to be uncollectible and charged to the reserve, net of recoveries. (B) Includes actual cash discounts taken by customers and sales returns and allowances that were granted to customers, all of which were charged to the reserve. PAGE
GIBSON GREETINGS, INC. SCHEDULE IX - SHORT-TERM BORROWINGS (Thousands of dollars) Column A Column B Column C Column D Column E - ---------------------- ---------- -------------------------- ----------- ---------- Weighted Maximum Average Average Weighted Amount Amount Interest Balance at Average Outstanding Outstanding Rate Category of Aggregrate End of Interest During the During the During the Short-Term Borrowings Period Rate Period Period Period - ---------------------- ---------- ---------- ----------- ----------- ---------- Bank Debt (D): Twelve months ended 12/31/93 $ 49,250 3.58 % $ 59,250 $ 17,133 3.55 % Twelve months ended 12/31/92 30,100 3.58 51,000 16,129 4.21 Twelve months ended 12/31/91 70,500 6.10 99,200 60,603 6.59 Commercial Paper (D): Twelve months ended 12/31/93 13,020 3.60 20,000 1,609 3.36 Twelve months ended 12/31/92 - - 49,000 4,589 3.63 Twelve months ended 12/31/91 - - 7,000 2,333 7.14
[FN] - ---------------------- (A) The maximum amount outstanding during the period was determined as of month-end. (B) The average amount outstanding during the period was computed based on the average daily outstanding balance. (C) The weighted average interest rate during the period was computed by dividing actual short-term interest expense by the average amount outstanding during the period. (D) See Note 6 of Notes to fiscal year 1993 and 1992 Consolidated Financial Statements and Note 8 of Notes to fiscal year 1991 Consolidated Financial Statements, each Note contained in or incorporated by reference into the Company's annual report on Form 10-K for that year, for information on short-term borrowing facilities. PAGE
GIBSON GREETINGS, INC. SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (Thousands of dollars) Column A Column B - ---------------------- ---------------------------------------- Twelve Months Ended December 31, ---------------------------------------- Item 1993 1992 1991 - ---------------------- ---------- ---------- ---------- Royalty expense $ 7,086 $ 6,191 $ 6,419
PAGE Index of Exhibits Exhibit Number Description ------- ----------------------------------------------------------------- 3(a) Restated Certificate of Incorporation as amended (*1) 3(b) Bylaws 4(a) Article 4.01 of Restated Certificate of Incorporation (included in Exhibit 3(a)) 4(b) Rights Agreement dated as of December 4, 1987, between Gibson Greetings, Inc. and The First National Bank of Boston, Rights Agent, including Certificate of Designation, Preferences and Rights of Series A Preferred Stock (*2) 10(a) Lease Agreement dated January 25, 1982 between Corporate Property Associates 2 and Corporate Property Associates 3 and Gibson Greeting Cards, Inc. (*3) 10(b) Sublease Agreement dated January 1, 1977 between B.F. Goodrich and Cleo Wrap Division of Gibson Greetings Card, Inc. (*3) 10(c) Amendment and Extension of Term of Sublease dated June 26, 1983, between B.F. Goodrich Company and Gibson Greeting Cards, Inc. (*4) 10(d) Amendment dated June 25, 1985, to Lease Agreement, dated January 25, 1982, by and between Corporate Property Associates 2 and Corporate Property Associates 3 and Gibson Greeting Cards, Inc. (*5) 10(e) Lease and Agreement dated March 7, 1986 between Associated Warehouses, Inc. and Cleo Wrap Division of Gibson Greetings, Inc. (*5) 10(f) Commercial Paper Issuing Agent Agreement dated as of July 11, 1986, between Gibson Greetings, Inc. and Irving Trust Corporation (*6) 10(g) Commercial Paper Dealer Agreement dated July 16, 1986, between Gibson Greetings, Inc. and The First Boston Corporation (*6) 10(h) Credit Agreement, dated as of April 26, 1993, by and among Gibson Greetings, Inc.; Bankers Trust Company; The Bank of New York; Mellon Bank, N.A.; The Fifth Third Bank; Harris Trust and Savings Bank; NBD Bank, N.A.; Royal Bank of Canada; The Sanwa Bank, Ltd.; Society National Bank; Union Bank of Switzerland; Wachovia Bank of Georgia, N.A.; and Bankers Trust Company, as agent (*7) 10(i) Form of Note Agreement between Gibson Greetings, Inc. and Connecticut Mutual Life, The Minnesota Mutual Life Insurance Company, The Reliable Life Insurance Company, Federated Life Insurance Company, The Variable Annuity Life Insurance Company and Nationwide Life Insurance Company, dated May 15, 1991 (*8) 10(j) Executive Compensation Plans and Arrangements (i) 1982 Stock Option Plan (ii) 1983 Stock Option Plan (iii) 1985 Stock Option Plan (iv) 1987 Stock Option Plan (v) 1989 Stock Option Plan (vi) 1989 Stock Option Plan for Nonemployee Directors (vii) 1991 Stock Option Plan (viii) Employment Agreement with Mr. Cooney (*9) (ix) Form of Second Amendment to Employment Agreement with Mr. Cooney (*1) PAGE Exhibit Number Description ------- ----------------------------------------------------------------- (x) Employment Agreement between Gibson Greetings, Inc. and Benjamin J. Sottile, dated April 1, 1993 (*7) (xi) Compensatory agreements (*10) (xii) ERISA Makeup Plan (*11) (xiii) Supplemental Executive Retirement Plan (*11) (xiv) Agreements dated January 2, 1991 and December 10, 1993 between Gibson Greetings, Inc. and Stephen M. Sweeney (xv) Agreement dated November 18, 1993 between Gibson Greetings, Inc. and William L. Flaherty (xvi) Agreement dated February 22, 1994 between Gibson Greetings, Inc. and Michael A. Pietrangelo 11 Computation of Income per Share 21 Subsidiaries of the Registrant 23 Consent of Independent Public Accountants - ---------------------- * Filed as an Exhibit to the document indicated and incorporated herein by reference: (1) The Company's Report on Form 10-K for the year ended December 31, 1988. (2) The Company's Report on Form 8-K dated December 28, 1987, filed January 4, 1988. (3) The Company's Registration Statement on Form S-8 (No. 2-82990). (4) The Company's Registration Statement on Form S-8 (No. 2-96396). (5) The Company's Report on Form 10-K for the year ended December 31, 1985. (6) The Company's Report on Form 10-Q for the quarter ended September 30, 1986. (7) The Company's Report on Form 10-Q for the quarter ended June 30, 1993. (8) The Company's Report on Form 10-Q for the quarter ended June 30, 1991. (9) The Company's Report on Form 10-K for the year ended December 31, 1986. (10) The Company's Report on Form 10-K for the year ended December 31, 1991. (11) The Company's Report on Form 10-K for the year ended December 31, 1992. - ---------------------- The Company will furnish to the Commission upon request its long-term debt instruments not listed above. EX-10 2 1982 STOCK OPTION PLAN - EXHIBIT 10(J)(I) Exhibit 10(j)(i) GIBSON GREETINGS, INC. 1982 STOCK OPTION PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1982 Stock Option Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Option. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan are the Company's common shares, $.01 par value, which may be either authorized but unissued shares or treasury shares. (b) The aggregate number of common shares of the Company which may be issued under the Plan shall not exceed one million PAGE fifty thousand (1,050,000) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted under this Plan which could cause such maximum limit to be exceeded. (c) Common shares covered by an option which is no longer exercisable with respect to such shares shall again be available for issuance in connection with other options granted under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provisions of the Plan, grant either nonqualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees". Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a nonqualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price. The option price per share shall be not less than 100% of the fair market value of the Company's common shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. (b) Period within which option may be exercised. The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder. Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted to an Eligible Employee who, at the time such option is granted owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Subsidiaries, the option price per share shall be at least 110% of the fair market value of the common shares subject to the option and such option may not be exercised after the expiration of five years from the date the option is granted. - 2 - PAGE (d) Termination of option by reason of termination of employment. If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to nonqualified options which are exercisable on the date of termination of employment. (e) Non-transferability. Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a nonqualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee. More than one option may be granted to an Optionee under this Plan and both nonqualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws. Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by - 3 - PAGE the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of common shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the common shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of stock issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's common shares resulting from stock splits, stock dividends, combinations or exchanges or shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (1) the number of shares available for option grant under this Plan, (2) the number of shares subject to options granted under this Plan, and (3) the option price of optioned shares. 9. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. 10. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be amended (1) to increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to - 4 - PAGE give effect to stock splits, etc.); (2) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (3) to change the requirement that the option price per share of common stock covered by an option granted under this Plan not be less than 100% of the fair market value of the Company's common stock on the date such option is granted; (4) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (5) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 9 above. 11. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 12. Implied Consent of Participants. Every Participant, by his acceptance of an option under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 13. No Effect on Employment Status. The fact than an employee has been granted an option under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 14. Duration and Termination of the Plan. This Plan became effective on January 26, 1982. No Incentive Stock Option shall be granted subsequent to January 25, 1992, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 10. 15. Delaware Law to Govern. This plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. 1982opt.pol - 5 - PAGE EX-10 3 1983 STOCK OPTION PLAN - EXHIBIT 10(J)(II) Exhibit 10(j)(ii) GIBSON GREETINGS, INC. 1983 STOCK OPTION PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1983 Stock Option Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Option. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan are the Company's common shares, $.01 par value, which may be either authorized but unissued shares or treasury shares. (b) The aggregate number of common shares of the Company which may be issued under the Plan shall not exceed one hundred PAGE twelve thousand five hundred (112,500) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted under this Plan which could cause such maximum limit to be exceeded. (c) Common shares covered by an option which is no longer exercisable with respect to such shares shall again be available for issuance in connection with other options granted under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provisions of the Plan, grant either nonqualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees". Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a nonqualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price. The option price per share shall be not less than 100% of the fair market value of the Company's common shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. (b) Period within which option may be exercised. The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder. Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted to an Eligible Employee who, at the time such option is granted owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Subsidiaries, the option price per share shall be at least 110% of the fair market value of the common shares subject to the - 2 - PAGE option and such option may not be exercised after the expiration of five years from the date the option is granted. (d) Termination of option by reason of termination of employment. If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to nonqualified options which are exercisable on the date of termination of employment. (e) Non-transferability. Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a nonqualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee. More than one option may be granted to an Optionee under this Plan and both nonqualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws. Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. - 3 - PAGE 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of common shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the common shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of stock issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's common shares resulting from stock splits, stock dividends, combinations or exchanges or shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (1) the number of shares available for option grant under this Plan, (2) the number of shares subject to options granted under this Plan, and (3) the option price of optioned shares. 9. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. 10. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be amended (1) to - 4 - PAGE increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to give effect to stock splits, etc.); (2) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (3) to change the requirement that the option price per share of common stock covered by an option granted under this Plan not be less than 100% of the fair market value of the Company's common stock on the date such option is granted; (4) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (5) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 9 above. 11. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 12. Implied Consent of Participants. Every Participant, by his acceptance of an option under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 13. No Effect on Employment Status. The fact than an employee has been granted an option under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 14. Duration and Termination of the Plan. This Plan became effective on May 13, 1983. No Incentive Stock Option shall be granted subsequent to May 12, 1993, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 10. 15. Delaware Law to Govern. This plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. 1983opt.pol - 5 - PAGE EX-10 4 1985 STOCK OPTION PLAN - EXHIBIT 10(J)(III) Exhibit 10(j)(iii) GIBSON GREETINGS, INC. 1985 STOCK OPTION PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1985 Stock Option Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Option. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan are the Company's common shares, $.01 par value, which may be either authorized but unissued shares or treasury shares. (b) The aggregate number of common shares of the Company which may be issued under the Plan shall not exceed Three Hundred PAGE Thousand (300,000) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted under this Plan which could cause such maximum limit to be exceeded. (c) Common shares covered by an option which is no longer exercisable with respect to such shares shall again be available for issuance in connection with other options granted under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provisions of the Plan, grant either nonqualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees". Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a nonqualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price. The option price per share shall be not less than 100% of the fair market value of the Company's common shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. (b) Period within which option may be exercised. The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder. Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted to an Eligible Employee who, at the time such option is granted owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or its Subsidiaries, the option price per share shall be at least 110% of the fair market value of the common shares subject to the option and such option may not be exercised after the expiration of five years from the date the option is granted. - 2 - PAGE (d) Termination of option by reason of termination of employment. If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to nonqualified options which are exercisable on the date of termination of employment. (e) Non-transferability. Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a nonqualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee. More than one option may be granted to an Optionee under this Plan and both nonqualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws. Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by - 3 - PAGE the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of common shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the common shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of stock issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's common shares resulting from stock splits, stock dividends, combinations or exchanges or shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (1) the number of shares available for option grant under this Plan, (2) the number of shares subject to options granted under this Plan, and (3) the option price of optioned shares. 9. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. 10. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be amended (1) to increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to - 4 - PAGE give effect to stock splits, etc.); (2) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (3) to change the requirement that the option price per share of common stock covered by an option granted under this Plan not be less than 100% of the fair market value of the Company's common stock on the date such option is granted; (4) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (5) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 9 above. 11. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 12. Implied Consent of Participants. Every Participant, by his acceptance of an option under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 13. No Effect on Employment Status. The fact than an employee has been granted an option under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 14. Duration and Termination of the Plan. This Plan became effective on January 25, 1985. No Incentive Stock Option shall be granted subsequent to January 24, 1995, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 10. 15. Delaware Law to Govern. This plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. 1985opt.pol - 5 - PAGE EX-10 5 1987 STOCK OPTION PLAN - EXHIBIT 10(J)(IV) Exhibit 10(j)(iv) GIBSON GREETINGS, INC. 1987 STOCK OPTION PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1987 Stock Option Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Option. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan are the Company's common shares, $.01 par value, which may be either authorized but unissued shares or treasury shares. PAGE (b) The aggregate number of common shares of the Company which may be issued under the Plan shall not exceed Three Hundred Thousand (300,000) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted under this Plan which could cause such maximum limit to be exceeded. (c) Common shares covered by an option which is no longer exercisable with respect to such shares shall again be available for issuance in connection with other options granted under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provisions of the Plan, grant either nonqualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees". Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a nonqualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price. The option price per share shall be not less than 100% of the fair market value of the Company's common shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. (b) Period within which option may be exercised. The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder. Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted to an Eligible Employee who, at the time such option is granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its Subsidiaries, the option price per share shall be at least 110% of the fair - 2 - PAGE market value of the common shares subject to the option and such option may not be exercised after the expiration of five years from the date the option is granted. (d) Termination of option by reason of termination of employment. If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to nonqualified options which are exercisable on the date of termination of employment. (e) Non-transferability. Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a nonqualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee. More than one option may be granted to an Optionee under this Plan and both nonqualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws. Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission. With respect thereto, the Committee may impose such conditions on transfer, restrictions - 3 - PAGE and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of common shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the common shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares of stock issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's common shares resulting from stock splits, stock dividends, combinations or exchanges or shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (1) the number of shares available for option grant under this Plan, (2) the number of shares subject to options granted under this Plan, and (3) the option price of optioned shares. 9. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. - 4 - PAGE 10. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be amended (1) to increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to give effect to stock splits, etc.); (2) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (3) to change the requirement that the option price per share of common stock covered by an option granted under this Plan not be less than 100% of the fair market value of the Company's common stock on the date such option is granted; (4) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (5) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 9 above. 11. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 12. Implied Consent of Participants. Every Participant, by his acceptance of an option under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 13. No Effect on Employment Status. The fact than an employee has been granted an option under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 14. Duration and Termination of the Plan. This Plan became effective on January 28, 1987. No Incentive Stock Option shall be granted subsequent to January 27, 1997, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 10. 15. Delaware Law to Govern. This plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. 1987opt.pol - 5 - PAGE EX-10 6 1989 STOCK OPTION PLAN - EXHIBIT 10(J)(V) Exhibit 10(j)(v) GIBSON GREETINGS, INC. 1989 STOCK INCENTIVE PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1989 Stock Incentive Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any other section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options and Restricted Shares provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Plan. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan, or issued as Restricted Shares under the Plan, are the Company's shares of Common Stock, $.01 par value, ("Common Shares") which may be either authorized but unissued shares or treasury shares. PAGE (b) The aggregate number of Common Shares of the Company which may be issued under the Plan shall not exceed Five Hundred Thousand (500,000) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted, or Restricted Shares issued, under this Plan which could cause such maximum limit to be exceeded. (c) Common Shares covered by an option which is no longer exercisable with respect to such shares, or Restricted Shares which have been resold to the Company and in respect of which no benefits of ownership have been received by the Participant, shall again be available for issuance under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provisions of the Plan, grant either nonqualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees". Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a nonqualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price. The option price per share shall be not less than 100% of the fair market value of the Company's Common Shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. (b) Period within which option may be exercised. The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder. Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted to an Eligible Employee who, at the time such option is granted owns shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or its - 2 - PAGE Subsidiaries, the option price per share shall be at least 110% of the fair market value of the Common Shares subject to the option and such option may not be exercised after the expiration of five years from the date the option is granted. (d) Termination of option by reason of termination of employment. If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to nonqualified options which are exercisable on the date of termination of employment. (e) Non-transferability. Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a nonqualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee. More than one option may be granted to an Optionee under this Plan and both nonqualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws. Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission and applicable state Blue Sky Laws. With respect thereto, the Committee may impose such - 3 - PAGE conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. (h) Cancellation of Option. The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected Optionee or Optionees, the cancellation of any or all outstanding options granted under this Plan and the grant in substitution therefor of new options under this Plan (subject to the limitations hereof) covering the same or different numbers of Common Shares at an option price per share in all events not less than fair market value on the date of the new grant. 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of Common Shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of Common Shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the Common Shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's Common Shares resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (i) the number of shares available for option grant or issuance under this Plan, (ii) the number of shares subject to options granted under this Plan, and (iii) the option price of optioned shares. 9. Allocation and Purchase of Restricted Shares. (a) The Committee may from time to time, in its discretion and subject to the provisions of the Plan, allocate Common Shares to any or all Eligible Employees. Common Shares - 4 - PAGE allocated under this Paragraph 9 of the Plan are referred to herein as "Restricted Shares." Employees to whom Restricted Shares have been allocated are herein referred to as "Participants." Each Participant to whom an allocation of Restricted Shares has been made shall be offered the right to purchase such Restricted Shares as herein provided. (b) The Committee shall advise each Participant to whom an allocation of Restricted Shares has been made in writing of the terms of the offer, including the number of shares which such person shall be entitled to purchase, the purchase price per share, and any other terms, conditions and restrictions relating thereto. The Participant shall have thirty (30) days from the date of the offer to accept such offer. The Committee may, in the exercise of its discretion, extend the term of any offer. Subject to the express provisions of the Plan, the Committee shall have the power to make such offer subject to any terms and conditions it may establish and the offers made to different persons, or to the same person at different times, may be subject to terms, conditions and restrictions which differ from each other. Each allocation and offer shall be embodied in a "Restricted Share Agreement" signed by the Participant and the Company providing that the Restricted Shares shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. (c) The purchase price of the Restricted Shares offered under this Plan shall be any lawful consideration established by the Committee in its discretion. If a Participant elects to purchase Restricted Shares, he shall pay the purchase price in full, at the principal office of the Company, prior to expiration of the offer. Upon payment of the purchase price, certificates representing the shares shall be issued to the Participant, which certificates shall bear an appropriate legend reflecting that such shares are subject to the restrictions contained in the Plan. At the Committee's election, such certificates may be held by the Company on behalf of the Participant until the restrictions applicable to such shares shall have lapsed. 10. Restrictions Applicable to Restricted Shares. (a) By purchasing the Restricted Shares allocated to him under this Plan, the Participant agrees and consents to the restrictions described in this Plan for a period determined by the Committee at the time of such allocation, said period referred to herein as the "Restricted Period." For the duration of the Restricted Period (unless the restrictions earlier lapse or are removed by the Committee), Restricted Shares issued under this Plan shall not be transferred, delivered, assigned, sold, or disposed of in any manner, nor pledged or otherwise hypothecated. On the last day of the Restricted Period, or upon the earlier lapse or removal of restrictions, such Restricted Shares shall - 5 - PAGE cease to be subject to the restrictions under this Paragraph 10(a) of the Plan. (b) Restricted Shares issued by the Company under the Plan shall be issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission and applicable state Blue Sky laws. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 11. Termination of Employment During Restricted Period. (a) If a Participant's employment with the Company and its Subsidiaries terminates because of death or disability, the restrictions under Paragraph 10(a) of this Plan shall automatically terminate as to that number of the Restricted Shares owned by the Participant which is equal to the total number of such Restricted Shares multiplied by a fraction, the numerator of which is the number of full months which have elapsed from the date of allocation and the denominator of which is the total number of months during the Restricted Period. The Participant (or his estate, heirs, or legatees) shall be required to resell the remaining Restricted Shares to the Company at a price per share equal to the original purchase price paid by the Participant for such shares, or such other price as may be set by the Committee in the Restricted Share Agreement, unless the Committee shall, in its discretion, waive the restrictions under Paragraph 10(a) as to any part or all of such remaining Restricted Shares. (b) If a Participant's employment with the Company and its Subsidiaries terminates during the Restricted Period other than by reason of death or disability, the Participant shall be required to resell all of the Restricted Shares to the Company at a price per share equal to the original purchase price paid by the Participant for such shares, or such other price as may be set by the Committee in the Restricted Share Agreement, unless the Committee shall, in its discretion, waive the restrictions under Paragraph 10(a) as to any part or all of the Restricted Shares. 12. Resale of Restricted Shares. In the event a Participant is required to resell Restricted Shares to the Company as the result of the termination of the Participant's employment as described in Paragraph 11, the Company by written notice to the Participant shall specify a date not less than five nor more than ten days from the date of such notice to consummate the purchase and sale of such Restricted Shares at the principal office of the Company. The Participant shall deliver to the Company certificates representing such Restricted Shares, duly endorsed and in proper form for transfer, and upon the receipt of - 6 - PAGE such share certificates, the Company shall deliver to the Participant a check in the amount of the purchase price. If the Participant fails to deliver the share certificates to the Company at the time specified in such notice, the Company may deposit the purchase price with the Treasurer of the Company, and thereafter the shares shall be deemed to have been transferred to the Company and the Participant, despite his failure to deliver the share certificates, shall have no further rights as a stockholder of the Company. In such event, the Treasurer of the Company shall continue to hold the purchase price for such shares and shall make payment thereof, without interest, upon delivery of the share certificates to the Company. 13. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. 14. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be so amended (i) to increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to give effect to stock splits, etc.); (ii) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (iii) to change the requirement that the option price per Common Share covered by an option granted under this Plan not be less than 100% of the fair market value of the Company's Common Shares on the date such option is granted; (iv) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (v) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 13 above, and any Restricted Shares shall continue to be subject to the terms of this Plan for the duration of the Restricted Period. - 7 - PAGE 15. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 16. Tax Withholding. Any grant of an option or issue of Restricted Shares hereunder shall provide as determined by the Committee for appropriate arrangements for the satisfaction by the Company and the Optionee or Participant of all federal, state, local or other income, excise or employment taxes or tax withholding requirements applicable to the exercise of the option, the receipt of Restricted Shares or the later disposition of the Common Shares thereby acquired and all such additional taxes or amounts as determined by the Committee in its discretion, including, without limitation, the right of the Company or any subsidiary thereof to receive transfers of Common Shares or other property from the Optionee or to deduct or withhold in the form of shares from any transfer to an Optionee or Participant, in such amount or amounts deemed required or appropriate by the Committee in its sole and absolute discretion. 17. Implied Consent. Every Optionee or Participant, by his acceptance of an option or Restricted Shares under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 18. No Effect on Employment Status. The fact than an employee has been granted an option or Restricted Shares under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 19. Duration and Termination of the Plan. This Plan became effective on January 23, 1989. No Incentive Stock Option shall be granted subsequent to January 22, 1999, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 14. 20. Delaware Law to Govern. This Plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. 1989opt.pol - 8 - PAGE EX-10 7 '89 NONEMPLOYEE STCK OPT PLAN - EXHBT 10(J)(VI) Exhibit 10(j)(vi) GIBSON GREETINGS, INC. 1989 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS (As amended and restated through April 29, 1993) 1. Purpose. The purpose of this Gibson Greetings, Inc. 1989 Stock Option Plan for Nonemployee Directors (the "Directors Plan" or "Plan") is to enhance the value of the stockholders' investment in Gibson Greetings, Inc. (the "Company") by encouraging those directors of the Company who are not employees of the Company or any of its subsidiaries (the "Directors") to acquire or increase and retain a financial interest in the Company and thereby also encourage the Directors to remain as directors of the Company and to put forth maximum efforts for the success of the Company. It is intended that stock options ("Nonqualified Stock Options" or "Options"), other than incentive stock options as defined by the Internal Revenue Code of 1986, as amended (the "Code"), may be granted under the Directors Plan. 2. Administration of the Directors Plan. (a) General. The Directors Plan shall be administered by the Board of Directors of the Company (the "Board") which, subject to and not inconsistent with the express provisions of the Directors Plan, shall exercise all the power and authority specifically granted to it under the Plan or necessary or advisable, in the sole and absolute discretion of the Board, to the administration of the Plan. (b) Rules and Interpretation. The Board shall have the authority to establish, adopt or revise such rules and regulations and to make all such determinations relating to the Directors Plan as it may deem necessary or advisable for the administration of the Plan and in order to preserve the exemption of the Plan and any Plan Options under Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. The Board's interpretation of the Directors Plan or any Option granted hereunder, and all decisions and determinations by the Board with respect to the Plan, shall be final, binding and conclusive on all parties. No member of the Board shall be personally liable for any action, failure to act, determination, interpretation or construction made in good faith with respect to the Directors Plan or any Option or transaction thereunder. (c) No Other Rights. Nothing contained in the Directors Plan, nor any Option granted pursuant to the Directors Plan, shall confer upon any Director covered by the Directors Plan any right to continue as a director of the Company nor limit PAGE in any way the right of the Company to terminate his status as a director at any time. 3. The Stock. The shares of stock available for issuance pursuant to the grant of Options under the Directors Plan shall consist of 80,000 shares of Common Stock, par value $0.01 per share (the "Common Shares"), of the Company, subject to adjustment as provided in Section 11 hereof. All shares acquired upon the exercise of Options will be, in whole or in part, either Common Shares purchased by the Company in the open market and held in the treasury of the Company or authorized and unissued Common Shares of the Company. Should an Option (or a portion thereof) expire for any reason without being exercised, the shares subject to the portion of such Option not so exercised shall be available for subsequent grants under the Directors Plan. 4. Effective Date and Termination of Plan. The Directors Plan became effective on January 23, 1989 and shall terminate upon the earlier of (i) January 23, 1999; or (ii) the date on which all shares available for issuance under the Directors Plan have been issued pursuant to the exercise of Options granted hereunder; or (iii) the determination of the Board that the Directors Plan shall terminate. No Options may be granted under the Directors Plan after the termination date, provided that the Options granted and outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such Options. 5. Grant, Terms and Conditions of Options. (a) Grant of Options. Under the Directors Plan, each then serving Director of the Company shall be granted each year, at the close of business on the date upon which the Company's annual meeting of stockholders for that year is held, beginning with the annual meeting to be held during 1989, Nonqualified Stock Options to purchase 1,000 Common Shares. Each Director receiving an Option may be referred to herein as an "Optionee." Each Option shall be embodied in an option agreement signed by the Optionee and the Company providing that the Option shall be subject to the provisions of this Plan and containing such other provisions as the Board may prescribe not inconsistent with the Plan. (b) When Exercisable. Options shall be exercisable one year after the date of grant. No fractional shares shall be issued, and fractional shares remaining in any Option shall be rounded down to the nearest whole number of shares. (c) Price. The exercise price per share of each Option shall be equal to the fair market value of a Common Share on the date of grant, as determined under Section 8 hereof, - 2 - PAGE provided that the exercise price shall be subject to adjustment only as provided in Section 11 hereof. (d) Term of Options. Options shall be effective on the date of grant and shall be of a term of ten (10) years from the date of grant. Each such Option shall be subject to earlier termination as provided in Section 6 hereof. 6. Termination of Director Status. (a) Except as otherwise provided in the Directors Plan, an Optionee's Options (i) are exercisable only by the Optionee, (ii) are exercisable only while the Optionee is a director of the Company and then only if the Options have become exercisable by their terms, and (iii) if not exercisable by their terms at the time the Optionee ceases to be a director of the Company, shall immediately expire on the date the Optionee ceases to be a director of the Company. (b) Except as provided by this subsection (6)(b), any Optionee's option which is exercisable by its terms at the time the Optionee ceases to be a director of the Company must be exercised on or before the earlier of (i) three years after the date the Optionee ceases to be a director of the Company or (ii) the fixed expiration date of such Option, after which applicable period such option shall expire. If an Optionee's status as a director is terminated on account of any act of fraud or intentional misrepresentation, or embezzlement, misappropriation or conversion of the assets or opportunities of the Company or any of its subsidiaries, all Options granted to such Optionee shall, to the extent not previously exercised, expire immediately as of the date on which the director's status as such is terminated. (c) In the event of the death of the Optionee while a director of the Company, each of that Optionee's unexercised options (whether or not then exercisable by its terms) shall become immediately exercisable by his estate for a period ending on the earlier of the fixed expiration date of such Option or three years after the date of death, after which period such Option shall expire. For purposes hereof, the estate of an Optionee shall be defined to include the legal representatives thereof or any person who has acquired the right to exercise an Option by reason of the death of the Optionee. (d) In the event the Optionee ceases to be a director by reason of permanent disability (as defined below), each of that Optionee's unexercised Options (whether or not then exercisable by its terms) shall become exercisable for a period ending on the earlier of the fixed expiration date of such Option or three years from the date the Optionee ceases to be a director, after which period such Option shall expire. For - 3 - PAGE purposes hereof "permanent disability" shall be deemed to be the inability of the Optionee to perform the duties of a director of the Company because of a physical or mental disability as evidenced by the opinion of a Company-approved doctor of medicine licensed to practice medicine in the United States of America. 7. Transferability of Options. Except that an Option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code, any Option granted hereunder shall be transferable only by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Optionee only by the Optionee or by his guardian or legal representative. 8. Fair Market Value. The "fair market value" of a Common Share on any relevant date for purposes of any provision of the Directors Plan shall be the last reported sales price of a Common Share on the NASDAQ National Market System on such 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. 9. Compliance with Securities Laws. Options granted and shares issued by the Company upon exercise of Options shall be granted and issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission and applicable state Blue Sky Laws. With respect thereto, the Board may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 10. Method of Exercise. An Option granted under this Plan may be exercised by written notice to the Board, signed by the Optionee, or by such other person as is entitled to exercise such Option. The notice of exercise shall state the number of shares in respect of which the Option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of Common Shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Section 8 hereof. A certificate or certificates for the Common Shares of the Company purchased through the exercise of an Option shall be issued in regular course after the exercise of the Option and payment therefor. During the option period no person entitled to exercise any Option granted under this Plan shall have any of the rights or privileges of a shareholder with - 4 - PAGE respect to any Common Shares issuable upon exercise of such Option until certificates representing such shares shall have been issued and delivered. 11. Share Adjustments. In the event there is any change in the Company's Common Shares resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Board in (i) the number of Common Shares available for Option grants under this Directors Plan, (ii) the number of Common Shares subject to Options granted under this Plan, and (iii) the option price of optioned shares. 12. Merger, Consolidation or Sale of Assets. (a) In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor corporation"), such successor corporation may obligate itself to continue this Plan and to assume all obligations under the Plan. In the event that such successor corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and, except as provided in Subsection 12(d) hereof, any Option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the Options previously granted hereunder. (b) In the event any person, by any means of purchase or acquisition, becomes the "beneficial owner" (as defined in Rule l3d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as in effect on January 23, 1989, or any successor provision thereto) of more than 50% of the outstanding Common Shares of the Company, or commences a tender offer pursuant to Regulation l4C promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as in effect on April 26, 1985, or any successor provision thereto, which if successful, would result in such person becoming the beneficial owner of more than 50% of such shares, then with respect to each Optionee all Options which were outstanding at the time of such event shall immediately become exercisable in full. (c) In the event of the execution of an agreement of reorganization, merger or consolidation of the Company with one or more corporations as a result of which the Company is not to be the surviving corporation (whether or not the Company shall be dissolved or liquidated) or the execution of an agreement of sale or transfer of all or substantially all of the assets of the Company, then with respect to each Optionee all Options which - 5 - PAGE were outstanding at the time of such event shall immediately become exercisable in full. (d) In the event of the consummation of any of the transactions called for in an agreement referred to in Subsection 12(c) hereof, any Optionee who is subject to the filing requirements imposed under Section 16(a) of the Securities Exchange Act of 1934 (the "Act") with respect to the Company shall receive a payment of cash equal to the difference between the aggregate Fair Value of the Common Shares subject to such accelerated Option and the aggregate option exercise price of such shares. For this purpose, "Fair Value" shall mean the cash value per share to be paid to stockholders pursuant to such agreement, or if cash value is not to be paid, the highest aggregate fair market value of the subject shares of Common Stock during the 60-day period immediately preceding the date of the consummation of the transaction. Payment of said cash shall be made within ten (10) days after said consummation of the transaction. The foregoing payments under this Subsection 12(d) shall be made in lieu of and in full discharge of any and all obligations of the Company in respect of all subject Options of the Optionee. (e) The grant of Options under the Directors Plan shall in no way affect the right of the Company to adjust, reclassify, reorganized 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. 13. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's stockholders; except that the Plan may not be so amended (i) to increase the aggregate number of Common Shares issuable under the Plan (excepting proportionate adjustments made under Section 11 to give effect to stock splits, etc.); (ii) to change the option price of optioned stock (excepting proportionate adjustments made under Section 11); (iii) to change the requirement that the option price per Common Stock covered by an Option granted under this Plan be 100% of the fair market value of the Company's Common Shares on the date such Option is granted; or (iv) to change, without the consent of the Optionee (or such Optionee's, or such Optionee's estate's, legal representative), any Option previously granted to such Optionee under the Plan. Notwithstanding the foregoing, the provisions of this Directors Plan governing the amount, price and timing of awards to Directors may not be amended more frequently than once every six months other than to comport with changes in the Code or the rules thereunder. If the Plan is terminated, any unexercised Option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 12 above. - 6 - PAGE 14. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of Common Shares under the terms of the Plan, so long as the Company acts in good faith. 15. Implied Consent. Every Optionee, by his acceptance of an Option under this Plan, shall be deemed to have consented to be bound, on his or her own behalf and on behalf of such Optionee's heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 16. Delaware Law to Govern. This Plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. stckoptn.pol - 7 - PAGE EX-10 8 1991 STOCK INCENTIVE PLAN - EXHIBIT 10(J)(VII) Exhibit 10(j)(vii) GIBSON GREETINGS, INC. 1991 STOCK INCENTIVE PLAN (As amended and restated through April 29, 1993) 1. Name and Purpose. This Plan, as it may be amended and restated from time to time, shall be known as the "Gibson Greetings, Inc. 1991 Stock Incentive Plan" (the "Plan"). The purpose of the Plan is to advance the interests of Gibson Greetings, Inc. (the "Company") by providing material incentive for the continued services of key employees and by attracting able executives to employment with the Company and its Subsidiaries. The term "Subsidiary" as used herein means a subsidiary corporation of the Company as the term is defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). Reference to any Code Section in this Plan includes the provisions of such Section as it may be amended or as it may be replaced by any other section or sections of the Code of like intent and purpose. 2. Administration. The Plan shall be administered by a committee (the "Committee") of the Board of Directors of the Company (the "Board") to consist of at least two directors, each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as such Rule may be amended from time to time, or any successor rule thereto. Subject to and consistent with the provisions of the Plan, the Committee shall establish such rules and regulations as it deems necessary or appropriate for the proper administration of the Plan, shall interpret the provisions of the Plan, shall decide all questions of fact arising in the application of Plan provisions and shall make such other determinations and take such actions in connection with the Plan and the options and Restricted Shares provided for herein as it deems necessary or advisable. 3. Eligibility. Regular full-time employees of the Company and its Subsidiaries who are key executive or other key salaried employees, including officers, whether or not directors of the Company, shall be eligible to participate in the Plan. Such employees are herein referred to as "Eligible Employees." Those directors who are not regular employees of the Company or its Subsidiaries are not eligible to participate in the Plan. 4. Shares Subject to Plan. (a) The shares to be issued and delivered by the Company upon exercise of options granted under the Plan, or issued as Restricted Shares under the Plan, are the Company's shares of Common Stock, $.01 par value, ("Common Shares") which may be either authorized but unissued shares or treasury shares. PAGE (b) The aggregate number of Common Shares of the Company which may be issued under the Plan shall not exceed One Million (1,000,000) shares; subject, however, to the adjustment provided in Paragraph 8 in the event of stock splits, stock dividends, exchanges of shares or the like occurring after the effective date of this Plan. No option may be granted, or Restricted Shares issued, under this Plan which could cause such maximum limit to be exceeded. (c) Common Shares covered by an option which is no longer exercisable with respect to such shares, or Restricted Shares which have been resold to the Company and in respect of which no benefits of ownership have been received by the Participant, shall again be available for issuance under this Plan. 5. Grant of Options. The Committee may from time to time, in its discretion and subject to the provision of the Plan, grant either non-qualified or Incentive Stock Options (as defined in Section 422 of the Code) to Eligible Employees. Employees to whom options have been granted are herein referred to as "Optionees." Each option shall be embodied in an option agreement signed by the Optionee and the Company providing that the option shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. The option agreement shall specify whether the option is a non-qualified option or an Incentive Stock Option. 6. Terms and Conditions of Option. All options granted under the Plan shall contain such terms and conditions as the Committee from time to time determines, subject to the foregoing and following limitations and requirements. (a) Option price: The option price per share for Incentive Stock Options shall be not less than 100% of the fair market value of the Company's Common Shares on the date the option is granted, as determined by the Committee in a manner consistent with the requirements of the Code for Incentive Stock Options. The option price per share for non-qualified options shall be at least 50% of the fair market value of a Common Share on the date of option grant, determined in the same manner. (b) Period within which option may be exercised: The period of each option shall be fixed by the Committee, but no Incentive Stock Option may be exercised after the expiration of ten years from the date the option is granted. The Committee may, in its discretion, determine as a condition of any option that a stated percentage of the shares covered by such option shall be exercisable in any one year or other stated period of time. (c) 10% Shareholder: Notwithstanding any other provision of this Plan, with respect to an Incentive Stock Option granted - 2 - PAGE to an Eligible Employee who, at the time such option is granted owns shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or its Subsidiaries, the option price per share shall be at least 110% of the fair market value of the Common Shares subject to the option and such option may not be exercised after the expiration of five years from the date the option is granted. (d) Termination of option by reason of termination of employment: If an Optionee's employment with the Company and its Subsidiaries terminates, all options granted under this Plan to such Optionee which are not exercisable on the date of such termination of employment shall immediately terminate, and any remaining options shall terminate if not exercised before the expiration of one of the following periods, or at such earlier time as may be applicable under Paragraph 6(b) or 6(c) above: (i) thirty (30) days following such termination of employment, if such termination was not a result of retirement under a Company Pension Plan or of death or disability (disability within the meaning of Section 22(e)(3) of the Code), or (ii) three (3) months following the Optionee's termination of employment because of retirement under a Company Pension Plan, or (iii) one (1) year following date of death or commencement of disability, if the Optionee was an employee of the Company and/or Subsidiary at the time of his death or the commencement of his disability; provided that such termination provisions may be varied by the Committee with respect to non-qualified options which are exercisable on the date of termination of employment. (e) Non-transferability: Each option and all rights thereunder shall be exercisable during the Optionee's lifetime only by him, or by his guardian or legal representative, and shall be non-assignable and non-transferable by the Optionee, except that a non-qualified option may be transferred pursuant to a "domestic relations order" as defined in Section 414(p)(1)(B) of the Code. In the event of the Optionee's death, any option shall be transferable by the Optionee's Will or by the laws of descent and distribution, and the representative or representatives of his estate, or the person or persons who acquired (by bequest or inheritance) the rights to exercise his options granted under this Plan, may exercise any of the unexercised options in whole or in part prior to the expiration of the applicable exercise period, as specified in Paragraph 6(d) above. (f) More than one option granted to an Optionee: More than one option may be granted to an Optionee under this Plan and both non-qualified and Incentive Stock Options may be granted to an Optionee. (g) Compliance with securities laws: Options granted and shares issued by the Company upon exercise of options shall be granted and issued only in full compliance with all applicable - 3 - PAGE securities laws, including laws, rules and regulations of the Securities and Exchange Commission and applicable state Blue Sky Laws. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. (h) Cancellation of option: The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected Optionee or Optionees, the cancellation of any or all outstanding options granted under this Plan and the grant in substitution therefor of new options under this Plan (subject to the limitations hereof) covering the same or different numbers of Common Shares at an option price per share in all events not less than fair market value on the date of the new grant with regard to Incentive Stock Options and not less than 50% of fair market value on the date of the new grant with regard to non-qualified stock options. 7. Method of Exercise. An option granted under this Plan may be exercised by written notice to the Committee, signed by the Optionee, or by such other person as is entitled to exercise such option. The notice of exercise shall state the number of Common Shares in respect of which the option is being exercised, and shall either be accompanied by the payment of the full option price for such shares, or shall fix a date (not more than ten business days from the date of such notice) for the payment of the full option price of the shares being purchased. All or any portion of the payment may be made by the transfer of Common Shares of the Company from the Optionee to the Company, to the extent permitted by law. Such shares shall be valued for this purpose at their fair market value on the date they are transferred to the Company as payment, determined in the same manner as is provided in Paragraph 6(a) hereof. A certificate or certificates for the Common Shares of the Company purchased through the exercise of an option shall be issued in regular course after the exercise of the option and payment therefor. During the option period no person entitled to exercise any option granted under this Plan shall have any of the rights or privileges of a shareholder with respect to any shares issuable upon exercise of such option until certificates representing such shares shall have been issued and delivered. 8. Share Adjustments. In the event there is any change in the Company's Common Shares resulting from stock splits, stock dividends, combinations or exchanges of shares, or other similar capital adjustments, equitable proportionate adjustments shall automatically be made without further action by the Committee in (i) the number of shares available for option grant or issuance under this Plan, (ii) the number of shares subject to options granted under this Plan, and (iii) the option price of optioned shares. - 4 - PAGE 9. Allocation and Purchase of Restricted Shares. (a) The Committee may from time to time, in its discretion and subject to the provisions of the Plan, allocate Common Shares to any or all Eligible Employees. Common Shares allocated under this Paragraph 9 of the Plan are referred to herein as "Restricted Shares." Employees to whom Restricted Shares have been allocated are herein referred to as "Participants." Each Participant to whom an allocation of Restricted Shares has been made shall be offered the right to purchase such Restricted Shares as herein provided. (b) The Committee shall advise each Participant to whom an allocation of Restricted Shares has been made in writing of the terms of the offer, including the number of shares which such person shall be entitled to purchase, the purchase price per share, and any other terms, conditions and restrictions relating thereto. The Participant shall have thirty (30) days from the date of the offer to accept such offer. The Committee may, in the exercise of its discretion, extend the term of any offer. Subject to the express provisions of the Plan, the Committee shall have the power to make such offer subject to any terms and conditions it may establish and the offers made to different persons, or to the same person at different times, may be subject to terms, conditions and restrictions which differ from each other. Each allocation and offer shall be embodied in a "Restricted Share Agreement" signed by the Participant and the Company providing that the Restricted Shares shall be subject to the provisions of this Plan and containing such other provisions as the Committee may prescribe not inconsistent with the Plan. (c) The purchase price of the Restricted Shares offered under this Plan shall be any lawful consideration established by the Committee in its discretion. If a Participant elects to purchase Restricted Shares, he shall pay the purchase price in full, at the principal office of the Company, prior to expiration of the offer. Upon payment of the purchase price, certificates representing the shares shall be issued to the Participant, which certificates shall bear an appropriate legend reflecting that such shares are subject to the restrictions contained in the Plan. At the Committee's election, such certificates may be held by the Company on behalf of the Participant until the restrictions applicable to such shares shall have lapsed. 10. Restrictions Applicable to Restricted Shares. (a) By purchasing the Restricted Shares allocated to him under this Plan, the Participant agrees and consents to the restrictions described in this Plan for a period determined by the Committee at the time of such allocation, said period referred to herein as the "Restricted Period." For the duration of the Restricted Period (unless the restrictions earlier lapse or are removed by the Committee), Restricted Shares issued under - 5 - PAGE this Plan shall not be transferred, delivered, assigned, sold, or disposed of in any manner, nor pledged or otherwise hypothecated. On the last day of the Restricted Period, or upon the earlier lapse or removal of restrictions, such Restricted Shares shall cease to be subject to the restrictions under this Paragraph 10(a) of the Plan. (b) Restricted Shares issued by the Company under the Plan shall be issued only in full compliance with all applicable securities laws, including laws, rules and regulations of the Securities and Exchange Commission and applicable state Blue Sky laws. With respect thereto, the Committee may impose such conditions on transfer, restrictions and limitations as it may deem necessary and appropriate to assure compliance with such applicable securities laws. 11. Termination of Employment During Restricted Period. (a) If a Participant's employment with the Company and its Subsidiaries terminates because of death or disability, the restrictions under Paragraph 10(a) of this Plan shall automatically terminate as to that number of the Restricted Shares owned by the Participant which is equal to the total number of such Restricted Shares multiplied by a fraction, the numerator of which is the number of full months which have elapsed from the date of allocation and the denominator of which is the total number of months during the Restricted Period. The Participant (or his estate, heirs, or legatee) shall be required to resell the remaining Restricted Shares to the Company at a price per share equal to the original purchase price paid by the Participant for such shares, or such other price as may be set by the Committee in the Restricted Share Agreement, unless the Committee shall, in its discretion, waive the restrictions under Paragraph 10(a) as to any part or all of such remaining Restricted Shares. (b) If a Participant's employment with the Company and its Subsidiaries terminates during the Restricted Period other than by reason of death or disability, the Participant shall be required to resell all of the Restricted Shares to the Company at a price per share equal to the original purchase price paid by the Participant for such shares, or such other price as may be set by the Committee in the Restricted Share Agreement, unless the Committee shall, in its discretion, waive the restrictions under Paragraph 10(a) as to any part or all of the Restricted Shares. 12. Resale of Restricted Shares. In the event a Participant is required to resell Restricted Shares to the Company as the result of the termination of the Participant's employment as described in Paragraph 11, the Company by written notice to the Participant shall specify a date not less than five nor more than ten days from the date of such notice to consummate - 6 - PAGE the purchase and sale of such Restricted Shares at the principal office of the Company. The Participant shall deliver to the Company certificates representing such Restricted Shares, duly endorsed and in proper form for transfer, and upon the receipt of such share certificates, the Company shall deliver to the Participant a check in the amount of the purchase price. If the Participant fails to deliver the share certificates to the Company at the time specified in such notice, the Company may deposit the purchase price with the Treasurer of the Company, and thereafter the shares shall be deemed to have been transferred to the Company and the Participant, despite his failure to deliver the share certificates, shall have no further rights as a stockholder of the Company. In such event, the Treasurer of the Company shall continue to hold the purchase price for such shares and shall make payment thereof, without interest, upon delivery of the share certificates to the Company. 13. Merger, Consolidation or Sale of Assets. In the event the Company shall consolidate with, merge into, or transfer all or substantially all of its assets to another corporation or corporations (herein referred to as "successor employer corporation"), such successor employer corporation may obligate itself to continue this Plan and to assume all obligations under the Plan in a manner consistent with the provisions of Section 424(a) of the Code. In the event that such successor employer corporation does not obligate itself to continue this Plan as above provided, this Plan shall terminate effective upon such consolidation, merger, or transfer, and any option previously granted hereunder shall terminate. If practical, the Company shall give each Optionee twenty (20) days prior notice of any possible transaction which might terminate this Plan and the options previously granted hereunder. 14. Amendment or Termination. The Board may terminate this Plan at any time, and may amend the Plan at any time or from time to time, without obtaining any approval of the Company's shareholders; except that the Plan may not be so amended (i) to increase the aggregate number of shares issuable under the Plan (excepting proportionate adjustments made under Paragraph 8 to give effect to stock splits, etc.); (ii) to change the option price of optioned stock (excepting proportionate adjustments made under Paragraph 8); (iii) to change the requirement that the option price per Common Share covered by an Incentive Stock Option granted under this Plan not be less than 100% of the fair market value of the Company's Common Shares on the date such option is granted; (iv) to extend the time within which Incentive Stock Options may be granted or the time within which a granted Incentive Stock Option may be exercised; or (v) to change, without the consent of the Optionee (or his, or his estate's, legal representative), any option previously granted to him under the Plan. If the Plan is terminated, any unexercised option shall continue to be exercisable in accordance with its terms, except as provided in Paragraph 13 above, and any Restricted - 7 - PAGE Shares shall continue to be subject to the terms of this Plan for the duration of the Restricted Period. 15. Company Responsibility. All expenses of this Plan, including the cost of maintaining records, shall be borne by the Company. The Company shall have no responsibility or liability (other than under applicable Securities Acts) for any act or thing done or left undone with respect to the price, time, quantity, or other conditions and circumstances of the purchase of shares under the terms of the Plan, so long as the Company acts in good faith. 16. Tax Withholding. Any grant of an option or issue of Restricted Shares hereunder shall provide as determined by the Committee for appropriate arrangements for the satisfaction by the Company and the Optionee or Participant of all federal, state, local or other income, excise or employment taxes or tax withholding requirements applicable to the exercise of the option, the receipt of Restricted Shares or the later disposition of the Common Shares thereby acquired and all such additional taxes or amounts as determined by the Committee in its discretion, including, without limitation, the right of the Company or any subsidiary thereof to receive transfers of Common Shares or other property from the Optionee or to deduct or withhold in the form of shares from any transfer to an Optionee or Participant, in such amount or amounts deemed required or appropriate by the Committee in its sole and absolute discretion. 17. Implied Consent. Every Optionee or Participant, by his acceptance of an option or Restricted Shares under this Plan, shall be deemed to have consented to be bound, on his own behalf and on behalf of his heirs, assigns, and legal representatives, by all of the terms and conditions of this Plan. 18. No Effect on Employment Status. The fact that an employee has been granted an option or Restricted Shares under this Plan shall not limit or otherwise qualify the right of his employer to terminate his employment at any time. 19. Duration and Termination of the Plan. This Plan became effective on February 3, 1991. No Incentive Stock Option shall be granted subsequent to February 2, 2001, or subsequent to any earlier date as of which the Plan is terminated pursuant to Paragraph 14. 20. Delaware Law to Govern: This Plan shall be construed and administered in accordance with and governed by the laws of the State of Delaware. gib1991.pln - 8 - PAGE EX-10 9 EMPLOY CONTRACT - S.M.SWEENEY - EX 10(J)(XIV) Exhibit 10(j)(xiv) January 2, 1991 Mr. Stephen M. Sweeney Vice President - Human Resources Gibson Greetings, Inc. 2100 Section Road Cincinnati, OH 45237 Re: Employment Agreement Dear Steve: In accordance with our prior discussions, it is my pleasure to confirm to you the following terms and conditions under which you have agreed to continue serving as Vice President - Human Resources of Gibson Greetings, Inc. ("Company"). 1. You have agreed to serve the Company on a full-time basis as a senior executive employee, and the Company agrees to employ you as such, for a period of three years commencing December 1, 1990 and ending November 30, 1993. Your annual salary, effective December 1, 1990, shall be $136,000, which amount may be increased from time to time by the Company throughout the term of the Agreement in accordance with the Company's salary administration program. In addition, you will qualify for the Key Executives' Bonus Program. 2. In addition to the above salary and bonus, you will also be included in Gibson's Supplemental Executive Retirement Plan and in Gibson's other programs for executives which include: executive physical examinations, supplemental life insurance and tax preparation and estate planning assistance. 3. In the event you are unable to perform your duties hereunder due to illness or other incapacity, which incapacity continues for more than six consecutive or nonconsecutive months in any twelve-month period, the Company shall have the right, on not less than 30 days written notice to you, to terminate this Agreement. In the event of your death during your employment hereunder, your salary shall cease as of the last day of the sixth full calendar month following the month in which your death occurs. Except for such salary continuation rights, this Agreement shall terminate as of the date of death. PAGE Mr. Stephen M. Sweeney January 2, 1991 Page 2 4. In the event any person becomes the beneficial owner of fifty percent (50%) or more of the Company's securities, and you are not retained by that person in substantially the same capacity and salary as contemplated herein for at least six (6) months from the date of said change in beneficial ownership, then upon your termination hereunder, you will be paid one year's salary reduced by 1/12 for each full month of employment completed after said change in beneficial ownership. Any amount to be paid hereunder would be further reduced by the value of any severance package received by you from the new ownership in connection with your termination. 5. In the event you voluntarily terminate your employment during the term of this Agreement, or if your employment is terminated for cause, your right to all compensation hereunder shall cease as of the date of termination. "Cause" shall mean dishonesty, insubordination, gross negligence, or willful misconduct in the performance of your duties, failure to perform duties in a diligent and competent manner, or any willful and material breach of this Agreement. Termination of employment under this Paragraph shall terminate this Agreement with the exception of the provisions of Paragraphs 6, 7 and 9. 6. Also in the event you voluntarily terminate your employment hereunder, or in the event the Company terminates this Agreement and your employment for cause, you agree that for a period of two years after such termination, you will not compete, directly or indirectly, with the Company or with any division, subsidiary or affiliate of the Company or participate as a director, officer, employee, consultant, advisor, partner or joint venturer in any business engaged in the manufacture or sale of greeting cards, gift wrap or other products produced by the Company, or by any division, subsidiary or affiliate of the Company, without the Company's prior consent. If this Agreement is not earlier terminated as provided in this Paragraph, your said obligation not to compete shall continue in effect for a period of one year following the expiration of this Agreement or of any renewal or extension hereof. 7. In connection with this Agreement, you agree to continue to receive confidential information of the Company in confidence, and not to disclose to others, assist others in the application of, or use for your own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of others by legal and equitable means. You further agree that, upon termination of employment with the Company, all PAGE Mr. Stephen M. Sweeney January 2, 1991 Page 3 documents, records, notebooks, and similar writings, including copies thereof, then in your possession, whether prepared by you or by others, will be left with the Company. For purposes of this Paragraph, "confidential information" means information concerning Company's finances, plans, sales, products, processes and services, or those of Company's subsidiaries, divisions or affiliates, which is disclosed to you or known by you as a consequence of or through your employment with the Company, and which is not generally known in the industry in which the Company or its subsidiaries, divisions or affiliates are or may become engaged. 8. Nothing herein is intended to be granted to you in lieu of any rights or privileges to which you may be entitled as an executive employee of the Company under any retirement, insurance, hospitalization, or other plan which may now or hereafter be in effect. 9. This Agreement shall inure to the benefit of and be binding upon you and your legal representatives as well as the Company, its successors and assigns including, without limitation, any person, partnership, corporation or other entity which may acquire all, or substantially all, of the Company's assets and business. To indicate your acceptance of and willingness to be bound by this Agreement, please sign and return one duplicate original of this letter. Sincerely, GIBSON GREETINGS, INC. /s/ Benjamin J. Sottile Benjamin J. Sottile President and C.E.O. BJS/HLC/ss ACCEPTED AND AGREED TO: /s/ Stephen M. Sweeney Stephen M. Sweeney Date: January 2, 1991 PAGE EX-10 10 CONTRACT AMEND - S.M.SWEENEY - EXH 10(J)(XIV) Exhibit 10(j)(xiv) December 10, 1993 Mr. Stephen M. Sweeney Vice President - Human Resources Gibson Greetings, Inc. 2100 Section Road Cincinnati, OH 45237 Dear Steve: As you are probably aware, your employment agreement with Gibson Greetings, Inc. was set to expire on November 30, 1993. Upon that expiration, without an extension, you would have become an at-will employee of the Company. However, we believe that you, as a valued member of the Company, have earned and continue to deserve the career and financial security afforded by an employment agreement. Therefore, we are hereby offering to extend your agreement indefinitely until it is terminated by the Company upon one (1) year's advance written notice to you. The agreement shall remain subject to earlier termination for cause. All other terms and conditions of the agreement shall remain the same. Please be aware that, even if the Company decides to terminate your employment agreement, that would not necessarily be a termination of your employment relationship with the Company. To indicate your acceptance of this amendment, please sign where indicated below and, as promptly as possible, return the executed original in the enclosed self-addressed envelope. Please be sure to retain an executed copy for your records. Sincerely, GIBSON GREETINGS, INC. /s/ Benjamin J. Sottile Benjamin J. Sottile Chairman of the Board, President and Chief Executive Officer BJS/HLC/dk ACCEPTED AND AGREED TO: Stephen M. Sweeney Date: 12/16/93 PAGE EX-10 11 EMPLOYMENT CONTRACT - FLAHERTY - EX 10(J)(XV) Exhibit 10(j)(xv) November 18, 1993 Mr. William L. Flaherty Vice President - Finance Gibson Greetings, Inc. 2100 Section Road Cincinnati, OH 45237 Dear Bill: Gibson Greetings, Inc. and I are very pleased that you have agreed to serve as Vice President - Finance and Chief Financial Officer of Gibson Greetings, Inc. ("the Company"). As such, you will report directly to the Chairman and Chief Executive Officer of the Company and will be responsible for all of the Finance, Treasury, Accounting, Tax, Internal Audit and Risk Management functions of the Company. The following terms and conditions will govern your service to the Company. 1. You will serve the Company on a full-time basis as a senior executive employee, and the Company will employ you as such, for a period of three years commencing November 18, 1993 and ending November 17, 1996 unless you are terminated at an earlier date pursuant to Paragraph 11, 12 or 14 of this Agreement. Your annual salary will be $175,000, which amount will be reviewed every fifteen months and which may be increased from time to time by the Company throughout the term of this Agreement in accordance with the Company's salary administration program. No later than twelve months prior to expiration of the initial term of this Agreement, it will be reviewed by the Company for the purpose of deciding whether or not it will be extended upon its expiration. You will be advised promptly of a decision not to extend. If you are not notified at that time of a decision not to extend the Agreement, it will continue indefinitely until terminated by the Company for any reason and at any time upon giving you one (1) year's advance written notice. This Agreement at all times shall remain subject to earlier termination for cause pursuant to Paragraph 11, 12 or 14. Notwithstanding anything herein to the contrary, if the Company decides not to extend this Agreement at the end of PAGE Mr. William L. Flaherty November 18, 1993 Page 2 the initial term and elects to terminate your employment at that time, you will receive a separation payment equal to six months' salary and be provided with outplacement services arranged by the Company at its expense. 2. You will receive a signing bonus of $30,000 paid in equal installments of $7,500 on December 1, 1993 and on March 1, June 1 and September 1, 1994, provided you are still in the employ of the Company on those dates. 3. As a participant in the Company's Executive Bonus Plan, you will be eligible for a bonus for 1994 and for the remaining term of this Agreement and for each year of any extension hereof. 4. As additional consideration for this Agreement, and contingent upon approval by the Compensation Committee, you will be granted a nonqualified stock option for 15,000 shares of the common stock of the Company. The options shall become vested at the rate of thirty-three and one- third percent (33 %) for each of the first three anniversaries of the grant date. Such vesting and subsequent exercisability shall be conditioned upon your continuing to be employed by the Company on each such anniversary date. 5. The Company will reimburse you for your reasonable expenses of moving from Weston, Massachusetts to Cincinnati, Ohio, including: household moving costs; your and your spouse's travel expenses for house-hunting trips as approved in advance by the Company; and realtor fees and transfer taxes for the sale of your present home in Weston, Massachusetts. 6. You will be covered by the Company's special benefit programs for executives which include: executive physical examinations, life insurance, tax preparation and estate planning assistance. The amount of your life insurance shall be three (3) times your annual salary, not to exceed $600,000. 7. Upon approval of the Compensation Committee, you will be named a participant in the Company's Supplemental Executive Retirement Plan (SERP). 8. You will be covered by the Company's health insurance plan for which we will waive the usual waiting period. PAGE Mr. William L. Flaherty November 18, 1993 Page 3 9. You will be eligible for four (4) weeks of paid vacation during each year this Agreement remains in effect. 10. In the event any person becomes the beneficial owner of fifty percent (50%) or more of the Company's securities, and you are not retained by that person in substantially the same capacity and salary as contemplated herein for at least six (6) months from the date of said change in beneficial ownership, then, upon your termination hereunder, you will be paid one year's salary reduced by 1/12 for each full month of employment completed after said change in beneficial ownership. Any amount to be paid hereunder would be further reduced by the value of any severance package received by you from the new ownership in connection with your termination. 11. In the event you are unable to perform your duties hereunder due to illness or other incapacity, which incapacity continues for more than six consecutive or nonconsecutive months in any twelve-month period, the Company shall have the right, on not less than 30 days' written notice to you, to terminate this Agreement. In the event of your death during your employment hereunder, your salary shall cease as of the last day of the sixth full calendar month following the month in which your death occurs. Except for such salary continuation rights and except for certain stock option rights, this Agreement shall terminate as of the date of death. 12. In the event you voluntarily terminate your employment during the term of this Agreement, or if the Company terminates this Agreement and your employment for cause, your right to all compensation hereunder shall cease as of the date of termination. As used in this Agreement, "cause" shall mean dishonesty, gross negligence, or willful misconduct in the performance of your duties or a willful and material breach of this Agreement. Termination of employment shall terminate this Agreement with the exception of the provisions of Paragraphs 13, 14, 15 and 17. 13. Also in the event you voluntarily terminate your employment hereunder or retire, or if the Company terminates this Agreement and your employment for cause, you agree that for a period of one and one-half years after such termination, you will not compete, directly or indirectly, with the Company or with any division, subsidiary or affiliate of the Company or participate as a director, officer, employee, PAGE Mr. William L. Flaherty November 18, 1993 Page 4 consultant, advisor, partner or joint venturer in any business engaged in the manufacture or sale of greeting cards, gift wrap or other products produced or sold by the Company, or by any division, subsidiary or affiliate of the Company, without the Company's prior written consent. If the Company chooses to terminate this Agreement any time after the initial term and you continue to be employed by the Company as an employee, agent, consultant or otherwise, you agree that this Paragraph 13 shall continue to bind you for a period of one (1) year after your separation from the Company as an employee, agent, consultant or otherwise. 14. In the event the Company terminates this Agreement and your employment without cause during the initial term of this Agreement, you shall continue to be paid your then current salary through the effective date of such termination. 15. In connection with this Agreement, you may receive confidential information of the Company. You agree, both during the term of this Agreement and after termination, not to disclose to others, assist others in the application of, or use for your own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of others by legal and equitable means. You further agree that, upon termination of employment with the Company, all documents, records, notebooks, and similar writings, including copies thereof, then in your possession, whether prepared by you or by others, will be left with or returned promptly to the Company. For purposes of this Paragraph 15, "confidential information" means information concerning Company's finances, plans, sales, products, processes and services, or those of Company's subsidiaries, divisions or affiliates, which is disclosed to you or known by you as a consequence of or through your employment with the Company, and which is not generally known in the industry in which the Company or its subsidiaries, divisions or affiliates are or may become engaged. You agree that this Paragraph 15 shall continue to bind you notwithstanding the termination of this Agreement or your employment for any reason whatsoever. If the Company chooses to terminate this Agreement any time after the initial term and you continue to be employed by the Company as an employee, agent, consultant or otherwise, you agree that this Paragraph 15 shall continue to bind you after your separation as an employee, agent or consultant. PAGE Mr. William L. Flaherty November 18, 1993 Page 5 16. Nothing herein is intended to be granted to you in lieu of any rights or privileges to which you may be entitled as an executive employee of the Company under any retirement, insurance, hospitalization, or other plan which may now or hereafter be in effect. 17. This Agreement shall inure to the benefit of and be binding upon you and your legal representatives as well as the Company, its successors and assigns including, without limitation, any person, partnership, corporation or other entity which may acquire all, or substantially all, of the Company's assets and business. 18. If any provision of this Agreement is later deemed to be void, the provision may be stricken and the remaining portions of this Agreement enforced as if the provision so stricken was never included herein. To indicate your acceptance of and willingness to be bound by this Agreement, please sign and return one duplicate original of this letter. Sincerely, GIBSON GREETINGS, INC. /s/ Benjamin J. Sottile Benjamin J. Sottile Chairman of the Board, President and Chief Executive Officer ACCEPTED AND AGREED TO: William L. Flaherty William L. Flaherty Date: 1/5/94 PAGE EX-10 12 SEVERANCE CONTRACT - PIETRANGELO EX 10(J)(XVI) Exhibit 10(j)(xvi) February 22, 1994 Mr. Michael A. Pietrangelo Cleo, Inc. 4025 Viscount Memphis, Tennessee Dear Mike: This letter sets forth our mutual agreement with respect to your decision to leave the employment of Gibson Greetings, Inc. ("Gibson") and its wholly owned subsidiary, Cleo, Inc. ("Cleo") (and both of which jointly herein are called "Gibson Companies"). In this connection, we have reached the following agreement: 1. Except as provided in Paragraph 11 herein, your Employment Agreement, dated May 9, 1990 as interpreted by letter of August 29, 1990, and your employment with the Gibson Companies, both are hereby terminated, effective as of the close of business on February 28, 1994 with no further obligations by either party under said Agreement. 2. Cleo shall pay to you a total severance payment of $550,000.00, with the payment to be made in forty-eight (48) equal semi-monthly installments (subject to withholdings appropriate for severance payments) commencing on March 15, 1994 and concluding on February 28, 1996. 3. Cleo shall pay to you forthwith a lump sum payment of $21,153.85 which shall be in lieu of any accrued vacations and vacation pay. 4. You shall be entitled to continue Cleo health coverage for yourself and your wife and eligible dependents on the basis currently enjoyed by you for the severance payment period, provided this provision shall terminate in the event you obtain employment during such period with an employer who offers substantially similar health coverage to its employees. 5. You shall be entitled to participate in the Gibson Companies' Group Insurance Plan during the severance payment period provided premium payments (currently $30 monthly) are paid by you to the Plan. 6. You shall be entitled to purchase the Infiniti automobile currently provided to you by Cleo at Cleo's January 1, 1994 depreciated book value of $8,400.00, provided the election to purchase and payment is made by you on or before March 15, 1994. In the event you determine not to purchase the automobile, it shall be returned by you to Cleo on or before March 15, 1994. PAGE Mr. Michael Pietrangelo February 22, 1994 Page 2 7. Cleo shall continue its corporate membership in the TPC Southwind Country Club for your usage during the severance payment period, provided that periodic membership dues and expenses are paid by you. In the event you determine not to make said payments or if the Gibson Companies have another usage for such membership, your membership usage shall cease. Notwithstanding the foregoing, to the extent you entertain Gibson Companies' customers at Cleo's request at the above Club, your expenses shall be reimbursed by Cleo. 8. You may use your current Cleo telephone credit card until May 31, 1994 for business purposes and with such credit card to be returned to Cleo by you at the conclusion of said period. 9. All outstanding stock options which you hold for common stock of Gibson shall be exercised by you, if at all, no later than March 28, 1994. 10. It is understood that, except as provided herein, you have no further rights or benefits in any of Gibson Companies' fringe benefit plans and including, without limitation, the Supplemental Executive Retirement Plan and the Retirement Income Plan. 11. The provisions of Paragraph 16 of the Employment Agreement of May 9, 1990, which paragraph is attached to and made a part of this Agreement as Exhibit A, shall remain in full force and effect. 12. During the two year severance payment period, you agree (a) not to represent or speak for the Gibson Companies in any manner without the prior specific authorization of the CEO of Gibson, (b) not to obtain employment from any competitor of Gibson Companies, and (c) not to compete with Gibson Companies or with the products of Gibson Companies as an employee of a third party, as a consultant, as an owner or in another other proprietary capacity, provided that subject to the foregoing you otherwise may seek and obtain employment from a third party. 13. You hereby resign, effective February 28, 1994, as an Officer and Director of Gibson and of all of its subsidiaries. 14. The foregoing understandings are in full settlement of all severance rights and any claims of any nature arising out of your employment and you waive and release and hold harmless Gibson Companies, and its directors, officers, agents, employees and affiliated organizations, from and against any and all rights, claims, demands and causes of action arising out of your employment relationship with Gibson Companies or out of termination of your employment relationship. * /s/ MP 15. This Agreement shall be construed under the laws of the State of Ohio. Yours truly, GIBSON COMPANIES PAGE Mr. Michael Pietrangelo February 22, 1994 Page 3 By /s/ Benjamin J. Sottile AGREED: /s/ M Pietrangelo Michael A. Pietrangelo Date: 2/23/94 /s/ MP * The Gibson Companies release and hold you harmless from and against any and all rights, claims, demands and causes of action arising out of your employment relationship with Gibson Companies or out of termination of your employment relationship but excepting such matters arising out of your conduct as a member of the Board of Directors of Gibson and its subsidiaries but with respect to which directorships certain provisions of law and of Gibson Companies' Articles and Bylaws otherwise may be applicable. PAGE 16. In connection with this Agreement, you agree to receive confidential information of the Company in confidence, and not to disclose to others, assist others in the application of, or use for your own gain, such information, or any part thereof, unless and until it has become public knowledge or has come into the possession of such others by legal and equitable means. You further agree that, upon termination of employment with the Company, all documents, records, notebooks, and similar writings, including copies thereof, then in your possession, whether prepared by you or by others, will be left with the Company. For purposes of this Paragraph 16 "confidential information" means information disclosed to you or known by you as a consequence of or through your employment with Company, not generally known in the industry in which the Company is or may become engaged, concerning the Company's sales, products, processes and services or those of its divisions, subsidiaries or affiliates. EXHIBIT A PAGE EX-11 13 COMPUTATION OF INCOME PER SHARE EXHIBIT 11 Exhibit 11 GIBSON GREETINGS, INC. COMPUTATION OF INCOME PER SHARE (In thousands except per share amounts)
Twelve Months Ended December 31, ---------------------------------------- 1993 1992 1991 ---------- ---------- ---------- Income before cumulative effect of accounting changes $ 25,852 $ 7,985 $ 41,884 Cumulative effect of accounting changes, net of income taxes - (1,449) - ---------- ---------- ---------- Net income $ 25,852 $ 6,536 $ 41,884 ========== ========== ========== Weighted average number of shares of common stock and equivalents outstanding: Common stock 16,042 16,022 15,876 Options 61 82 163 ---------- ---------- ---------- 16,103 16,104 16,039 ========== ========== ========== Income per share before cumulative effect of accounting changes $ 1.61 $ 0.50 $ 2.61 Cumulative effect per share of accounting changes - (0.09) - ---------- ---------- ---------- Net income per share $ 1.61 $ 0.41 $ 2.61 ========== ========== ==========
PAGE EX-21 14 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 11 Exhibit 21 GIBSON GREETINGS, INC. Subsidiaries of the Registrant As of December 31, 1993 NAME STATE OF INCORPORATION -------------------------------------- ---------------------- Cleo, Inc. Tennessee Gibson Greetings International Limited Delaware Gibson de Mexico S.A. de C.V. Mexico Greetings USA, Inc. Delaware The Paper Factory of Wisconsin, Inc. Wisconsin PAGE EX-23 15 CONSENT OF INDEPENDANT PUBLIC ACCTS EX 23 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated March 4, 1994 included in this Form 10-K, into the Company's previously filed Registration Statements File Nos. 2-88721, 33-2481, 33-18221, 33-32596, 33-32597 and 33-44633. ARTHUR ANDERSEN & CO. Cincinnati, Ohio, March 18, 1994. -----END PRIVACY-ENHANCED MESSAGE-----