-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KksJF29CcBRUOIVQOe6OKRJSOfmZE8nr29sZlUHzo6JFb792wkRlskp3ptkFRgO/ ApCfZYx4ITrNMLJ3EYByiQ== 0000950152-99-008771.txt : 19991110 0000950152-99-008771.hdr.sgml : 19991110 ACCESSION NUMBER: 0000950152-99-008771 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19991109 GROUP MEMBERS: AMERICAN GREETINGS CORP GROUP MEMBERS: GRANITE ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GIBSON GREETINGS INC CENTRAL INDEX KEY: 0000717829 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 521242761 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-34974 FILM NUMBER: 99744776 BUSINESS ADDRESS: STREET 1: 2100 SECTION RD CITY: CINCINNATI STATE: OH ZIP: 45237 BUSINESS PHONE: 5138416600 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GREETINGS CORP CENTRAL INDEX KEY: 0000005133 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [2771] IRS NUMBER: 340065325 STATE OF INCORPORATION: OH FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE AMERICAN ROAD CITY: CLEVELAND STATE: OH ZIP: 44144 BUSINESS PHONE: 2162527300 MAIL ADDRESS: STREET 1: ONE AMERICAN ROAD CITY: CLEVELAND STATE: OH ZIP: 44144 SC 14D1 1 GIBSON GREETINGS/AMERICAN GREETINGS SC 14D1 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ GIBSON GREETINGS, INC. (NAME OF SUBJECT COMPANY) GRANITE ACQUISITION CORP. AND AMERICAN GREETINGS CORPORATION (BIDDERS) COMMON STOCK, PAR VALUE $0.01 PER SHARE (INCLUDING ASSOCIATED SERIES B PREFERRED STOCK PURCHASE RIGHTS) (TITLE OF CLASS OF SECURITIES) ------------------------ 374827103 (CUSIP NUMBER OF CLASS OF SECURITIES) JON GROETZINGER, JR., ESQ. ONE AMERICAN ROAD CLEVELAND, OHIO 44114 (216) 252-7300 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) ------------------------ COPY TO: LYLE G. GANSKE, ESQ. JONES, DAY, REAVIS & POGUE NORTH POINT 901 LAKESIDE AVENUE CLEVELAND, OHIO 44114 (216) 586-3939 ------------------------ CALCULATION OF FILING FEE - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Transaction Valuation* Amount of Filing Fee** - --------------------------------------------------------------------------------------------- $186,034,917 $37,207 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
* Estimated for purposes of calculating the filing fee only. Such amount was derived by multiplying $10.25, the amount offered for each share of common stock, par value $0.01 per share (the "Shares"), of Gibson Greetings, Inc., by the sum of (i) 15,846,663, representing all of the Shares that were issued and outstanding as of October 29, 1999, and (ii) 2,303,085, representing all of the Shares that may be issued upon the exercise of all outstanding options to purchase Shares. ** 1/50th of 1% of the value of the transaction. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. AMOUNT PREVIOUSLY PAID: FILING PARTY: FORM OR REGISTRATION NO.: DATE FILED: PAGE 1 OF 6 PAGES (EXHIBIT INDEX IS LOCATED ON PAGE 6) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Tender Offer Statement on Schedule 14D-1 is filed by American Greetings Corporation ("Parent") and Granite Acquisition Corp., a wholly owned subsidiary of Parent ("Purchaser"), relating to the offer by Purchaser to purchase all outstanding shares of common stock (the "Shares") of Gibson Greetings, Inc. (the "Company"), and the associated Series B Preferred Stock Purchase Rights (the "Rights"), issued pursuant to the Rights Agreement, dated September 8, 1999, between the Company and The Bank of New York, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $10.25 per Share (and associated Right), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in the Offer To Purchase, dated November 9, 1999 (the "Offer To Purchase"), and in the related Letter of Transmittal and any amendments or supplements thereto, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively (which collectively constitute the "Offer"). The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY (a) The name of the subject company is Gibson Greetings, Inc. The address of its principal executive offices is 2100 Section Road, Cincinnati, Ohio 45237. The telephone number of the Company at such location is (513) 841-6600. (b) The information set forth on the cover page and under "Introduction" in the Offer To Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of the Shares; Dividends on the Shares") of the Offer To Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND (a)-(d), (g) This Statement is filed by Purchaser and Parent. The information set forth on the cover page, under "Introduction," in Section 9 ("Certain Information Concerning Purchaser and Parent") and in Schedule I of the Offer To Purchase is incorporated herein by reference. (e)-(f) None of Purchaser, Parent or, to the knowledge of Purchaser and Parent, any of the persons listed in Schedule I to the Offer To Purchase has during the last five years been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of a competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY (a)-(b) The information set forth under "Introduction" and in Section 8 ("Certain Information Concerning the Company"), Section 9 ("Certain Information Concerning Purchaser and Parent"), Section 11 ("Background of the Offer") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; Other Matters") of the Offer To Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION (a)-(b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer To Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER (a)-(e) The information set forth under "Introduction" and in Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; Other Matters") and in Section 13 ("Dividends and Distributions") of the Offer To Purchase is incorporated herein by reference. 2 3 (f)-(g) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares, Stock Exchange Listing and Exchange Act Registration, and Margin Securities") of the Offer To Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY (a)-(b) The information set forth under "Introduction" and in Section 9 ("Certain Information Concerning Purchaser and Parent") of the Offer To Purchase is incorporated herein by reference. ITEM 7.CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES The information set forth under "Introduction" and in Section 9 ("Certain Information Concerning Purchaser and Parent") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; Other Matters") of the Offer To Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The information set forth under "Introduction" and in Section 16 ("Fees and Expenses") of the Offer To Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS The information set forth in Section 9 ("Certain Information Concerning Purchaser and Parent") of the Offer To Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION (a) The information set forth under "Introduction" and in Section 9 ("Certain Information Concerning Purchaser and Parent") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; Other Matters") of the Offer To Purchase is incorporated herein by reference. (b)-(c) The information set forth under "Introduction" and in Section 14 ("Certain Conditions of the Offer") and Section 15 ("Certain Legal Matters") of the Offer To Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares, Stock Exchange Listing and Exchange Act Registration, and Margin Securities") of the Offer To Purchase is incorporated herein by reference. (e) To the knowledge of Parent and Purchaser, no legal proceedings relating to the Offer and the Merger required to be disclosed in Item 10(e) of Schedule 14D-1 are pending or have been instituted. (f) The information set forth in the Offer To Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS (a)(1) Offer To Purchase, dated November 9, 1999 (a)(2) Letter of Transmittal (a)(3) Notice of Guaranteed Delivery (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Form of Summary Advertisement, dated November 9, 1999 (a)(8) Text of Joint Press Release of Amber and Granite, dated November 3, 1999
3 4 (b) Not applicable (c)(1) Agreement and Plan of Merger, dated as of November 2, 1999, among American Greetings Corporation, Granite Acquisition Corp. and Gibson Greetings, Inc. (c)(2) Confidentiality Agreement, dated October 29, 1998, between American Greetings Corporation and Gibson Greetings, Inc. (c)(3) Standstill Agreement, dated October 26, 1998, between American Greetings Corporation and Gibson Greetings, Inc. (d) Not applicable (e) Not applicable (f) Not applicable
4 5 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 9, 1999 GRANITE ACQUISITION CORP. By: /s/ MORRY WEISS ---------------------------------- Name: Morry Weiss Title: President AMERICAN GREETINGS CORPORATION By: /s/ MORRY WEISS ---------------------------------- Name: Morry Weiss Title: Chairman and Chief Executive Officer 5 6 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------- ----------- (a)(1) Offer To Purchase, dated November 9, 1999 (a)(2) Letter of Transmittal (a)(3) Notice of Guaranteed Delivery (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Form of Summary Advertisement, dated November 9, 1999 (a)(8) Text of Joint Press Release of Amber and Granite, dated November 3, 1999 (c)(1) Agreement and Plan of Merger, dated as of November 2, 1999, among American Greetings Corporation, Granite Acquisition Corp. and Gibson Greetings, Inc. (c)(2) Confidentiality Agreement, dated October 29, 1998, between American Greetings Corporation and Gibson Greetings, Inc. (c)(3) Standstill Agreement, dated October 26, 1998, between American Greetings Corporation and Gibson Greetings, Inc.
6 EX-1.A 2 EXHIBIT (A)(1) 1 Offer To Purchase for Cash All Outstanding Shares of Common Stock (Including Associated Series B Preferred Stock Purchase Rights) of Gibson Greetings, Inc. at $10.25 Net Per Share (Subject to Possible Upward Adjustment) by Granite Acquisition Corp., a wholly owned subsidiary of American Greetings Corporation THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES OF COMMON STOCK (THE "SHARES") OF GIBSON GREETINGS, INC. (THE "COMPANY"), THAT, TOGETHER WITH THE SHARES THEN OWNED BY AMERICAN GREETINGS CORPORATION ("PARENT"), REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY-DILUTED BASIS (ASSUMING THE EXERCISE OF ALL OUTSTANDING OPTIONS THAT ARE EXERCISABLE AND IN-THE-MONEY AT THE OFFER PRICE). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THIS OFFER TO PURCHASE. THE BOARD OF DIRECTORS OF THE COMPANY, HAS UNANIMOUSLY (i) DETERMINED THAT THE MERGER AGREEMENT AMONG PARENT, GRANITE ACQUISITION CORP. ("PURCHASER") AND THE COMPANY, AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED HEREIN), ARE FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF SHARES (THE "STOCKHOLDERS"), (ii) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND (iii) RESOLVED TO RECOMMEND THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------------ Any Stockholder desiring to tender all or a portion of its Shares should either (1) complete and sign the appropriate Letter(s) of Transmittal (or a manually signed facsimile thereof) in accordance with the instructions in such Letter of Transmittal, mail or deliver such Letter(s) of Transmittal and any other required documents to the Depositary and either deliver the certificates for those Shares to the Depositary along with such Letter(s) of Transmittal or tender those Shares pursuant to the procedures for book-entry transfer set forth in Section 3 hereof or (2) request its broker, dealer, commercial bank, trust company or other nominee to effect the tender on its behalf. Any Stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that broker, dealer, commercial bank, trust company or other nominee if the Stockholder desires to tender such Shares. Any Stockholder who desires to tender Shares and whose certificate(s) representing those Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis must tender those Shares by following the procedures for guaranteed delivery set forth in Section 3 hereof. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer To Purchase. Requests for additional copies of this Offer To Purchase, the Letter of Transmittal and other related materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. November 9, 1999 2 TABLE OF CONTENTS
PAGE ---- INTRODUCTION............................................................. 1 1. Terms of the Offer.......................................... 3 2. Acceptance for Payment and Payment for Shares............... 4 3. Procedure for Tendering Shares.............................. 6 4. Withdrawal Rights........................................... 8 5. Certain Federal Income Tax Consequences of the Offer and the Merger...................................................... 9 6. Price Range of the Shares; Dividends on the Shares.......... 10 7. Effect of the Offer on the Market for Shares, Stock Exchange Listing and Exchange Act Registration, and Margin Securities.................................................. 10 8. Certain Information Concerning the Company.................. 12 9. Certain Information Concerning Purchaser and Parent......... 13 10. Source and Amount of Funds.................................. 14 11. Background of the Offer..................................... 15 12. Purpose of the Offer and the Merger; Plans for the Company; the Merger Agreement; Other Matters......................... 18 13. Dividends and Distributions................................. 32 14. Certain Conditions of the Offer............................. 33 15. Certain Legal Matters and Regulatory Approvals.............. 33 16. Fees and Expenses........................................... 36 17. Miscellaneous............................................... 36 SCHEDULE I............................................................... I-1
i 3 To the Holders of Common Stock of Gibson Greetings, Inc. INTRODUCTION Granite Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of American Greetings Corporation ("Parent"), hereby offers to purchase all outstanding shares of common stock (the "Shares") of Gibson Greetings, Inc. ("Company") and the associated Series B Preferred Stock Purchase Rights (the "Rights"), issued pursuant to the Rights Agreement, dated September 8, 1999, between the Company and The Bank of New York, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $10.25 per Share and associated Right (subject to possible upward adjustment as described below, the "Offer Price"), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in this Offer To Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Unless the context otherwise requires, all references to Shares in this Offer To Purchase will include the associated Rights and all references to the Rights will include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement, including the right to receive any payment due upon redemption of the Rights. The Offer Price will be increased by an amount equal to 30% of any after-tax gain realized by the Company in any sale or disposition for cash by the Company or its subsidiaries, prior to the Expiration Date (as hereinafter defined), of all or any part of the Company's investment in E-Greetings Network ("EGN"), divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding options, whether or not such options are then vested, that are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on any sale or disposition will be the cash received by the Company, but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See Sections 2 and 12 of this Offer To Purchase. If the Offer Price is increased, the Offer will remain open for a minimum of ten business days from the date of such increase. Holders of Shares ("Stockholders") who have Shares registered in their own name and who tender directly to the Depositary will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 to the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Stockholders who hold their Shares through their broker or bank should consult with such institution as to whether there are any fees applicable to a tender of Shares. Purchaser will pay all charges and expenses of Wasserstein Perella & Co., Inc., as the dealer manager (the "Dealer Manager"), First Chicago Trust Company of New York, as the depositary (the "Depositary"), and Corporate Investor Communications, Inc., as the information agent (the "Information Agent"), in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), HAS UNANIMOUSLY (i) DETERMINED THAT THE MERGER AGREEMENT (AS HEREINAFTER DEFINED) AMONG PARENT, PURCHASER AND THE COMPANY, AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS HEREINAFTER DEFINED), ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS, (ii) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND (iii) RESOLVED TO RECOMMEND THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. J.P. Morgan Securities Inc., the Company's financial advisor, has delivered to the Company Board a written opinion dated November 2, 1999 to the effect that, as of such date and based on and subject to certain matters stated in such opinion, the $10.25 per Share cash consideration to be received in the Offer and the Merger by Stockholders (other than Parent and its affiliates) was fair, from a financial point of view, to such Stockholders. A copy of J.P. Morgan Securities Inc.'s written opinion is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange Commission (the "Commission") in connection with the Offer, a copy of which is being furnished to Stockholders concurrently with this Offer To Purchase. Stockholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered and limitations of the review undertaken by J.P. Morgan Securities Inc. 4 The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 2, 1999 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, for the commencement of the Offer by Purchaser and further provides that after the purchase of Shares pursuant to the Offer, subject to the satisfaction or waiver of certain conditions, Purchaser will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent (the "Surviving Corporation"). In the Merger, each Share (excluding Shares owned by Stockholders who have properly exercised their dissenters' rights under the Delaware General Corporation Law ("Delaware Law"), Shares owned by Parent and its subsidiaries and Shares held by the Company as treasury stock) issued and outstanding immediately prior to the effective time of the Merger (the "Effective Time") will be converted at the Effective Time into the right to receive the Offer Price (or any greater amount paid for Shares pursuant to the Offer), in cash payable to the holder thereof, without interest, prorated for fractional Shares and less any required withholding taxes and, in certain circumstances, stock transfer taxes (the "Merger Consideration"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES, THAT, TOGETHER WITH THE SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY-DILUTED BASIS (ASSUMING THE EXERCISE OF ALL OUTSTANDING OPTIONS THAT ARE EXERCISABLE AND IN-THE-MONEY AT THE OFFER PRICE) (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE, INCLUDING THE EXPIRATION OR EARLIER TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT- RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 AND THE REGULATIONS THEREUNDER (THE "HSR ACT"). SEE SECTIONS 1, 14 AND 15 OF THIS OFFER TO PURCHASE. The Merger Agreement provides that if (x)(1)the applicable waiting period under the HSR Act shall not have expired or been terminated or (2) the Antitrust Division of the United States Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") is challenging by litigation or otherwise any of the transactions contemplated by the Merger Agreement and (y) the Merger Agreement is terminated for any reason other than because the Company Board (1) has withdrawn or modified its recommendation of the Merger Agreement, the Offer or the Merger, (2) recommends or enters into an alternative transaction or (3) removes any of its anti-takeover defenses, then Parent is obligated to pay the Company a $20 million termination fee. In addition, concurrently with the signing of the Merger Agreement, Parent contributed $10 million to a Rabbi Trust established by the Company to fund the compensation and benefits to be provided to employees of the Company and its subsidiaries under incentive arrangements designed and adopted by the Company (the "Rabbi Trust"). The Company has informed Purchaser in the Merger Agreement that, as of October 29, 1999, there were 15,846,663 Shares issued and outstanding, and 2,303,085 options outstanding to purchase Shares ("Options"), which were granted under the Company's stock option plans (collectively, the "Stock Option Plans"). The completion of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote or consent of the Stockholders. The Company's Certificate of Incorporation and Delaware Law require the affirmative vote of holders of a majority of the outstanding Shares to approve the Merger. As a result, if the Minimum Condition and the other conditions to the Offer are satisfied and the Offer is consummated, Purchaser will own a sufficient number of Shares to ensure that the Merger will be approved. Under Delaware Law, if, after consummation of the Offer, Purchaser owns at least 90% of the Shares then outstanding, Purchaser will be able to cause the Merger to occur without a vote of the Stockholders. If, however, after consummation of the Offer, Purchaser owns less than 90% of the then outstanding Shares, a vote of the Stockholders will be required under Delaware Law to approve the Merger, and a significantly longer period of time will be required to effect the Merger. See Section 12. As of the date of this Offer To Purchase, Parent beneficially owns 15 Shares. No dissenters' rights are available in connection with the Offer. Stockholders may exercise dissenters' rights, however, in connection with the Merger regardless of whether the Merger is consummated with or without a vote of the Stockholders. 2 5 The Merger Agreement is more fully described in Section 12. Certain federal income tax consequences of the sale of Shares pursuant to the Offer and the conversion of Shares into the Merger Consideration pursuant to the Merger are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment (and thereby purchase) all Shares that are validly tendered and not withdrawn in accordance with Section 4 prior to the Expiration Date. As used in the Offer, the term "Expiration Date" means 12:00 midnight, New York City time, on Wednesday, December 8, 1999, unless and until Purchaser, in accordance with the terms of the Offer and the Merger Agreement, extends the period of time during which the Offer is open, in which event the term "Expiration Date" means the latest time and date on which the Offer, as so extended, expires. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition. The Offer is also subject to certain other conditions set forth in Section 14, including the expiration or termination of all waiting periods imposed by the HSR Act. Purchaser expressly reserves the right to waive the condition set forth in Section 14 relating to the representations and warranties and covenants of the Company; provided, however, that no other change in the conditions of the Offer may be made without the prior written consent of the Company. Subject to the terms of the Merger Agreement, without the prior written consent of the Company, Purchaser will have the right to extend the Offer (i) from time to time if, at the scheduled or extended expiration date of the Offer, any of the conditions set forth in Section 14 exist, until such conditions no longer exist or (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law; provided, however, that each such extension will be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company. If all of the conditions to the Offer are satisfied or waived on any scheduled expiration date of the Offer, the Company will have the right to require Purchaser to extend the Offer on one or more occasions for an aggregate period of not more than 20 business days beyond the latest expiration date that would otherwise be permitted under the clause (i) or (ii) of the previous sentence, if, on such expiration date the number of Shares tendered (and not withdrawn) pursuant to the Offer, together with the Shares then owned by Parent, represents less than 90% of the outstanding Shares on a fully-diluted basis (assuming the exercise of all outstanding Options that are exercisable and in-the-money at the Offer Price), and Purchaser will have the right to extend the Offer on one occasion for a period of not more than 5 business days pursuant to the provisions of this sentence; provided, however, that the Company may prevent such extension by Purchaser if the Company, in its reasonable judgment, determines that such an extension could threaten in any way the consummation of the Offer. If all of the conditions to the Offer are not satisfied or waived on any scheduled expiration date of the Offer, Purchaser shall extend the Offer from time to time until such conditions are satisfied or waived; provided, however, that each such extension will be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company and; provided further, however, that Purchaser will not be required to extend the Offer if the Merger Agreement is terminable because the Offer has not been consummated on or before 18 months after the execution of the Merger Agreement (except as extended for the time period equal to the time period beyond ten business days during which either the Company or Parent fails to make an HSR Filing) or within ten days following the satisfaction of all other conditions of the Offer, the Minimum Condition shall not have been satisfied (except as extended to allow for the extension of the Expiration Date of the Offer pursuant to clause (ii) of the fourth sentence of this paragraph or pursuant to the adjustment of the Offer Price as described above). Purchaser shall, and Parent shall cause it to, accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all Shares properly tendered and not withdrawn pursuant to the Offer that Purchaser is obligated to purchase. Subject to the terms of the Merger Agreement and the rights of tendering Stockholders to withdraw their Shares, Purchaser will retain all tendered Shares until the Expiration Date. 3 6 Subject to the applicable regulations of the Commission and the terms of the Merger Agreement as described in the second preceding paragraph, Purchaser also expressly reserves the right, in its sole discretion, at any time or from time to time, to (i) delay acceptance for payment of, or regardless of whether such Shares were theretofore accepted for payment, payment for, such Shares pending receipt of any regulatory or governmental approvals specified in Section 15; (ii) terminate the Offer (whether or not any Shares have theretofore been accepted for payment) if any condition referred to in Section 14 exists; (iii) waive the condition set forth in Section 14 relating to the representations and warranties and covenants of the Company; or (iv) except as set forth in the Merger Agreement, otherwise amend the Offer in any respect, in each case, by giving oral or written notice of such termination, waiver or amendment to the Depositary. The rights reserved by Purchaser in the immediately preceding paragraph are in addition to Purchaser's rights described in Section 14. Any extension, termination or amendment of the Offer will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which Purchaser may choose to make any public announcement, subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934 (the "Exchange Act"), which require that material changes be promptly disseminated to holders of Shares), Purchaser will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer, or if it waives a material condition to the Offer, Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the materiality of the changes. In the Commission's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to Stockholders, and, if material changes are made with respect to information that approaches the significance of price and the percentage of securities sought, a minimum of ten business days may be required to allow for adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with its stockholder list and security position listings for the purpose of disseminating the Offer to the Stockholders. This Offer To Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment (and thereby purchase) and pay for Shares that are validly tendered and not properly withdrawn prior to the Expiration Date, as soon as practicable after the Expiration Date. Subject to the applicable rules of the Commission and the terms of the Merger Agreement, Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply, in whole or in part, with any other applicable law, government regulation or condition contained therein. See Sections 1, 14 and 15. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for the Shares (or a timely Book-Entry Confirmation (as defined in Section 3) with respect to the Shares), (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly 4 7 completed and duly executed with any required signature guarantees (or, in the case of a book-entry transfer of Shares, an Agent's Message), and (iii) all other documents required by the Letter of Transmittal. See Section 3. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Depositary and forming part of a Book-Entry Confirmation, which states that (i) the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, (ii) such participant has received and agrees to be bound by the terms of the applicable Letter of Transmittal, and (iii) Purchaser may enforce such agreement against such participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) tendered Shares if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for the tendering Stockholders for the purpose of receiving payment from Purchaser and transmitting payment to the tendering Stockholders whose Shares have been accepted for payment. If, for any reason, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights described in Section 14, the Depositary may, nevertheless, on behalf of Purchaser, retain the tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering Stockholders are entitled to withdrawal rights as described in Section 4 and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ACCRUE ON THE CONSIDERATION TO BE PAID FOR THE SHARES BY PURCHASER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not purchased for any reason or if certificates are submitted for more Shares than are tendered, certificates for the Shares not purchased or tendered will be returned pursuant to the instructions of the tendering Stockholder without expense to the tendering Stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, the Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility) as promptly as practicable following the expiration, termination or withdrawal of the Offer. Parent or Purchaser reserves the right, subject to the provisions of the Merger Agreement, to assign, in whole or from time to time in part, to one or more of Parent's subsidiaries or affiliates the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but no such assignment will relieve Parent or Purchaser of its obligations under the Offer or prejudice the rights of tendering Stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. If a Liquidation Event occurs (or if more than one such Liquidation Event occurs, with respect to each Liquidation Event), each of the Merger Consideration and the Offer Price will be increased by an amount equal to 30% of any after-tax gain (after giving full effect to any capital loss carry-forward available to the Company, the availability of which is confirmed by the Company's independent accountants) on such Liquidation Event, calculated in accordance with generally accepted accounting principles, divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding Options, whether or not such Options are then vested, that are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. A "Liquidation Event" means any sale or disposition for cash (including, without limitation, a sale or disposition by EGN of all or substantially all of its assets followed by a distribution of the cash proceeds thereof to shareholders of EGN, a merger or consolidation involving EGN, a purchase of all or substantially all of the stock of EGN by a third party or the repurchase by EGN of any of its capital stock from the Company or its subsidiaries) by the Company or its subsidiaries of all or any part of its investment in EGN prior to the Expiration Date. The price used to compute any after-tax gain on a Liquidation Event will be the cash received by the Company in such sale or disposition (net of any underwriting discounts and other amounts paid by the Company in connection with such sale), but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See the discussion entitled "The Merger Agreement--Consideration to be Paid in the Merger" in Section 12 of this Offer To Purchase. 5 8 IF, PRIOR TO THE EXPIRATION DATE, PURCHASER INCREASES THE CONSIDERATION TO BE PAID PER SHARE PURSUANT TO THE OFFER, PURCHASER WILL PAY THE INCREASED CONSIDERATION FOR ALL SHARES PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT THE SHARES WERE TENDERED PRIOR TO THE INCREASE IN CONSIDERATION. 3. PROCEDURE FOR TENDERING SHARES VALID TENDERS. For Shares to be validly tendered pursuant to the Offer, either (i) the appropriate Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer of Shares, an Agent's Message), and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer To Purchase prior to the Expiration Date and either (a) certificates representing tendered Shares must be received by the Depositary at any one of those addresses prior to the Expiration Date or (b) the Shares must be delivered pursuant to the procedures for book-entry transfer set forth below and a Book-Entry Confirmation must be received by the Depositary prior to the Expiration Date or (ii) the tendering Stockholder must comply with the guaranteed delivery procedures set forth below. If certificates for Shares are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or facsimile thereof) must accompany each such delivery. No alternative, conditional or contingent tenders will be accepted. THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer To Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer the Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer To Purchase prior to the Expiration Date, or the tendering Stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL OR OTHER DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY OF THE LETTER OF TRANSMITTAL OR SUCH OTHER DOCUMENTS TO THE DEPOSITARY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder of Shares tendered therewith (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the owner of the Shares) and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loans associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the certificates representing Shares are registered in the name of a person other than the signer of the Letter of Transmittal or if payment is to be made or if certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, then the 6 9 tendered certificates representing Shares must be endorsed or accompanied by appropriate stock powers, in each case signed exactly as the name or names of the registered holder or owners appears on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as described above and as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY. If a Stockholder wishes to tender Shares pursuant to the Offer and the Stockholder's certificates are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to be received by the Depositary prior to the Expiration Date, the Shares may nevertheless be tendered if all the following guaranteed delivery procedures are complied with: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser with this Offer To Purchase, is received by the Depositary as provided below prior to the Expiration Date; and (iii) the certificates for all tendered Shares in proper form for transfer or a Book-Entry Confirmation with respect to all tendered Shares, together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any required signature guarantees (or, in the case of a book-entry transfer of Shares, an Agent's Message) in connection with a book-entry transfer of Shares, and any other documents required by the Letter of Transmittal, are received by the Depositary within three Nasdaq National Market trading days after the date of execution of the Notice of Guaranteed Delivery. A "Nasdaq trading day" is any day on which The Nasdaq Stock Market, Inc.'s ("Nasdaq") Nasdaq National Market is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mailed to the Depositary and must include an endorsement by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery and a representation that the Stockholder on whose behalf the tender is being made is deemed to own the Shares being tendered within the meaning of Rule 14e-4 under the Exchange Act. Notwithstanding any other provision of this Offer To Purchase, payment for Shares accepted for payment pursuant to the Offer in all cases will be made only after timely receipt by the Depositary of certificates for (or Book-Entry Confirmation with respect to) the Shares, a Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with all required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and all other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering Stockholders at the same time, and will depend upon when Share certificates are received by the Depositary or Book-Entry Confirmations of such Shares are received into the Depositary's account at the Book-Entry Transfer Facility. BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE PAYMENTS MADE TO STOCKHOLDERS WITH RESPECT TO THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER OR THE MERGER, A STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH ITS CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT IT IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE SECTION 5 BELOW AND INSTRUCTION 10 OF THE LETTER OF TRANSMITTAL. DETERMINATION OF VALIDITY. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares pursuant to any of the procedures described above will be determined by Purchaser in its sole discretion, which determination will be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders of Shares determined not to be in proper form or the acceptance of or payment for which may, in the opinion of counsel, be unlawful and reserves the absolute right to waive any defect or irregularity in any tender of Shares. Subject to the terms of the Merger Agreement, Purchaser expressly reserves the right to waive the condition set forth in Section 14 of this Offer To Purchase relating to representations and warranties and covenants of the Company; provided, however, that no 7 10 other change in the conditions set forth in Section 14 of this Offer To Purchase may be made without the prior written consent of the Company. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter(s) of Transmittal and the instructions thereto) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Parent, Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering Stockholder irrevocably appoints designees of Purchaser as his attorneys-in-fact and proxies, with full power of substitution and resubstitution, in the manner set forth in the Letter of Transmittal, to the full extent of the Stockholder's rights with respect to the Shares tendered by the Stockholder and purchased by Purchaser and with respect to any and all other Shares or other securities issued or issuable in respect of those Shares, on or after the date of the Offer. All such powers of attorney and proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts the Shares for payment. Upon acceptance for payment, all prior powers of attorney and proxies given by the Stockholder with respect to the Shares (and any other Shares or other securities so issued in respect of such purchased Shares) will be revoked, without further action, and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective) by the Stockholder. The designees of Purchaser will be empowered to exercise all voting and other rights of the Stockholder with respect to such Shares (and any other Shares or securities so issued in respect of such purchased Shares) as they in their sole discretion may deem proper, including without limitation in respect of any annual or special meeting of the Stockholders, or any adjournment or postponement of any such meeting. Purchaser reserves the absolute right to require that, in order for Shares to be validly tendered, immediately upon Purchaser's acceptance for payment of the Shares, Purchaser must be able to exercise full voting and other rights with respect to the Shares, including voting at any meeting of Stockholders then scheduled. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering Stockholder and Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser as provided in this Offer To Purchase, may also be withdrawn at any time after January 8, 2000 (or such later date as may be applicable if the Offer is extended). If Purchaser extends the Offer, is delayed in its purchase of or payment for Shares, or is unable to purchase or pay for Shares for any reason then, without prejudice to the rights of Purchaser, tendered Shares may be retained by the Depositary on behalf of Purchaser and may not be withdrawn, except to the extent that tendering Stockholders are entitled to withdrawal rights as set forth in this Section 4. The reservation by Purchaser of the right to delay the acceptance or purchase of or payment for Shares is subject to the terms of the Merger Agreement and provisions of Rule 14e-1(c) under the Exchange Act, which requires Purchaser to pay the consideration offered or to return Shares deposited by or on behalf of Stockholders promptly after the termination or withdrawal of the Offer. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer To Purchase. Any such notice of withdrawal must specify the name of the persons who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered the Shares. If certificates evidencing Shares have been delivered or otherwise identified to the Depositary then, prior to the release of the certificates, the tendering Stockholder must also submit the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn, and the signature on the 8 11 notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered for the account of an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding on all parties. No withdrawal of Shares will be deemed to have been made properly until all defects and irregularities have been cured or waived. None of Parent, Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failing to give such notification. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be tendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3 above. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER The following is a summary of the material federal income tax consequences of the Offer and the Merger to Stockholders whose Shares are purchased pursuant to the Offer or whose Shares are converted into the right to receive the Merger Consideration in the Merger (including any cash amounts received by dissenting Stockholders pursuant to the exercise of dissenters' rights). This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury Regulations promulgated and proposed thereunder, and published judicial authority and administrative rulings and practice. Legislative, judicial or administrative authorities or interpretations are subject to change, possibly on a retroactive basis, at any time and a change could alter or modify the statements and conclusions set forth below. It is assumed for purposes of this discussion that the Shares are held as "capital assets" within the meaning of Section 1221 of the Code. This discussion does not address all aspects of federal income taxation that may be relevant to a particular Stockholder in light of such Stockholder's personal investment circumstances, or those Stockholders subject to special treatment under the federal income tax laws (for example, life insurance companies, tax-exempt organizations, foreign corporations and nonresident alien individuals) or to Stockholders who acquired their Shares through the exercise of employee stock options or other compensation arrangements. In addition, the discussion does not address any aspect of foreign, state or local income taxation or any other form of taxation that may be applicable to a Stockholder. CONSEQUENCES OF THE OFFER AND THE MERGER TO STOCKHOLDERS The receipt of the Offer Price and the Merger Consideration (and any cash amounts received by dissenting Stockholders pursuant to the exercise of dissenters' rights) will be a taxable transaction for federal income tax purposes (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a Stockholder will recognize gain or loss equal to the difference between its adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger or pursuant to the exercise of dissenters' rights and the amount of cash received therefor. Such gain or loss will be capital gain or loss and will be long-term gain or loss, if, on the date of sale (or, if applicable, the date of the Merger), the Shares were held for more than one year. BACKUP TAX WITHHOLDING Under the Code, a Stockholder may be subject, under certain circumstances, to "backup withholding" at a 31% rate with respect to payments made in connection with the Offer or the Merger. Backup withholding generally applies if the Stockholder (i) fails to furnish his social security number or other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails properly to report interest or dividends, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is his correct number and that he or she is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an 9 12 overpayment of tax. Certain persons generally are exempt from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include the reportable payments in income. Each Stockholder should consult with its own tax advisor as to its qualifications for exemption from withholding and the procedure for obtaining such exemption. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, (the "Company Form 10-K"), the Shares are traded on the Nasdaq National Market under the symbol "GIBG." The following table sets forth, for the periods indicated, the reported high and low sale prices for the Shares on the Nasdaq National Market as reported in the Company Form 10-K with respect to calendar years 1997 and 1998, and as reported thereafter by published financial sources with respect to calendar year 1999.
HIGH LOW ---- --- 1997 First Quarter............................................... $21 5/8 $18 Second Quarter.............................................. 23 1/4 19 Third Quarter............................................... 26 3/4 18 1/2 Fourth Quarter.............................................. 26 1/4 20 1/2 1998 First Quarter............................................... $28 3/8 $18 7/8 Second Quarter.............................................. 29 1/4 21 15/16 Third Quarter............................................... 26 3/8 16 Fourth Quarter.............................................. 20 3/4 8 3/4 1999 First Quarter............................................... $12 1/8 $ 6 1/8 Second Quarter.............................................. 10 1/16 5 15/16 Third Quarter............................................... 6 5/8 3 15/16 Fourth Quarter (through November 8, 1999)................... 8 15/16 4 1/4
On November 2, 1999, the last full trading day before the public announcement of the Merger Agreement, the last reported sale price on the Nasdaq National Market was $5 1/2 per Share. On November 8, 1999, the last full trading day before the commencement of the Offer, the last reported sale price on the Nasdaq National Market was $8 29/32 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES. No dividends were declared or paid in 1999, 1998 or 1997. The terms of certain of the Company's financing agreements contain covenants that could limit the payment of cash dividends. The Company has agreed in the Merger Agreement that it will not pay any dividend or other distribution payable in cash, stock or property with respect to the Shares. 7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES, STOCK EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION, AND MARGIN SECURITIES. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by Stockholders other than Purchaser. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer Price. 10 13 NASDAQ QUOTATION. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued inclusion in Nasdaq. According to Nasdaq's published guidelines, the Shares would not be eligible to be included for quotation if, among other things, the number of publicly held Shares falls below 500,000, the number of holders of Shares falls below 400 or the aggregate market value of such publicly held Shares falls below $3,000,000. If these standards are not met, the Shares might continue to be quoted on The Nasdaq SmallCap Market, Inc., but if the number of holders of the Shares falls below 300, or if the number of publicly held Shares falls below 100,000, or if the aggregate market value of such publicly held Shares falls below $200,000 or there are not at least two registered and active market makers (one of which may be a market maker entering a stability bid), Nasdaq rules provide that the securities would no longer qualify for inclusion in Nasdaq and Nasdaq would cease to provide any quotations. Shares held directly or indirectly by an officer or director of the Company or by a beneficial owner of more than 10% of the Shares will ordinarily not be considered as being publicly held for purposes of these standards. In the event the Shares are no longer eligible for Nasdaq quotation, quotations might still be available from other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of such Shares remaining at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act as described below and other factors. Purchaser has been advised by the Company that as of November 5, 1999, there were approximately 600 holders of record of the Shares. The Company has advised Purchaser that it believes that the number of beneficial owners of the Shares as of November 5, 1999, is approximately 4,500. EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Shares. The termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), and the requirement of furnishing a proxy statement in connection with Stockholders' meetings pursuant to Section 14(a), no longer applicable to the Shares. Furthermore, if the Shares are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions would no longer be applicable to the Company. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. Purchaser believes that the purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for termination of registration under the Exchange Act, and it is the intention of Purchaser to cause the Company to make an application for termination of registration of the Shares as soon as possible after successful completion of the Offer if the Shares are then eligible for such termination. If registration of the Shares is not terminated prior to the Merger, then following the consummation of the Merger, the Shares will no longer be eligible for Nasdaq quotation and the registration of the Shares under the Exchange Act will be terminated. MARGIN REGULATIONS. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer, it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for Nasdaq reporting. Purchaser intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of the registration of the Shares are met. 11 14 8. CERTAIN INFORMATION CONCERNING THE COMPANY GENERAL INFORMATION. The Company is a Delaware corporation with its principal executive offices located at 2100 Section Road, Cincinnati, Ohio 45237. The Company and its wholly owned and majority owned subsidiaries operate in a single industry segment--the design and sale of greeting cards, paper partywares, gift wrap and related specialty relationship-fostering products. The foregoing description of the Company's business has been derived in part from the Company Form 10-K and is qualified in its entirety by reference to the Company Form 10-K. HISTORICAL FINANCIAL INFORMATION. Certain selected consolidated financial information with respect to the Company and its subsidiaries excerpted from the Company 10-K and the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (the "Company Form 10-Q") is set forth below. More comprehensive financial information is included in such reports (including management's discussion and analysis of financial condition and results of operations) and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies should be obtainable in the manner set forth below under "Available Information." GIBSON GREETINGS, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) SIX MONTHS ENDED FISCAL YEAR ENDED JUNE 30, -------------------------------------- -------------------- DECEMBER 31, 1999 1998 1998(1)(2) 1997 1996(3) INCOME STATEMENT DATA -------- -------- ---------- ------------ -------- Revenues.......................... $144,498 $206,726 $408,530 $397,717 $390,246 Net Income (loss)................. (27,792) (3,343) 2,183 21,598 21,962 Net Income (loss) per share: Basic........................... (1.76) (0.20) 0.13 1.32 1.36 Diluted......................... (1.76) (0.20) 0.13 1.27 1.34
JUNE 30, DECEMBER 31, -------- -------------------------------- 1999 1998 1997 1996 BALANCE SHEET DATA -------- -------- -------- -------- Total Assets.................................... $383,663 $437,451 $443,322 $451,559 Debt due within one year(4)..................... 78 155 7,890 7,901 Long-term debt(5)............................... 10,069 10,384 24,158 40,898 Stockholders' equity............................ 242,857 271,478 281,744 256,316
- --------------- (1) Excluding the effect of the restructuring charge, 1998 net income would have totaled $15,969, or $0.97 per diluted share. (2) Includes the operations of The Ink Group Companies since July 3, 1998, the date of acquisition, and The Paper Factory of Wisconsin, Inc. through August 31, 1998, the date of divestiture. (3) Includes the operations of Gibson de Mexico S.A. de C.V. through September 1, 1996, the date of liquidation. (4) Includes the current portion of long-term debt at December 31, which consisted of $155 in 1998, $7,890 in 1997, $7,901 in 1996, $9,894 in 1995 and $11,164 in 1994. (5) Excludes $12,040 in capitalized lease obligation at December 31, 1998, which is included in other liabilities as part of the Company's restructuring reserve. 12 15 AVAILABLE INFORMATION. The Company is subject to the informational filing requirements of the Exchange Act. In accordance with the Exchange Act, the Company files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of those persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies may be obtained upon payment of the Commission's prescribed fees by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, or through the Commission's website (http://www.sec.gov). Although neither Parent nor Purchaser believes as of the date of this Offer To Purchase that statements contained herein based upon such documents are untrue in any material respect, none of Parent, Purchaser, Dealer Manager or Information Agent assumes any responsibility for the accuracy or completeness of the information concerning the Company, furnished by the Company, or contained in the documents and records referred to herein or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent and Purchaser. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT Purchaser, a Delaware corporation, was organized to acquire all of the Shares pursuant to the Offer and the Merger and has not conducted any unrelated activities since its organization. All of the outstanding capital stock of Purchaser is owned directly by Parent. The principal executive offices of Purchaser are located at One American Road, Cleveland, Ohio 44144. Parent is an Ohio corporation, with its principal executive offices located at One American Road, Cleveland, Ohio 44144. Parent and its subsidiaries operate predominantly in a single industry--the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. The name, business address, citizenship, present principal occupation and employment history for the past five years of each of the executive officers and directors of Parent and Purchaser are set forth on Schedule I. Set forth below is certain selected consolidated financial information with respect to Parent and its subsidiaries, excerpted from Parent's Annual Report on Form 10-K for the fiscal year ended February 28, 1999 (the "Parent 10-K"), and Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1999 (the "Parent 10-Q"). More comprehensive financial information is included in such reports (including management's discussion and analysis of financial condition and results of operations) and other documents filed by Parent with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all the financial information (including any related notes) contained therein. The Parent 10-K and the Parent 10-Q are incorporated herein by reference. Such reports and other documents should be available for inspection and copies should be obtainable from the offices of the Commission in the same manner as set forth under "Available Information" in Section 8 above. 13 16 AMERICAN GREETINGS CORPORATION SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) SIX MONTHS ENDED FISCAL YEAR ENDED AUGUST 31, FEBRUARY 28 OR 29, -------------------- -------------------------------------- 1999 1998 1999 1998 1997 SUMMARY OF OPERATIONS -------- -------- ---------- ---------- ---------- Net Sales....................... $936,540 $967,641 $2,205,706 $2,198,765 $2,161,089 Net Income...................... $(15,451) $ 47,756 $ 180,222 $ 190,084 $ 167,095 Earnings Per Share.............. (0.23) 0.67 2.56 2.58 2.23 Earnings per share -- assuming dilution...................... (0.23) 0.67 2.53 2.55 2.22 Cash dividends per share........ 0.20(1) 0.37 0.94 0.71 0.67
- --------------- (1) Dividend of $0.19 per share paid June 10,1999, was declared in February 1999.
AUGUST 31, FEBRUARY 28 OR 29, ---------- -------------------------------------- 1999 1999 1998 1997 FINANCIAL POSITION ---------- ---------- ---------- ---------- Total assets.............................. $1,103,569 $2,419,328 $2,161,464 $2,135,120 Long-term debt............................ 439,490 463,246 148,800 219,639 Stockholders' equity...................... 1,199,392 1,346,611 1,345,217 1,361,655
Except as set forth elsewhere in this Offer To Purchase or Schedule I hereto: (i) neither Parent nor Purchaser nor, to the knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of Parent or Purchaser or any of the persons so listed, (a) beneficially owns or has a right to acquire any Shares or any other equity securities of the Company, (b) has effected any transaction in the Shares or any other equity securities of the Company during the past 60 days, or (c) has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company (including any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations); (ii) there have been no transactions that would require reporting under the rules and regulations of the Commission between Parent or Purchaser or any of their respective subsidiaries or, to the knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or any of its executive officers, directors or affiliates, on the other hand; and (iii) there have been no contacts, negotiations or transactions between Parent or Purchaser or any of their respective subsidiaries or, to the knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 10. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by Purchaser to pay the aggregate purchase price to be paid pursuant to the Offer and the Merger, to cash out the Options and to pay the fees and expenses related to the Offer and the Merger is estimated to be approximately $175 million. These funds are expected to be provided to Purchaser in the form of capital contributions or advances made by Parent. Parent plans to obtain the funds for such capital contributions or advances from cash on hand, borrowings under its existing bank credit facilities or a combination thereof. 14 17 11. BACKGROUND OF THE OFFER In March 1995, Mr. Morry Weiss, Chairman and Chief Executive Officer of Parent, acting on rumors of the possible sale of the Company, publicly announced Parent's interest in acquiring parts of the Company's business if the Company were to put itself up for sale. In response to this announcement, the Executive Committee of the Company Board sent Mr. Weiss a letter identifying certain regulatory issues raised by a proposed business combination between Parent and the Company, and invited Mr. Weiss and his legal advisors to present a solution to these concerns. On July 6, 1995, the Company publicly announced that it was exploring the sale of the Company. On July 14, 1995, the legal advisors of Parent and the Company met to discuss the regulatory issues that would arise in a proposed business combination of Parent and the Company. The Company's legal advisors stated their concerns that obtaining regulatory approval for a business combination of Parent and the Company would be difficult. In addition, the Company's representatives expressed their concerns over sharing competitively sensitive information with Parent and with the negative impact a failed transaction could have on the Company's morale, personnel, retention of key customers and competitive position in the greeting card industry. Parent's legal advisors stated their belief that obtaining regulatory approval was not an insurmountable problem. On July 21, 1995, the Executive Committee of the Company Board decided to terminate discussions between Parent and the Company due to regulatory and business concerns, and on July 24, 1995, the Company publicly announced its rejection of Parent's proposal. Parent subsequently announced the possibility that it would pursue an unsolicited takeover of the Company, but never initiated one. On February 29, 1996, each director of the Company received a letter from Parent proposing a business combination between the Company and Parent in which the Company's stockholders would receive consideration of $18 per share, in cash or Parent stock. The Executive Committee of the Company Board again informed Parent that it had concluded that at that time the regulatory risks of the proposed business combination with Parent were too high, and reject Parent's proposal. On March 4, 1996, Parent publicly announced its interest in acquiring the Company, without indicating the terms of its proposal. On March 5, 1996, the Company issued a press release rejecting Parent's proposal and terminating discussions with Parent. Parent publicly disclosed the terms of its proposal to acquire the Company and its continued interest in acquiring the Company on March 6, 1996. On March 7, 1996, Parent indicated that it would not attempt an unsolicited takeover of the Company, but would leave its $18 proposal open until March 19, 1996. The Company responded that it would not consider Parent's proposal and planned to focus on rebuilding its business and remain independent. On March 19, 1996, Parent announced that its proposal to acquire the Company had expired and that it was abandoning further efforts to acquire the Company. For the remainder of 1996 through late 1998, there were no further contacts between the Company and Parent regarding any possible business combination. In October 1998, Mr. Weiss called Mr. Frank J. O'Connell, Chairman, Chief Executive Officer and President of the Company, to discuss a possible transaction between Parent and the Company. Mr. O'Connell, after consultation with the Company's legal and financial advisors, decided to meet with Mr. Weiss to determine if a proposed business combination between Parent and the Company was possible given the Company's weakening financial performance and competitive position in the greeting card industry. At a meeting on October 25, 1998, Mr. Weiss and Mr. O'Connell discussed in more detail the possible terms of such a transaction. In connection with these discussions, the parties executed a standstill agreement, pursuant to which Parent agreed not to purchase or agree or offer to purchase ownership of any of the Company's securities or assets, or solicit, or participate in a solicitation of, any proxy from stockholders of the Company, unless approved by the Company, and a confidentiality agreement, which included covenants by Parent to maintain the confidentiality of any information received by Parent regarding the Company. On November 3, 1998, the Company received a letter from Parent proposing a business combination between the Company and Parent in which the Company's stockholders would receive consideration of $20 per share. Over the next several weeks, Mr. Weiss and Mr. O'Connell had numerous telephone conversations 15 18 involving the status of a possible business combination between the companies. Mr. O'Connell reiterated the Company Board's concerns regarding regulatory risks and the negative impact that a failed business combination would likely have on the Company's business and stockholder value and requested that Parent clarify its proposal in terms of protecting the Company and its stockholders against the risks of a failed transaction. On February 18, 1999, the Company announced its financial results for the fourth quarter and full year ended December 31, 1998. The Company reported lower net income and earnings per share for each such period in 1998 compared to the same period a year earlier. The Company cited an increasingly competitive greeting card industry hurt by declining unit volume and increased price sensitivity among the reasons for its financial problems. The stock price of the Company declined substantially following this announcement. On May 6, 1999, the Company announced its financial results for the first quarter ended March 31, 1999. The Company again reported a net loss for such period attributed, in part, to lower-than-anticipated sales of everyday products and higher returns and allowances. The stock price of the Company continued to decline following this announcement. On May 14, 1999, Mr. Weiss sent the Company an unsolicited letter briefly outlining a new proposal for a business combination in which Parent would acquire the Company for $10 per share in cash. On May 19, 1999, Mr. Albert R. Pezzillo, chairman of a Special Committee of the Company Board that considered Parent's proposal, sent Mr. Weiss a letter indicating that the Special Committee would need to receive a more detailed proposal from Parent which included a regulatory strategy, assurances from Parent that it would fully assume any regulatory risks and specific terms of a proposed merger agreement that would maximize the chances for a successful transaction. On June 8, 1999, Mr. Weiss, Mr. O'Connell, Mr. Pezzillo and their respective legal and economic advisors met to discuss the feasibility and terms of a business combination. Discussions continued for the next week, with Parent presenting a new proposal on June 18, 1999, in which Parent would acquire the Company for $10 per share in cash, pay the Company a termination fee of $5 million if regulatory approval were not obtained and fund a $4 million program to retain key employees of the Company. The Company informed Parent that the Company Board had met, together with its legal and financial advisors, to consider Parent's proposal and had determined that the economic protections offered by Parent did not sufficiently protect the Company in the event that regulatory approval were not obtained and that Parent's proposal was therefore rejected. On July 19, 1999, the Company released a preliminary analysis of its results for the second quarter ended June 30, 1999. The Company announced that it expected a further decline in its financial results with a continued increase in its loss per share due to weak sales and its on-going restructuring plan. In addition, the Company announced that it expected to report a loss for the full year ended December 31, 1999. Following continued discussions and negotiations, Mr. Weiss telephoned Mr. O'Connell and Mr. Pezzillo on July 19, 1999, with an updated proposal. The proposal contemplated a $10 per share cash offer for the Company, a $15 million termination fee if regulatory approval were not obtained and a $15 million retention program for the Company funded by Parent. Mr. O'Connell sent Mr. Weiss a letter dated July 26, 1999, detailing the Company Board's structural requirements for a proposed business combination. The letter indicated that Parent would have to agree to fully commit to obtaining regulatory approval, limited termination rights under the Merger Agreement, limited closing conditions to the Offer, a non-refundable $15 million retention program and a $15 million termination fee payable in all circumstances except if the Company Board recommended a superior transaction with another party pursuant to its fiduciary obligations. Mr. Weiss responded with a letter dated July 29, 1999, addressing the Company Board's concerns. Mr. O'Connell sent Mr. Weiss a letter dated August 4, 1999, which indicated that the Company Board met to consider Parent's latest proposal, and, after consultation with its financial and legal advisors, determined that Parent had not adequately addressed the Company Board's concerns regarding assumption of regulatory risk and certainty of closing. Consequently, the Company Board had rejected Parent's latest proposal. 16 19 During August 1999, Mr. Weiss and Mr. O'Connell continued to discuss a possible business combination. In a letter dated August 11, 1999, Mr. O'Connell communicated to Mr. Weiss that the Company Board, after consultation with its legal and financial advisors, instructed Mr. O'Connell that it would not consider another proposal from Parent unless such proposal contained guarantees on assumption of regulatory risk, certainty of closing of the transaction and adequate financial safeguards for the Company and its stockholders in the event of a failed transaction. Parent and the Company exchanged numerous written communications during the month of August that detailed each party's position on a variety of issues. In late August 1999, Mr. Weiss indicated to Mr. O'Connell that Parent was reevaluating its previously stated proposal to acquire the Company at a price of $10 per Share. Mr. O'Connell, after conferring with the Company Board, advised Mr. Weiss that the Company would not consider an offer of less than $10 per Share. Mr. Weiss and Mr. O'Connell continued discussions during September 1999, engaging in numerous telephone calls, exchanging detailed written communications and meeting with their respective legal and financial advisors. By mid-September 1999, Parent and the Company had agreed on certain key contract terms which the Company Board required. The parties also had limited discussions regarding price per Share. Among the key terms the parties agreed to were: a non-refundable $15 million retention program funded by Parent; a $15 million termination fee payable by Parent in all circumstances except if the Company accepted a superior proposal from another party pursuant to its fiduciary obligations; limited closing conditions to the Offer and the Merger; and representations and warranties of the Company given only as of the date of the Merger Agreement, including the Company's representation and warranty regarding material adverse changes in the Company's business. From September 23, 1999 to October 2, 1999, Parent conducted business and legal due diligence of the Company and its operations. From October 1, 1999, through October 14, 1999, representatives of Parent and the Company negotiated the terms of the Merger Agreement. During this period, the Company determined that a higher termination fee would better protect the Company and its stockholders in the event of a failed transaction. Parent and the Company agreed to increase the termination fee to $20 million while reducing the retention program to $10 million. The parties continued to have on-going discussions on price. On October 14, 1999, negotiations between the parties terminated due to differences on key contract terms relating to allocation of regulatory risk. On October 24, 1999, Mr. Weiss contacted Mr. O'Connell to inquire if the parties would be able to settle their outstanding differences. Mr. O'Connell insisted that no further negotiations would take place unless Parent was willing to accept all of the regulatory risk of a proposed business combination. After conferring with senior management and his legal advisors, Mr. Weiss telephoned later that week and indicated that Parent, under certain conditions, would accept certain regulatory risks. On October 28, 1999, Mr. O'Connell and Mr. Pezzillo spoke with Mr. Weiss and reported that the Company Board had rejected Parent's revised proposal due to the conditions required by Parent with respect to the regulatory risk. During this telephone call, the parties resolved the outstanding issues and tentatively agreed on a price of $10.25 per Share, which Mr. Weiss confirmed in an October 29, 1999, telephone call with Mr. O'Connell. From October 30, 1999, to November 1, 1999, representatives of Parent and the Company finalized the terms of the Merger Agreement. At a special meeting held on November 1, 1999, the Board of Directors of Parent approved the Offer, the Merger and the Merger Agreement. The Company informed Parent that on November 1 and 2, 1999, at a special meeting of the Company Board, (i) Mr. O'Connell updated the directors on the status of the discussions with Parent, (ii) representatives of J.P. Morgan Securities Inc. delivered their oral opinion to the Company Board (subsequently confirmed in writing) that, as of such date, the consideration proposed to be received by the stockholders of the Company in the Offer and in the Merger was fair, from a financial point of view, to such holders and (iii) the Company Board, by a unanimous vote, approved the Offer, the Merger and the Merger Agreement and determined to recommend that 17 20 the Company's stockholders accept the Offer and tender their Shares and approve the Merger and the Merger Agreement. The Company, Parent and Purchaser executed the Merger Agreement in the evening on November 2, 1999, and publicly announced the transaction on the morning of November 3, 1999. On November 9, 1999, Purchaser commenced the Offer. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER AGREEMENT; OTHER MATTERS PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer and the Merger is to enable Purchaser to acquire, in one or more transactions, control of, and the entire equity interest, in the Company. The Offer is intended to increase the likelihood that the Merger will be completed promptly. The acquisition of the entire equity interest in the Company has been structured as a cash tender offer followed by a cash merger in order to provide a prompt and orderly transfer of ownership of the Company from the Stockholders to Parent and to provide the Stockholders with cash in a per Share amount equal to the Offer Price for all of their Shares. PLANS FOR THE COMPANY Following consummation of the Merger, Parent presently intends to operate the company as a subsidiary under the name of the Company. However, Parent will conduct a further review of the Company and its subsidiaries and their respective assets, businesses, corporate structure, capitalization, operations, properties, policies, management and personnel. After such review, Parent will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist, and reserves the right to effect such actions or changes. Parent's decisions could be affected by information hereafter obtained, changes in general economic or market conditions or in the business of the Company or its subsidiaries, actions by the Company or its subsidiaries and other factors. Except as otherwise provided in this Offer To Purchase, and for possible transactions between the Company and other subsidiaries of Parent in connection with the integration of business conducted by the Company with the other businesses of Parent and its subsidiaries after the Effective Time, Purchaser, Parent and the directors and officers of Purchaser and Parent listed on Schedule I have no current plans or proposals that would result in (i) an extraordinary corporate transaction, such as a merger, reorganization, liquidation or sale or transfer of a material amount of assets involving the Company or any of its Subsidiaries, (ii) a sale or transfer of a material amount of the assets of the Company or any of its Subsidiaries, (iii) any change in the present Company Board or management of the Company, (iv) any material change in the present capitalization or dividend policy of the Company, (v) any material change in the Company's corporate structure or business, (vi) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association, or (vii) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act. THE MERGER AGREEMENT The following is a summary of the material terms of the Merger Agreement and is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is filed with the Commission as an exhibit to the Schedule 14D-1 and is incorporated herein by reference. The Merger Agreement should be read in its entirety for a more complete description of the matters summarized below. The Merger Agreement may be examined, and copies obtained from the offices of the Commission in the same manner as set forth in Section 8 above. Defined terms used below and not defined herein have the respective meanings assigned to those terms in the Merger Agreement. 18 21 THE OFFER. The Merger Agreement provides for the commencement of the Offer, completion of which is subject only to the conditions set forth in Section 14 of this Offer To Purchase. Purchaser expressly reserved the right in the Merger Agreement to waive the condition set forth in Section 14 relating to the representations and warranties and covenants of the Company; provided, however, that no other change in the conditions of the Offer may be made without the prior written consent of the Company. Subject to the terms of the Merger Agreement, without the prior written consent of the Company, Purchaser will have the right to extend the Offer (i) from time to time if, at the scheduled or extended expiration date of the Offer, any of the conditions set forth in Section 14 exist, until such conditions no longer exist or (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law; provided, however, that each such extension will be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company. If all of the conditions to the Offer are satisfied or waived on any scheduled expiration date of the Offer, the Company will have the right to require Purchaser to extend the Offer on one or more occasions for an aggregate period of not more than 20 business days beyond the latest expiration date that would otherwise be permitted under clause (i) or (ii) of the previous sentence, if, on such expiration date the number of Shares tendered (and not withdrawn) pursuant to the Offer, together with the Shares then owned by Parent, represents less than 90% of the outstanding Shares on a fully-diluted basis (assuming the exercise of all outstanding Options that are exercisable and in-the-money at the Offer Price), and Purchaser will have the right to extend the Offer on one occasion for a period of not more than 5 business days pursuant to the provisions of this sentence; provided, however,that the Company may prevent such extension by Purchaser if the Company, in its reasonable judgment, determines that such an extension could threaten in any way the consummation of the Offer. If all of the conditions to the Offer are not satisfied or waived on any scheduled expiration date of the Offer, Purchaser will extend the Offer from time to time until such conditions are satisfied or waived; provided, however, that each such extension will be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company and; provided further, however, that Purchaser will not be required to extend the Offer if the Merger Agreement is terminable because the Offer has not been consummated on or before 18 months after the execution of the Merger Agreement (except as extended for the time period equal to the time period beyond ten business days during which either the Company or Parent fails to make an HSR Filing) or within ten days following the satisfaction of all other conditions of the Offer, the Minimum Condition shall not have been satisfied (except as extended to allow for the extension of the Expiration Date of the Offer pursuant to clause (ii) of the fourth sentence of this paragraph or pursuant to the adjustment of the Offer Price as described above). Purchaser will, and Parent will cause it to, accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all Shares properly tendered and not withdrawn pursuant to the Offer that Purchaser is obligated to purchase. See Section 14 of this Offer To Purchase for a discussion of the conditions to the Offer. The Company made representations to Parent and Purchaser in the Merger Agreement that (a) the Company Board, at a meeting duly called and held, (i) unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, are fair to and in the best interests of the Stockholders, (ii) unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger (such approval being sufficient to render Section 203 of Delaware Law, Articles V and VI of the Company's Certificate of Incorporation and the Rights Agreement inapplicable to the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger), (iii) unanimously resolved to recommend acceptance of the Offer and approval and adoption of the Merger Agreement and the Merger by the Stockholders, provided, however, that, the Company Board may, subject to the terms of the Merger Agreement and its fiduciary duties under applicable law, withdraw, modify or amend such recommendation and (iv) amended the Rights Agreement in order to (A) render the Rights Agreement inapplicable to the Offer, the Merger and the other transactions contemplated by the Merger Agreement, (B) ensure that (1) neither Parent nor any of its subsidiaries nor any of its permitted assignees or transferees is an Acquiring Person (as defined in the Rights Agreement) pursuant to the Rights Agreement and (2) a Stock Acquisition Date, Triggering Event or Distribution Date (in each case, as defined in the Rights Agreement) does not occur by reason of the execution of the Merger Agreement, the commencement or completion of the Offer, the consummation of the Merger or the other transactions contemplated by the Merger Agreement and (b) that 19 22 J.P. Morgan Securities Inc. has delivered to the Company Board its opinion that the consideration to be received in the Offer and the Merger is fair to the Stockholders from a financial point of view. BOARD REPRESENTATION. The Merger Agreement provides that effective upon the acceptance for payment pursuant to the Offer of a number of Shares that satisfies the Minimum Condition, Parent will be entitled to designate the number of directors, rounded up to the next whole number, on the Company Board that equals the product of (i) the total number of directors on the Company Board (giving effect to the election of any additional directors pursuant to this provision) and (ii) the percentage that the number of Shares beneficially owned by Parent (including Shares accepted for payment) bears to the total number of Shares outstanding, and the Company shall take all action necessary to cause Parent's designees to be elected or appointed to the Company Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such time, the Company will also use its best efforts to cause individuals designated by Parent to constitute the number of members, rounded up to the next whole number, on (i) each committee of the Company Board other than the Executive Committee or any committee of the Board established to take action under the Merger Agreement and (ii) each board of directors of each subsidiary of the Company (and each committee thereof) that represents the same percentage as such individuals represent on the Company Board. Notwithstanding the foregoing, the Company shall use its reasonable best efforts to ensure that at least three members of the Company Board and such committees and boards as of the date of the Merger Agreement who are not employees of the Company (the "Continuing Directors") will remain members of the Company Board and such committees and boards until the Effective Time, provided, however, that, if the number of Continuing Directors is reduced below three prior to the Effective Time, the remaining such Directors will be entitled to designate to fill the vacancy a person who is not an officer, director or designee of Parent or any of its affiliates and who will be deemed to be a Continuing Director for all purposes of the Merger Agreement. The Company's obligations to appoint Parent's designees to the Company Board will be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company will promptly take all actions, and will include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as Section 14(f) and Rule 14f-1 require in order to fulfill its obligations. Parent shall supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. Following the election or appointment of Parent's designees and until the Effective Time, the approval of a majority of the Continuing Directors of the Company then in office who were not designated by Parent shall be required to authorize (and such authorization will constitute the authorization of the Company Board and no other action on the part of the Company, including any action by any other director of the Company, will be required to authorize) any termination of the Merger Agreement by the Company, any amendment of the Merger Agreement requiring action by the Company Board, any extension of time for performance of any obligation or action thereunder by Parent or Purchaser and any waiver of compliance with any of the agreements or conditions contained therein for the benefit of the Company. THE MERGER. The Merger Agreement provides that at the Effective Time, Purchaser will be merged with and into the Company in accordance with Delaware Law, whereupon the separate existence of Purchaser will cease, and the Company will be the surviving corporation (the "Surviving Corporation"). The certificate of incorporation of Purchaser in effect at the Effective Time will be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable law, provided, however, that, at the Effective Time, Article I of such certificate of incorporation will be amended to read as follows: "The name of the corporation is Gibson Greetings, Inc." The bylaws of Purchaser in effect at the Effective Time will be the bylaws of the Surviving Corporation until amended in accordance with applicable law. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of Purchaser at the Effective Time will be the directors of the Surviving Corporation and (ii) the officers of Purchaser at the Effective Time will be the officers of the Surviving Corporation. CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Purchaser or the Company or the holders of any of the following securities: (i) except as described below, each Share outstanding immediately prior to the Effective Time will be converted into the right to receive the Merger Consideration; (ii) each Share held by the Company as treasury stock or owned by Parent or any of its subsidiaries immediately prior to the Effective 20 23 Time will be canceled, and no payment will be made with respect thereto; and (iii) each share of common stock of Purchaser outstanding immediately prior to the Effective Time will be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and will constitute the only outstanding shares of capital stock of the Surviving Corporation. If, during the period between the date of the Merger Agreement and the Effective Time, any change in the outstanding Shares occurs, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period, the cash payable pursuant to the Offer, the Merger Consideration and any other amounts payable pursuant to the Merger Agreement will be appropriately adjusted. If a Liquidation Event occurs (or if more than one such Liquidation Event occurs, with respect to each Liquidation Event), each of the Merger Consideration and the Offer Price will be increased by an amount equal to 30% of any after-tax gain (after giving full effect to any capital loss carry-forward available to the Company, the availability of which is confirmed by the Company's independent accountants) on such Liquidation Event, calculated in accordance with generally accepted accounting principles, divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding Options, whether or not such Options are then vested, that are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on a Liquidation Event will be the cash received by the Company in such sale or disposition (net of any underwriting discounts and other amounts paid by the Company in connection with such sale), but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. COMPANY STOCK OPTION PLANS. The Merger Agreement provides that the Company shall take all actions necessary (which include, but are not limited to, satisfying the requirements of Rule 16b-3(e) promulgated under Section 16 of the Exchange Act, without incurring any liability in connection therewith, and seeking any consents required of holders of Options) to provide that at or immediately prior to the Effective Time, each Option outstanding under any of the Company's Stock Option Plans, whether or not vested or exercisable, will be canceled, and the Company shall pay each holder of any such Option, at or promptly after the Effective Time, for each such Option surrendered an amount in cash determined by multiplying (i) the excess, if any, of the Merger Consideration over the applicable exercise price of such Option by (ii) the number of Shares such holder could have purchased (assuming full vesting of all options) had such holder exercised such Option in full immediately prior to the Effective Time. Prior to the Effective Time, the Company will make any amendments to the terms of the Stock Option Plans deemed necessary by the Company or Parent to give effect to the transactions contemplated above. Except as provided in the Merger Agreement or as otherwise agreed to by the parties, the Company will cause the Stock Option Plans to terminate as of the Effective Time and the Company will ensure that following the Effective Time, no holder of Options or any participant in the Stock Option Plans will have any right to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. STOCKHOLDER MEETING. The Merger Agreement provides that the Company will cause a meeting of the Stockholders (the "Company Stockholder Meeting") to be duly called and held as soon as reasonably practicable after consummation of the Offer for the purpose of voting on the approval and adoption of the Merger Agreement and the Merger, unless Delaware Law does not require a vote of the Stockholders for consummation of the Merger. Subject to the provisions of the Merger Agreement, the Company Board will recommend approval and adoption of the Merger Agreement and the Merger by the Stockholders. The Merger Agreement also provides that, notwithstanding the above, if Parent, Purchaser or any other subsidiary of Parent acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the parties to the Merger Agreement will, at the request of Parent, take all necessary and appropriate action to cause the Merger to be effective as soon as practicable after the acceptance for payment and purchase of Shares pursuant to the Offer without a meeting of Stockholders in accordance with Delaware Law. REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the Company has made representations and warranties as of the date of signing the Merger Agreement with respect to, among other things: (i) its organization, corporate powers and qualifications, (ii) its corporate power and authority to execute, deliver and 21 24 perform the Merger Agreement and, subject to obtaining any necessary Stockholder approval, consummate the transactions contemplated thereby, (iii) the absence of required governmental authorizations for the execution, delivery and performance by the Company of the Merger Agreement and the consummation by the Company of the transactions contemplated thereby, (iv) the absence of conflicts or defaults between the Merger Agreement and the transactions contemplated thereby with the Company's certificate of incorporation or bylaws, laws, statutes, ordinances, rules, regulations, judgments, injunctions, orders or decrees, contracts. licenses, leases, or loans and the absence of required consents, (v) the capitalization of the Company, (vi) the organization, corporate powers and qualifications of the Company's material subsidiaries and the ownership by the Company of its material subsidiaries, (vii) the accuracy of documents filed by the Company with the Commission, (viii) the accuracy of financial statements filed by the Company with the Commission, (ix) the conduct of the business of the Company and the absence of certain events since June 30, 1999, (x) the absence of undisclosed material liabilities, (xi) compliance with laws and court orders, (xii) the absence of litigation, (xiii) the absence of finders fees and commissions (excluding fees and commissions to be paid to J.P. Morgan Securities Inc.) payable in connection with the transactions contemplated by the Merger Agreement, (xiv) certain tax considerations, (xv) employee benefit plans, (xvi) certain environmental matters, (xvii) the Company's action to exempt the Offer, the Merger, the Merger Agreement and the transactions contemplated thereby from the provisions of Section 203 of Delaware Law and Articles V and VI of the Company's certificate of incorporation and the Company's action to render the Rights Agreement inapplicable to the Offer, the Merger and the other transactions contemplated by the Merger Agreement, (xviii) certain intellectual property matters and (xix) the current status of the Company's Year 2000 readiness. The continued accuracy of the representations and warranties of the Company in the Merger Agreement is not a condition to closing either the Offer or the Merger. Pursuant to the Merger Agreement, Parent and Purchaser have made representations and warranties with respect to, among other things, (i) their organization and corporate power, (ii) their corporate power and authority to execute, deliver and perform the Merger Agreement and the transactions contemplated by the Merger Agreement, (iii) the absence of required governmental authorizations for the execution, delivery and performance by Parent and the Purchaser of the Merger Agreement and the consummation by Parent and Purchaser of the transactions contemplated thereby, (iv) the absence of conflicts or defaults between the Merger Agreement and the transactions contemplated thereby with Parent or Purchaser's certificate of incorporation or bylaws, laws, rules, regulations, judgments, injunctions, orders or decrees and the absence of required consents, (v) the absence of finders fees and commissions (excluding fees and commissions to be paid to Wasserstein & Perella & Co., Inc. in connection with the transactions contemplated by the Merger Agreement), and (vi) the availability of funds or borrowing capacity necessary for the transactions contemplated by the Merger Agreement. CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the terms of the Merger Agreement the Company has agreed that during the period from the date of the Merger Agreement until the Effective Time, (i) the Company and its subsidiaries will conduct their business and affairs in the ordinary course consistent with past practice and will use their reasonable best efforts to preserve intact their business organizations and relationships with third parties; (ii) the Company will not amend its certificate of incorporation or bylaws; (iii) the Company will not declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; and neither the Company nor any of its subsidiaries will (y) issue, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or any of its subsidiaries, other than issuances of Shares pursuant to securities, options, warrants, calls, commitments or rights that have been granted at the date of the Merger Agreement and are or become exercisable prior to the Effective Time and previously disclosed to Parent in writing or as set forth in various documents filed with the Commission or (z) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; provided, however, that, the Company is not prohibited from issuing shares, options or warrants to acquire up to 100,000 shares of capital stock of any class of the Company pursuant to its 1999 Incentive Stock Option Plan for a period of ten business days following the date of the Merger Agreement, provided, however, that, no such issuances will be made to the Chief Executive Officer or Chief Financial Officer of the Company and the Company will not be prohibited from taking any action pursuant to the Company's obligations to The Ink Group NZ Limited or The Ink Group Publishers PTY Limited regarding any put rights held by such entities; (iv) the Company will not (y) incur any long-term indebtedness (whether evidenced by a 22 25 note or other instrument, pursuant to a financing lease, sale-leaseback transaction, or otherwise) or incur short-term indebtedness other than under lines of credit existing on the date of the Merger Agreement other than, in each case, to operate the Company's business in the ordinary course or (z) except in the ordinary course of business consistent with past practice, enter into, amend, terminate, renew or fail to use reasonable efforts to renew in any material respect any material contract; (v) except pursuant to employment contracts in effect on the date of the Merger Agreement, neither the Company nor any of its subsidiaries will (x) grant any increase in the compensation or benefits payable or to become payable by the Company or any of its subsidiaries to any employee, (y) adopt, enter into, amend or otherwise increase, or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under any bonus, incentive compensation, deferred compensation, severance, termination, change in control, retention, hospitalization or other medical, life, disability, insurance or other welfare, profit sharing, stock option, stock appreciation right, restricted stock or other equity based, pension, retirement or other employee compensation or benefit plan, program agreement or arrangement, or (z) enter into or amend in any material respect any employment or collective bargaining agreement or, except in accordance with the existing written policies of the Company or existing contracts or agreements, grant any severance or termination pay to any officer, director or employee of the Company or any of its subsidiaries, provided, however, that the Company is not prohibited from taking any action under the Merger Agreement pursuant to its program established by the Rabbi Trust and the related plan; (vi) neither the Company nor its subsidiaries will change the accounting principles used by it unless required by generally accepted accounting principles (or, if applicable with respect to subsidiaries, foreign generally accepted accounting principles); (vii) neither the Company nor any of its subsidiaries will acquire by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, otherwise acquire any assets of any other person (other than the purchase of assets from suppliers or vendors in the ordinary course of business consistent with past practice) for an amount in excess of $10 million, individually or in the aggregate, other than (x) any investment by the Company in EGN necessary to maintain the Company's pro rata investment in EGN or (y) any exercise by the Company of its warrants in EGN; (viii) neither the Company nor any of its subsidiaries will sell, lease, exchange, transfer or otherwise dispose of, or agree to sell, lease, exchange, transfer or otherwise dispose of, any of its assets except (x) pursuant to existing contracts or commitments and (y) in the ordinary course of business consistent with past practice, except that the Company may dispose of in any manner and at any time all or a portion of its interest in EGN, provided, however, that, if the Company disposes of EGN and such disposition is (A) for an aggregate amount less than $30 million or (B) to an affiliate of the Company, then such disposition shall be for an amount at least equal to fair market value of the Company's interest in EGN that is disposed; (ix) the Company and its subsidiaries will not mortgage, pledge, hypothecate, grant any security interest in, or otherwise subject to any other lien on any of its properties or assets, except in connection with the incurrence of indebtedness permitted under the Merger Agreement; (x) neither the Company nor its subsidiaries will compromise, settle, grant any waiver or release relating to or otherwise adjust any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), including any litigation, except for any such compromise, settlement, waiver, release or adjustment in the ordinary course of business consistent with past practice and involving a payment by the Company or any of its subsidiaries not in excess of $250,000 in the aggregate following prior notice to and consultation with Parent; and (xi) neither the Company nor any of its subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing. CONSENTS, APPROVALS AND FILINGS. The Merger Agreement provides that the Company and Parent will use their best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the Merger Agreement, including, without limitation, using their best efforts to cause the conditions to the Offer to be satisfied as soon as reasonably possible and, subject to the terms and conditions of the Merger Agreement, consummating the Offer as soon as possible after such conditions are satisfied or waived. Each of the Parent and Company also agree to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated by the Merger Agreement as promptly as practicable and in any event within ten business days of the date of the Merger Agreement and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take 23 26 all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. In connection with the efforts referenced above to obtain all requisite approvals and authorizations for the transactions contemplated by the Merger Agreement under the HSR Act or any other Antitrust Law (as defined below), each of Parent and Company will use its reasonable best efforts to (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii) keep the other party informed in all material respects of any material communication received by such party from, or given by such party to, the FTC, the Antitrust Division or any other governmental authority and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated by the Merger Agreement and (iii) permit the other party to review any material communication given by it to, and consult with each other in advance of any meeting or conference with, the FTC, the Antitrust Division or any such other governmental authority or, in connection with any proceeding by a private party. Subject to the Confidentiality Agreement, dated as of October 28, 1998 between the Company and Parent (the "Confidentiality Agreement"), covenants by the Parent regarding confidentiality set forth in the Merger Agreement, and any attorney-client, work product or other privilege, each of the parties to the Merger Agreement will coordinate and cooperate fully with the other parties to the Merger Agreement in exchanging such information and providing such assistance as such other parties may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act. Any competitively sensitive information that is disclosed pursuant to the foregoing will be limited to each of Parent's and the Company's respective counsel and economists pursuant to a separate customary confidentiality agreement. For purposes of the Merger Agreement, "Antitrust Law" means the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission Act, and all other federal, state and foreign, if any, statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. The Merger Agreement also provides that each of Parent and the Company shall use its best efforts to resolve such objections if any, as may be asserted with respect to the transactions contemplated by the Merger Agreement under any Antitrust Law. In connection with the foregoing, if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by the Merger Agreement as violative of any Antitrust Law, each of Parent and the Company shall cooperate in all respects with each other and use its respective best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by the Merger Agreement, including, without limitation, vigorously defending in litigation on the merits any claim asserted in any court by any party through a final and nonappealable judgment. If any objections are asserted with respect to the transactions contemplated by the Merger Agreement under any Antitrust Law or if any suit is instituted by any government authority or any private party challenging any of the transactions contemplated by the Merger Agreement as violative of any Antitrust Law, each of Parent and the Company shall use its best efforts to resolve such objections or challenge as such governmental authority or private party may have to such transactions under such Antitrust Law so as to permit consummation of the transactions contemplated by the Merger Agreement. In furtherance and not in limitation of the foregoing, each of Parent and the Company (and, to the extent required by any governmental authority, its respective subsidiaries and affiliates over which it exercises control) shall be required to pursue a resolution with any governmental authority and, if acceptable to any governmental authority, enter into a settlement, undertaking, consent decree, stipulation or other agreement with such governmental authority regarding antitrust matters in connection with the transactions contemplated by the Merger Agreement (each, a "Settlement"). Notwithstanding anything else contained in the Merger Agreement, neither Parent nor the Company will be required to enter into any Settlement that requires Parent and/or the Company to sell or otherwise dispose of assets of Parent and its subsidiaries 24 27 and/or the Company and its subsidiaries (any such action, a "Divestiture") if such Divestiture would have a material adverse effect on the pro forma combined business of Parent and the Company. The Company acknowledged that Parent will lead the process to obtain all necessary waivers, consents and approvals, and to effect all necessary filings under the Antitrust Law, and that Parent's reasonable determination after consultation with the Company as to the appropriate course of action to obtain such waivers, consents and approvals will be final, provided, however, that, the foregoing will not limit in any respect any of the parties' obligations under the Merger Agreement. DIRECTOR AND OFFICER LIABILITY. The Merger Agreement provides that Parent shall cause the Surviving Corporation to do the following: (i) for six years after the Effective Time, indemnify and hold harmless the present and former officers and directors of the Company (each an "Indemnified Person") in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by Delaware Law or any other applicable laws or provided under the Company's certificate of incorporation and bylaws in effect on the date of the Merger Agreement, provided, however, that such indemnification will be subject to any limitation imposed from time to time under applicable law; (ii) for six years after the Effective Time, provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such Indemnified Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date of the Merger Agreement. If Parent, the Surviving Corporation or any of its successors or assigns (x) consolidates with or merges into any other person and will not be the continuing or surviving corporation or entity of such consolidation or merger, or (y) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, will assume the obligations set forth in this provision. The rights of each Indemnified Person under this paragraph will be in addition to any rights such person may have under the certificate of incorporation or bylaws of the Company or any of its subsidiaries, or under Delaware Law or any other applicable laws. These rights will survive consummation of the Merger and are intended to benefit, and will be enforceable by, each Indemnified Person. The Merger Agreement also provides that Parent shall, prior to the Effective Time, provide the Company with pre-paid, irrevocable officers' and directors' liability insurance with a nationally recognized insurance provider with an A.M. Best rating of at least "A", in amounts and for such periods of time as specified above. EMPLOYEE BENEFITS. The Merger Agreement provides that for a period of one year after the Effective Time, Parent will maintain or cause to be maintained employee compensation and benefit plans and arrangements for the benefit of each individual who is an employee of the Company or its subsidiaries as of the Effective Time (each a "Transferred Employee") that are no less favorable to such Transferred Employee than the compensation and benefits provided to the Transferred Employee by the Company and its subsidiaries immediately prior to the Effective Time. Without limiting the generality of the foregoing, (i) for a period of one year after the Effective Time, Parent will maintain or cause to be maintained severance and employment termination benefits no less favorable to each Transferred Employee than the severance and employment termination benefits provided under the plans, policies and practices of the Company and its subsidiaries, immediately prior to the Effective Time, and (ii) for a period of one year after the Effective Time Parent will maintain or cause to be maintained for the benefit of each eligible current and former employee of the Company and its subsidiaries (and his or her eligible domestic partner) the post-retirement medical and life insurance benefits maintained by the Company and its subsidiaries immediately prior to the Effective Time and will make such benefits available to each such individual on a basis no less favorable to such individual than the basis on which such benefits were provided to similarly situated individuals immediately prior to the Effective Date. If Transferred Employees or former employees of the Company or its subsidiaries are included in any benefit plan, policy, or arrangement of Parent or its affiliates such individuals will receive credit for service prior to the Effective Time with the Company and its subsidiaries and their respective predecessors for all purposes to the same extent such service was recognized under any similar Employee Plan (as hereinafter defined) of the Company or its subsidiaries, except that such service will not be counted for purposes of benefit accruals under any defined benefit pension plan to the extent that it would result in a duplication of vested benefits accrued by 25 28 any such individual under any Employee Plan of the Company or its subsidiaries. If Transferred Employees or former employees of the Company or its subsidiaries (or their domestic partners or dependents) are included in any medical, dental or health plan other than the plans they participated in at the Effective Time (a "Successor Plan"), any such Successor Plan will waive pre-existing conditions, to the extent such conditions were not applicable under the Employee Plans of the Company and its subsidiaries, and will provide that any expenses incurred prior to such change will be taken into account under the deductible and out-of-pocket maximums under such Successor Plan. For purposes of the Merger Agreement, "Employee Plan" means any material, written "employee benefit plan," as defined in Section 3(3) of ERISA, or employment, severance or similar contract or other plan providing for severance benefits, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, health, medical or disability benefits which is maintained, administered or contributed to by the Company or any ERISA Affiliate and covers any employee or former employee of the Company or any subsidiary, or with respect to which the Company or any subsidiary has any liability. For purposes of the Merger Agreement, "ERISA Affiliate" of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986. NO SOLICITATION. The Merger Agreement provides that from the date of the Merger Agreement until the acceptance for payment by Purchaser of the Shares tendered into the Offer or the earlier termination of the Merger Agreement, the Company will not, and will cause its subsidiaries and the officer, directors, investment bankers, attorneys, accountants, consultants or other agents or advisors of the Company and its subsidiaries not to (i) take any action (A) to solicit or (B) for the primary purpose of initiating or encouraging the submission of any Acquisition Proposal (as hereinafter defined), (ii) engage in substantive discussions or negotiations with, or disclose any material nonpublic information relating to the Company or any of its subsidiaries or afford access to the properties, books or records of the Company or any of its subsidiaries to, any person who the Company should reasonably be expected to know is considering making, or has made and Acquisition Proposal or (iii) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage any effort or attempt by any other person, in each case, for the primary purpose of making any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Offer, the Merger or any other transaction contemplated by the Merger Agreement. The Company will notify Parent promptly after receipt by the Company (or any of its advisors) of any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its subsidiaries or for access to the properties, books or records of the Company or any of its subsidiaries by any person who the Company should reasonably be expected to know is considering making, or has made, an Acquisition Proposal. The Company will, and will cause its subsidiaries and the directors, officers and other agents of the Company and its subsidiaries to, cease immediately and cause to be terminated all discussions and negotiations with any persons conducted prior to the date of the Merger Agreement with respect to any Acquisition Proposal. Nothing contained in the Merger Agreement will prevent the Company Board from complying with Rule 14e-2 under the Exchange Act with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the acceptance for payment by Purchaser of the Shares tendered in the Offer the Company may, if it gives Parent notice of its intention to do so, negotiate or otherwise engage in substantive discussions with, and furnish nonpublic information to, any person who delivers an unsolicited Superior Proposal (as hereinafter defined) if (i) the Company, among other things, notifies Parent promptly after its receipt of any Acquisition Proposal, (ii) the Company Board determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to take such action could create a reasonable possibility of a breach of the fiduciary duties of the Company Board under applicable law, and (iii) such person executes a confidentiality agreement with the Company not more favorable to the recipient of such information than the Confidentiality Agreement. For the purposes of the Merger Agreement, an "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, a merger, consolidation, tender offer, share exchange, business combination, reorganization, recapitalization or other similar transaction involving the Company or any of its subsidiaries or any proposal or offer to acquire, directly or indirectly, any equity interest in, any voting securities of, or a substantial portion of the assets of, the Company or any of its subsidiaries, other than (i) the transactions 26 29 contemplated by the Merger Agreement and (ii) any transaction involving EGN. For purposes of the Merger Agreement, a "Superior Proposal" means any bona fide, unsolicited written Acquisition Proposal for at least a majority of the outstanding Shares on terms that the Company Board determines in good faith by a majority vote, on the basis of the advice of a financial advisor of nationally recognized reputation and taking into account all the terms and conditions of the Acquisition Proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, (i) is more favorable to all the Company's stockholders than as provided under the Merger Agreement, (ii) is reasonably capable of obtaining any required financing and (iii) is reasonably capable of being completed. The Company Board will be permitted to withdraw, or modify in a manner adverse to Parent, its recommendation to the Stockholders under the Merger Agreement if the Company Board determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that an Acquisition Proposal is a Superior Proposal and that failure to take such action could create a reasonable possibility of a breach of the fiduciary duties of the Company Board under applicable law. STANDSTILL AND CONFIDENTIALITY AGREEMENTS. The Merger Agreement provides that during the period from the date of the Merger Agreement through the Effective Time, the Company will not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement for the benefit of the Company or any of its subsidiaries, other than the Confidentiality Agreement pursuant to its terms or by written agreement of the parties thereto, provided, however, that the Company may take such action if the Company Board determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of breach of the fiduciary duties of the Company Board under applicable law, and provided, further, however, that this provision will not apply to any confidentiality agreement that is not related to, or does not arise from, an Acquisition Proposal. RIGHTS AGREEMENT AND ANTI-TAKEOVER PROVISIONS. The Merger Agreement provides that the Company Board will take all further action reasonably requested in writing by Parent (including redeeming the Rights immediately prior to the Effective Time or further amending the Rights Agreement) in order to render the Rights Agreement inapplicable to the Offer and the Merger and the other transactions contemplated thereby to the extent provided therein and in the Rights Agreement. Except as described above with respect to the Offer, the Merger and the other transactions contemplated by the Merger Agreement or approved in writing by Parent, the Company Board of Directors will not (i) amend the Rights Agreement, (ii) redeem the Rights or (iii) take any action with respect to, or make any determination under, the Rights Agreement to facilitate an Acquisition Proposal, provided, however, that the Company may take such action if the Company Board determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of a breach of its fiduciary duties under applicable law. In addition, except as otherwise provided in the Merger Agreement, the Company will not approve an Acquisition Proposal, other than the Offer, the Merger and the other transactions contemplated by the Merger Agreement, for purposes of Section 203 of Delaware Law or Article VI of the Company's Certificate of Incorporation, provided, however, that the Company may take such action if the Company Board determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of a breach of its fiduciary duties under applicable law. CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective obligations of each party to effect the Merger will be subject to the satisfaction of the following conditions: (i) if required by Delaware Law, the Merger Agreement shall have been approved and adopted by the Stockholders in accordance with such law; (ii) no injunction shall have been issued and remain in effect which restrains consummation of the Merger; and (iii) the number of Shares tendered pursuant to the Offer and not withdrawn, together with the Shares then owned by Parent, satisfies the Minimum Condition and the Purchaser has accepted for payment and paid for such Shares. The Merger Agreement further provides that the respective obligation of each of Parent and Purchaser to effect the Merger will be subject to the satisfaction or waiver, prior to the Effective Time, of the additional 27 30 condition that the Company shall have performed in all material respects is obligations with respect to the election or appointment of Parent's designees to the Company Board, as described above. TERMINATION AND FEES. The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of the Merger Agreement by the Stockholders): (i) by mutual written agreement of the Company and Parent; (ii) by either the Company or Parent, if, (A) the Offer has not been consummated on or before 18 months after the date of the Merger Agreement, provided, however, that (x) the right to terminate the Merger Agreement pursuant to this clause (A) will not be available to any party whose breach of any provision of the Merger Agreement results in the failure of the Offer to be consummated by such time and (y) such 18 month period will be extended for the time period equal to the time period beyond ten business days during which either the Company or Parent fails to make an HSR Filing as described above, (B) within ten days following satisfaction of all other conditions to the Offer, the Minimum Condition has not been satisfied, provided, however, that, such ten day period will be extended for a period to allow for the extension of the Expiration Date for an increase in the Offer Price and as may be required by the Commission, (C) a permanent injunction which is final and nonappealable shall have been issued restraining or otherwise prohibiting consummation of the Merger or any of the other transactions contemplated by the Merger Agreement, provided, however, that the party seeking to terminate the Merger Agreement pursuant to this clause (C) shall have used all efforts to prevent the entry of such permanent injunction or (D) the other party has breached or failed to perform in all material respects any of its obligations described above in the section above entitled "Consents, Approvals and Filings," on or prior to such time, provided, however, that, such party shall have failed to substantially cure such failure to perform within a reasonable time after being notified of such failure to perform; (iii) by Parent, if, after the date of the Merger Agreement and prior to the acceptance for payment of the Shares under the Offer: (A) the Company Board shall have withdrawn, or modified in a manner materially adverse to Parent, its approval or recommendation of the Merger Agreement, the Offer or the Merger, or shall have recommended an Acquisition Proposal other than by Parent or its affiliates, (B) the Company Board shall have (x) amended the Rights Agreement to facilitate an Acquisition Proposal or (y) terminated or redeemed the Rights, except in each case as is necessary to render the Rights Agreement inapplicable to the Offer and the Merger and the other transactions contemplated by the Merger Agreement (or any other Acquisition Proposal by Parent or its affiliates) or as directed by Parent pursuant to the Merger Agreement, (C) the Company Board shall have taken action under Section 203 of Delaware Law or Article VI of the Company's Certificate of Incorporation to approve any transaction other than the Offer and the Merger and the other transactions contemplated thereby (or any other Acquisition Proposal by Parent or its affiliates), or (D) the Company shall have breached or failed to perform any of its obligations under the Merger Agreement required to be performed on or prior to such time or any of the representations and warranties of the Company under the Merger Agreement shall fail to be accurate as of the date made, provided, however, that in each such case, (x) the Company shall have failed to substantially cure such breach, failure to perform or inaccuracy within a reasonable time after being notified by Parent of such breach, failure to perform or inaccuracy and (y) such breach, failure to perform or inaccuracy would have, individually or in the aggregate, a Material Adverse Effect on the Company; and (iv) by the Company, if, prior to the acceptance for payment of the Shares under the Offer the Company Board shall have recommended, or entered into an agreement with respect to, a Superior Proposal. The party desiring to terminate the Merger Agreement as described above (other than pursuant to clause (i) above) must give notice of such termination to the other party. Termination by the Company as described in clause (iv) above will not be effective unless and until the Company has paid to Parent the fee described below. Termination by Parent as described in clauses (i), (ii)(A), (ii)(C), (ii)(D) or (iii)(D) above will not be effective unless and until Parent has paid, or caused the Escrow Agent (as hereinafter defined) to pay, to the Company the fee described below. In the Merger Agreement, the Company has agreed to pay Parent a fee in immediately available funds equal to $7 million concurrently with the termination of the Merger Agreement if the Merger Agreement is terminated by Parent pursuant to the events described in clauses (iii)(A), (iii)(B) or (iii)(C) of the second preceding paragraph or by the Company pursuant to the events described in clause (iv) of the second preceding paragraph; provided, however, that Parent or Purchaser is not in breach of its representations and warranties under the 28 31 Merger Agreement and has not failed to perform in all material respects each of its obligations under the Merger Agreement. In the Merger Agreement, Parent has agreed to pay, or cause to be paid to, the Company a fee in immediately available funds equal to $20 million simultaneously with the termination of the Merger Agreement if the Merger Agreement is terminated as a result of the occurrence of any of the events described in clauses (i), (ii)(A), (ii)(C), (ii)(D) or (iii)(D) of the third preceding paragraph; provided, however, that, at the time of such termination, the applicable waiting period under the HSR Act shall not have expired or been terminated and the FTC, the Antitrust Division or any other person shall not be challenging by litigation or otherwise any of the transactions contemplated by the Merger Agreement. Concurrently with the signing of the Merger Agreement, Parent delivered the $20 million termination fee to The Bank of New York (the "Escrow Agent") to be held, invested and disbursed by the Escrow Agent as provided in the Escrow Agreement, dated as of November 2, 1999, between the Company and the Escrow Agent. EXPENSES. Except as described below, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such cost or expense. Whether or not the transactions contemplated by the Merger Agreement are consummated, Parent has agreed to pay all costs and expenses incurred by the Company or its subsidiaries in connection with the Merger Agreement arising from the HSR Act review and the Company's obligations described in the section above entitled "Consents, Approvals and Filings," including, without limitation, all costs and expenses related to prior antitrust analyses undertaken by the Company and its advisors in connection with the transactions contemplated by the Merger Agreement since October 1, 1998, preparing and filing the Notifications and Report Form pursuant to the HSR Act, responding to a second request issued under the HSR Act, preventing the entry of any injunction, appealing any such injunction, obtaining all necessary consents, approvals or waivers from any government authorities, opposing vigorously any litigation or administrative proceeding relating primarily to antitrust aspects of the Merger Agreement or the transactions contemplated thereby or otherwise complying with any Antitrust Law. Parent shall promptly pay such costs and expenses as they are incurred by the Company, provided, however, that, Parent's obligation to pay such costs and expenses will not exceed in the aggregate $2.5 million. RABBI TRUST. Concurrently with the signing of the Merger Agreement, Parent contributed cash in the amount of $10 million to the Rabbi Trust, which was established by the Company to fund the compensation and benefits to be provided to employees of the Company and its subsidiaries under incentive arrangements designed and adopted by the Company. The incentives will reward certain specified employees of the Company who remain with the Company through the Effective Time, facilitating the Company's continued operation of its business during the period before the Effective Time. CONFIDENTIALITY. The Merger Agreement provides that prior to the Effective Time and after any termination of the Merger Agreement and for two years thereafter, Parent will hold, and will use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents (including, without limitation, any economists employed by Parent to assist in its antitrust review of the Offer, the Merger and the transactions contemplated thereby) to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Company or any of its subsidiaries furnished to Parent or its affiliates in connection with the transactions contemplated by the Merger Agreement, including, without limitation, the stockholder lists furnished by the Company to Parent, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Parent, (ii) in the public domain through no fault of Parent or (iii) later lawfully acquired by Parent from sources other than the Company, provided, however, that Parent may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by the Merger Agreement so long as Parent informs such persons of the confidential nature of such information and directs them to treat it confidentially. Parent and its affiliates will satisfy their obligation to hold any such information in confidence if they exercise the same care with respect to such information as a reasonable person would take to preserve the confidentiality of their own similar information under similar circumstances. If the Merger Agreement is terminated, Parent and its affiliates will, and will use their best efforts to cause their officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Company, upon request, all documents and other materials, and 29 32 all copies thereof, that Parent or its affiliates obtained, or that were obtained on their behalf, from the Company or any of its subsidiaries in connection with the Merger Agreement and that are subject to such confidence. Notwithstanding anything therein to the contrary, the terms of the Confidentiality Agreement executed by Parent will remain in full force and effect. AMENDMENTS AND WAIVERS. The Merger Agreement provides that any provision of the Merger Agreement may be amended or waived prior to the Effective Time, if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective, provided, however, that, after the adoption of the Merger Agreement by the Stockholders and without their further approval, no such amendment or waiver will reduce the amount or change the kind of consideration to be received in exchange for the Shares. THIRD PARTY BENEFICIARIES. Except with respect to any Indemnified Person, no provision of the Merger Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities thereunder upon any person other than the parties thereto and their respective successors and assigns. OTHER MATTERS EFFECTS OF INABILITY TO CONSUMMATE THE MERGER. Pursuant to the Merger Agreement, following the consummation of the Offer and subject to certain other conditions, Purchaser will be merged with and into the Company. If, following the Offer, approval of the Stockholders is required by applicable law in order to consummate the Merger of Purchaser with the Company, the Company will submit the Merger to the Stockholders for approval. If the Merger is submitted to the Company's Stockholders for approval, the Merger will require the approval of the holders of a majority of the outstanding Shares, including the Shares owned by Purchaser. If the Offer is consummated, and the Minimum Condition is satisfied without being reduced or waived, Purchaser will be able to approve the Merger without the vote of any other Stockholder. If the Merger is consummated, Stockholders who elected not to tender their Shares in the Offer will receive the same amount of consideration in exchange for each Share as they would have received in the Offer, subject to their rights to exercise dissenters' rights. If, following the consummation of the Offer, the Merger is not consummated, Parent, which owns 100% of the Common Stock of Purchaser, indirectly will control the number of Shares acquired by Purchaser pursuant to the Offer. Under the Merger Agreement, promptly following payment by Purchaser for Shares purchased pursuant to the Offer, and from time to time thereafter, subject to applicable law, the Company has agreed to take all actions necessary to cause a majority of the directors of the Company selected by Parent to consist of persons designated by Parent (whether, by election or by the resignation of existing directors and causing Parent designees to be elected). As a result of its ownership of such Shares and right to designate nominees for election to the Company Board, Parent indirectly will be able to influence decisions of the Board and the decisions of Purchaser as a Stockholder of the Company. This concentration of influence in one Stockholder may adversely affect the market value of the Shares. If Parent controls more than 50% of the outstanding Shares following the consummation of the Offer but the Merger is not consummated, Stockholders of the Company, other than those affiliated with Parent, will lack sufficient voting power to elect directors or to cause other actions to be taken that require majority approval. If for any reason following completion of the Offer, the Merger is not consummated, Parent and Purchaser reserve the right, subject to its standstill agreement with the Company (as amended by the Merger Agreement) and to any applicable legal restrictions, to acquire additional Shares through private purchases, market transactions, tender or exchange offers or otherwise on terms and at prices that may be more or less favorable than those of the Offer or, subject to any applicable legal restrictions, to dispose of any or all Shares acquired by Parent and Purchaser. STATUTORY REQUIREMENTS. In general, under Delaware Law a merger of two Delaware corporations requires the adoption of a resolution by the board of directors of each of the corporations desiring to merge approving an Agreement of Merger containing provisions with respect to certain statutorily specified matters and the approval of such Agreement of Merger by the stockholders of each corporation by the affirmative vote of the holders of a majority of all the outstanding shares of stock entitled to vote on such merger. According to the Company's 30 33 Certificate of Incorporation, the Shares are the only securities of the Company that entitle the holders thereof to voting rights. Delaware Law also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if as a result of the Offer or otherwise Purchaser acquires or controls the voting power of at least 90% of the Shares, Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. If the Merger is consummated, however, Stockholders who have not tendered their Shares will have certain rights under Delaware Law to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Stockholders who perfect such rights by complying with the procedures set forth in Section 262 of Delaware Law ("Section 262") will have the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) determined by the Delaware Court of Chancery and will be entitled to receive a cash payment equal to such fair value from the Surviving Corporation. In addition, such dissenting Stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, the court is required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset values and earning capacity. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. The Weinberger court also noted that under Section 262, fair value is to be determined "exclusive of any element of value arising from the accomplishment or expectation of the merger." In Cede & Co. v. Technicolor, Inc., however, the Delaware Supreme Court stated that, in the context of a two-step cash merger, "to the extent that value has been added following a change in majority control before cash-out, it is still value attributable to the going concern," to be included in the appraisal process. As a consequence of the foregoing, the fair value determined in any appraisal proceeding could be the same as or more or less than the Offer Price. Parent does not intend to object, assuming the proper procedures are followed, to the exercise of appraisal rights by any Stockholder and the demand for appraisal of, and payment in cash for the fair value of, the Shares. Parent intends, however, to cause the Surviving Corporation to argue in an appraisal proceeding that, for purposes of such proceeding, the fair value of each Share is less than the price paid in the Merger. In this regard, Stockholders should be aware that opinions of investment banking firms as to the fairness from a financial point of view (including J.P. Morgan Securities Inc. opinion described herein) are not necessarily opinions as to "fair value" under Section 262. Several decisions by Delaware courts have held that, in certain circumstances, a controlling stockholder of a company involved in a merger has a fiduciary duty to other stockholders that requires that the merger be "entirely fair" to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there was fair dealing among the parties. The Delaware Supreme Court stated in Weinberger and in Rabkin v. Philip A. Hunt Chemical Corp. that although the remedy ordinarily available to minority stockholders in a cash-out merger that is found to be not fair to the minority stockholders is the right to appraisal described above, monetary damages, injunctive relief or such other relief as the court may fashion may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER DELAWARE LAW DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE UNDER DELAWARE LAW. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW. 31 34 GOING PRIVATE TRANSACTIONS. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining Shares not held by it. However, Purchaser believes that Rule 13e-3 will be inapplicable because it is anticipated that (i) the Shares will be deregistered under the Exchange Act prior to the Merger or other business combination or (ii) the Merger or other business combination will be consummated within one year after the purchase of the Shares pursuant to the Offer and the amount paid per Share in the Merger or other business combination is at least equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information regarding the Company and certain information regarding the fairness of the Merger and the consideration offered to minority Stockholders be filed with the Commission and disclosed to minority Stockholders prior to consummation of the Merger. 13. DIVIDENDS AND DISTRIBUTIONS If, during the period between the dates of this Agreement and the Effective Time, any change in the outstanding Shares occurs, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period, the cash payable pursuant to the Offer, the Merger Consideration and any other amounts payable pursuant to this Agreement will be appropriately adjusted. The Merger Agreement provides that, the Company will not declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; and neither the Company nor any of its subsidiaries will (i) issue, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or any of its subsidiaries, other than issuances of Shares pursuant to securities, option, warrants, calls, commitments or rights that have been granted at the date hereof and are or become exercisable prior to the Effective Time and previously disclosed to Parent in writing or as set forth in the Company's SEC filings or (ii) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; provided, however, that this paragraph will not prohibit the Company from (A) issuing shares, options or warrants to acquire up to 100,000 shares of capital stock of any class of the company pursuant to its 1999 Incentive Stock Option Plan for a period of 10 business days following the date of the Merger Agreement; provided, however, that, no such issuances will be made to the Chief Executive Officer or Chief Financial Officer of the Company or (B) taking any action pursuant to the Company's obligations to The Ink Group NZ Limited or The Ink Group Publishers PTY Limited regarding any put rights held by such entities. If on or after the date of the Merger Agreement the Company declares or pays any dividend on the Shares or any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to Stockholders of record on a date prior to the transfer into the name of Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer, and if Shares are purchased in the Offer, then, without prejudice to Purchaser's rights under Section 14, (i) the Offer Price will be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution, issuance, proceeds or rights to be received by the tendering stockholders will (A) be received and held by the tendering stockholders for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering Stockholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer or (B) at the direction of Purchaser, be exercised for the benefit of Purchaser, in which case the proceeds of such exercise will promptly be remitted to Purchaser. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution, issuance, proceeds or rights and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by Purchaser in its sole discretion. 32 35 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer or the Merger Agreement, Parent and Purchaser will not be required to accept for payment any Shares if prior to the expiration date of the Offer, any of the following conditions exist: (a) an injunction shall have been issued and remain in effect that restrains consummation of the Offer; (b) the Company shall have breached or failed to perform in all material respects any of its obligations under the Merger Agreement required to be performed on or prior to such time or any of the representations and warranties of the Company under the Merger Agreement fails to be accurate as of the date made; provided, however, that, such breach, failure to perform or inaccuracy would have, individually or in the aggregate, a material adverse effect (i) on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole or (ii) on the ability of the Company to perform its obligations under or to consummate the transactions contemplated by the Merger Agreement; (c) the applicable waiting period under the HSR Act relating to the Merger shall not have expired or been terminated; (d) the number of Shares tendered pursuant to the Offer and not withdrawn, together with the Shares then owned by Parent, represents less than a majority of the Shares outstanding on a fully-diluted basis (assuming the exercise of all outstanding options that are exercisable and in-the-money at the Offer Price); or (e) the Merger Agreement shall have been terminated in accordance with its terms. A public announcement may be made of a material change in, or waiver of, such conditions and the Offer may, in certain circumstances, be extended in connection with any such change or waiver. Purchaser acknowledges that the Commission believes that (i) if Purchaser is delayed in accepting the Shares it must either extend the Offer or terminate the Offer and promptly return the Shares and (ii) the circumstances in which a delay in payment is permitted are limited and do not include unsatisfied conditions of the Offer, except with respect to most required regulatory approvals. 15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS Except as described in this Offer To Purchase, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, but without any independent investigation, neither Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of Shares as contemplated in this Offer To Purchase or of any approval or other action by any governmental authority that would be required for the acquisition or ownership of Shares by Purchaser as contemplated in this Offer To Purchase. Should any such approval or other action be required, Purchaser and Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." There can be no assurance, however, that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 above for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States (including Delaware where the Company is incorporated and Ohio where the Company has its headquarters) have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, Stockholders, executive offices or places of business in those states. To the extent that certain provisions of certain of these state takeover statutes purport to apply to the Offer or the Merger, Parent and Purchaser believe that such laws conflict with federal law and constitute an unconstitutional burden on interstate commerce. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Act, which, as a matter of state securities law, made certain corporate acquisitions more difficult. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target 33 36 corporation without prior approval of the remaining Stockholders, provided that the laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a Federal district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Sections 1707.01, 1707.041, and 1707.042 of the Ohio Revised Code (collectively, the "Ohio Take-Over Act") regulate tender offers for any equity security of a subject company from a resident of Ohio if, after the purchase, the offeror would directly or indirectly be the beneficial owner of more than 10% of any class of issued and outstanding equity securities of such company (a "control bid"). A subject company includes an issuer, such as the Company, that either has its principal place of business or principal executive offices located in Ohio or owns or controls assets located in Ohio that have a fair market value of at least $1.0 million, and that has more than 10% of its beneficial or record equity security holders resident in Ohio, or has more than 10% of its equity securities owned, beneficially or of record, by residents in Ohio, or has 1,000 beneficial or record equity security holders who are resident in Ohio. A subject company, however, need not be incorporated in Ohio. The Ohio Take-Over Act prohibits an offeror from making a control bid for securities of a subject company pursuant to a tender offer until the offeror has filed specified information with the Ohio Division of Securities (the "Ohio Division"). In addition, the offeror is required to deliver a copy of such information to the subject company not later than the offeror's filing with the Ohio Division and to send or deliver such information and the material terms of the proposed offer to all offerees in Ohio as soon as practicable after the offeror's filing with the Ohio Division. Within five calender days of such filing, the Ohio Division may, by order, summarily suspend the continuation of the control bid if it determines that the offeror has not provided all of the specified information or that the control bid materials provided to offerees do not provide full disclosure of all material information concerning the control bid. If the Ohio Division summarily suspends a control bid, it must schedule and hold a hearing within 10 calendar days of the date on which the suspension is imposed and must make its determination within three calendar days after the hearing has been completed but no later than 14 calendar days after the date on which the suspension is imposed. The Ohio Division may maintain its suspension of the continuation of the control bid if, based upon the hearing, it determines that all of the information required to be provided by the Ohio Take-Over Act has not been provided by the offeror, that the control bid materials provided to offerees do not provide full disclosure of all material information concerning the control bid, or that the control bid is in material violation of any provision of the Ohio securities laws. If, after the hearing, the Ohio Division maintains the suspension, the offeror has the right to correct the disclosure and other deficiencies identified by the Ohio Division and to reinstitute the control bid by filing new or amended information pursuant to the Ohio Take-Over Act. Purchaser has filed the information required under the Ohio Take-Over Act. Other than as described in this Offer To Purchase, Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer or the Merger although, pursuant to the Merger Agreement, the Company has represented that the Company Board has taken appropriate action to render Section 203 of Delaware Law inapplicable to the Offer, the Merger and the transactions contemplated by the Merger Agreement. Purchaser reserves the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Merger, and nothing in this Offer To Purchase nor any action taken in connection herewith is intended as a waiver of that right. In the event that it is asserted that one or more state takeover statutes apply to the Offer or the Merger, and it is not determined by an appropriate court that such statute or statutes do not apply or are invalid as applied to the Offer or the Merger, as applicable, Purchaser may be required to file certain documents with, or receive approvals from, the relevant state authorities, and Purchaser might be unable to accept 34 37 for payment or purchase Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer. In such case, Purchaser may not be obligated to accept for purchase, or pay for, any Shares tendered. See Section 14. ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares under the Offer may be consummated following the expiration of a 15-calendar-day waiting period following the filing by Purchaser of a Notification and Report Form with respect to the Offer, unless Purchaser receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Such filing is expected to be filed as promptly as practicable after commencement of the Offer. If, however, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Purchaser concerning the Offer, the waiting period will be extended and would expire 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Purchaser with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, the waiting period may be extended only by court order or with the consent of Purchaser. In practice, complying with a request for additional information or documentary material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while the negotiations continue. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as Purchaser's proposed acquisition of the Company. At any time before or after Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by Purchaser or the divestiture of substantial assets of Purchaser or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. While Parent and Purchaser believe that the Offer and the Merger do not involve a violation of antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result of that challenge. See Section 14 for certain conditions to the Offer, including conditions with respect to an injunction. In the Merger Agreement, Parent and the Company have agreed to use their best efforts to consummate the transactions contemplated by the Merger Agreement as soon as possible, including making the HSR Filing. Parent and the Company have also agreed to use their reasonable best efforts to cooperate with each other in connection with the HSR Filing and any investigation or other inquiry initiated by the Antitrust Division or the FTC and any proceeding initiated by a private party. Parent and the Company have also agreed to use their best efforts to resolve objections or challenges to the consummation of the transactions contemplated the Merger Agreement, including, entering into a settlement, undertaking, consent decree, stipulation or other agreement, provided, however, that neither Parent nor the Company will be required to enter into any resolution that requires a Divestiture if such Divestiture would have a material adverse effect on the pro forma combined business of Parent and the Company. See the discussion entitled "The Merger Agreement--Consents, Approvals and Filings" in Section 12 of this Offer To Purchase. Foreign Approvals. According to publicly available information, the Company conducts business in a number of other foreign countries and jurisdictions. In connection with the acquisition of the Shares pursuant to the Offer or the Merger, the laws of certain of those foreign countries and jurisdictions may require the filing of information with, or the obtaining of the approval or consent of, governmental authorities in such countries and jurisdictions. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of the Shares pursuant to the Offer or the Merger. If such approvals or consents are found to be required, the parties intend to make the appropriate filings and applications. In the event such a filing or application is made for the requisite foreign approvals or consents, there can be no assurance that such approvals or consents will be granted and, if such approvals or consents are received, there can be no assurance as to the date of such approvals or consents. In addition, there can be no assurance that Purchaser will be able to cause 35 38 the Company or its subsidiaries to satisfy or comply with such laws or that compliance or noncompliance will not have adverse consequences for the Company or any subsidiary after purchase of the Shares pursuant to the Offer or the Merger. 16. FEES AND EXPENSES Wasserstein Perella & Co., Inc. is acting as Dealer Manager in connection with the Offer and as financial advisor to Parent in connection with Parent's proposed acquisition of the Company, for which services Wasserstein Perella & Co., Inc. will receive customary compensation. In addition, Parent has agreed to reimburse Wasserstein Perella & Co., Inc. for its reasonable expenses incurred in rendering its services (including reasonable legal expenses) under its engagement agreement with Parent and has agreed to indemnify Wasserstein Perella & Co., Inc. against certain liabilities and expenses in connection with the Offer and the Merger, including certain liabilities under the federal securities laws. In the ordinary course of its business, Wasserstein Perella & Co., Inc. engages in securities trading, market-making and brokerage activities and may, at any time, hold long or short positions and may trade or otherwise effect transactions in securities of the Company and Parent. Corporate Investor Communications, Inc. has been retained by Purchaser as Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee Stockholders to forward material relating to the Offer to beneficial owners of Shares. Purchaser will pay the Information Agent reasonable and customary compensation for all such services in addition to reimbursing the Information Agent for reasonable out-of-pocket expenses in connection therewith. In addition, First Chicago Trust Company of New York has been retained as the Depositary. Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, will reimburse the Depositary for its reasonable out-of-pocket expenses in connection therewith and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as set forth above, neither Parent nor Purchaser will pay any fees or commissions to any broker dealer or other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by Parent or Purchaser for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) Stockholders residing in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of the jurisdiction. However, Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to Stockholders in that jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers that are licensed under the laws of the jurisdiction. Purchaser has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-1 under the Exchange Act containing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments to the Schedule 14D-1, including exhibits, may be examined and copies may be obtained from the principal office of the Commission in the manner set forth in Section 8 above (except that they will not be available at the regional offices of the Commission). NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 36 39 Neither the delivery of the Offer To Purchase nor any purchase pursuant to the Offer will under any circumstances create any implication that there has been no change in the affairs of Parent, Purchaser, the Company or any of their respective subsidiaries since the date as of which information is furnished or the date of this Offer To Purchase. GRANITE ACQUISITION CORP. November 9, 1999 37 40 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The following table sets forth the name, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Parent. Unless otherwise indicated below, (i) each individual has held his or her positions with Parent for more than the past five years, (ii) the business address of each person is One American Road, Cleveland, Ohio 44144 and (iii) all directors and officers listed below are citizens of the United States. Directors are identified by an asterisk.
PRESENT PRINCIPAL OCCUPATION OR NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY ---- ------------------------------------------- *Scott S. Cowen Dr. Cowen's principal occupation is President of Tulane University. Prior to that Dr. Cowen served as Dean and Albert J. Weatherhead, III Professor of Management, Weatherhead School of Management at Case Western Reserve University. Dr. Cowen serves as a director of JoAnn Stores, Inc. (specialty store retailer), Forest City Enterprises, Inc. (conglomerate corporation engaged in real estate development, sales, investment, construction and lumber wholesale) and Newell-Rubbermaid Incorporated (consumer home products). *Edward Fruchtenbaum Mr. Fruchtenbaum is President and Chief Operating Officer of Parent, a position he has held for more than five years. Mr. Fruchtenbaum is on the boards of INROADS/Northeast Ohio, Inc., Gilmour Academy, Cleveland Playhouse and The National Conference Board (non-profit organizations). *Stephen R. Hardis Mr. Hardis' principal occupation is Chairman and Chief Executive Officer of Eaton Corporation, (manufacturer of highly engineered products that serve industrial, vehicle, construction, commercial and semiconductor markets). Before joining Easton in 1979, Mr. Hardis served as Executive Vice president of Finance and Planning for Sybron Corporation (health equipment supplies and services) and prior to that he was associated with General Dynamics Corporation (industrial) aerospace manufacturer). Mr. Hardis is a member of the boards of KeyCorp (holding company for Key Bank), Lexmark International Corporation (a spin-off of IBM's printer business), Marsh & McLennon Companies, Inc. (holding company providing services in the risk and insurance services, investment and management consulting fields), Nordson Corporation (industrial painting system manufacturer) and Progressive Corporation (holding company of Progressive Insurance Company and other companies). He also serves as a director of the Cleveland Clinic Foundation (hospital) and is a trustee of the Musical Arts Association (Cleveland Orchestra), Leadership Cleveland, Playhouse Square, Foundation, Greater Cleveland Roundtable and Cleveland Tomorrow (non-profit organizations).
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PRESENT PRINCIPAL OCCUPATION OR NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY ---- ------------------------------------------- *Harriet Mouchly-Weiss Mrs. Mouchly-Weiss is founder and managing partner of Strategy XXI (corporate communications). Before founding Strategy XXI, she was President of the GCI Group International, an international public relations and marketing agency. She also served as Chairman of Ruder Finn & Rotman International Partners, an independent public relations firm. She is a director of Viisage Technology, Inc. (developer of personal security and identification systems), a division of LAU Technologies, Foundation of the Committee of 200, Friends of the United Nations, American Academy of Rome, Chinese Foundation of Culture and Arts for Children, Abraham Fund and Israel Policy Forum (professional, educational and charitable organizations. *Albert B. Ratner Mr. Ratner's principal occupation is Co-Chairman of the Board, Chief Executive Officer and President of Forest City Enterprises, Inc. (conglomerate corporation engaged in real estate development, sales, investment, construction and lumber wholesale) and an officer of its various subsidiary companies. He is also a director of RPM, Inc. (manufacturer and marketer of protective coatings). *James C. Spira Mr. Spira's principal occupation is managing partner and director of Diamond Technology Partners, Inc., (technology management consulting firm). Before joining Diamond Technology Partners, he co-founded Cleveland Consulting Associates, serving as President and Chief Executive Officer from 1974 until 1989. Mr. Spira serves as a director of New Media, Inc. (information technology consulting) and is a member of the advisory board of Progressive Insurance Company's National Accounts Division (specialty property-casualty insurer). *Harry H. Stone Mr. Stone's principal occupation is President of the Courtland Group, Inc. (investments, property and business development and management) and a general partner in partnerships that own and manage The Residence Inn by Marriott Cleveland at Beachwood, Middleburg Heights, Rockside and Westlake, Ohio locations. He is a trustee of the Cleveland Rotary Foundation and is Trustee Emeritus of Educational Television Association of Metropolitan Cleveland, Jewish Community Federation of Cleveland and Brandeis University (non-profit organizations). *Irving I. Stone Mr. Stone's principal occupation is Founder-Chairman of Parent, a position he has held for more than five years, and Chairman of the Executive Committee. He also serves as a director for Liberty Mutual Insurance Company (health and life insurance company). *Morry Weiss Mr. Weiss' principal occupation is Chairman and Chief Executive Officer of Parent, a position he has held for more than five years. He also serves as a director of National City Corporation (holding company of National City Bank -- Cleveland and other banks) and is a member of the advisory board of Primus Venture Partners (equity investor in companies requiring growth capital). Michael B. Birkholm Vice President, Manufacturing from 1994 until becoming Senior Vice President in 1998. Dale A. Cable Vice President and Treasurer.
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PRESENT PRINCIPAL OCCUPATION OR NAME EMPLOYMENT AND FIVE-YEAR EMPLOYMENT HISTORY ---- ------------------------------------------- Mary Ann Corrigan-Davis President of Carlton Cards Retail, Inc. from 1992 until 1996, and Group Managing Director of the John Sands Group from 1996 until becoming Senior Vice President in 1997. Jon Groetzinger, Jr. Senior Vice President, General Counsel and Secretary. John M. Klipfell Senior Vice President. Mr. Klipfell also serves as President and Chief Executive Officer of americangreetings.com (a subsidiary of Parent). William R. Mason Senior Vice President. William S. Meyer Senior Vice President and Chief Financial Officer. Patricia A. Papesh Vice President, Creative of the U.S. Greeting Card Division from 1992 until becoming Senior Vice President in 1995. Patricia L. Ripple Executive Director, Tax and Financial Reporting from 1993 until becoming Vice President and Corporate Controller in 1996. Erwin Weiss Senior Vice President. Jeffrey M. Weiss Vice President, Materials Management of Parent's U.S. Greeting Card Division from 1996 until 1997; and Vice President, Product Management of Parent's U.S. Greeting Card Division from 1997 until becoming Senior Vice President in 1998. George A. Wenz Vice President, National Accounts from 1984 before becoming Senior Vice President in 1997. Thomas T. Zinn, Sr. Principal with Ernst & Young LLP before joining Parent in 1995 as Vice President, Information Services. He became Senior Vice President in 1998.
B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER The director of Purchaser is Morry Weiss. The executive officers of Purchaser are Morry Weiss, President, Edward Fruchtenbaum, Vice President, Jon Groetzinger, Jr., Secretary, and Dale Cable, Treasurer. Messrs. Weiss, Fruchtenbaum, Groetzinger and Cable are also executive officers of Parent. Information concerning the present principal occupation or employment and material occupation, positions, offices or employment for the past five years of Messrs. Weiss, Fruchtenbaum, Groetzinger and Cable is set forth in the table of the directors and executive officers of Parent. The business address of each director and officer of Purchaser is One American Road, Cleveland, Ohio 44144, and all directors and officers of Purchaser are citizens of the United States. I-3 43 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each Stockholder or his broker dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND: First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of New York of New York of New York Corporate Actions, Suite 4660 Corporate Actions, Suite 4680 c/o Securities Transfer and P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc. Jersey City, NJ 07303-2569 New York, NY 10005 Attn: Corporate Actions 100 William Street, Galleria New York, New York 10038
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer To Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent and Dealer Manager as set forth below and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: CORPORATE INVESTOR COMMUNICATIONS, INC. 111 Commerce Road - Carlstadt, New Jersey 07072-2586 Banks and Brokers call: (800) 346-7885 All Others Call Toll Free: (877) 842-2411 THE DEALER MANAGER FOR THE OFFER IS: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect (212) 969-2700 I-4 EX-2.A 3 EXHIBIT (A)(2) 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING ASSOCIATED SERIES B PREFERRED STOCK PURCHASE RIGHTS) OF GIBSON GREETINGS, INC. PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 9, 1999 BY GRANITE ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF AMERICAN GREETINGS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND: First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of New York of New York of New York Corporate Actions, Suite 4660 Corporate Actions, Suite 4680 c/o Securities Transfer and P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc. Jersey City, NJ 07303-2569 New York, NY 10005 Attn: Corporate Actions 100 William Street, Galleria New York, New York 10038
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by holders of Shares ("Stockholders") either if certificates for Shares (as defined in the Offer To Purchase, dated November 9, 1999 (the "Offer To Purchase")) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer To Purchase) is utilized, if tenders of Shares are to be made by book-entry transfer to an account maintained by First Chicago Trust Company of New York (the "Depositary") at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer To Purchase. Stockholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders." Stockholders whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date (as defined in the Offer To Purchase) or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer To Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2 NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. - -------------------------------------------------------------------------------- [ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: Account Number: Transaction Code Number: - -------------------------------------------------------------------------------- [ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): Window Ticket Number (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution that Guaranteed Delivery: - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ---------------------------------------------------------------------------------------------------- Name(s) and Address(es) of Registered Holder(s) (Please Fill In, If Blank, Exactly as Name(s) Share Certificate(s) and Share(s) Tendered Appear(s) on Share Certificate(s)) (Attach Additional List, If Necessary) - ---------------------------------------------------------------------------------------------------- Total Number of Shares Certificate Represented Number of Number(s)* by Certificate(s)* Shares Tendered** ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- Total Shares - ----------------------------------------------------------------------------------------------------
* Need not be completed by Book-Entry Stockholders. ** Unless otherwise indicated, it will be assumed that all Shares represented by Share Certificates delivered to the Depositary are being tendered. See Instruction 4. [ ] CHECK HERE IF CERTIFICATES HAVE BEEN LOST OR MUTILATED. SEE INSTRUCTION 11.
- -------------------------------------------------------------------------------- 3 Ladies and Gentlemen: The undersigned hereby tenders to Granite Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of American Greetings Corporation ("Parent"), the above-described shares of common stock (the "Shares") of Gibson Greetings, Inc. (the "Company") pursuant to Purchaser's offer to purchase all outstanding Shares and the associated Series B Preferred Stock Purchase Rights (the "Rights"), issued pursuant to the Rights Agreement, dated September 8, 1999, between the Company and The Bank of New York, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $10.25 per Share and associated Rights (subject to possible upward adjustment as described below, the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer To Purchase, dated November 9, 1999, receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its subsidiaries or affiliates the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Unless the context otherwise requires, all references to Shares in this Letter of Transmittal shall include the associated Rights and all references to the Rights shall include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement, including the right to receive any payment due upon redemption of the Rights. The Offer Price will be increased by an amount equal to 30% of any after-tax gain realized by the Company in any sale or disposition for cash by the Company or its subsidiaries, prior to the Expiration Date (as defined in the Offer To Purchase), of all or any part of the Company's investment in E-Greetings Network ("EGN"), divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding options, whether or not such options are then vested, that are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on any sale or disposition will be the cash received by the Company, but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See Sections 2 and 12 of the Offer To Purchase. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the order of, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby and any and all dividends on the Shares (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities, the issuance of rights for the purchase of any securities, or any cash dividends) that are declared or paid by the Company on or after the date of the Offer To Purchase and are payable or distributable to Stockholders of record on a date prior to the transfer into the name of Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer (collectively "Distributions"), and constitutes and irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact and proxy of the undersigned to the full extent of the undersigned's rights with respect to such Shares (and Distributions) with full power of substitution (such power of attorney and proxy being deemed to be an irrevocable power coupled with an interest), to (a) deliver Share Certificates (and Distributions), or transfer ownership of such Shares on the account books maintained by the Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price, (b) present such Shares (and Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints designees of Purchaser, and each of them, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote in such manner as each such attorney and proxy or his or her substitute shall, in his or her sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all of the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or action (and Distributions) which the undersigned is entitled to vote at any meeting of Stockholders of the Company (whether annual or special and whether or not an adjourned meeting), or by written consent in lieu of such meeting, or otherwise. This power of attorney and proxy is coupled with an interest in the Company and in the Shares tendered hereby and is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke, without further action, any other power of attorney or proxy granted by the undersigned at any time with respect to such Shares (and Distributions) and no subsequent powers of attorney or proxies will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned understands that Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser is able to exercise full voting rights with respect to such Shares and Distributions, including voting at any meeting of stockholders. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and Distributions) and that when the same are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of Purchaser any and all other Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer and, pending such remittance or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of such Distributions and may withhold the entire purchase price or deduct from the purchase price of Shares tendered hereby the amount or value thereof, as determined by Purchaser in its sole discretion. All authority herein conferred or herein agreed to be conferred shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, legal representatives, successors and assigns of the undersigned. Tenders of Shares pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer To Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer To Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment (and accompanying documents as appropriate) to the undersigned at the address shown below the undersigned's signature. In the event that both the "Special Delivery Instructions" and the "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any Share Certificates not tendered or accepted for payment in the name(s) of, and deliver said check and/or return certificates to, the person or persons so indicated. Stockholders tendering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at the Book-Entry Transfer Facility. The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of such Shares. 4 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share Certificates not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than that designated on the front cover. Issue check and/or certificates to: Name: -------------------------------------------------------------------------- -------------------------------------------------------------------------- (Please Type or Print) Address: ----------------------------------------------------------------------- ----------------------------------------------------------------------- (Include Zip Code) ----------------------------------------------------------------------- (Taxpayer Identification or Social Security No.) (See Substitute Form W-9) [ ] Credit unpurchased Shares tendered by book-entry transfer to the Book-Entry Transfer Facility ----------------------------------------------------------------------- (ACCOUNT NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Share Certificates not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown on the front cover. Mail check and/or certificate to: Name: --------------------------------------------------------------------------- (Please Type or Print) Address: ------------------------------------------------------------------------ (Include Zip Code) ----------------------------------------------------------------------- (Taxpayer Identification or Social Security No.) (See Substitute Form W-9) 5 IMPORTANT STOCKHOLDER: SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Signatures(s) of Owner(s) Dated: ____________________________ (Must be signed by the registered holder(s) exactly as name(s) appear(s) on the Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the necessary information. See Instruction 5.) Name(s): ---------------------------------------------------------------------- ------------------------------------------------------------------------------ (Please Print) Capacity (full title): -------------------------------------------------------- Address: ---------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number: ----------------------------------------------- Tax Identification or Social Security No: ------------------------------------- (See Substitute Form W-9) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature: --------------------------------------------------------- Name (Please print): ---------------------------------------------------------- Title: ------------------------------------------------------------------------ Name of Firm: ----------------------------------------------------------------- Address: ---------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number: ----------------------------------------------- Dated: ____________________________ 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered herewith (which term, for purposes of this document, includes any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares), unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the inside front cover hereof or (ii) if such Shares are tendered for the account of a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. If the Certificates are registered in the name of a person other than the signer of this Letter of Transmittal or if payment is to be made or Certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the Certificates tendered, then the tendered Certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the Certificates, with the signatures on the Certificates or stock powers guaranteed by an Eligible Institution as provided in this Letter of Transmittal. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in Section 3 of the Offer To Purchase. Share Certificates, or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date. Stockholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedures for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer To Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary on or prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a facsimile hereof), with any required signature guarantees (or in the case of a book-entry delivery an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq trading days after the date of execution of such Notice of Guaranteed Delivery. A "Nasdaq trading day" is any day on which The Nasdaq Stock Market, Inc.'s Nasdaq National Market is open for business. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or facsimile hereof) must accompany each such delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering Stockholders, by execution of this Letter of Transmittal or facsimile hereof, waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate schedule attached hereto and separately signed on each page thereof in the same manner as this Letter of Transmittal is signed. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by your old certificate(s) will be sent to you, unless otherwise provided in the appropriate box marked "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to or certificates for Shares not tendered or purchased are to be issued in the name of a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 7 If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Shares listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner(s) appear(s) on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price received by such holder(s) pursuant to this Offer (i.e., such purchase price will be reduced) unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If (i) a check is to be issued in the name of and/or (ii) certificates for unpurchased Shares are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown on the front cover hereof, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer (i.e., Book-Entry Stockholders) may request that Shares not purchased be credited to such account maintained at the Book-Entry Transfer Facility as such Book-Entry Stockholder may designate hereon. If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. See Instruction 1. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to the Information Agent at its addresses set forth below. Requests for additional copies of the Offer To Purchase and this Letter of Transmittal may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. Such materials will be furnished at Purchaser's expense. 9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by Purchaser (subject to certain limitations in the Merger Agreement (as defined in the Offer To Purchase)), in whole or in part, at any time or from time to time, in Purchaser's sole discretion. 10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a Stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such Stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN, or an adequate basis for exemption, the Internal Revenue Service may subject the Stockholder or other payee to a $50 penalty, and the gross proceeds of any payments that are made to such Stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. If withholding results in an overpayment of taxes, a refund may be obtained. Certain Stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the Stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the Stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. To prevent backup withholding on payments that are made to a Stockholder with respect to Shares purchased pursuant to the Offer, the Stockholder is required to notify the Depositary of such Stockholder's correct TIN by completing a Substitute Form W-9 certifying (i) that the TIN provided on Substitute Form W-9 is correct (or that such Stockholder is awaiting a TIN), and (ii) that (a) such Stockholder is exempt from backup withholding or (b) such Stockholder has not been notified by the Internal Revenue Service that such Stockholder is subject to backup withholding as a result of a failure to report all interest or dividends or (c) the Internal Revenue Service has notified such Stockholder that such Stockholder is no longer subject to backup withholding. Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt holder must enter its correct TIN in Part 1 of Substitute Form W-9, write "Exempt" in Part 2 of such form, and sign and date the form. See the enclosed Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8, "Certificate of Foreign Status" signed under penalties of perjury attesting to such exempt status. Such forms may be obtained from the Payor. If you do not have a TIN, consult the W-9 Guidelines for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If you do not provide your TIN to the Payor within 60 days, backup withholding will begin and continue until you furnish your TIN to the Payor. NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE. The Stockholder is required to give the Depositary the TIN of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the Stockholder should promptly notify the Information Agent. The Stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE COPY HEREOF) OR AN AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. 8 TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS OF SECURITIES (SEE INSTRUCTION 9) - -------------------------------------------------------------------------------- PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK - --------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT TIN ----------------------------- FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. (Social Security Number or Employer Identification Number) ------------------------------------------------------------------------------------------ DEPARTMENT OF PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING THE TREASURY (SEE INSTRUCTIONS) INTERNAL REVENUE SERVICE ------------------------------------------------------------------------------------------ PAYER'S REQUEST FOR PART 3 -- CERTIFICATIONS -- UNDER PENALTIES OF PERJURY. I CERTIFY THAT: (1) The number TAXPAYER'S IDENTIFICATION shown on this form is my correct Taxpayer Identification Number (or I am waiting for a NUMBER ("TIN") AND number to be issues to me) and (2) I am not subject to backup withholding either because: CERTIFICATION (a) I am exempt from backup withholding; or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Signature _____________________________________ Date_____________________ - ---------------------------------------------------------------------------------------------------------------------------
You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART 1 OF SUBSTITUTE FORM W-9. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number to the payor within 60 days, 31% of all reportable payments made to me will be withheld. Signature:______________________________________ Date: ____________________ - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 9 MANUALLY SIGNED FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW: THE DEPOSITARY FOR THE OFFER IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK BY MAIL: BY OVERNIGHT DELIVERY: BY HAND: First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of New York of New York of New York Corporate Actions, Suite 4660 Corporate Actions, Suite 4680 c/o Securities Transfer and P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc. Jersey City, NJ 07303-2569 New York, NY 10005 Attn: Corporate Actions 100 William Street, Galleria New York, New York 10038
By Facsimile Transmission: (201) 324-3402 (201) 324-3403 Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of the Offer To Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent or the Dealer Manager as set forth below, and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: CORPORATE INVESTOR COMMUNICATIONS, INC. 111 Commerce Road - Carlstadt, New Jersey 07072-2586 Banks and Brokers call: (800) 346-7885 All Others Call Toll Free: (877) 842-2411 THE DEALER MANAGER FOR THE OFFER IS: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect (212) 969-2700 EX-3.A 4 EXHIBIT (A)(3) 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING ASSOCIATED SERIES B PREFERRED STOCK PURCHASE RIGHTS) OF GIBSON GREETINGS, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates representing shares of common stock (the "Shares") of Gibson Greetings, Inc. (the "Company") and the associated Rights (as defined in the Offer To Purchase) are not immediately available or time will not permit all required documents to reach First Chicago Trust Company of New York (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase), or the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mailed to the Depositary. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: FIRST CHICAGO TRUST COMPANY OF NEW YORK
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND: First Chicago Trust Company First Chicago Trust Company First Chicago Trust Company of New York of New York of New York Corporate Actions, Suite 4660 Corporate Actions, Suite 4680 c/o Securities Transfer and P.O. Box 2569 14 Wall Street, 8th Floor Reporting Services Inc. Jersey City, NJ 07303-2569 New York, NY 10005 Attn: Corporate Actions 100 William Street, Galleria New York, New York 10038
By Facsimile Transmission: (201) 324-3402 (201) 324-3403 Confirmation by Telephone: (201) 222-4707 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 Ladies and Gentlemen: The undersigned hereby tenders to Granite Acquisition Corp., a wholly owned subsidiary of American Greetings Corporation, upon the terms and subject to the conditions set forth in the Offer To Purchase, dated November 9, 1999 (the "Offer To Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer To Purchase. Number of Shares: --------------------------------- Certificate No(s). (if available): --------------------- If Share(s) will be tendered by book-entry transfer, check the box. [ ] Account Number: ----------------------------------- Date: Area Code and Telephone Number(s): --------------- ------------- Name(s) of Record Holder(s): ---------------------------------------- (PLEASE PRINT) Signature(s): ------------------------------------------------------- Address(es): --------------------------------------------------------- (ZIP CODE) THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (Not to Be Used for Signature Guarantee) The undersigned, a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, hereby guarantees to deliver to the Depositary at one of its addresses set forth above either the certificates representing all tendered Shares, in proper form for transfer, a Book-Entry Confirmation (as defined in the Offer To Purchase), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of book-entry delivery of Shares, an Agent's Message (as defined in the Offer To Purchase), and any other documents required by the Letter of Transmittal within three Nasdaq trading days after the date of execution of this Notice of Guaranteed Delivery. A "Nasdaq trading day" is any day on which The Nasdaq Stock Market, Inc.'s Nasdaq National Market is open for business. Name of Firm: ---------------------------------- AUTHORIZED SIGNATURE Address: Name: --------------------------------------- ----------------------------------- PRINT TYPE OR PRINT ZIP CODE Title: --------------------------- ------------------------------------- Area Code and Tel. No: Dated ---------------------- ------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EX-4.A 5 EXHIBIT (A)(4) 1 Offer To Purchase for Cash All Outstanding Shares of Common Stock (Including Associated Series B Preferred Stock Purchase Rights) of GIBSON GREETINGS, INC. at $10.25 Net Per Share (Subject to Possible Upward Adjustment) by Granite Acquisition Corp., a wholly owned subsidiary of AMERICAN GREETINGS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. November 9, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Granite Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of American Greetings Corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's offer to purchase all outstanding shares of common stock (together with the associated Rights (as defined in the Offer To Purchase), the "Shares") of Gibson Greetings, Inc. (the "Company") at a purchase price of $10.25 per Share (subject to possible upward adjustment as described below, the "Offer Price"), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in the Offer To Purchase and the related Letter of Transmittal (which together constitute the "Offer"). Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares in your name or in the name of your nominee. Enclosed herewith for your information and for forwarding to your clients are copies of the following documents: 1. Offer To Purchase, dated November 9, 1999. 2. Letter of Transmittal to tender Shares for your use and for the information of your clients, together with Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9, which provides information relating to backup federal income tax withholding. Manually signed facsimile copies of the Letter of Transmittal may be used to tender Shares. 3. A letter to holders of Shares ("Stockholders") from Frank J. O'Connell, Chairman, Chief Executive Officer and President of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9. 4. Notice of Guaranteed Delivery for Shares to be used to accept the Offer if neither of the two procedures for tendering Shares set forth in the Offer To Purchase can be completed on a timely basis. 5. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Return envelope addressed to the Depositary (as defined in the Offer To Purchase). 2 YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. Please note the following: 1. The Offer Price is $10.25 per Share. The Offer Price will be increased by an amount equal to 30% of any after-tax gain realized by the Company in any sale or disposition for cash by the Company or its subsidiaries, prior to the Expiration Date (as defined in the Offer To Purchase), of all or any part of the Company's investment in E-Greetings Network ("EGN"), divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding options, whether or not such options are then vested, which are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on any sale or disposition will be the cash received by the Company, but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See Sections 2 and 12 of the Offer To Purchase. 2. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares that, together with the Shares then owned by Parent, represents at least a majority of the Shares then outstanding on a fully-diluted basis (assuming the exercise of all outstanding options which are exercisable and in-the-money at the Offer Price). The Offer is also subject to certain other conditions contained in the Offer To Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer To Purchase. 3. The Offer is being made for all of the outstanding Shares. 4. Tendering Stockholders will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Depositary or the Information Agent (as defined below) or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is provided or unless the required tax identification information is provided. See Instruction 10 of the Letter of Transmittal. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Wednesday, December 8, 1999, unless the Offer is extended. 6. The Board of Directors of the Company, has unanimously (i) determined that the Merger Agreement (as defined in the Offer To Purchase) and the transactions contemplated thereby, including the Offer and the Merger (as defined in the Offer To Purchase), are fair to and in the best interests of the Stockholders, (ii) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (iii) resolved to recommend that Stockholders accept the Offer and tender their Shares pursuant to the Offer. 7. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) certificates for Shares (the "Certificates") or a timely Book-Entry Confirmation (as defined in the Offer To Purchase) with respect to such Shares pursuant to the procedures set forth in Section 3 of the Offer To Purchase, (b) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with any required signature guarantees (or, in the case of book-entry transfers, an Agent's Message), and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering Stockholders at the same time depending upon when Certificates for or confirmations of book-entry transfer of such Shares are actually received by the Depositary. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal (or a manually signed facsimile thereof) and any required signature guarantees (or, in the case of book-entry transfers, an Agent's Message) and any other required documents should be sent to the Depositary and (ii) either Certificates representing the tendered Shares or a timely Book-Entry Confirmation (as defined in the Offer To Purchase) should be delivered to the Depositary in accordance with the instructions set forth in the Letter of Transmittal and the Offer To Purchase. 3 If Stockholders wish to tender their Shares, but it is impracticable for them to forward the Certificates for such Shares or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer To Purchase. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Information Agent or the Depositary, as described in the Offer To Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of the Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to Wasserstein Perella & Co., Inc., the Dealer Manager, or Corporate Investor Communications, Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of the Offer To Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks or trust companies. Very truly yours, Wasserstein Perella & Co., Inc. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF PURCHASER, PARENT, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-5.A 6 EXHIBIT (A)(5) 1 Offer To Purchase for Cash All Outstanding Shares of Common Stock (Including Associated Series B Preferred Stock Purchase Rights) of GIBSON GREETINGS, INC. at $10.25 Net Per Share (Subject to Possible Upward Adjustment) by Granite Acquisition Corp., a wholly owned subsidiary of AMERICAN GREETINGS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. November 9, 1999 To Our Clients: Enclosed for your consideration are the Offer To Purchase, dated November 9, 1999 (the "Offer To Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") and other materials relating to the offer by Granite Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of American Greetings Corporation ("Parent"), to purchase all outstanding shares of common stock (together with the associated Rights (as defined in the Offer To Purchase), the "Shares") of Gibson Greetings, Inc. (the "Company") at a purchase price of $10.25 per Share (subject to possible upward adjustment as described below, the "Offer Price"), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in the Offer To Purchase and the related Letter of Transmittal (which together constitute the "Offer"). Holders of Shares ("Stockholders") whose certificates for such Shares (the "Certificates") are not immediately available or who cannot deliver their Certificates and all other required documents to the Depositary (as defined in the Offer To Purchase) or complete the procedures for book-entry transfer on or prior to the Expiration Date (as defined in the Offer To Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer To Purchase. WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to have us tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The Offer Price is $10.25 per Share. The Offer Price will be increased by an amount equal to 30% of any after-tax gain realized by the Company in any sale or disposition for cash by the Company or its subsidiaries, prior to the Expiration Date, of all or any part of the Company's investment in E-Greetings Network ("EGN"), divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding options, whether or not such options are then vested, which are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on any sale or disposition will be the cash received 2 by the Company, but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See Sections 2 and 12 of the Offer To Purchase. 2. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date that number of Shares that, together with the Shares then owned by Parent, represents at least a majority of the Shares then outstanding on a fully-diluted basis (assuming the exercise of all outstanding options which are exercisable and in-the-money at the Offer Price). The Offer is also subject to certain other conditions contained in the Offer To Purchase. See the Introduction and Sections 1, 14 and 15 of the Offer To Purchase. 3. The Offer is being made for all outstanding Shares. 4. Tendering Stockholders will not be obligated to pay brokerage fees or commissions to the Dealer Manager (as defined in the Offer To Purchase), the Depositary or the Information Agent (as defined in the Offer To Purchase) or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 10 of the Letter of Transmittal. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Wednesday, December 8, 1999, unless the Offer is extended. 6. The Board of Directors of the Company, has unanimously (i) determined that the Merger Agreement (as defined in the Offer To Purchase) and the transactions contemplated thereby, including the Offer and the Merger (as defined in the Offer To Purchase), are fair to and in the best interests of the Stockholders, (ii) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (iii) resolved to recommend that Stockholders accept the Offer and tender their Shares pursuant to the Offer. 7. Notwithstanding any other provision of the Offer, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) Certificates for Shares or a timely Book-Entry Confirmation (as defined in the Offer To Purchase) with respect to such Shares pursuant to the procedures set forth in Section 3 of the Offer To Purchase, (b) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed with any required signature guarantees (or, in the case of book-entry transfers, an Agent's Message (as defined in the Offer To Purchase)), and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering Stockholders at the same time depending upon when Certificates for or confirmations of book-entry transfer of such Shares are actually received by the Depositary. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth on the back page of this letter. Please forward your instructions to us in ample time to permit us to submit a tender on your behalf prior to the Expiration Date. An envelope to return your instructions to us is enclosed. IF YOU AUTHORIZE THE TENDER OF YOUR SHARES, ALL SUCH SHARES WILL BE TENDERED UNLESS OTHERWISE SPECIFIED ON THE INSTRUCTION FORM SET FORTH BELOW. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdictions. 3 Instructions with Respect to the Offer To Purchase for Cash All Outstanding Shares of Common Stock (Including Associated Series B Preferred Stock Purchase Rights) of GIBSON GREETINGS, INC. by Granite Acquisition Corp. a wholly owned subsidiary of AMERICAN GREETINGS CORPORATION The undersigned acknowledge(s) receipt of your letter, the enclosed Offer To Purchase, dated November 9, 1999, and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by Granite Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of American Greetings Corporation, to purchase all outstanding shares of common stock (together with the associated Rights (as defined in the Offer To Purchase), the "Shares") of Gibson Greetings, Inc. at a purchase price of $10.25 per Share (subject to possible upward adjustment as described in the Offer To Purchase), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in the Offer To Purchase. This will instruct you to tender to Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered:* Shares ---------------------- Date: ----------------- SIGN HERE Signature(s): ------------------------------------------------------------------- Print Name(s): ------------------------------------------------------------------ Print Address(es): -------------------------------------------------------------- - -------------------------------------------------------------------------------- Area Code and Telephone Number(s): ---------------------------------------------- Taxpayer Identification or Social Security Number(s) ---------------------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. THIS FORM MUST BE RETURNED TO THE BROKERAGE FIRM MAINTAINING YOUR ACCOUNT. EX-6.A 7 EXHIBIT (A)(6) 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. The taxpayer identification number for an individual is the individual's Social Security number. Social Security numbers have nine digits separated by two hyphens: e.g., 000-00-0000. The taxpayer identification number for an entity is the entity's Employer Identification number. Employer Identification numbers have nine digits separated by only one hyphen: e.g., 00-0000000. The table below will help determine the number to give the payer.
- ----------------------------------------------------------------- GIVE THE NAME AND SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name guardian or The ward, minor, or committee for a designated ward, incompetent person(3) minor, or incompetent person 7. a. The usual revocable savings The grantor-trustee(1) trust (grantor is also trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law
- ----------------------------------------------------------------- GIVE THE NAME AND EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------------------------- 8. Sole proprietorship The owner(4) 9. A valid trust, estate, or pension The legal entity (Do trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate The corporation 11. Association, club, religious, The organization charitable, educational or other tax-exempt organization 12. Partnership The partnership 13. A broker or registered nominee The broker or nominee 14. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agriculture program payments
- --------------------------------------------------------------- --------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 Section references are to the Internal Revenue Code. OBTAINING A NUMBER If you do not have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. To complete the Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the Form, and give it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an individual retirement plan ("IRA"), or a custodial account under 403(b)(7), if the account satisfies the requirements of section 401(f)(2). (3) The United States or any of its agencies or instrumentalities. (4) A State, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends generally not subject to backup withholding also include the following: - - Payments to nonresident aliens subject to withholding under section 1441. - - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident partner. - - Payments of patronage dividends not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest generally not subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt interest dividends under section 852). - - Payments described in section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under section 1451. - - Payments made by certain foreign organizations. - - Mortgage interest paid by you. Payments that are not subject to information reporting are also not subject to backup withholding. For details see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N, and the regulations under such sections. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. ENTER YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PRIVACY ACT NOTICE Section 6109 requires you to give your correct taxpayer identification number to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your taxpayer identification number whether or not you are qualified to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-7.A 8 EXHIBIT (A)(7) 1 EXHIBIT (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer To Purchase, dated November 9, 1999, and the related Letter of Transmittal, and any amendments or supplements thereto, and is being made to all holders of Shares. The Offer, however, is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Granite Acquisition Corp. by Wasserstein Perella & Co., Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdictions. Notice of Offer To Purchase for Cash All Outstanding Shares of Common Stock (Including Associated Series B Preferred Stock Purchase Rights) of GIBSON GREETINGS, INC. at $10.25 Net Per Share (Subject to Possible Upward Adjustment) by Granite Acquisition Corp., a wholly owned subsidiary of AMERICAN GREETINGS CORPORATION Granite Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of American Greetings Corporation ("Parent"), is offering to purchase all outstanding shares of common stock (the "Shares") of Gibson Greetings, Inc. ("Company") and the associated Series B Preferred Stock Purchase Rights (the "Rights"), issued pursuant to the Rights Agreement, dated September 8, 1999, between the Company and The Bank of New York, as Rights Agent (as the same may be amended, the "Rights Agreement"), at a purchase price of $10.25 per Share and associated Right (subject to possible upward adjustment as described below, the "Offer Price"), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in the Offer To Purchase, dated November 9, 1999 (the "Offer To Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). Holders of Shares ("Stockholders") who have Shares registered in their name and who tender directly will not be charged brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Following the Offer, Purchaser intends to effect the merger described below. Unless the context otherwise requires, all references to Shares herein and in the Offer To Purchase will include the associated Rights and all references to the Rights will include all benefits that may inure to holders of the Rights pursuant to the Rights Agreement, including the right to receive any payment due upon redemption of the Rights. - -------------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, DECEMBER 8, 1999, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Offer Price will be increased by an amount equal to 30% of any after-tax gain realized by the Company in any sale or disposition for cash by the Company or its subsidiaries, prior to the Expiration Date (as defined below), of all or any part of the Company's investment in E-Greetings Network ("EGN"), divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding options, whether or not such options are then vested, which are (or, giving effect to the adjustment in the Offer Price contemplated hereby, would be) in-the-money. The price used to compute any after-tax gain on any sale or disposition will be the cash received by the Company, but only if such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. See Sections 2 and 12 of the Offer To Purchase. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES THAT, TOGETHER WITH THE SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST A MAJORITY OF THE SHARES THEN OUTSTANDING ON A FULLY-DILUTED BASIS (ASSUMING THE EXERCISE OF ALL OUTSTANDING OPTIONS WHICH ARE EXERCISABLE AND IN-THE-MONEY AT THE OFFER PRICE) (THE "MINIMUM CONDITION"). THE OFFER IS 2 ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THE OFFER TO PURCHASE. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of November 2, 1999 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides that, among other things, Purchaser will make the Offer and that following the purchase of Shares pursuant to the Offer, subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement and in accordance with relevant provisions of Delaware law, Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation and will be a wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share (excluding Shares held by the Company as treasury stock, Shares owned by Parent or any subsidiary of Parent and any Shares owned by Stockholders who have properly exercised their dissenters' rights under Delaware law) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive cash in an amount equal to the price per Share paid pursuant to the Offer, without interest (and less any required withholding taxes). The Merger Agreement is more fully described in Section 12 of the Offer To Purchase. THE BOARD OF DIRECTORS OF THE COMPANY, HAS UNANIMOUSLY (i) DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS, (ii) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER AND (iii) RESOLVED TO RECOMMEND THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. In all cases, on the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering Stockholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering Stockholders. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) or, in the case of book-entry transfer, an Agent's Message (as defined in the Offer To Purchase), and (iii) any other documents required by the Letter of Transmittal. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, including, if required, the approval of the Merger by the requisite vote of the Stockholders of the Company. The Stockholder vote necessary to approve the Merger is the affirmative vote of the holders of a majority of the issued and outstanding Shares, voting as a single class, at the Company Stockholders' Meeting. If the Minimum Condition is satisfied and Purchaser purchases Shares pursuant to the Offer, Purchaser will be able to effect the Merger without the affirmative vote of any other Stockholder. If Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, Purchaser will be able to effect the Merger pursuant to the "short-form" merger provisions of Delaware law, without prior notice to, or any action by, any other Stockholder. In that event, Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID FOR THE SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. NO INTEREST WILL BE PAID ON THE CONSIDERATION TO BE PAID IN THE MERGER TO STOCKHOLDERS WHO FAIL TO TENDER THEIR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN EFFECTING THE MERGER OR MAKING SUCH PAYMENT. The term "Expiration Date" means 12:00 Midnight, New York City time, on Wednesday, December 8, 1999, unless and until Purchaser (in accordance with the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" means the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission, Purchaser may, under certain circumstances, (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer in any other respect by giving oral or written notice 3 of such amendment by the Depositary. Any extension, delay, waiver, amendment or termination of the Offer will be followed as promptly as practicable by a public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right of a tendering Stockholder to withdraw such Stockholder's Shares. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn at any time after January 8, 2000 (or such later date as may be applicable if the Offer is extended), unless theretofore accepted for payment as provided in the Offer To Purchase. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth in the Offer To Purchase and must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holders of the Shares, if different from the person who tendered the Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution (as defined in the Offer To Purchase)) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering Stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at The Depository Trust Company to be credited with the withdrawn Shares. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934 is contained in the Offer To Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to Stockholders. The Offer To Purchase and the related Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial Stockholders. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance and copies of the Offer To Purchase, the related Letter of Transmittal and other tender offer materials may be directed to the Information Agent or the Dealer Manager as set forth below, and copies will be furnished promptly at Purchaser's expense. Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager and the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: CORPORATE INVESTOR COMMUNICATIONS, INC. 111 Commerce Road C Carlstadt, New Jersey 07072-2586 Banks and Brokers call: (800) 346-7885 All Others Call Toll Free: (877) 842-2411 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect (212) 969-2700 November 9, 1999 EX-8.A 9 EXHIBIT (A)(8) 1 EXHIBIT (A)(8) AMERICAN GREETING ANNOUNCES PLANS TO ACQUIRE GIBSON GREETINGS INC. COMPANY EXPECTS $10.25 PER SHARE OFFER TO BE ADDITIVE TO EARNINGS AFTER TAKEOVER CLEVELAND, Ohio (November 3, 1999) -- American Greetings (NYSE: AM) today announced plans to acquire Gibson Greetings Inc. (Nasdaq: GIBG) in a cash transaction that is expected to produce ongoing synergies and be additive to earnings for American Greetings in the upcoming fiscal year. "This acquisition marks our most important step yet in implementing our long-term strategic plan by providing ongoing growth to our US and international greeting card business and our electronic marketing unit," said Morry Weiss, chairman and chief executive officer of American Greetings. He said the companies signed a definitive agreement yesterday and the respective boards of directors approved the transaction. The acquisition still requires regulatory approval. American Greetings expects the acquisition to generate ongoing revenue of about $225 million and ongoing annual cost savings of at least $50 million. American Greetings expects the acquisition to be slightly accretive to earnings in the first 12 months after the transaction is complete. Once the integration is complete, the transaction is expected to add about 30 cents per share to earnings. American Greetings has agreed to pay $10.25 for each share of Gibson stock upon completion of the transaction. Weiss said American Greetings is in a unique position to realize the full value of Gibson. Terms of the transaction reflect the value from the following three distinct business segments: - - Gibson's US greeting card division will provide ongoing sales opportunities for American Greetings from several new retail partners, making American Greetings a stronger and more effective competitor across all channels of distribution. - - Gibson's UK greeting card division will add incremental growth to American Greetings current UK units -- Carlton Cards, Camden Graphics and Hanson White -- generating significant synergies. - - Gibson's creative content and investment in electronic commerce will enhance the electronic marketing division of American Greetings. "After integration, Gibson should enhance our already strong cash flow to help us to fund possible additional opportunities in several other product categories," Weiss said. "Our commitment is as strong as ever to continue growing our party goods, candles, stationery and educational products." Additionally, American Greetings plans to continue to use the Gibson name to extend its current branding strategy into other emerging retail channels. This means consumers can select from a broader and more relevant selection of greeting cards from American Greetings. The acquisition also should result in improved productivity for the current retail partners of Gibson Greetings. "This is an exciting opportunity to expand our greeting card business into another channel with a proven brand name, Gibson. This will benefit our consumers, retailers, shareholders and 2 associates," said Ed Fruchtenbaum, president and chief operating officer. "We expect the acquisition to create substantial ongoing synergies that add economic value for our shareholders. Those synergies will help us compete more effectively and efficiently in an increasingly competitive marketplace." Frank O'Connell, chairman and chief executive officer of Gibson Greetings, said the sale to American Greetings "represent the best opportunity for Gibson to enhance shareholder value." "We also are happy that American Greetings values the 150-year heritage of Gibson and the value of our brand in the marketplace," O'Connell said. "Our key accounts should welcome the opportunity to partner with American Greetings with its greater array of products and services and we expect our customers to benefit from this transaction." Weiss said the acquisition of Gibson is another example of American Greetings commitment to its long-term strategic plan and its goal to enhance shareholder value. "Since we unveiled our strategic plan in 1997, we have taken a series of steps to grow all of our businesses," Weiss said. "We also have introduced innovative greeting card lines and signed important licensing agreements that have enhanced our entire product offering. Those factors, coupled with an improved focus on managing our capital resources continues to allow American Greetings to grow while adding value to all of our key audiences. American Greetings is the world's largest publicly held creator, manufacturer and distributor of greeting cards and social expression products. With headquarters in Cleveland, Ohio, American Greetings employs more than 21,000 associates around the world and has one of the largest creative studios in the world. For more information on the Company, visit our site on the World Wide Web at www.americangreetings.com. Gibson Greetings, Inc., an industry innovator in the greeting card business. Gibson distributes more than 24,000 individual relationship communication products, including greeting cards, gift wrap, party goods and licensed products. E-mail greetings featuring Gibson content are available through the privately held Egreetings Network (www.egreetings.com), in which Gibson holds a minority equity interest. Gibson cards are also available through the Internet from Sparks.com (www.sparks,com). For more information on Gibson Greetings, visit our web site at www.gibsongreetings.com. 3 Forward looking statements contained in this press release involve risks and uncertainties that could cause actual results to differ materially from those contemplated. Factors that could cause such differences include this risks associated with the businesses of American Greetings and Gibson Greetings generally, transactional effects, integration risks and other investment considerations described from time to time by companies in their filings with the Securities and Exchange Commission. AMERICAN GREETINGS CONTACT: Dale A. Cable Jim King Vice President, Treasurer Manager, Investor & Media Relations (216) 252-7300 (216) 252-4864 GIBSON GREETINGS CONTACT: James T. Wilson Adam Friedman Chief Financial Officer Adam Friedman Associates (513) 841-6926 (212) 391-7596 EX-1.C 10 EXHIBIT (C)(1) 1 Exhibit (c)(1) CONFORMED COPY AGREEMENT AND PLAN OF MERGER dated as of November 2, 1999 among GIBSON GREETINGS, INC. AMERICAN GREETINGS CORPORATION and GRANITE ACQUISITION CORP. 2 TABLE OF CONTENTS PAGE ---- ARTICLE 1 - --------- DEFINITIONS ----------- SECTION 1.01. Definitions.....................................................2 ARTICLE 2 - --------- THE OFFER --------- SECTION 2.01. The Offer.......................................................6 SECTION 2.02. Company Action..................................................8 SECTION 2.03. Directors.......................................................9 ARTICLE 3 - --------- THE MERGER ---------- SECTION 3.01. The Merger.....................................................11 SECTION 3.02. Conversion of Shares...........................................11 SECTION 3.03. Surrender and Payment..........................................12 SECTION 3.04. Dissenting Shares..............................................13 SECTION 3.05. Stock Options..................................................13 SECTION 3.06. Adjustments....................................................14 SECTION 3.07. Withholding Rights.............................................14 SECTION 3.08. Lost Certificates..............................................15 SECTION 3.09. Adjustments to Price...........................................15 ARTICLE 4 - --------- THE SURVIVING CORPORATION ------------------------- SECTION 4.01. Certificate of Incorporation...................................16 SECTION 4.02. Bylaws.........................................................16 SECTION 4.03. Directors and Officers.........................................16 ARTICLE 5 - --------- REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- SECTION 5.01. Corporate Existence and Power..................................16 SECTION 5.02. Corporate Authorization........................................17 SECTION 5.03. Governmental Authorization.....................................17 SECTION 5.04. Non-contravention..............................................17 SECTION 5.05. Capitalization.................................................18 SECTION 5.06. Subsidiaries...................................................18 SECTION 5.07. SEC Filings....................................................19 SECTION 5.08. Financial Statements...........................................20 SECTION 5.09. Absence of Certain Changes.....................................20 SECTION 5.10. No Undisclosed Material Liabilities............................21 SECTION 5.11. Compliance with Laws and Court Order...........................22 SECTION 5.12. Litigation.....................................................22 SECTION 5.13. Finders'Fees...................................................22 i 3 SECTION 5.14. Taxes..........................................................22 SECTION 5.15. Employee Benefit Plans.........................................23 SECTION 5.16. Environmental Matters..........................................24 SECTION 5.17. Antitakeover Statutes, Rights Agreement and Standstill Agreement ..........................................25 SECTION 5.18. Intellectual Property..........................................25 SECTION 5.19. Year 2000 Compliance...........................................26 ARTICLE 6 - --------- REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY -------------------------------------------------------------- SECTION 6.01. Corporate Existence and Power..................................27 SECTION 6.02. Corporate Authorization........................................27 SECTION 6.03. Governmental Authorization.....................................27 SECTION 6.04. Non-contravention..............................................28 SECTION 6.05. Finders'Fees...................................................28 SECTION 6.06. Financing......................................................28 ARTICLE 7 - --------- COVENANTS OF THE COMPANY ------------------------ SECTION 7.01. Conduct of the Company.........................................29 SECTION 7.02. Stockholder Meeting; Proxy Material............................31 SECTION 7.03. Access to Information..........................................32 SECTION 7.04. No Solicitation; Other Offers..................................32 SECTION 7.05. Notices of Certain Events......................................34 SECTION 7.06. Disclosure Documents...........................................34 SECTION 7.07. Standstill Agreements: Confidentiality Agreements..............35 SECTION 7.08. Rights Agreement; Anti-takeover Provisions.....................35 ARTICLE 8 - --------- COVENANTS OF PARENT ------------------- SECTION 8.01. Confidentiality................................................36 SECTION 8.02. Obligations of Merger Subsidiary...............................37 SECTION 8.03. Voting of Shares...............................................37 SECTION 8.04. Director and Officer Liability.................................37 SECTION 8.05. Employee Benefits..............................................38 SECTION 8.06. Disclosure Documents...........................................39 ARTICLE 9 - --------- COVENANTS OF PARENT AND THE COMPANY ----------------------------------- SECTION 9.01. Best Efforts...................................................39 SECTION 9.02. Certain Filings................................................42 SECTION 9.03. Public Announcements...........................................42 SECTION 9.04. Further Assurances.............................................42 ii 4 ARTICLE 10 - ---------- CONDITIONS TO THE MERGER ------------------------ SECTION 10.01. Conditions to Obligations of Each Party.......................43 SECTION 10.02. Conditions to Obligations of Parent and Merger Subsidiary to Effect the Merger...............................43 ARTICLE 11 - ---------- TERMINATION ----------- SECTION 11.01. Termination...................................................43 SECTION 11.02. Effect of Termination.........................................45 ARTICLE 12 - ---------- MISCELLANEOUS ------------- SECTION 12.01. Notices.......................................................46 SECTION 12.02. Survival of Representations and Warranties....................47 SECTION 12.03. Amendments; No Waivers........................................47 SECTION 12.04. Expenses......................................................47 SECTION 12.05. Successors and Assigns........................................49 SECTION 12.06. Governing Law.................................................49 SECTION 12.07. Dispute Resolution; Jurisdiction..............................49 SECTION 12.08. WAIVER OF JURY TRIAL..........................................50 SECTION 12.09. Counterparts; Effectiveness; Benefit..........................50 SECTION 12.10. Entire Agreement..............................................50 SECTION 12.11. Captions......................................................50 SECTION 12.12. Severability..................................................50 SECTION 12.13. Specific Performance..........................................50 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER dated as of November 2, 1999 among Gibson Greetings, Inc., a Delaware corporation (the "COMPANY"), American Greetings Corporation, an Ohio corporation ("PARENT"), and Granite Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER SUBSIDIARY"). The parties hereto agree as follows: 5 ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "ACQUISITION PROPOSAL" means any offer or proposal for, or any indication of interest in, a merger, consolidation, tender offer, share exchange, business combination, reorganization, recapitalization or other similar transaction involving the Company or any of its Subsidiaries or any proposal or offer to acquire, directly or indirectly, any equity interest in, any voting securities of, or a substantial portion of the assets of, the Company or any of its Subsidiaries, other than (A) the transactions contemplated by this Agreement and (B) any transaction involving EGN. "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY BALANCE SHEET" means the condensed consolidated balance sheet of the Company as of June 30, 1999 as read in conjunction with the footnotes thereto set forth in the Company 10-K. "COMPANY BALANCE SHEET DATE" means June 30, 1999. "COMPANY 10-K" means the Company's annual report on Form 10-K for the fiscal year ended December 31, 1998. "COMPANY'S KNOWLEDGE" or any other similar knowledge qualification in this Agreement means the actual knowledge of: Frank J. O'Connell, Chairman, Chief Executive Officer and President of the Company, James T. Wilson, Executive Vice President-Finance and Operations and Chief Financial Officer of the Company or James E. Thaxton, Vice President-Business Affairs and Counsel of the Company. "DELAWARE LAW" means the General Corporation Law of the State of Delaware. "EGN" means E-Greetings Network, a California corporation. "ENVIRONMENTAL CLAIM" means any written claim, demand, suit, action, proceeding, investigation or notice to the Company or any of its Subsidiaries by any Person or entity alleging any potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response 2 6 costs, natural resource damages, or penalties) arising out of, based on, or resulting from the presence, or Release into the environment, of any Hazardous Substance at any location, whether owned, leased, operated or used by the Company or its Subsidiaries. "ENVIRONMENTAL LAWS" means all Laws as currently in effect, which regulate the threatened Releases of Hazardous Substances, or otherwise relating to the manufacture, generation, processing, distribution, use, storage, disposal, transport or handling of Hazardous Substances, including the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act. "EMPLOYEE PLAN" means any material, written "employee benefit plan," as defined in Section 3(3) of ERISA, or employment, severance or similar contract or other plan providing for severance benefits, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, health, medical or disability benefits which is maintained, administered or contributed to by the Company or any ERISA Affiliate and covers any employee or former employee of the Company or any Subsidiary, or with respect to which the Company or any Subsidiary has any liability. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code. "HAZARDOUS SUBSTANCE" means (1) pollutants, contaminants, hazardous wastes, toxic substances, and oil and petroleum products, (2) any substance that is or contains friable asbestos, urea formaldehyde foam insulation, polychorinated biphenyls, petroleum or petroleum-derived substances or wastes, radon gas or related materials, (3) any substance that requires removal or remediation under any Environmental Law, or is defined, listed or identified as a "hazardous waste" or "hazardous substance" thereunder, or (4) any substance that is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous; in each case in clauses (1)-(4) above which is regulated under any Environmental Law. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "LIEN" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired 3 7 or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset. "MATERIAL ADVERSE EFFECT" means, with respect to the Company, a material adverse effect (i) on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole or (ii) on the ability of the Company to perform its obligations under or to consummate the transactions contemplated by this Agreement. "MINIMUM CONDITION" means that number of Shares that are validly tendered in accordance with the terms of the Offer, prior to the expiration date of the Offer and not withdrawn, that, together with the Shares then owned by Parent, represents at least a majority of the Shares then outstanding on a fully-diluted basis (assuming the exercise of all outstanding options which are exercisable and in-the-money at the Offer Price). "1933 ACT" means the Securities Act of 1933. "1934 ACT" means the Securities Exchange Act of 1934. "OPERATING SUBSIDIARY" shall mean a subsidiary of the Company that is not a material Subsidiary. "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect on the ability of Parent or Merger Subsidiary to perform its obligations under or to consummate the transactions contemplated by this Agreement. "PERSON" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "RABBI TRUST" means the trust established by the Company to fund the compensation and benefits to be provided to employees of the Company and its Subsidiaries under incentive arrangements designed and adopted by the Company. "RELEASE" means any releasing, disposing, discharging, injecting, spilling, leaking, pumping, dumping, emitting, escaping, emptying, migration, transporting, placing and the like, including into or upon, any land, soil, surface water, ground water or air, or otherwise entering into the environment. "SEC" means the Securities and Exchange Commission. "SHARES" means the shares of common stock, $0.01 par value, of the Company. 4 8 "SUBSIDIARY" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person. "TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA other than any "multiemployer plan", as defined in Section 3(37) of ERISA. Any reference in this Agreement to a statute shall be to such statute, as amended from time to time, and to the rules and regulations promulgated thereunder. (b) Each of the following terms is defined in the Section set forth opposite such term: TERM SECTION ---- ------- Antitrust Law........................................... 9.01(b)(iii) Certificates............................................ 3.03(a) Closing................................................. 3.01(b) Closing Date............................................ 3.01(b) Company Disclosure Documents............................ 7.06(a) Company Proxy Statement................................. 7.06(a) Company SEC Documents................................... 5.07(a)(iv) Company Securities...................................... 5.05(b)(iii) Company Stockholder Meeting............................. 7.02(a) Company Subsidiary Securities........................... 5.06(b)(ii) Confidentiality Agreement............................... 7.03 Continuing Directors.................................... 2.03(a)(ii) DOJ..................................................... 9.01(b)(ii) Disclosure Schedule..................................... 5 Effective Time.......................................... 3.01(c) Escrow Agent............................................ 12.04(d) Exchange Agent.......................................... 3.03(a) FTC..................................................... 9.01(b)(ii) GAAP.................................................... 5.08 Indemnified Person...................................... 8.04(a)(i) Liquidation Event....................................... 3.09 Merger.................................................. 3.01(a) Merger Consideration.................................... 3.02(a) Offer ............................................... 2.01(a) Offer Documents......................................... 2.01(b)(i)(A) Offer Price............................................. 2.01(a) Option Holder........................................... 3.05(a) Option Spread........................................... 3.05(a)(ii) 5 9 Rights Agreement........................................ 5.17(b)(i) Schedule 14D-1.......................................... 2.01(b)(i)(A) Schedule 14D-9.......................................... 2.02(b) Standstill Agreement.................................... 5.17(b)(ii) Successor Plan.......................................... 8.05(b) Superior Proposal....................................... 7.04(b)(iii) Surviving Corporation................................... 3.01(a) Tax Return.............................................. 5.14(f) Taxes................................................... 5.14(f) Taxing Authority........................................ 5.14(f) Transferred Employee.................................... 8.05(a) ARTICLE 2 THE OFFER SECTION 2.01. The Offer. (a) Provided this Agreement shall not have been terminated, as promptly as practicable after the date hereof, but in no event later than five business days following the public announcement of the terms of this Agreement, Parent shall cause Merger Subsidiary to commence, and Merger Subsidiary shall commence, an offer (as amended or supplemented in accordance with this Agreement, the "OFFER") to purchase for cash any and all of the outstanding Shares at a price of $10.25 per Share (the "OFFER PRICE"), subject to adjustment as set forth in Section 3.06 and Section 3.09, net to the seller in cash. The Offer shall be subject only to the conditions set forth in Annex I hereto. Merger Subsidiary expressly reserves the right to waive the condition to the Offer relating to the representations and warranties and covenants of the Company, provided that no other change in the conditions to the Offer may be made without the prior written consent of the Company. Notwithstanding the foregoing, without the consent of the Company, Merger Subsidiary shall have the right to extend the Offer (i) from time to time if, at the scheduled or extended expiration date of the Offer, any of the conditions to the Offer shall not have been satisfied or waived, until such conditions are satisfied or waived or (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law, provided that, each such extension shall be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company. If all of the conditions to the Offer are satisfied or waived on any scheduled expiration date of the Offer, the Company shall have the right to require Merger Subsidiary to extend the Offer on one or more occasions for an aggregate period of not more than 20 business days beyond the latest expiration date that would otherwise be permitted under clause (i) or (ii) of the previous sentence, if, on such expiration date, the number of Shares tendered (and not withdrawn) pursuant to the Offer, 6 10 together with the Shares then owned by Parent, represents less than 90% of the then outstanding Shares on a fully-diluted basis (assuming the exercise of all outstanding options which are exercisable and in-the-money at the Offer Price), and Merger Subsidiary shall have the right to extend the Offer on one occasion for a period of not more than 5 business days pursuant to the provisions of this sentence, provided that, the Company may prevent such extension by Merger Subsidiary if the Company, in its reasonable judgment, determines that such an extension could threaten in any way the consummation of the Offer. If all of the conditions to the Offer are not satisfied or waived on any scheduled expiration date of the Offer, Merger Subsidiary shall extend the Offer from time to time until such conditions are satisfied or waived, provided that, each such extension shall be for such period (not to exceed 20 business days without the consent of Parent) as may be specified by the Company and, provided further that, Merger Subsidiary shall not be required to extend the Offer if this Agreement is terminable pursuant to Sections 11.01(b)(i) or 11.01(b)(ii) hereof (except that the time periods referenced in Sections 11.01(b)(i) or 11.01(b)(ii) shall be extended for the time period equal to the time period beyond ten business days during which either the Company or Parent shall fail to make an HSR Filing pursuant to Section 9.01(a)). Merger Subsidiary shall, and Parent shall cause it to, accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all Shares properly tendered and not withdrawn pursuant to the Offer that Merger Subsidiary is obligated to purchase. (b) As soon as practicable on the date of commencement of the Offer, Parent and Merger Subsidiary shall file with (A) the SEC a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE 14D-1") with respect to the Offer, which will contain the offer to purchase and form of the related letter of transmittal and summary advertisement (such Schedule 14D-1 and such documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "OFFER DOCUMENTS") and (B) the Ohio Division of Securities and the Company such documents as may be required in accordance with Section 1707.041 of the General Corporation Law of Ohio (the "OHIO LAW"). Parent and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect. Parent and Merger Subsidiary agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given an opportunity to review and approve the Offer Documents prior to their being filed with the SEC or disseminated to the holders of Shares. Parent and Merger Subsidiary shall provide the Company and its counsel with any comments or other communications, whether written or oral, that Parent, Merger Subsidiary or their counsel may receive from time to time 7 11 from the SEC or its staff with respect to the Offer Documents promptly after receipt of such comments or other communications. SECTION 2.02. Company Action. (a) The Company hereby consents to the Offer and represents that its Board of Directors, at a meeting duly called and held has (i) unanimously determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the Company's stockholders, (ii) unanimously approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger (such approval being sufficient to render Section 203 of Delaware Law, Articles V and VI of the Company's Certificate of Incorporation and the Rights Agreement inapplicable to this Agreement and the transactions contemplated hereby, including the Offer and the Merger), (iii) unanimously resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by its stockholders, provided that, subject to and in accordance with the provisions of Section 7.04(c), the Board of Directors of the Company may withdraw, modify or amend such recommendation and (iv) amended the Rights Agreement as described in Section 5.17 hereof. The Company further represents that J.P. Morgan Securities Inc. has delivered to the Company's Board of Directors its opinion that the consideration to be received in the Offer and the Merger is fair to the holders of Shares from a financial point of view. The Company will promptly furnish Parent with a list of its stockholders, mailing labels and any available listing or computer file containing the names and addresses of all record holders of Shares and lists of securities positions of Shares held in stock depositories, in each case true and correct as of the most recent practicable date, and will provide to Parent such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent may reasonably request in connection with the Offer. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Merger Subsidiary and each of their Affiliates, associates, employees, agents and advisors shall hold in confidence the information contained in any such lists, labels, listings or files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated and if the Company so requests, shall deliver, and shall use their reasonable efforts to cause their Affiliates, associates, employees, agents and advisors to deliver, to the Company all copies and any extracts or summaries from such information then in their possession or control. (b) Simultaneously with the filing by Merger Subsidiary of the Schedule 14D-1 or as promptly thereafter as practicable, the Company shall file with the SEC and disseminate to holders of Shares, in each case as and to the extent required by applicable federal securities laws, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements 8 12 thereto, the "SCHEDULE 14D-9") that, subject to the provisions of Section 7.04(c), shall reflect the recommendations of the Company's Board of Directors referred to above. The Company and Parent each agree promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect. The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given an opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. The Company shall provide Parent and its counsel with any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of such comments or other communications. SECTION 2.03. Directors. (a) Effective upon the acceptance for payment pursuant to the Offer of a number of Shares that satisfies the Minimum Condition, Parent shall be entitled to designate the number of directors, rounded up to the next whole number, on the Company's Board of Directors that equals the product of (i) the total number of directors on the Company's Board of Directors (giving effect to the election of any additional directors pursuant to this Section) and (ii) the percentage that the number of Shares beneficially owned by Parent (including Shares accepted for payment) bears to the total number of Shares outstanding, and the Company shall take all action necessary to cause Parent's designees to be elected or appointed to the Company's Board of Directors, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such time, the Company will also use its best efforts to cause individuals designated by Parent to constitute the number of members, rounded up to the next whole number, on (i) each committee of the Board other than the Executive Committee or any committee of the Board established to take action under this Agreement and (ii) each board of directors of each Subsidiary of the Company (and each committee thereof) that represents the same percentage as such individuals represent on the Board of Directors of the Company. Notwithstanding the foregoing, the Company shall use its reasonable best efforts to ensure that at least three members of the Board of Directors and such committees and boards as of the date hereof who are not employees of the Company (the "CONTINUING DIRECTORS") shall remain members of the Board of Directors and such committees and boards until the Effective Time, provided that, if the number of Continuing Directors is reduced below three prior to the Effective Time, the remaining such Directors shall be entitled to designate to fill the vacancy a person who is not an officer, director or designee of Parent or any of its Affiliates and who shall be deemed to be a Continuing Director for all purposes of this Agreement. 9 13 (b) The Company's obligations to appoint Parent's designees to the Board of Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions, and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors, as Section 14(f) and Rule 14f-1 require in order to fulfill its obligations under this Section. Parent shall supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (c) Following the election or appointment of Parent's designees pursuant to Section 2.03(a) and until the Effective Time, the approval of a majority of the Continuing Directors of the Company then in office who were not designated by Parent shall be required to authorize (and such authorization shall constitute the authorization of the Board of Directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Board of Directors, any extension of time for performance of any obligation or action hereunder by Parent or Merger Subsidiary and any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company. ARTICLE 3 THE MERGER SECTION 3.01. The Merger. (a) At the Effective Time, Merger Subsidiary shall be merged (the "MERGER") with and into the Company in accordance with Delaware Law, whereupon the separate existence of Merger Subsidiary shall cease, and the Company shall be the surviving corporation (the "SURVIVING CORPORATION"). (b) Upon the terms and subject to the conditions of this Agreement, the closing of the Merger (the "CLOSING") shall take place at 10:00 a.m. on a date to be specified by the parties (the "CLOSING DATE") that shall be no later than the second business day after satisfaction of the conditions set forth herein, other than those conditions that are to be satisfied at the Closing, but subject to the satisfaction of such conditions, at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, unless the parties hereto agree in writing to another time, date or place. (c) Upon the Closing, the Company and Merger Subsidiary shall file a certificate of merger with the Delaware Secretary of State and make all other filings or recordings required by Delaware Law in connection with the Merger. 10 14 The Merger shall become effective at such time (the "EFFECTIVE TIME") as the certificate of merger is duly filed with the Delaware Secretary of State or at such later time as is specified in the certificate of merger. (d) From and after the Effective Time, the Surviving Corporation shall possess all the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Subsidiary, all as provided under Delaware Law. SECTION 3.02. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Subsidiary or the Company or the holders of any of the following securities: (a) except as otherwise provided in Section 3.02(c), Section 3.04, Section 3.06 or Section 3.09, each Share outstanding immediately prior to the Effective Time shall be converted into the right to receive $10.25 in cash or any higher price paid for each Share in the Offer, without interest (the "MERGER CONSIDERATION"); (b) each Share held by the Company as treasury stock or owned by Parent or any of its Subsidiaries immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto; and (c) each share of common stock of Merger Subsidiary outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. SECTION 3.03. Surrender and Payment. (a Prior to the Effective Time, Parent shall appoint Bank One Corporation as agent (the "EXCHANGE AGENT") for the purpose of exchanging certificates representing Shares (the "CERTIFICATES") for the Merger Consideration. Parent will make available to the Exchange Agent, as needed, the Merger Consideration to be paid in respect of the Shares. Promptly after the Effective Time, Parent will send, or will cause the Exchange Agent to send, to each holder of Shares at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates to the Exchange Agent) for use in such exchange. (b) Each holder of Shares that have been converted into the right to receive the Merger Consideration will be entitled to receive, upon surrender to the Exchange Agent of a Certificate, together with a properly completed letter of transmittal, the Merger Consideration payable for each Share represented by such Certificate. Until so surrendered, each such Certificate shall represent after the 11 15 Effective Time for all purposes only the right to receive such Merger Consideration. (c) If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition to such payment that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) After the Effective Time, there shall be no further registration of transfers of Shares. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article. (e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 3.03(a) (and any interest or other income earned thereon) that remains unclaimed by the holders of Shares six months after the Effective Time shall be returned to Parent, and any such holder who has not exchanged them for the Merger Consideration in accordance with this Section prior to that time shall thereafter look only to Parent for payment of the Merger Consideration in respect of such Shares without any interest thereon. Notwithstanding the foregoing, Parent shall not be liable to any holder of Shares for any amount paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of Shares six years after the Effective Time (or such earlier date immediately prior to such time when the amounts would otherwise escheat to or become property of any governmental authority) shall become, to the extent permitted by applicable law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto. (f) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 3.03(a) to pay for Shares for which appraisal rights have been perfected shall be returned to Parent, upon demand. SECTION 3.04. Dissenting Shares. Notwithstanding Section 3.02, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Delaware Law shall not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect, withdraws or otherwise loses its right to appraisal. If, after the Effective Time, such holder fails to perfect, withdraws or loses its right to 12 16 17 appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Except with the prior written consent of Parent, the Company shall not make any payment with respect to, or settle or offer to settle, any such demands. SECTION 3.05. Stock Options. (a) The Company shall take all actions necessary (which include, but are not limited to, satisfying the requirements of Rule 16b-3(e) promulgated under Section 16 of the Exchange Act, without incurring any liability in connection therewith, and seeking any consents required of holders of Options) to provide that at or immediately prior to the Effective Time, each stock option to purchase Shares (the "OPTIONS") outstanding under any employee or director stock option or compensation plan or arrangement of the Company (the "OPTION PLANS"), whether or not vested or exercisable, shall be canceled, and the Company shall pay each holder of any such Option (an "OPTION HOLDER") at or promptly after the Effective Time for each such Option surrendered an amount in cash determined by multiplying (i) the excess, if any, of the Merger Consideration over the applicable exercise price of such Option by (ii) the number of Shares such holder could have purchased (assuming full vesting of all options) had such holder exercised such Option in full immediately prior to the Effective Time (the "OPTION SPREAD"). (b) Prior to the Effective Time, the Company shall make any amendments to the terms of such stock option or compensation plans or arrangements deemed necessary by the Company or Parent to give effect to the transactions contemplated by Section 3.05(a). (c) Except as provided herein or as otherwise agreed to by the parties, (i) the Company shall cause the Option Plans to terminate as of the Effective Time and (ii) the Company shall ensure that following the Effective Time, no holder of Options or any participant in the Option Plans will have any right to acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary thereof. SECTION 3.06. Adjustments. If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding Shares shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period, the cash payable pursuant to the Offer, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted. 13 18 SECTION 3.07. Withholding Rights. Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If the Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which the Surviving Corporation or Parent, as the case may be, made such deduction and withholding. SECTION 3.08. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will pay, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the Shares represented by such Certificate, as contemplated by this Article 3. SECTION 3.09. Adjustments to Price. A "LIQUIDATION EVENT" shall mean any sale or disposition for cash (including, without limitation, a sale or disposition by EGN of all or substantially all of its assets followed by a distribution of the cash proceeds thereof to shareholders of EGN, a merger or consolidation involving EGN, a purchase of all or substantially all of the stock of EGN by a third party or the repurchase by EGN of any of its capital stock from the Company or its Subsidiaries) by the Company or its Subsidiaries of all or any part of its investment in EGN prior to the expiration date of the Offer. In the event of a Liquidation Event (or if more than one such Liquidation Event occurs, with respect to each Liquidation Event), each of the Merger Consideration, the Offer Price and the Option Spread shall be increased by an amount equal to 30% of any after-tax gain (after giving full effect to any capital loss carry-forward available to the Company, the availability of which is confirmed by the Company's independent accountants) on such Liquidation Event, calculated in accordance with GAAP, divided by the total number of Shares then outstanding on a fully diluted basis, assuming for this purpose the exercise only of outstanding Options, whether or not such Options are then vested, which are (or, giving effect to the adjustment in the Merger Consideration contemplated hereby, would be) in-the-money. Parent and Merger Subsidiary shall make such changes in the Offer Documents necessary to reflect any increase in the price per Share of the Offer pursuant to this provision, including extending the expiration date of the Offer as required by applicable Federal securities laws. The price used to compute any after-tax gain on a Liquidation Event shall be the cash received by the Company in such sale or disposition (net of any underwriting discounts and other amounts paid by the Company in connection with such sale), but only if 14 19 such cash is for an aggregate amount in excess of the Company's then net book value of its interest in EGN. ARTICLE 4 THE SURVIVING CORPORATION SECTION 4.01. Certificate of Incorporation. The certificate of incorporation of Merger Subsidiary in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable law, provided that, at the Effective Time, Article I of such certificate of incorporation shall be amended to read as follows: "The name of the corporation is Gibson Greetings, Inc." SECTION 4.02. Bylaws. The bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws of the Surviving Corporation until amended in accordance with applicable law. SECTION 4.03. Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation and (ii) the officers of [Merger Subsidiary] at the Effective Time shall be the officers of the Surviving Corporation. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent that, except (A) as would not have, individually or in the aggregate, a Material Adverse Effect on the Company, (B) as disclosed in the Company SEC Documents filed prior to the date of this Agreement or (C) as set forth (including an identification by section reference to the representations and warranties to which such exceptions relate) on the Disclosure Schedule to this Agreement (the "DISCLOSURE SCHEDULE"): SECTION 5.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each material 15 20 jurisdiction where such qualification is necessary. The Company has heretofore delivered to Parent true and complete copies of the certificate of incorporation and bylaws of the Company as currently in effect. SECTION 5.02. Corporate Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby are within the Company's corporate powers and, except for the affirmative vote of the holders of a majority of the outstanding Shares in connection with the consummation of the Merger (if required by law), have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of a majority of the outstanding Shares (if required by law) is the only vote of the holders of any of the Company's capital stock necessary in connection with the consummation of the Merger. This Agreement constitutes a valid and binding agreement of the Company. SECTION 5.03. Governmental Authorization. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any governmental body, agency, official or authority, domestic or foreign, other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and other Antitrust Laws, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other applicable securities or takeover laws, whether federal, state or foreign, and (iv) compliance with Section 1707.041 of the Ohio Law. SECTION 5.4. Non-contravention. The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any material provision of the certificate of incorporation or bylaws of the Company, (ii) assuming compliance with the matters referred to in Section 5.03, contravene, conflict with, or result in a violation or breach of any material provision of any applicable law, statute, ordinance, rule, regulation, judgment, injunction, order or decree, (iii) to the Company's Knowledge, require any consent by any Person under, or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination or cancellation of, any provision of any contract, license, lease or loan binding upon the Company or any of its Subsidiaries that (A) provides for annual rentals or payments by or to the Company of $100,000 or more and (B) is not terminable by the Company or the other party to such agreement on less than 90 days notice or (iv) result in the creation or imposition of any Lien on any material asset of the Company or any of its Subsidiaries. 16 21 SECTION 5.05. Capitalization. (a) The authorized capital stock of the Company consists of 50,000,000 Shares and 5,300,000 shares of preferred stock, par value $1.00. As of October 29, 1999, there were outstanding (i) 15,846,663 Shares and (ii) no shares of preferred stock. As of October 29, 1999, there were reserved for issuance, (i) 931,773 Shares under the Company's employee stock option plans listed on Section 5.15 of the Disclosure Schedule in the amounts and for the exercise prices stated in such schedule and (ii) no shares of Series B Preferred Stock, par value $1.00 per share, pursuant to the Rights Agreement. As of October 29, 1999, 1,291,601 Shares were held in the treasury of the Company. As of October 29, 1999, there were outstanding compensatory employee and director stock options to purchase an aggregate of 2,303,085 Shares. All outstanding shares of capital stock of the Company have been, and all shares that may be issued pursuant to the compensatory employee and director stock option plans of the Company will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued and are fully paid and nonassessable. (b) Except for changes since October 29, 1999 resulting from the exercise of employee stock options outstanding on such date, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "COMPANY SECURITIES"). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities. SECTION 5.06. Subsidiaries. (a) Each material Subsidiary of the Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Each such Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each material jurisdiction where such qualification is necessary. All material Subsidiaries of the Company and their respective jurisdictions of incorporation are identified in the Company 10-K. (b) All of the outstanding capital stock of, or other voting securities or ownership interests in, each material Subsidiary and, to the Company's Knowledge, each Operating Subsidiary of the Company, is owned by the Company, directly or indirectly, free and clear of any material Lien and free of any other material limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or 17 22 ownership interests). There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any material Subsidiary or, to the Company's Knowledge, any Operating Subsidiary of the Company or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or other obligation of the Company or any of its Subsidiaries to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any material Subsidiary of the Company (the items in clauses (i) and (ii) being referred to collectively as the "COMPANY SUBSIDIARY Securities"). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. SECTION 5.07. SEC Filings. (a) The Company has delivered to Parent (i) the Company's annual reports on Form 10-K for its fiscal years ended December 31, 1996, 1997 and 1998, (ii) its quarterly reports on Form 10-Q for its fiscal quarters ended March 31, 1999 and June 30, 1999, (iii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of the Company held since December 31, 1998, and (iv) all of its other reports, statements, schedules and registration statements filed with the SEC since December 31, 1998 (the documents referred to in this Section 5.07(a), collectively, the "COMPANY SEC DOCUMENTS".) The Company has filed all forms, reports and documents required to be filed with the SEC since January 1, 1996 (the "FILED SEC DOCUMENTS"). (b) As of the filing date, each Filed SEC Document complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be. (c) As of its filing date (or, if amended or superceded by a filing prior to the date hereof, on the date of such filing), each Filed SEC Document filed pursuant to the 1934 Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (d) Each Filed SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 5.08. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the 18 23 Company included in the Filed SEC Documents fairly present in all material respects, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements), except that the notes and disclosures therein in the Company's quarterly reports on Form 10-Q have not been prepared in accordance with GAAP. SECTION 5.09. Absence of Certain Changes. Since the Company Balance Sheet Date, the business of the Company and its material Subsidiaries and, to the Company's Knowledge, its Operating Subsidiaries has been conducted in the ordinary course consistent with past practices and, except as disclosed to Parent prior to the date of this Agreement, there has not been: (a) any event, occurrence, development or state of circumstances or facts that has had individually or in the aggregate, a Material Adverse Effect on the Company, except any such event, occurrence, development or state of circumstances or facts resulting from or arising in connection with (A) changes, circumstances or conditions affecting the greeting cards industry in general or (B) changes in general economic, regulatory or political conditions; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, or any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or any of its material Subsidiaries; (c) any amendment of any material term of any outstanding security of the Company or any of its material Subsidiaries; (d) any incurrence, assumption or guarantee by the Company, or any of its Subsidiaries of any indebtedness for borrowed money, including capitalized leases, other than in the ordinary course of business and in amounts and on terms consistent with past practices; (e) any making of any loan, advance or capital contributions to or investment in any Person, exceeding, individually or in the aggregate, $1 million, other than loans, advances or capital contributions to or investments in its Subsidiaries made in the ordinary course of business consistent with past practices or loans or advances to employees of the Company or any of its Subsidiaries made in the ordinary course of business consistent with past practice; 19 24 (f) any transaction or commitment made, or any contract or agreement entered into, by the Company or any of its material Subsidiaries and to the Company's Knowledge, its Operating Subsidiaries relating to its assets or business (including the acquisition or disposition of any material assets) or any relinquishment by the Company or any of its material Subsidiaries and to the Company's Knowledge, its Operating Subsidiaries of any contract or other right, in either case, material to the Company and its Subsidiaries, taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (g) any material change in any method of accounting, method of tax accounting or accounting principles or practice by the Company or any of its Subsidiaries, except for any such change required by reason of a concurrent change in GAAP or Regulation S-X under the 1934 Act; (h) any (i) increase in benefits payable under any existing severance or termination pay policies or employment agreements exceeding $100,000, (ii) any entering into any employment, severance deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director, officer or employee of the Company or any of its Subsidiaries , with payments thereunder exceeding $100,000, (iii) establishment, adoption or amendment (except as required by applicable law) of any profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of the Company or any of its Subsidiaries, or (iv) increase in compensation, bonus or other benefits payable to any director, officer or employee of the Company or any of its subsidiaries exceeding $100,000, other than in the ordinary course of business consistent with past practice. SECTION 5.10. No Undisclosed Material Liabilities. There are no liabilities or obligations of the Company or any of its Subsidiaries other than: (a) liabilities or obligations disclosed or provided for in the Company Balance Sheet or in the notes thereto or in the Company SEC Documents filed prior to the date of this Agreement; (b) liabilities or obligations incurred in the ordinary course consistent with past practice; and (c) liabilities or obligations under this Agreement or incurred in connection with the transactions contemplated hereby. SECTION 5.11. Compliance with Laws and Court Orders. The Company and, to the Company's Knowledge, each of its Subsidiaries is in compliance with, and is not under investigation with respect to any violation of, any applicable 20 25 material law, statute, ordinance, rule, regulation, judgment, injunction, order or decree. SECTION 5.12. Litigation. There is no material action, suit, investigation or proceeding pending against or affecting, the Company, any of its Subsidiaries, or any of their respective properties before any court or arbitrator or before or by any governmental body, agency or official, domestic or foreign. SECTION 5.13. Finders' Fees. Except for J.P. Morgan Securities Inc., a copy of whose engagement agreement has been provided to Parent, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who might be entitled to any material fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement. SECTION 5.14. Taxes. (a) The Company and each of its Subsidiaries have timely filed or will file or cause to be timely filed all material Tax Returns required by applicable law to be filed by them prior to or as of the Effective Time, and all such material Tax Returns are, or will be at the time of filing, true and complete in all material respects. (b) The Company and each of its Subsidiaries have paid, or withheld and remitted to the appropriate taxing authority all taxes shown as due and payable on the Tax Returns that have been filed. (c) No federal, state, local or foreign audits, administrative proceedings or court proceeding are pending with regard to any Taxes or Tax Returns of the Company and there are no outstanding deficiencies or assessments asserted or proposed. (d) There are no outstanding agreements, consents or waivers extending the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company, and the Company is not a party to any agreement providing for the allocation or sharing of Taxes. (e) Since January 1, 1990, the Company has not been a member of an affiliated group filing consolidated or combined Tax Returns other than a federal income tax group the common parent of which is the Company. (f) "TAXES" shall mean any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, goods and services, service use, license, value added, capital, net worth, payroll, profits, withholding, franchise, transfer and recording taxes, fees and charges, and 21 26 any other taxes, assessment or similar charges imposed by the Internal Revenue Service or any taxing authority (whether domestic or foreign including any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)) (a "TAXING AUTHORITY"), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments. "TAX RETURN" shall mean any report, return, document, declaration or other information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information. SECTION 5.15. Employee Benefit Plans. (a) Section 5.15 of the Disclosure Schedule contains a true and complete list of the Employee Plans. The Company has made available to Parent copies of each Employee Plan and all amendments thereto and, where applicable, the most recent annual reports (Form 5500, including Schedule B thereto), the most recent actuarial valuation report and the most recent determination letter of the Internal Revenue Service relating to each Employee Plan. (b) No "accumulated funding deficiency," as defined in Section 412 of the Code, has been incurred with respect to any Title IV Plan. No "reportable event," within the meaning of Section 4043 of ERISA, other than a "reportable event" that will not have a Material Adverse Effect on the Company, and no event described in Section 4062 or 4063 of ERISA, has occurred in connection with any Employee Plan. Neither the Company nor any ERISA Affiliate of the Company has (i) engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii) incurred any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA that could become a liability of the Company, any Subsidiary of the Company, Parent or any of their ERISA Affiliates after the Effective Time. (c) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code is the subject of a favorable qualification determination letter issued by the Internal Revenue Service and to the Company's Knowledge nothing has occurred that would adversely affect that determination. (d) Each Employee Plan has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all applicable 22 27 statutes, orders, rules and regulations, including but not limited to ERISA and the Code. (e) (i) No Employee Plan provides any benefits or compensation which would be triggered by the transactions contemplated herein and (ii) no compensation or benefits payable in connection with the transactions contemplated herein will constitute an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. (f) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement. To the Company's Knowledge there is no organizing effort or representation dispute with respect to any employee of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is involved in or, to the Company's Knowledge, threatened with any labor dispute (other than individual grievances arising in the ordinary course), work stoppage, labor strike or slowdown. SECTION 5.16. Environmental Matters. (a) (i) No written notice, order, complaint or penalty has been received by the Company or any Subsidiary arising out of any Environmental Laws and there are no Environmental Claims pending or, to the Company's Knowledge, threatened. (ii) The Company and each Subsidiary have all environmental permits necessary for their operations to comply with all applicable Environmental Laws and are in compliance with the terms of such permits. (iii) The operations of the Company and each Subsidiary are in compliance with the terms of applicable Environmental Laws. (b) Except as set forth in this Section 5.16, no representations or warranties are being made with respect to matters arising under or relating to environmental matters. SECTION 5.17. Antitakeover Statutes, Rights Agreement and Standstill Agreement. (a) The Company has taken all action necessary to exempt the Offer, the Merger, this Agreement, and the transactions contemplated hereby from the provisions of Section 203 of Delaware Law and Articles V and VI of the Company's Certificate of Incorporation, and, accordingly, neither such provisions nor other antitakeover or similar statute or regulation applies or purports to apply to any such transactions. (b) The Company will take all action necessary to (i) render the Rights Agreement dated as of September 8, 1999 between the Company and The Bank of New York (the "RIGHTS AGREEMENT") inapplicable to the Offer, the Merger and 23 28 the other transactions contemplated hereby, (ii) ensure that (y) neither Parent nor any of its Subsidiaries nor any of its permitted assignees or transferees is an Acquiring Person (as defined in the Rights Agreement) pursuant to the Rights Agreement and (z) a Stock Acquisition Date, Triggering Event or Distribution Date (in each case as defined in the Rights Agreement) does not occur by reason of the execution of this Agreement, the commencement or completion of the Offer, the consummation of the Merger or the other transactions contemplated hereby and (iii) render the provisions of the Standstill Agreement dated as of October 26, 1998, between Parent and the Company (the "STANDSTILL AGREEMENT") inapplicable to the Offer, the Merger, this Agreement and the transactions contemplated hereby. If this Agreement is terminated for any reason, then the provisions of the Rights Agreement and the Standstill Agreement will apply to Parent in full force and effect as if the provisions of this Section 5.17(b) had never been agreed to, with the provisions of the Standstill Agreement remaining in full force and effect for a period of two years after such termination. SECTION 5.18. Intellectual Property. (a) The Company or its Subsidiaries own or have the valid right to use all material intellectual property used by it in connection with its business, including: (i) trademarks and service marks (registered or unregistered) and trade names, and all goodwill associated therewith; (ii) patents, patentable inventions, discoveries, improvements, ideas, know-how, processes and computer programs, software and databases (including source code); (iii) trade secrets and the right to limit the use or disclosure thereof; and (iv) copyrights in all works, including software programs and mask works (collectively "INTELLECTUAL PROPERTY"). (b) To the Company's Knowledge, the conduct of the businesses of the Company as currently conducted does not conflict with or infringe in any material respect any proprietary right of any third party. There is no claim, suit, action or proceeding pending or, to the Company's Knowledge, threatened against the Company (i) alleging any such conflict or infringement with any third party's proprietary rights, or (ii) challenging the ownership or use of the Intellectual Property. SECTION 5.19. Year 2000 Compliance. (a) To the Company's Knowledge, the material Subsidiaries of the Company are Year 2000 Compliant. Section 5.19 of the Disclosure Schedule contains, to the Company's Knowledge, the current status of the Company's Year 2000 readiness. (b) The term "YEAR 2000 COMPLIANCE" means, with respect to the material Subsidiaries of the Company, (i) the functions, calculations and other computer processes of all equipment, computer hardware, software and systems of the material 24 29 Subsidiaries of the Company, including, but not limited to, internal and outsourced systems and embedded computer features within other systems and equipment of the material Subsidiaries of the Company (collectively, "PROCESSES"), perform properly in an accurate and consistent manner regardless of the date in time on which the Processes are actually performed and regardless of the date of input, whether before, on or after January 1, 2000 and whether or not the dates are affected by leap years; (ii) the equipment, computer hardware, software and systems accept, calculate, compare, sort, extract, sequence and otherwise process data inputs and date values, and return and display date values, in an accurate and consistent manner regardless of the dates used, whether before, on or after January 1, 2000; (iii) the equipment, computer hardware, software and systems will function properly without interruptions or manual interventions caused by the date in time on which the Processes are actually performed or by the date of input to the software, whether before, on or after January 1, 2000; (iv) the equipment, computer hardware, software and systems accept and respond to two-digit year data input in the Processes in a manner that resolves any ambiguities as to the century in a defined, predetermined and appropriate manner; and (v) the equipment, computer hardware, software and systems store and display data information in the Processes in ways that are accurate and unambiguous as to the determination of the century. Notwithstanding any other provision of this Agreement to the contrary, to the extent the Company is able to show that Parent knows of facts as of the date hereof that constitute an inaccuracy or breach of the representations and warranties made by the Company not to be true as of the date given, Parent shall have no right or remedy with respect to such inaccuracy and such facts shall be deemed to be exceptions to such representations and warranties. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY Parent and Merger Subsidiary represent and warrant to the Company that: SECTION 6.01. Corporate Existence and Power. Each of Parent and Merger Subsidiary is a corporation duly incorporated, validly existing and in good 25 30 standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not have, individually or in the aggregate, a Parent Material Adverse Effect. Since the date of its incorporation, Merger Subsidiary has not engaged in any activities other than in connection with or as contemplated by this Agreement or in connection with arranging any financing required to consummate the transactions contemplated hereby. SECTION 6.02. Corporate Authorization. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby are within the corporate powers of Parent and Merger Subsidiary and have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of each of Parent and Merger Subsidiary. SECTION 6.03. Governmental Authorization. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any governmental body, agency, official or authority, domestic or foreign, other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which Parent is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act, (iii) compliance with any applicable foreign antitrust, requirements of the 1933 Act, the 1934 Act and any other applicable securities or takeover laws, whether federal, state or foreign, or (iv) compliance with Section 1707.041 of the Ohio Law. SECTION 6.04. Non-contravention. The execution, delivery and performance by Parent and Merger Subsidiary of this Agreement and the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any material provision of the certificate of incorporation or bylaws of Parent or Merger Subsidiary, (ii) assuming compliance with the matters referred to in Section 6.03, contravene, conflict with, or result in any violation or breach of any provision of any law, rule, regulation, judgment, injunction, order or decree or (iii) require any consent by any Person under any provision of any agreement binding upon Parent or Merger Subsidiary, except in the case of clauses (ii) and (iii) for conflicts, violations, breaches or defaults, or the failure to obtain such consents, that individually or in the aggregate would not be reasonably expected to have a Parent Material Adverse Effect. 26 31 SECTION 6.05. Finders' Fees. Except for Wasserstein & Perella, whose fees will be paid by Parent, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent who might be entitled to any material fee or commission from the Company or any of its Subsidiaries upon consummation of the transactions contemplated by this Agreement. SECTION 6.06. Financing. Parent has and will make available to Merger Subsidiary, sufficient cash, available lines of credit or other sources of immediately available funds necessary to purchase all of the Shares outstanding on a fully-diluted basis and to pay all related fees and expenses pursuant to the Offer. ARTICLE 7 COVENANTS OF THE COMPANY The Company agrees that: SECTION 7.01. Conduct of the Company. From the date hereof until the Effective Time, the Company and its Subsidiaries shall conduct their business and affairs in the ordinary course consistent with past practice and shall use their reasonable best efforts to preserve intact their business organizations and relationships with third parties. Without limiting the generality of the foregoing, from the date hereof until the Effective Time, except as set forth in Schedule 7.01 (including an identification by section reference to the covenants to which such exceptions relate): (a) The Company will not amend its certificate of incorporation or bylaws; (b) The Company will not declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; and neither the Company nor any of its Subsidiaries will (i) issue, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or any of its Subsidiaries, other than issuances of Shares pursuant to securities, options, warrants, calls, commitments or rights that have been granted at the date hereof and are or become exercisable prior to the Effective Time and previously disclosed to Parent in writing or as set forth in the Company SEC Documents or (ii) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; provided that, this subsection (b) shall not prohibit the Company from (A) issuing shares, options or warrants to acquire up to 100,000 shares of capital stock 27 32 of any class of the Company pursuant to its 1999 Incentive Stock Option Plan for a period of 10 business days following the date of this Agreement, provided that, no such issuances shall be made to the Chief Executive Officer or Chief Financial Officer of the Company or (B) taking any action pursuant to the Company's obligations to The Ink Group NZ Limited or The Ink Group Publishers PTY Limited regarding any put rights held by such entities; (c) The Company will not (i) incur any long-term indebtedness (whether evidenced by a note or other instrument, pursuant to a financing lease, sale-leaseback transaction, or otherwise) or incur short-term indebtedness other than under lines of credit existing on the date hereof other than, in each case, to operate the Company's business in the ordinary course or (ii) except in the ordinary course of business consistent with past practice, enter into, amend, terminate, renew or fail to use reasonable efforts to renew in any material respect any material contract; (d) Except pursuant to employment contracts in effect on the date hereof, neither the Company nor any of its Subsidiaries will (i) grant any increase in the compensation or benefits payable or to become payable by the Company or any of its Subsidiaries to any employee; (ii) adopt, enter into, amend or otherwise increase, or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under any bonus, incentive compensation, deferred compensation, severance, termination, change in control, retention, hospitalization or other medical, life, disability, insurance or other welfare, profit sharing, stock option, stock appreciation right, restricted stock or other equity based, pension, retirement or other employee compensation or benefit plan, program agreement or arrangement; or (iii) enter into or amend in any material respect any employment or collective bargaining agreement or, except in accordance with the existing written policies of the Company or existing contracts or agreements, grant any severance or termination pay to any officer, director or employee of the Company or any of its Subsidiaries, provided that clauses (i), (ii) and (iii) shall not prohibit the Company from taking any action hereunder pursuant to its program established by the Rabbi Trust and the related plan; (e) Neither the Company nor its Subsidiaries will change the accounting principles used by it unless required by GAAP (or, if applicable with respect to Subsidiaries, foreign generally accepted accounting principles); (f) Neither the Company nor any of its Subsidiaries will acquire by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, otherwise acquire any assets of any other Person (other than the purchase of assets from suppliers or vendors in the ordinary course of business consistent with past practice) for an amount in excess of $10 million, individually or in the aggregate, 28 33 other than (A) any investment by the Company in EGN necessary to maintain the Company's pro rata investment in EGN or (B) any exercise by the Company of its warrants in EGN; (g) Neither the Company nor any of its Subsidiaries will sell, lease, exchange, transfer or otherwise dispose of, or agree to sell, lease, exchange, transfer or otherwise dispose of, any of its assets except (i) pursuant to existing contracts or commitments and (ii) in the ordinary course of business consistent with past practice, except that the Company may dispose of in any manner and at any time all or a portion of its interest in EGN, provided that, if the Company disposes of EGN and such disposition is (A) for an aggregate amount less than $30 million or (B) to an Affiliate of the Company, then such disposition shall be for an amount at least equal to fair market value of the Company's interest in EGN that is disposed; (h) The Company and its Subsidiaries will not mortgage, pledge, hypothecate, grant any security interest in, or otherwise subject to any other lien on any of its properties or assets, except in connection with the incurrence of indebtedness permitted under Section 7.01(c); (i) Neither the Company nor its Subsidiaries will compromise, settle, grant any waiver or release relating to or otherwise adjust any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), including any Litigation, except for any such compromise, settlement, waiver, release or adjustment in the ordinary course of business consistent with past practice and involving a payment by the Company or any of its Subsidiaries not in excess of $250,000 in the aggregate following prior notice to and consultation with Parent; and (j) Neither the Company nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing. SECTION 7.02. Stockholder Meeting; Proxy Material. (a) The Company shall cause a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be duly called and held as soon as reasonably practicable after consummation of the Offer for the purpose of voting on the approval and adoption of this Agreement and the Merger, unless Delaware Law does not require a vote of stockholders of the Company for consummation of the Merger. Subject to Section 7.04(c), the Board of Directors of the Company shall recommend approval and adoption of this Agreement and the Merger by the Company's stockholders. In connection with such meeting, the Company will (i) promptly prepare and file with the SEC, will use its best efforts to have cleared by the SEC and will thereafter mail to its stockholders as promptly as practicable the Company Proxy Statement, which shall contain the recommendation of the Board of Directors, and all other proxy materials for such meeting, (ii) use its best efforts 29 34 to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby and (iii) otherwise comply with all legal requirements applicable to such meeting. (b) If Parent, Merger Subsidiary or any other Subsidiary of Parent shall acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the parties hereto agree, at the request of Parent, to take all necessary and appropriate action to cause the Merger to be effective as soon as practicable after the acceptance for payment and purchase of Shares pursuant to the Offer without a meeting of stockholders of the Company in accordance with Delaware Law. SECTION 7.03. Access to Information. From the date hereof until the Effective Time and subject to applicable law and the Confidentiality Agreement dated as of October 28, 1998 between the Company and Parent (the "CONFIDENTIALITY AGREEMENT"), the Company shall (i) furnish on a periodic basis to Parent, its counsel, financial advisors, auditors and other authorized representatives financial and operating data, (ii) give Parent reasonable access to Frank J. O'Connell, Chairman, Chief Executive Officer and President of the Company, James T. Wilson, Executive Vice President-Finance and Operations and Chief Financial Officer of the Company and James E. Thaxton, Vice President-Business Affairs and Counsel of the Company, (iii) furnish Parent with all documents and analyses relating to the requirements of and approvals needed under the HSR Act to effect a closing of the transaction and (iv) update Parent on any material changes that develop with respect to information or documents previously provided to Parent, provided that, except as otherwise provided in this Agreement, including without limitation Section 9.01(b) hereof, in no event shall the Company be required to provide information or documents that (A) it deems to be of a competitively sensitive nature and (B) are subject to any attorney-client, work product or other privilege that the Company or any Subsidiary may have. Any action taken pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Company and its Subsidiaries. SECTION 7.04. No Solicitation; Other Offers. (a) From the date hereof until the acceptance for payment by Merger Subsidiary of the Shares tendered into the Offer or the earlier termination hereof, the Company will not, and will cause its Subsidiaries and the officers, directors, investment bankers, attorneys, accountants, consultants or other agents or advisors of the Company and its Subsidiaries not to (i) take any action (y) to solicit or (z) for the primary purpose of initiating or encouraging the submission of any Acquisition Proposal, (ii) engage in substantive discussions or negotiations with, or disclose any material nonpublic information relating to the Company or any of its Subsidiaries or afford access to the properties, books or records of the Company or any of its Subsidiaries to, any Person who the Company should reasonably be expected to know is considering making, or has made, an Acquisition Proposal or (iii) 30 35 otherwise cooperate in any way with, or assist or participate in, facilitate or encourage any effort or attempt by any other Person, in each case, for the primary purpose of making any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Offer, the Merger or any other transaction contemplated by this Agreement. The Company will notify Parent promptly after receipt by the Company (or any of its advisors) of any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its Subsidiaries or for access to the properties, books or records of the Company or any of its Subsidiaries by any Person who the Company should reasonably be expected to know is considering making, or has made, an Acquisition Proposal. The Company shall, and shall cause its Subsidiaries and the directors, officers and other agents of the Company and its Subsidiaries to, cease immediately and cause to be terminated all discussions and negotiations with any Persons conducted prior to the date hereof with respect to any Acquisition Proposal. Nothing contained in this Agreement shall prevent the Board of Directors of the Company from complying with Rule 14e-2 under the 1934 Act with respect to any Acquisition Proposal. (b) Notwithstanding the foregoing, prior to the acceptance for payment by Merger Subsidiary of the Shares tendered in the Offer the Company may, if it gives Parent notice of its intention to do so, negotiate or otherwise engage in substantive discussions with, and furnish nonpublic information to, any Person who delivers an unsolicited Superior Proposal if (i) the Company has complied with the terms of this Section 7.04, including, without limitation, the requirement in Section 7.04(a) that it notify Parent promptly after its receipt of any Acquisition Proposal, (ii) the Board of Directors of the Company determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to take such action could create a reasonable possibility of a breach of the fiduciary duties of the Board of Directors under applicable law, and (iii) such Person executes a confidentiality agreement with the Company not more favorable to the recipient of such information than the Confidentiality Agreement. For purposes of this Agreement, "SUPERIOR PROPOSAL" means any bona fide, unsolicited written Acquisition Proposal for at least a majority of the outstanding Shares on terms that the Board of Directors of the Company determines in good faith by a majority vote, on the basis of the advice of a financial advisor of nationally recognized reputation and taking into account all the terms and conditions of the Acquisition Proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, (A) is more favorable to all the Company's stockholders than as provided hereunder, (B) is reasonably capable of obtaining any required financing and (C) is reasonably capable of being completed. (c) The Board of Directors of the Company shall be permitted to withdraw, or modify in a manner adverse to Parent, its recommendation to its 31 36 stockholders referred to in Sections 2.02 and 7.02 hereof if the Board of Directors determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that an Acquisition Proposal is a Superior Proposal and that failure to take such action could create a reasonable possibility of a breach of the fiduciary duties of the Board of Directors under applicable law. SECTION 7.05. Notices of Certain Events. (a) The Company shall promptly notify Parent of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; and (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement. (b) The Company shall give prompt notice to Parent at any time the Company has Knowledge that any representation or warranty contained in this Agreement was inaccurate in any material respect as of the date made. SECTION 7.06. Disclosure Documents. (a) Each document required to be filed by the Company with the SEC or required to be distributed or otherwise disseminated to the Company's stockholders in connection with the transactions contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including, without limitation, the Schedule 14D-9, the proxy or information statement of the Company (the "COMPANY PROXY STATEMENT"), if any, to be filed with the SEC in connection with the Merger, and any amendments or supplements thereto, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the 1934 Act. (b) (i) The Company Proxy Statement, as supplemented or amended, if applicable, at the time such Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on adoption of this Agreement, and (ii) any Company Disclosure Document (other than the Company Proxy Statement), at the time of the filing of such Company Disclosure Document or any supplement or amendment thereto and at the time of any distribution or dissemination thereof, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 7.06(b) will not apply to statements or omissions included in the Company Disclosure Documents based upon information furnished to the Company by Parent. 32 37 (c) The information with respect to the Company or any of its Subsidiaries that the Company furnishes to Parent for use in the Offer Documents, at the time of the filing thereof, at the time of any distribution or dissemination thereof and at the time of the consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. SECTION 7.07. Standstill Agreements: Confidentiality Agreements . During the period from the date of this Agreement through the Effective Time, the Company will not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement for the benefit of the Company or any of its Subsidiaries, other than the Confidentiality Agreement pursuant to its terms or by written Agreement of the parties thereto, provided that, the Company may take such action if the Board of Directors determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of a breach of the fiduciary duties of the Board of Directors under applicable law, and provided further that this Section 7.07 shall not apply to any confidentiality agreement that is not related to, or does not arise from, an Acquisition Proposal. SECTION 7.08. Rights Agreement; Anti-takeover Provisions. The Company's Board of Directors will take all further action (in addition to that referred to in Section 5.17 hereof) reasonably requested in writing by Parent (including redeeming the Rights immediately prior to the Effective Time or further amending the Rights Agreement) in order to render the Rights Agreement inapplicable to the Offer and the Merger and the other transactions contemplated hereby to the extent provided herein and in the Rights Agreement. Except as provided above with respect to the Offer, the Merger and the other transactions contemplated hereby or approved in writing by Parent, the Board of Directors of the Company will not (i) amend the Rights Agreement, (ii) redeem the Rights or (iii) take any action with respect to, or make any determination under, the Rights Agreement to facilitate an Acquisition Proposal, provided that, the Company may take such action if the Board of Directors determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of a breach of its fiduciary duties under applicable law. In addition, except as otherwise provided in this Agreement, the Company will not approve an Acquisition Proposal, other than the Offer, the Merger and the other transactions contemplated by this Agreement, for purposes of Section 203 of Delaware Law or Article VI of the Company's Certificate of Incorporation, provided that, the Company may take such action if the Board of Directors determines in its good faith, reasonable judgment, after consultation with and the receipt of advice from 33 38 its financial advisor and outside counsel, that failure to do so would create a reasonable possibility of a breach of its fiduciary duties under applicable law. ARTICLE 8 COVENANTS OF PARENT Parent agrees that: SECTION 8.01. Confidentiality. Prior to the Effective Time and after any termination of this Agreement and for two years thereafter, Parent will hold, and will use its best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents (including, without limitation, any economists employed by Parent to assist in its antitrust review of the Offer, the Merger and the transactions contemplated thereby) to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Company or any of its Subsidiaries furnished to Parent or its Affiliates in connection with the transactions contemplated by this Agreement, including, without limitation, the stockholder lists furnished by the Company pursuant to Section 2.02, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by Parent, (ii) in the public domain through no fault of Parent or (iii) later lawfully acquired by Parent from sources other than the Company, provided that Parent may disclose such information to its officers, directors, employees, accountants, counsel, consultants, advisors and agents in connection with the transactions contemplated by this Agreement so long as Parent informs such Persons of the confidential nature of such information and directs them to treat it confidentially. Parent and its Affiliates shall satisfy their obligation to hold any such information in confidence if they exercise the same care with respect to such information as a reasonable Person would take to preserve the confidentiality of their own similar information under similar circumstances. If this Agreement is terminated, Parent and its Affiliates will, and will use their best efforts to cause their officers, directors, employees, accountants, counsel, consultants, advisors and agents to, destroy or deliver to the Company, upon request, all documents and other materials, and all copies thereof, that Parent or its Affiliates obtained, or that were obtained on their behalf, from the Company or any of its Subsidiaries in connection with this Agreement and that are subject to such confidence. Notwithstanding anything herein to the contrary, the terms of the Confidentiality Agreement executed by Parent shall remain in full force and effect. SECTION 8.02. Obligations of Merger Subsidiary. Parent will take all action necessary to cause Merger Subsidiary to perform its obligations under this 34 39 Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. SECTION 8.03. Voting of Shares. Parent agrees to vote all Shares beneficially owned by it in favor of adoption of this Agreement at the Company Stockholder Meeting. SECTION 8.04. Director and Officer Liability. (a) Parent shall cause the Surviving Corporation, and the Surviving Corporation hereby agrees, to do the following: (i) For six years after the Effective Time, the Surviving Corporation shall indemnify and hold harmless the present and former officers and directors of the Company (each an "INDEMNIFIED PERSON") in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by Delaware Law or any other applicable laws or provided under the Company's certificate of incorporation and bylaws in effect on the date hereof, provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. (ii) For six years after the Effective Time, the Surviving Corporation shall provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time covering each such Indemnified Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof. (iii) If Parent, the Surviving Corporation or any of its successors or assigns (A) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (B) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 8.04. (iv) The rights of each Indemnified Person under this Section 8.04 shall be in addition to any rights such Person may have under the certificate of incorporation or bylaws of the Company or any of its Subsidiaries, or under Delaware Law or any other applicable laws. These rights shall survive consummation of the Merger and are intended to benefit, and shall be enforceable by, each Indemnified Person. 35 40 (b) Parent shall, prior to the Effective Time, provide the Company with pre-paid, irrevocable officers' and directors' liability insurance with a nationally recognized insurance provider with an A.M. Best rating of at least "A", in amounts and for such periods of time as specified in Section 8.04(a)(ii). SECTION 8.05. Employee Benefits. (a) For a period of one year after the Effective Time, Parent will maintain or cause to be maintained employee compensation and benefit plans and arrangements for the benefit of each individual who is an employee of the Company or its Subsidiaries as of the Effective Time (each a "TRANSFERRED EMPLOYEE") that are no less favorable to such Transferred Employee than the compensation and benefits provided to the Transferred Employee by the Company and its Subsidiaries immediately prior to the Effective Time. Without limiting the generality of the foregoing, (i) for a period of one year after the Effective Time, Parent will maintain or cause to be maintained severance and employment termination benefits no less favorable to each Transferred Employee than the severance and employment termination benefits provided under the plans, policies and practices of the Company and its Subsidiaries, immediately prior to the Effective Time, and (ii) for a period of one year after the Effective Time Parent will maintain or cause to be maintained for the benefit of each eligible current and former employee of the Company and its Subsidiaries (and his or her eligible domestic partner) the post-retirement medical and life insurance benefits maintained by the Company and its Subsidiaries immediately prior to the Effective Time and shall make such benefits available to each such individual on a basis no less favorable to such individual than the basis on which such benefits were provided to similarly situated individuals immediately prior to the Effective Date. (b) If Transferred Employees or former employees of the Company or its Subsidiaries are included in any benefit plan, policy, or arrangement of Parent or its Affiliates such individuals shall receive credit for service prior to the Effective Time with the Company and its Subsidiaries and their respective predecessors for all purposes to the same extent such service was recognized under any similar Employee Plan of the Company or its Subsidiaries, except that such service shall not be counted for purposes of benefit accruals under any defined benefit pension plan to the extent that it would result in a duplication of vested benefits accrued by any such individual under any Employee Plan of the Company or its Subsidiaries. If Transferred Employees or former employees of the Company or its Subsidiaries (or their domestic partners or dependents) are included in any medical, dental or health plan other than the plans they participated in at the Effective Time (a "SUCCESSOR PLAN"), any such Successor Plan shall waive pre-existing conditions, to the extent such conditions were not applicable under the Employee Plans of the Company and its Subsidiaries, and shall provide that any expenses incurred prior to such change shall be taken into account under the deductible and out-of-pocket maximums under such Successor Plan. 36 41 SECTION 8.06. Disclosure Documents. (a) The information with respect to Parent and any of its Subsidiaries that Parent furnishes to the Company in writing specifically for use in any Company Disclosure Document will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading (i) in the case of the Company Proxy Statement, as supplemented or amended, if applicable, at the time such Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on adoption of this Agreement, and (ii) in the case of any Company Disclosure Document other than the Company Proxy Statement, at the time of the filing of such Company Disclosure Document or any supplement or amendment thereto and at the time of any distribution or dissemination thereof. (b) The Offer Documents, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the 1934 Act and, at the time of the filing thereof, at the time of any distribution or dissemination thereof and at the time of consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, provided that this representation and warranty will not apply to statements or omissions included in the Offer Documents based upon information furnished to Parent or Merger Subsidiary by the Company. ARTICLE 9 COVENANTS OF PARENT AND THE COMPANY The parties hereto agree that: SECTION 9.01. Best Efforts. (a) Subject to the terms and conditions of this Agreement, Company and Parent will use their best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement including, without limitation, using their best efforts to cause the conditions to the Offer to be satisfied as soon as reasonably possible and, subject to the terms and conditions of this Agreement, consummating the Offer as soon as possible after such conditions are satisfied or waived. In furtherance and not in limitation of the foregoing, each of Parent and Company agrees to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act (an "HSR FILING") with respect to the transactions contemplated hereby as promptly as practicable and in any event within ten 37 42 business days of the date hereof and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. (b) In connection with the efforts referenced in Section 9.01(a) to obtain all requisite approvals and authorizations for the transactions contemplated by this Agreement under the HSR Act or any other Antitrust Law, each of Parent and Company shall use its reasonable best efforts to (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii) keep the other party informed in all material respects of any material communication received by such party from, or given by such party to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "DOJ") or any other governmental authority and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated hereby and (iii) permit the other party to review any material communication given by it to, and consult with each other in advance of any meeting or conference with, the FTC, the DOJ or any such other governmental authority or, in connection with any proceeding by a private party. Subject to the Confidentiality Agreement, Section 8.01 of this Agreement, and any attorney-client, work product or other privilege, each of the parties hereto will coordinate and cooperate fully with the other parties hereto in exchanging such information and providing such assistance as such other parties may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods under the HSR Act. Any competitively sensitive information that is disclosed pursuant to this Section 9.01 will be limited to each of Parent's and the Company's respective counsel and economists pursuant to a separate customary confidentiality agreement. For purposes of this Agreement, "ANTITRUST LAW" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign, if any, statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. (c) In furtherance and not in limitation of the covenants of the parties contained in Section 9.01(a) and 9.01(b), each of Parent and the Company shall use its best efforts to resolve such objections if any, as may be asserted with respect to the transactions contemplated hereby under any Antitrust Law. In connection with the foregoing, if any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by this 38 43 Agreement as violative of any Antitrust Law, each of Parent and the Company shall cooperate in all respects with each other and use its respective best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement, including, without limitation, vigorously defending in litigation on the merits any claim asserted in any court by any party through a final and nonappealable judgment. (d) If any objections are asserted with respect to the transactions contemplated hereby under any Antitrust Law or if any suit is instituted by any government authority or any private party challenging any of the transactions contemplated hereby as violative of any Antitrust Law, each of Parent and the Company shall use its best efforts to resolve such objections or challenge as such governmental authority or private party may have to such transactions under such Antitrust Law so as to permit consummation of the transactions contemplated by this Agreement. In furtherance and not in limitation of the foregoing, each of Parent and the Company (and, to the extent required by any governmental authority, its respective Subsidiaries and Affiliates over which it exercises control) shall be required to pursue a resolution with any governmental authority and, if acceptable to any governmental authority, enter into a settlement, undertaking, consent decree, stipulation or other agreement with such governmental authority regarding antitrust matters in connection with the transactions contemplated by this Agreement (each, a "SETTLEMENT"). Notwithstanding anything else contained in this Agreement, neither Parent nor the Company shall be required to enter into any Settlement that requires Parent and/or the Company to sell or otherwise dispose of assets of Parent and its Subsidiaries and/or the Company and its Subsidiaries (any such action, a "DIVESTITURE") if such Divestiture would have a material adverse effect on the pro forma combined business of Parent and the Company. (e) The Company hereby acknowledges that Parent will lead the process to obtain all necessary waivers, consents and approvals, and to effect all necessary filings under the Antitrust Law, and that Parent's reasonable determination after consultation with the Company as to the appropriate course of action to obtain such waivers, consents and approvals will be final, provided that, the foregoing shall not limit in any respect any of the parties' obligations under this Agreement. SECTION 9.02. Certain Filings. The Company and Parent shall cooperate with one another (i) in connection with the preparation of the Company Disclosure Documents and the Offer Documents, (ii) in determining whether any action by or in respect of, or filing with, any governmental body, agency, official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with 39 44 the consummation of the transactions contemplated by this Agreement and (iii) in taking such actions or making any such filings, furnishing information required in connection therewith or with the Company Disclosure Documents or the Offer Documents and seeking timely to obtain any such actions, consents, approvals or waivers. SECTION 9.03. Public Announcements. Parent and the Company will consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. SECTION 9.04. Further Assurances. At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Subsidiary, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. ARTICLE 10 CONDITIONS TO THE MERGER SECTION 10.01. Conditions to Obligations of Each Party. The obligations of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (a) if required by Delaware Law, this Agreement shall have been approved and adopted by the stockholders of the Company in accordance with such law; (b) no injunction shall have been issued and remain in effect which restrains consummation of the Offer; and (c) the number of Shares tendered pursuant to the Offer and not withdrawn, together with the Shares then owned by Parent, satisfies the Minimum Condition and the Merger Subsidiary has accepted for payment and paid for such Shares. 40 45 SECTION 10.02. Conditions to Obligations of Parent and Merger Subsidiary to Effect the Merger. The obligations of Parent and Merger Subsidiary to effect the Merger are further subject to the satisfaction or waiver of the following condition prior to the Effective Time: (a) The Company shall have performed in all material respects its obligations under Section 2.03(a) with respect to the election or appointment of Parent's designees to the Company's Board of Directors. ARTICLE 11 TERMINATION SECTION 11.01. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company): (a) by mutual written agreement of the Company and Parent; (b) by either the Company or Parent, if: (i) the Offer has not been consummated on or before 18 months after the date hereof, provided that (A) the right to terminate this Agreement pursuant to this Section 11.01(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Offer to be consummated by such time and (B) such 18 month period shall be extended for the time period equal to the time period beyond ten business days during which either the Company or Parent shall fail to make an HSR Filing pursuant to Section 9.01(a); (ii) within 10 days following satisfaction of all other conditions to the Offer, the Minimum Condition shall not have been satisfied, provided that, such 10 day period shall be extended for a period to allow for the extension of the expiration date of the Offer pursuant clause (ii) of the fourth sentence of Section 2.01(a) or pursuant to Section 3.09 to allow for an increase in the Offer Price; (iii) a permanent injunction which is final and nonappealable shall have been issued restraining or otherwise prohibiting consummation of the Merger or any of the other transactions contemplated by this Agreement, provided that the party seeking to terminate this Agreement pursuant to this Section 11.01(b)(iii) shall have used all efforts to prevent the entry of such permanent injunction; or 41 46 (iv) the other party shall have breached or failed to perform in all material respects any of its obligations pursuant to Section 9.01 hereof on or prior to such time, provided that, such party shall have failed to substantially cure such failure to perform within a reasonable time after being notified of such failure to perform; (c) by Parent, if, after the date hereof and prior to the acceptance for payment of the Shares under the Offer: (i) the Board of Directors of the Company shall have withdrawn, or modified in a manner materially adverse to Parent, its approval or recommendation of this Agreement, the Offer or the Merger, or shall have recommended an Acquisition Proposal other than by Parent or its Affiliates; (ii) the Board of Directors of the Company shall have (i) amended the Rights Agreement to facilitate an Acquisition Proposal or (ii) terminated or redeemed the Rights, except in each case (A) as shall be necessary to render the Rights Agreement inapplicable to the Offer and the Merger and the other transactions contemplated hereby (or any other Acquisition Proposal by Parent or its Affiliates) or (B) as directed by Parent pursuant to Section 7.08; (iii) the Board of Directors of the Company shall take action under Section 203 of Delaware Law or Article VI of the Company's Certificate of Incorporation to approve any transaction other than the Offer and the Merger and the other transactions contemplated hereby (or any other Acquisition Proposal by Parent or its Affiliates); or (iv) the Company shall have breached or failed to perform any of its obligations under this Agreement required to be performed on or prior to such time or any of the representations and warranties of the Company under this Agreement shall fail to be accurate as of the date made, provided that, in each such case, (A) the Company shall have failed to substantially cure such breach, failure to perform or inaccuracy within a reasonable time after being notified by Parent of such breach, failure to perform or inaccuracy and (B) such breach, failure to perform or inaccuracy would have, individually or in the aggregate, a Material Adverse Effect on the Company; (d) by the Company, if, prior to the acceptance for payment of the Shares under the Offer the Board of Directors of the Company shall have recommended, or entered into an agreement with respect to a Superior Proposal pursuant to Section 7.04. 42 47 The party desiring to terminate this Agreement pursuant to this Section 11.01 (other than pursuant to Section 11.01(a)) shall give notice of such termination to the other party. Termination by the Company pursuant to Section 11.01(d) shall not be effective unless and until the Company shall have paid to Parent the fee described in Section 12.04(c) hereof. Termination by Parent pursuant to Sections 11.01(a), 11.01(b)(i), 11.01(b)(iii), 11.01(b)(iv) or 11.01(c)(iv) shall not be effective unless and until Parent shall have paid, or caused the Escrow Agent to pay, to Company the fee described in Section 12.04(d). SECTION 11.02. Effect of Termination. If this Agreement is terminated pursuant to Section 11.01, this Agreement shall become void and of no effect with no liability on the part of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party hereto, provided that, if such termination shall result from the (i) failure of either party to fulfill a condition to the performance of the obligations of the other party or (ii) failure of either party to perform a covenant hereof, such party shall be fully liable for any and all liabilities and damages incurred or suffered by the other party as a result of such failure or breach. The provisions of Sections 8.01, 12.04, 12.06, 12.07 and 12.08 shall survive any termination hereof pursuant to Section 11.01. ARTICLE 12 MISCELLANEOUS SECTION 12.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given, if to Parent or Merger Subsidiary, to: American Greetings Corporation One American Road Cleveland, Ohio 44144 Fax: (216) 252-6777 Attn: General Counsel with a copy to: Jones, Day, Reavis & Pogue North Point 901 Lakeside Avenue Cleveland, OH 44144 43 48 Fax: (216) 579-0212 Attn: Lyle G. Ganske if to the Company, to: Gibson Greetings, Inc. 2100 Section Road Cincinnati, Ohio 45237 Fax: (513) 841-6921 Attn: Chief Executive Officer with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Fax: (212) 450-4800 Attn: Phillip R. Mills or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt. SECTION 12.02. Survival of Representations and Warranties. The representations and warranties and agreements contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or the termination of this Agreement, except for the agreements set forth in Article 3, Sections 8.01, 8.04 (which shall only survive the Effective Time),11.02, 12.04, 12.06, 12.07 and 12.08. SECTION 12.03. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective, provided that, after the adoption of this Agreement by the stockholders of the Company and without their further approval, no such amendment or waiver shall reduce the amount or change the kind of consideration to be received in exchange for the Shares. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial 44 49 exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 12.04. Expenses. (a) Except as otherwise provided in this Section, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. (b) Whether or not the transactions contemplated by this Agreement are consummated, subject to the last sentence of this Section 12.04(b), Parent agrees to pay all costs and expenses incurred by the Company or its Subsidiaries in connection with this Agreement arising from the Hart-Scott-Rodino review and the Company's obligations contained in Section 9.01 hereof, including, without limitation, all costs and expenses related to prior antitrust analyses undertaken by the Company and its advisors in connection with the transactions contemplated hereby since October 1, 1998, preparing and filing the Notification and Report Form pursuant to the HSR Act, responding to a Second Request issued under the HSR Act, preventing the entry of any injunction, appealing any such injunction, obtaining all necessary consents, approvals or waivers from any government authorities, opposing vigorously any litigation or administrative proceeding relating primarily to antitrust aspects of this Agreement or the transactions contemplated hereby or otherwise complying with any Antitrust Law. Parent shall promptly pay such costs and expenses as they are incurred by the Company, provided that, Parent's obligation to pay such costs and expenses shall not exceed in the aggregate $2.5 million. (c) The Company agrees to pay Parent a fee in immediately available funds equal to $7 million concurrently with the termination of this Agreement by Parent pursuant to the provisions of Section 11.01(c)(i), 11.01(c)(ii) or 11.01(c)(iii) or by the Company pursuant to the provisions of Section 11.01(d), provided that Parent or Merger Subsidiary is not in breach of its representations and warranties under this Agreement and shall not have failed to perform in all material respects each of its obligations under this Agreement. (d) Parent agrees to pay, or cause to be paid to, the Company a fee in immediately available funds equal to $20 million simultaneously with the termination of this Agreement as a result of the occurrence of any of the events set forth in Sections11.01(a), 11.01(b)(i), 11.01(b)(iii), 11.01(b)(iv) or 11.01(c)(iv), provided that, at the time of such termination, the applicable waiting period under the HSR Act shall not have expired or been terminated and the FTC, DOJ or any other Person shall not be challenging by litigation or otherwise any of the transactions contemplated hereby. Concurrently with the signing of this Agreement, Parent shall deliver such $20 million termination fee to The Bank of New York (the "ESCROW AGENT") to be held, invested and disbursed by the 45 50 Escrow Agent as provided in the Escrow Agreement dated as of November 2, 1999 between the Company and the Escrow Agent. (e) Concurrently with the signing of this Agreement, Parent agrees to contribute cash in the amount of $10 million to the Rabbi Trust. SECTION 12.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Parent or Merger Subsidiary may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase all or a portion of the Shares pursuant to the Offer, but no such transfer or assignment will relieve Parent or Merger Subsidiary of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. SECTION 12.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state. SECTION 12.07. Dispute Resolution; Jurisdiction. (a) If a dispute relating to this Agreement arises between the parties, the following procedure shall be implemented before either party pursues other available remedies (except that such procedure shall not apply to any equitable remedy). The parties shall hold a meeting promptly, attended by the persons with decision-making authority regarding the dispute, to attempt in good faith to negotiate a resolution of the dispute. If not resolved at such meeting, the parties shall continue to attempt in good faith to negotiate a resolution of the dispute for 30 days after such meeting. The parties agree to participate in good faith in such negotiations related thereto. If within 30 days after such meeting the parties have not succeeded in negotiating a resolution of the dispute, then the parties may seek to resolve the dispute by litigation in an appropriate court of jurisdiction. (b) Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in any federal court located in the State of Delaware or any Delaware state court, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient form. Process in any such suit, action or proceeding 46 51 may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.01 shall be deemed effective service of process on such party. SECTION 12.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 12.09. Counterparts; Effectiveness; Benefit. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Except as provided in Section 8.04, no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns. SECTION 12.10. Entire Agreement. This Agreement, the Confidentiality Agreement, the Escrow Agreement, the Rabbi Trust and the Standstill Agreement constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. SECTION 12.11. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. SECTION 12.12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. SECTION 12.13. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not 47 52 performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the State of Delaware or any Delaware state court, in addition to any other remedy to which they are entitled at law or in equity. 48 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. GIBSON GREETINGS, INC. By: /s/ Frank O'Connell ---------------------------------------- Name: Frank O'Connell Title: Chairman, President and Chief Executive Officer AMERICAN GREETINGS CORPORATION By: /s/ Morry Weiss ---------------------------------------- Name: Morry Weiss Title: Chairman and Chief Executive Officer GRANITE ACQUISITION CORP. By: /s/ Morry Weiss ---------------------------------------- Name: Morry Weiss Title: President 54 ANNEX I Notwithstanding any other provision of the Offer or this Agreement, Parent and Merger Subsidiary shall not be required to accept for payment any Shares if prior to the expiration date of the Offer, any of the following conditions exist: (a) an injunction shall have been issued and remain in effect which restrains consummation of the Offer; (b) the Company shall have breached or failed to perform in all material respects any of its obligations under this Agreement required to be performed on or prior to such time or any of the representations and warranties of the Company under this Agreement shall fail to be accurate as of the date made, provided that, such breach, failure to perform or inaccuracy would have, individually or in the aggregate, a Material Adverse Effect on the Company; (c) the applicable waiting period under the HSR Act relating to the Merger shall not have expired or been terminated; (d) the number of Shares tendered pursuant to the Offer and not withdrawn, together with the Shares then owned by Parent, represents less than a majority of the Shares outstanding on a fully-diluted basis (assuming the exercise of all outstanding options which are exercisable and in-the-money at the Offer Price); or (e) this Agreement shall have been terminated in accordance with its terms. EX-2.C 11 EXHIBIT (C)(2) 1 EXHIBIT (c)(2) GIBSON GREETINGS, INC. 2100 Section Road Cincinnati, OH 45237 October 29, 1998 American Greetings Corporation 1 American Road Cleveland, OH 44144 Attention: Mr. Morry Weiss Dear Sirs: In connection with your consideration of a possible business combination with Gibson Greetings, Inc. (together with its subsidiaries, the "COMPANY"), we may furnish you with certain nonpublic information about the business and operations of the Company. Such information, written or oral, together with analyses, compilations, studies or other documents prepared by you or your affiliates, officers, directors, employees, agents or representatives (collectively, "REPRESENTATIVES") which contain or otherwise reflect such information, is hereinafter referred to as "CONFIDENTIAL". In consideration of your being provided with the Confidential Information, you agree that the Confidential Information will be kept confidential and shall not be disclosed, in whole or in part, to any person other than your Representatives who need to know such Confidential Information for the purpose of evaluating the proposed combination. You agree to inform each of your Representatives of the nonpublic nature of the Confidential Information and to direct such persons to treat such Confidential Information in accordance with the terms of this agreement. You will not use or allow the use of the Confidential Information for any purpose except to evaluate the proposed combination. Without the prior written consent of the Company, neither you nor your Representatives will disclose to any person the fact that the Confidential Information has been made available to you, except as otherwise required by law. 2 American Greetings Corporation 2 October 29, 1998 The Confidential Information, except for that portion which consists of analyses, compilations, studies or other documents prepared by you or your Representatives, will be returned to the Company immediately upon the Company's request. That portion of the Confidential Information which consists of analyses, compilations, studies or other documents prepared by you or your Representatives will be destroyed immediately upon the Company's request. In the event you or anyone to whom you transmit the Confidential Information is requested or required (by oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demand or similar process) to disclose any of the Confidential Information, you will provide the Company with prompt notice so that the Company may seek a protective order or other appropriate remedy and/or waive your compliance with the provisions of this agreement. In the event that such protective order or other remedy is not obtained, or the Company waives your compliance with the provisions of this agreement, you will furnish only that portion of the Confidential Information which is legally required, in the reasonable opinion of your counsel, and will exercise your best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. You also agree that for a period of two years from the date of this agreement, neither you nor any of your affiliates will, without the prior written consent of the Company, directly or indirectly solicit for employment or hire any officer, director, or employee of the Company, except that you shall not be precluded from hiring any such officer, director or employee who (i) responds to any public advertisement placed by you, (ii) initiates the request for employment with you, or (iii) has been terminated by the Company prior to commencement of employment discussions between you and such officer, director or employee. The term "Confidential Information" does not include any information (i) that was publicly available prior to the date of this agreement or thereafter becomes publicly available without any violation of this agreement on the part of you or any of your Representatives, (ii) that was available to you on a non-confidential basis prior to its disclosure to you by the Company or its Representatives or becomes available to you from a person other than the Company and its Representatives who is not, to the best of your knowledge, subject to any legally binding obligation to keep such information confidential, or (iii) that was independently developed by you as evidenced by your records. No failure or delay by the Company in exercising any right, power or privilege hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. 2 3 American Greetings Corporation 3 October 29, 1998 You agree that the Company would be irreparably injured by a breach of this agreement by you or your Representatives and that, in such event, the Company shall be entitled, in addition to any and all other remedies, to injunctive relief and specific performance. The Company and its Representatives make no representations or warranties, express or implied, with respect to the Confidential Information, except for any particular representations and warranties which may be made to a purchaser in a definitive purchase agreement when, as, and if finally executed, and subject to such limitations and restrictions as may be specified in such agreement. You agree that neither the Company nor any of its Representatives shall have any liability to you or your Representatives resulting from the selection or use of the Confidential Information by you or your Representatives. Except as otherwise provided, this agreement will be binding upon you and your Representatives for a period of three years from the date hereof. This agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. Very truly yours, GIBSON GREETINGS, INC. By: /s/ Frank O'Connell -------------------------------- Name: Frank O'Connell Title: Chairman, President and Chief Executive Officer Accepted and agreed: AMERICAN GREETINGS CORPORATION By: /s/ Morry Weiss --------------------------------- Name: Morry Weiss Title: Chairman & CEO 3 EX-3.C 12 EXHIBIT (C)(3) 1 EXHIBIT (c)(3) GIBSON GREETINGS, INC. 2100 Section Road Cincinnati, OH45237 October 26, 1998 American Greetings Corporation 10500 American Road Cleveland, OH 44144 Attention: Mr. Morry Weiss Dear Sirs: You have asked to meet with us to in order to explore your views on a possible business combination between Gibson Greetings, Inc. (the "COMPANY") and American Greetings Corporation ("AMERICAN GREETINGS"). Our willingness to consider and respond to your proposal is premised on your assurance that your intentions with respect to the Company are entirely friendly and that you do not intend to take any action in furtherance of any business combination proposal with the Company, without the prior written approval of the Company. Accordingly, American Greetings agrees that without the prior written consent of the Company, it will not, and will not permit any of its affiliates to (i) purchase or otherwise acquire, or agree or offer to purchase or otherwise acquire, beneficial ownership of any securities of the Company: (ii) make, disclose or encourage public speculation about any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Company or any subsidiary of the Company or the acquisition of any equity interest in, or a substantial portion of the assets of, the Company or any subsidiary of the Company; (iii) solicit, or become a participant in any solicitation of, any proxy from any holder of securities of the Company or agree or announce its intention to vote with any person undertaking a solicitation; (iv) form, join or in any way participate in a group with respect to any securities of the Company; or (v) propose any amendment to this Agreement that is or may be required to be publicly disclosed. 2 2 October 25, 1998 This Agreement shall be binding on American Greetings for a period of two years from the date hereof. However, American Greetings and the Company each agree that it will not at anytime, whether during or after such two-year period, disclose the existence and contents of this letter or the fact of or contents of any discussions between the Company and its representatives and American Greetings and its representatives, except as may be required by law. This letter agreement shall be governed by, and construed in accordance with, the laws of the State of New York. American Greetings agrees that the Company would be irreparably injured by a breach of this agreement and that, in such event, the Company shall be entitled, in addition to any and all other remedies, to injunctive relief and specific performance. If the foregoing reflects our mutual understanding, please sign and return the duplicate copy of this letter. Very truly yours, Gibson Greetings, Inc. By: /S/ Frank O'Connell --------------------------------- Name: Frank O'Connell Title: President & CEO Accepted and agreed: American Greetings Corporation By: /s/ Morry Weiss --------------------------- Name: Morry Weiss Title: Chairman & CEO -----END PRIVACY-ENHANCED MESSAGE-----